Operational Excellence

Six Sigma

Six Sigma: DMAIC; Y=f(x)

Is it a Goal, a Measure, a Process, a Tool or an expletive deleted?
By Lee Olson Presentation to INFORMS

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Objectives

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Understand the Basics of the Six Sigma Program Understand How Six Sigma Relates to Lean, TOC, TQM
(Theory Of Constraints; Total Quality Management)

Ability to Define a Strategy and Roadmap for Success

Operational Excellence Training

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Define

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Is it a Goal, a Measure, a Process, a Tool or an expletive deleted?

Yes

Operational Excellence Training

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Define
Six Sigma Is a management methodology
Customer focused Data driven decisions Breakthrough performance gains Validated bottom line results

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Customer Focused
ON TIME DELIVERY (sample)

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The percentage of sales order line items that ship complete on or before the original customer promise date, for all line items shipped in the month.

Our Performance Compared to Competitors Importance to Customers Complete Quality OTD High

On-Time Delivery
100% 90% 80% 70% 60% 50% 40%

Pareto of Drivers
100%

% Impact

75% 50% 25% 0%

Orders on Credit Hold Engineering Change Orders
Current Due Date

Late Supplier Deliveries

xyz Cell Always Late

Unrealistic Promise Date

20% 10% 0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Target

Reason

Top 5 Action Items

Driver Action Description Status Status Description Ow ner Original Due Date

Late Supplier Deliveries

Monthly reporting to suppliers on delivery & quality metrics.

On track

Report Cards Implemented.

Adam

Low Yield on part abc

30%

5/21

5/21

Late Supplier Deliveries

Arrange face to face meetings with top offenders. Review and approve supplier's corrective action plan. Kaizen Event to focus on improving throughput by 40% and improve labor efficiency by 35% Focus on custom products to provide realistic ATP based on inventory and leadtime of components.

On track

Meetings Complete with top 10 Suppliers.

Beth

6/15

6/15

Late Supplier Deliveries

Caution Corrective Action Plan in Place for 2 major Suppliers On track Event held 5/1. 25% throughput improvement in May. Labor Efficiency Increase of 30%

Carlos

7/15

9/15

xyz Cell Always Late

Doreen

5/21

5/21

Unrealistic Promise Date

Problem Continued lack of progress. Restructured and focused team. Developing detailed plan.

Earnest

6/15

8/15

Training
Shared Goals Price Complaints Moderateto-Low

Were Better

Theyre Better

Operational Excellence Training

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Data Driven Decisions

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Y= f (X)
To get results, should we focus our behavior on the Y or X ?

Y Dependent Output Effect Symptom Monitor Response

X1 . . . XN Independent Input-Process Cause Problem Control Factor

Why should we test or inspect Y, if we know this relationship? Operational Excellence Training

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Breakthrough performance gains

(Distribution Shifted 1.5)

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2 3 4 5 6
Process Capability

PPM 308,537 66,807 6,210 233 3.4

Defects per Million Opportunities

Sigma is a statistical unit of measure which reflects process capability. The sigma scale of measure is perfectly correlated to such characteristics as defects-per-unit, parts-per million defective, and the probability of a failure/error.
Operational Excellence Training

Pr ic e In cr ea se Vo lu m e In c. w ith Le ve ra g e lC os ts at er ia M

Impact on Bottom Line

M an uf ac tu r in g

Vo lu m e In c. No Le ve ra g Ta e SG &A

Operational Excellence Training

G en

Assuming a 10% change in the factor

Validated bottom line results

Factors
W er al -5 % La or ki n Pr ic e g Ca p Re d

xe

bo

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Define
Methodology Define Measure Analyze Improve Control

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Operational Excellence Training

Roadmap
Example
Next Project Celebrate Project $

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Define
Customers, Value, Problem Statement Scope, Timeline, Team Primary/Secondary & OpEx Metrics Current Value Stream Map Voice Of Customer (QFD)

