A cost of quality economic analysis of a six sigma program at a government contractor

In this study, the results of a multi-project engineering economic analysis of a Six Sigma program for a contractor providing custom manufacturing and service activities for a U.S. federal government agency are presented. Examined are the project costs, project savings, benefit/cost ratio, and operational performance improvement for Six Sigma projects conducted over a seven year period. Projects in both manufacturing and nonmanufacturing (administrative and service-related) applications were examined. The analysis demonstrated that Six Sigma projects are very cost effective, achieving a median benefit/cost ratio of 2.66 for the Six Sigma program for the contractor. The results also demonstrated that process improvements for Six Sigma projects in nonmanufacturing operations achieve gains comparable to improvements in manufacturing operations, and demonstrate that significant gains can he achieved through Six Sigma programs.