(1.

2) The Nonaka-Takeuchi model

Knowledge Transfer

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(2.3) Selecting a Six Sigma team
• Champions
executives who understand Six Sigma and serve as mentors to black belts
and interface with senior management
• Mentors
drive the project forward and give support and direction.
• Master black belts
experienced, full-time leaders with a developed knowledge of Six Sigma
• Black belts
will lead quality projects, usually on a full-time basis until they are
complete
• Green belts
work on projects on a part-time basis but will often lead teams in their
own area or function

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(4.1) Key financial measures

Gross profit margin Net operating profit Return on sales Return on assets
(GPM) EBIT or EBITDA Operating Profit/Net Net Income/Total
Gross Profit/Sales x Sales x100 Assets x100
100

Return on capital Stock turn Debtor days Creditor days

employed (ROCE) Cost of Sales/Average Trade Debtors/Sales x Trade Payables/Sales
EBIT/Capital Stock Held 365 days x 365 days
Employed x100

Current ratio Acid ratio Gearing Interest cover

Current (Current Assets – Total Debt/Total EBIT or EBITDA/Total
Assets/Current Stock)/Current Equity x100 Interest
Liabilities Liabilities

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Cashflows for Project A
Net cashflow Cumulative
each year cashflow
£ £
Year 0 (200,000) (200,000)
Year 1 50,000 (150,000)
Year 2 50,000 (100,000)
Year 3 50,000 (50,000)
Year 4 50,000 0
Year 5 50,000 50,000

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Cashflows for Project B
Net cashflow Cumulative
each year cashflow
£ £
Year 0 (200,000) (200,000)
Year 1 20,000 (180,000)
Year 2 20,000 (160,000)
Year 3 20,000 (140,000)
Year 4 80,000 (60,000)
Year 5 80,000 20,000
Year 6 80,000 100,000

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Using DCF tables
Rate of discount
5% 6% 7% 8% 9% 10%
Year
0 1.000 1.000 1.000 1.000 1.000 1.000
1 0.952 0.943 0.935 0.926 0.917 0.909
2 0.907 0.890 0.873 0.857 0.842 0.826
3 0.864 0.840 0.816 0.794 0.772 0.751
4 0.823 0.792 0.763 0.735 0.708 0.683
5 0.784 0.747 0.713 0.681 0.650 0.621
6 0.746 0.705 0.666 0.630 0.596 0.564

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NPVs for Projects A and B
Project A Project B
Year Discount Cashflows Present values Cashflows Present values
factors £ £ £ £
0 1.00 (200,000) (200,000) (200,000) (200,000)
1 0.93 50,000 46,300 20,000 18,520
2 0.86 50,000 42,850 20,000 17,140
3 0.79 50,000 39,700 20,000 15,880
4 0.74 50,000 36,750 80,000 58,800
5 0.68 50,000 34,050 80,000 54,480
6 0.63 80,000 50,400

Net present value (350) 15,220

Note: be careful of the assumptions built into these calculations!

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