Validate Project $

Measure
Assess specification / Demand Measurement Capability (Gage R&R) Correct the measurement system Process map, Spaghetti, Time obs. Measure OVs & IVs / Queues

Control
Document process (WIs, Std Work) Mistake proof, TT sheet, CI List Analyze change in metrics Value Stream Review Prepare final report

Validate Project $ Validate Project $

Improve
Optimize KPOVs & test the KPIVs Redesign process, set pacemaker 5S, Cell design, MRS Visual controls Value Stream Plan

Analyze (and fix the obvious)

Validate Project $
Root Cause (Pareto, C&E, brainstorm) Find all KPOVs & KPIVs FMEA, DOE, critical Xs, VA/NVA Graphical Analysis, ANOVA Future Value Stream Map

Operational Excellence Training

Operational Excellence Methodology

Plan

Execute Strategic Link to Business Plan defined in Project Selection Process Defined Business Impact with Op Ex Champion support Structured Brainstorming at all organizational levels Cause and Effect Diagrams identifying critical factors Primary and Secondary Metrics defined and charted Multi-Level Pareto Charts to confirm project focus

Identify Problem

Practical Problem

Develop a focused Problem Statement and Objective Develop a Process Map and/or FMEA Develop a Current State Map Identify the response variable(s) and how to measure them Analyze measurement system capability Assess the specification (Is one in place? Is it the right one?)

Problem Definition

Characterize the response, look at the raw data Abnormal? Other Clues? Mean or Variance problem? Time Observation Spaghetti Diagram Takt Time Future State Maps Percent Loading Standard Work Combination Use Graphical Analysis, Multi-Vari, ANOVA and basic statistical tools to identify the likely families of variability
Identify the likely Xs 5S Set Up Time Reduction (SMED) Material Replenishment Systems Level Loading / Line Leveling Cell Design Visual Controls Use Design of Experiments to find the critical few Xs Move the distribution; Shrink the spread; Confirm the results

Problem Solution

Problem Control
Execute Plan

Mistake Proof the process (Poka-Yoke) Tolerance the process Measure the final capability Place appropriate process controls on the critical Xs Document the effort and results Standard Work TPM

Problem Solving
What do you want to know? How do you want to see what it is that you need
to know?

What type of tool will generate what it is that you

need to see?

What type of data is required of the selected tool? Where can you get the required type of data?
Crane Co. Op. Ex. Methodology Originated by MBBs; D. Braasch, J. Davis, R. Duggins, J. OCallaghan, R. Underwood, I. Wilson

Based in part on Six Sigma Methodology developed by GE Medical Systems and Six Sigma Academy, Inc.

Define
Key Items

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Customers, Value, Problem Statement Scope, Timeline, Team Primary/Secondary & OpEx Metrics Current Value Stream Map Voice Of Customer (QFD)
(Quality Function Deployment)

Operational Excellence Training

Project Selection
Impact

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Business Impact
Revenue Growth Cost Reduction Capital Reduction Key Business Objectives On Time Delivery Lead Time Quality Customer Satisfaction

Impact on Operational Excellence Metrics

Operational Excellence Training

Evaluate and Rank Suggestions

Effort and Risk

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Effort required
People Resources Capital Resources Duration of Project

Probability of success
Technical Risk
Data available Knowledge of process

Management Risk
Aligned with objectives Support by value stream manager

Impact vs. Risk vs. Effort

Assess ROI (Return On Investment) Assign priorities to projects
Operational Excellence Training

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Evaluate and Rank Suggestions

Project Information Impact Effort

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Risk

Duration of Project

Capital Resources

People Resources

Management Risk
4 2 2 3 4 5 1 1 1

Capital Reduction

On Time Delivery

Revenue Growth

Cost Reduction

Technical Risk

Total Impact

Key Business Objective

Total Effort

Customer Satisfaction

Mfg (M) or Admin # (A)

1 2 3 4 5 A M A M A

Project Description Variable weightings

Customer Billing Errors Warranty scrap warranty vs sales Vendor Delivery Performance On Time Shipping Performance Hiring and Retention 20% - 24% Turnover New Product Development Cycle Time

