Every day, I read about a consultant, IT professional, Six-Sigma professional, or accountant who talks about how much money they've saved their clients. 99 times out of 100, this number is bogus. It's not their fault and they're not trying to deceive - at least in most cases. The issue is how they calculated the savings in the first place.
In this post and attached document, I show why these savings are often wrong and propose a alternate approach to modeling the effects of improvement activities.
Some of the terms may be new. If there is any confusion about terms, please feel free to read this document as reference.