Level 1 Savings:  Direct and certain impact on the bottom line with a clear cause and effect. You should have a 90% confidence and the improvement must be real…there must be economic substance. Some examples are Material cost reduction, Certain warranty reductions, Reduction in overtime, Cancellation of external lease, Enterprise headcount reduction, Incremental volume, Price realization, Direct freight reduction, Scrap reduction, Finance benefit on inventory, receivable reduction.

Level 2 Savings:  Productive redeployment of resources and must be whole person. The improvement must be real…there must be economic substance…value add. Examples are Person productively redeployed in support of enterprise growth with documented senior management / Vice President approval or Equipment productively redeployed to a different plant/process thereby avoiding capital spend or outsourcing of operation.

Level 3 Savings:  Generally less direct and certain than Level I benefit, would have a 70% confidence and would include avoidances. Examples are Benefits from projects that qualify for NPV based measurement, Margin on incremental volume with 70% confidence, or cost/capital avoidance.

The trend chart shows the running total of CI and Six Sigma cost savings for the past 13 months.

The Pareto chart displays the running total of savings broken down by the level of savings.

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