20% 0 0 0 2 0

15% 2 2 2 1 3

10% 0 0 2 2 0

15% 4 1 2 4 2

20% 4 1 5 5 1

5% 2 0 4 0 0

5% 2 3 3 1 3

10% 100% 50% 5 3 0 5 2 2.4 1.1 2.2 2.9 1.3 2 4 1 4 3

20% 1 4 1 1 2

30% 100% 40% 3 5 3 2 4 2.1 4.3 1.6 2.8 3.1 1 4 1 1 1

60% 100% 2.8 2.8 1.6 2.2 2.8

6 7 8 9

A M A M Manufacturing Maintenance Tooling Maintenance Day Sales Outstanding (DSO) FTY of 65% on product 123

3 0 0 4

4 3 0 4

2 0 4 2

5 1 2 5

3 2 0 4

3 3 0 4

4 1 0 5

5 0 0 5

3.6 1.2 0.7 4.1

5 1 1 2

3 4 0 1

5 1 2 1

4.6 1.6 1.1 1.5

5 1 1 2

5.0 1.0 1.0 1.4

Example tool to rank projects

0106-01 Project Rating.xls
Operational Excellence Training

Total Risk

Lead Time

Quality

Example chart to rank projects 0106-01 Project Rating.xls

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Measure

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Establish measurement capability

Validate the database (transactional) Gage R&R (Repeatability & Reproducibility) Calibration is not enough Many (or most) measurement systems are not capable How good is the data you are using to make decisions?

Fix the measurement system

Enables calculation of process capability Enables calculation of alpha & beta risks This step is often skipped

Operational Excellence Training

Analyze
(and fix the obvious)

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Find all KPOVs & KPIVs

(Key Process Output Variables; Key Process Input Variables)

FMEA, DOE, critical Xs, VA/NVA

(Failure Modes Effects Analysis; Design Of Experiment)

Graphical Analysis, ANOVA

(Analysis Of Variance)

Future Value Stream Map

Operational Excellence Training

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Improve

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Optimize KPOVs & test the KPIVs

(Key Process Output Variables; Key Process Input Variables)

Redesign process, set pacemaker 5S, Cell design, MRS

(Material Replenishment System)

Visual controls Value Stream Plan

Operational Excellence Training

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Control

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Management of Change
Owned by project champion and value stream manager Critical to long term success of project Physical and cultural changes

Measurement controls
On-going metrics

Visual Controls
Enable workers to self-manage the process

Operational Excellence Training

Basic Implementation
Roadmap
Identify Customer Requirements

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Understand and Define Entire Value Streams Vision (Strategic Business Plan) Deploy Key Business Objectives
- Measure and target (metrics)

- Align and involve all employees - Develop and motivate

Continuous Improvement (DMAIC)

Define, Measure, Analyze, Improve
Identify root causes, prioritize, eliminate waste, make things flow and pulled by customers

Control
-Sustain Improvement -Drive Towards Perfection

Operational Excellence Training

3.1

3.2

3.0
2.1 2.2

Improve Customer Focus Educate/Get Everyone Involved

1.1 1.2

2.0 1.0
8 7 6 5 4 3 2 1 1 2 3 4 5 6

Improve the Metrics

Your Manager's 1-Year Breakthrough Objectives

Train functional leaders as LGBs Improve On Time Delivery to 98% Establish tracking of OTD in every cell

Conduct interviews with top 10 customers

Train leadership team as Lean Green Belts (LGB)

Train workers in how our products are used by our major customers

Your Annual Breakthrough

Indicator's and Goals

Complete 1 Leadership LGB training course

Objectives

Benefits
100% Completion of LGB Projects Leaders have ability to map a value stream
Metrics module in all appropriate training sequences Training projects demonstrate flowdown of metics to operational level

Operational Excellence Training

4 4 4 4 4
Develop culture of teams
Trainees participate in customer survey Complete 3 functional LGB training courses Bring reps from top 10 customers in for plant tours Implement lean concepts in top 3 volume lines establish pareto of drivers for OTD

Type in --> 4

Key:

4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4

4 4 4 4

4 Impact

IT Operations Quality Engineering Maintenance Marketing Training

Hoshin
Owner
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Resource

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ON TIME DELIVERY (sample)

The percentage of sales order line items that ship complete on or before the original customer promise date, for all line items shipped in the month.

