Question

If you managed an internal department at Caterpillar, like Accounts Payable, how might 6 Sigma be used, and what might it help you achieve?

Answer 1

Caterpillar is the world’s leading manufacturer in varied segments such as construction and mining equipment segment,   diesel and natural gas engines segment, industrial gas turbines and diesel-electric locomotives. The company focuses on smart and ethical financial decisions in the accounting department.

Implementing Six Sigma in the Accounts Payable (A/P) department helps the department to have more error free transactions. The A/P division is the center of many business organizations because they are in-charge of cash outflow in the organizations which is critical to the functioning of the business. This department interacts with vendors, customers, banks and their employees to ensure that all the payments are made appropriately. Applying Six Sigma in this financial function helps in the following ways:

- The turnaround time from receipt of invoice till the payment is made can be reduced.

- The rate of accuracy for invoice entry is measured through Six Sigma and the causes for errors are eliminated.

- The vendor payments are made in a timely manner without any delays.

- The discount period is utilized to the benefit of the company.

To ensure that the above objectives are met, Six Sigma DMAIC (define, measure, analyze, improve, control) process can be applied. It helps to improve the existing or current practices in the system. It also helps to eliminate the defects/errors in the process to have more accuracy with speed.