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Six Sigma pricing.

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  • Author(s): Sodhi MS;Sodhi MS; Sodhi NS
  • Source:
    Harvard business review [Harv Bus Rev] 2005 May; Vol. 83 (5), pp. 135-42, 154.
  • Publication Type:
    Journal Article
  • Language:
    English
  • Additional Information
    • Source:
      Publisher: Harvard Business School Pub Country of Publication: United States NLM ID: 9875796 Publication Model: Print Cited Medium: Print ISSN: 0017-8012 (Print) Linking ISSN: 00178012 NLM ISO Abbreviation: Harv Bus Rev
    • Publication Information:
      Original Publication: Boston, MA : Harvard Business School Pub.,
    • Subject Terms:
    • Abstract:
      Many companies are now good at managing costs and wringing out manufacturing efficiencies. The TQM movement and the disciplines of Six Sigma have seen to that. But the discipline so often brought to the cost side of the business equation is found far less commonly on the revenue side. The authors describe how a global manufacturer of industrial equipment, which they call Acme Incorporated, recently applied Six Sigma to one major revenue related activity--the price-setting process. It seemed to Acme's executives that pricing closely resembled many manufacturing processes. So, with the help of a Six Sigma black belt from manufacturing, a manager from Acme's pricing division recruited a team to carry out the five Six Sigma steps: Define what constitutes a defect. At Acme, a defect was an item sold at an unauthorized price. Gather data and prepare it for analysis. That involved mapping out the existing pricing-agreement process. Analyze the data. The team identified the ways in which people failed to carry out or assert effective control at each stage. Recommend modifications to the existing process. The team sought to decrease the number of unapproved prices without creating an onerous approval apparatus. Create controls. This step enabled Acme to sustain and extend the improvements in its pricing procedures. As a result of the changes, Acme earned dollar 6 million in additional revenue on one product line alone in the six months following implementation--money that went straight to the bottom line. At the same time, the company removed much of the organizational friction that had long bedeviled its pricing process. Other companies can benefit from Acme's experience as they look for ways to exercise price control without alienating customers.
    • Accession Number:
      0 (Petroleum)
      12597-69-2 (Steel)
    • Publication Date:
      Date Created: 20050603 Date Completed: 20050711 Latest Revision: 20061115
    • Publication Date:
      20220302
    • Accession Number:
      15929409