On-Time Delivery
100% 90% 80% 70% 60% 50% 40%

Pareto of Drivers
100%

% Impact

75% 50% 25% 0%

Orders on Credit Hold Engineering Change Orders
Current Due Date

Late Supplier Deliveries

xyz Cell Always Late

Unrealistic Promise Date

20% 10% 0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Target

Reason

Top 5 Action Items

Driver Action Description Status Status Description Ow ner Original Due Date

Late Supplier Deliveries

Monthly reporting to suppliers on delivery & quality metrics.

On track

Report Cards Implemented.

Adam

Low Yield on part abc

30%

5/21

5/21

Late Supplier Deliveries

Arrange face to face meetings with top offenders. Review and approve supplier's corrective action plan. Kaizen Event to focus on improving throughput by 40% and improve labor efficiency by 35% Focus on custom products to provide realistic ATP based on inventory and leadtime of components.

On track

Meetings Complete with top 10 Suppliers.

Beth

6/15

6/15

Late Supplier Deliveries

Caution Corrective Action Plan in Place for 2 major Suppliers On track Event held 5/1. 25% throughput improvement in May. Labor Efficiency Increase of 30%

Carlos

7/15

9/15

xyz Cell Always Late

Doreen

5/21

5/21

Unrealistic Promise Date

Problem Continued lack of progress. Restructured and focused team. Developing detailed plan.

Earnest

6/15

8/15

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Does it work?.
The top companies in Customer Satisfaction grow MVA at nearly twice the rate of their poor-performing counterparts.

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Market Value Added

50 40 30 20 10 0

In Billions $

$42

1999 73 companies Ralston Purina Quaker Oats Hilton Hotels Coca-Cola Unilever etc.

$23

Low

High

Customer Satisfaction Index Score

Source: American Customer Satisfaction Index, U Michigan, HBR, 2001

Operational Excellence Training

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What about Lean, TOC, TQM

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Six Sigma
Remove defects, minimize variance

Lean
Remove waste, shorten the flow

TOC
Remove and manage constraints

TQM
Continuous Improvement

Operational Excellence Training

Value Stream Map - Current State

6 WEEK Forecast
Suppliers

Production Control

90/60/30 day Forecasts

Customer

MRP

Order Entry
Orders/day = 36 Queue = 1.5 Days Demand = 45 per day 2 shifts Takt Time = 18.2 Minutes Competitive Lead Time = 3 Days

Lead Time - 34 Days WEEKLY SCHEDULE

1X Daily I

Coils 5 days

Stamping

S. Weld # 1

Assembly I

Test I

Shipping I

342 CT=1sec Co=1 hr. Uptime=85% 1 shift 5 days 1 sec CT=3 min Co=10 min. Uptime=70% 1 shift 7.6 days 3 min

81 CT= 15 min Co=0 min. Uptime=100% 2 shifts 1.8 days 15 min

122 CT= 67 min Co= 23 min FTY = 67% 2 shifts

202 CT= 4 min Co=0 Uptime=100% 2 shifts

90 Lead Time =23.6 days Touch Time = 89 min 2 days 4 min

2.7 days 67 min

4.5 days

Demand = 45/day Takt Time = 18.2 min

6 WEEK Forecast Production Control

Customer Data
On-Time Delivery
90/60/30 day Forecasts Customer

Competitive LT = 3 days
Suppliers

MRP

Order Entry
Orders/day = 36 Queue = 1.5 Days Demand = 45 per day 2 shifts Takt Time = 18.2 Minutes Competitive Lead Time = 3 Days

