Six Sigma and KPI’s: Waste Reduction Rate

One of the core philosophies behind Six Sigma is waste reduction. This idea results from improving your organization’s efficiency and deterring production and manufacturing errors. However, simply saying that you wish to reduce waste can be a rather broad term. To help with this, we will introduce you to a simple KPI that measures your organization’s waste; Waste Reduction Rate. With this rate, you will gain insight into how your company operates, how you utilize your resources, and what areas need improvements and changes.

What is Your ‘Waste Reduction Rate’?

Your Waste Reduction Rates measure to what extent your organization tries to minimize the amount of waste you generate. This can vary greatly between companies and organizations, especially depending on the field and industry you’re in. Likewise, there are multiple factors that determine your waste reduction rate. But why is calculating this so important? While it may not be obvious at first, your waste determines your organization’s disposal costs, how expensive it is to manufacture your products, and even lost production time. With these figures in mind, it’s important to calculate your organization’s waste reduction rate.

To calculate your waste reduction rate, you must first find two variables. These are the amount of raw materials you use within a certain period and the wasted raw materials from the previous period. Then, you divide the first variable by the second and multiply your results by 100 to get a percentage. This is your waste reduction rate. However, it’s important to note a few variables about your calculations.

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First, you must collect the appropriate data for each of your time periods. If the data is inaccurate, your waste reduction rate will not be proportional to your actual results. Second, data collection can be expensive. If you want to calculate your waste production, begin setting up the infrastructure to do so. This includes monitoring a number of raw materials you bring in regularly. Additionally, how much of the materials you use and what’s left over. We recommend using a Six Sigma professional who understands how to correctly mine and analyze data. If you do not have employees with the appropriate training, we offer multiple courses for each Six Sigma certification level you might require.

Six Sigma and Waste Reduction

As a founding principle of Six Sigma, waste reduction is critical to every organization. Whether you specialize in manufacturing, logistics, or production, there are ways to improve your organization’s efficiency. By calculating your waste reduction rate, you can instantly see how well your operations are running. If you wish to improve your rate, there are ways to do this. For example, implementing the steps of DMAIC is an excellent way to find inefficiencies and replace them with innovative changes. These steps and more will help improve your organization’s raw material utilization and save you from unexpected disposal costs.