The Power-of-6 rule

When QRM is implemented well it will lead to a big amount of results over a broad
range. These results can be divided into direct and indirect results, but also
in opportunities.

Direct results:

  • Overview / insight increases
  • Stocks decrease both of raw materials/semi-finished products as finished products
  • Less pre-financing is needed
  • Quality increases
  • Output increases
  • Delivery performance increases
  • Delivery time can be shorter

Indirect results:

  • Reaction speed increases
  • Flexibility increases
  • Less space needed
  • Costs decrease
  • Work pleasure increases
  • You create space to look forward instead of fighting fires
  • Relationships with your suppliers become better (partnership)
  • Less overtime

Opportunities

  • There will be new opportunities with new customers because of your better performance which is recognised in the market
  • There will be room to focus on new products/markets (PMC’s) which is an opportunity to increase turnover

All these results will lead to a financial benefit. The founder of QRM, Professor Rajan Suri, has done an extensive study in cooperation with the University of Wisconsin to the relationship between reduction of lead time on one side and costs on the other side. In this study a number of QRM implementations have been reviewed and this led to the following relationship:

  • In half of the number of implementations the leadtime had been reduced with an average of 80%
  • On average a cost reduction was achieved of 25%

This research led to the development of the “Power of Six rule” which gives an indication of the cost reduction that can be expected with an implementation.

This “Power of Six rule” is stated as: 

power of 6 regel

Where:

K          the new cost price to be determined

Ko        the old cost price

D         the new leadtime

Do       the old leadtime

For more information about the revenues of QRM, read the article  What Kind of “Numbers” can a Company Expect After Implementing Quick Response Manufacturing?, Authors: Francisco Tubino & Rajan Suri.