Lead Time - 34 Days WEEKLY SCHEDULE

1X Daily I

Coils 5 days

Stamping

S. Weld # 1

Assembly I

Test I

Shipping I

342 CT=1sec Co=1 hr. Uptime=85% 1 shift 5 days 1 sec CT=3 min Co=10 min. Uptime=70% 1 shift 7.6 days 3 min

81 CT= 15 min Co=0 min. Uptime=100% 2 shifts 1.8 days 15 min

122 CT= 67 min Co= 23 min FTY = 67% 2 shifts

202 CT= 4 min Co=0 Uptime=100% 2 shifts

90 Lead Time =23.6 days Touch Time = 89 min 2 days 4 min

2.7 days 67 min

4.5 days

Raw = 5 days WIP = 12.1 days FG = 6.5 days

Suppliers

Inventory
6 WEEK Forecast Production Control 90/60/30 day Forecasts Customer

MRP

Order Entry
Orders/day = 36 Queue = 1.5 Days Demand = 45 per day 2 shifts Takt Time = 18.2 Minutes Competitive Lead Time = 3 Days

Lead Time - 34 Days WEEKLY SCHEDULE

1X Daily I

Coils 5 days

Stamping

S. Weld # 1

Assembly I

Test I

Shipping I

342 CT=1sec Co=1 hr. Uptime=85% 1 shift 5 days 1 sec CT=3 min Co=10 min. Uptime=70% 1 shift 7.6 days 3 min

81 CT= 15 min Co=0 min. Uptime=100% 2 shifts 1.8 days 15 min

122 CT= 67 min Co= 23 min FTY = 67% 2 shifts

202 CT= 4 min Co=0 Uptime=100% 2 shifts

90 Lead Time =23.6 days Touch Time = 89 min 2 days 4 min

2.7 days 67 min

4.5 days

Lead Time = 23.6 days Touch Time = 89 min

6 WEEK Forecast
Suppliers

Flow of Value
Lead Time
Production Control 90/60/30 day Forecasts Customer

MRP

Order Entry
Orders/day = 36 Queue = 1.5 Days Demand = 45 per day 2 shifts Takt Time = 18.2 Minutes Competitive Lead Time = 3 Days

Lead Time - 34 Days WEEKLY SCHEDULE

1X Daily I

Coils 5 days

Stamping

S. Weld # 1

Assembly I

Test I

Shipping I

342 CT=1sec Co=1 hr. Uptime=85% 1 shift 5 days 1 sec CT=3 min Co=10 min. Uptime=70% 1 shift 7.6 days 3 min

81 CT= 15 min Co=0 min. Uptime=100% 2 shifts 1.8 days 15 min

122 CT= 67 min Co= 23 min FTY = 67% 2 shifts

202 CT= 4 min Co=0 Uptime=100% 2 shifts

90 Lead Time =23.6 days Touch Time = 89 min 2 days 4 min

2.7 days 67 min

4.5 days

Max Wip = 7.6 days CT (67) > Takt Time (18)

6 WEEK Forecast
Suppliers

Constraints
OTD, Lead Time
Production Control 90/60/30 day Forecasts Customer

MRP

Order Entry
Orders/day = 36 Queue = 1.5 Days Demand = 45 per day 2 shifts Takt Time = 18.2 Minutes Competitive Lead Time = 3 Days

Lead Time - 34 Days WEEKLY SCHEDULE

1X Daily I

Coils 5 days

Stamping

S. Weld # 1

Assembly I

Test I

Shipping I

342 CT=1sec Co=1 hr. Uptime=85% 1 shift 5 days 1 sec CT=3 min Co=10 min. Uptime=70% 1 shift 7.6 days 3 min

81 CT= 15 min Co=0 min. Uptime=100% 2 shifts 1.8 days 15 min

122 CT= 67 min Co= 23 min FTY = 67% 2 shifts

202 CT= 4 min Co=0 Uptime=100% 2 shifts

90 Lead Time =23.6 days Touch Time = 89 min 2 days 4 min

2.7 days 67 min

4.5 days

CO = 1 hour CO = 23 min CO =
Suppliers

Setup Times
OP Margin, Lead Time
Production Control 90/60/30 day Forecasts Customer

6 WEEK Forecast Changeover

MRP

Order Entry
Orders/day = 36 Queue = 1.5 Days Demand = 45 per day 2 shifts Takt Time = 18.2 Minutes Competitive Lead Time = 3 Days

Lead Time - 34 Days WEEKLY SCHEDULE

1X Daily I

Coils 5 days

Stamping

S. Weld # 1

Assembly I

Test I

Shipping I

342 CT=1sec Co=1 hr. Uptime=85% 1 shift 5 days 1 sec CT=3 min Co=10 min. Uptime=70% 1 shift 7.6 days 3 min

81 CT= 15 min Co=0 min. Uptime=100% 2 shifts 1.8 days 15 min

122 CT= 67 min Co= 23 min FTY = 67% 2 shifts

202 CT= 4 min Co=0 Uptime=100% 2 shifts

90 Lead Time =23.6 days Touch Time = 89 min 2 days 4 min

2.7 days 67 min

4.5 days

Uptime = 70%
6 WEEK Forecast
Suppliers

Maintenance
OTD, Lead Time
Production Control 90/60/30 day Forecasts Customer

MRP

Order Entry
Orders/day = 36 Queue = 1.5 Days Demand = 45 per day 2 shifts Takt Time = 18.2 Minutes Competitive Lead Time = 3 Days

Lead Time - 34 Days WEEKLY SCHEDULE

1X Daily I

Coils 5 days

Stamping

S. Weld # 1

Assembly I

Test I

Shipping I

342 CT=1sec Co=1 hr. Uptime=85% 1 shift 5 days 1 sec CT=3 min Co=10 min. Uptime=70% 1 shift 7.6 days 3 min

81 CT= 15 min Co=0 min. Uptime=100% 2 shifts 1.8 days 15 min

122 CT= 67 min Co= 23 min FTY = 67% 2 shifts

202 CT= 4 min Co=0 Uptime=100% 2 shifts

90 Lead Time =23.6 days Touch Time = 89 min 2 days 4 min

2.7 days 67 min

4.5 days

FTY = 67%
6 WEEK Forecast
Suppliers

Quality
Production Control 90/60/30 day Forecasts Customer

MRP

Order Entry
Orders/day = 36 Queue = 1.5 Days Demand = 45 per day 2 shifts Takt Time = 18.2 Minutes Competitive Lead Time = 3 Days

Lead Time - 34 Days WEEKLY SCHEDULE

1X Daily I

Coils 5 days

Stamping

S. Weld # 1

Assembly I

Test I

Shipping I

342 CT=1sec Co=1 hr. Uptime=85% 1 shift 5 days 1 sec CT=3 min Co=10 min. Uptime=70% 1 shift 7.6 days 3 min

81 CT= 15 min Co=0 min. Uptime=100% 2 shifts 1.8 days 15 min

122 CT= 67 min Co= 23 min FTY = 67% 2 shifts

202 CT= 4 min Co=0 Uptime=100% 2 shifts

90 Lead Time =23.6 days Touch Time = 89 min 2 days 4 min

2.7 days 67 min

4.5 days

Who is setting the pace? What is the pitch time?

6 WEEK Forecast
Suppliers

Flow of Value
OTD, Lead Time
Production Control 90/60/30 day Forecasts Customer

MRP

Order Entry
Orders/day = 36 Queue = 1.5 Days Demand = 45 per day 2 shifts Takt Time = 18.2 Minutes Competitive Lead Time = 3 Days

Lead Time - 34 Days WEEKLY SCHEDULE

1X Daily I

Coils 5 days

Stamping

S. Weld # 1

Assembly I

Test I

Shipping I

342 CT=1sec Co=1 hr. Uptime=85% 1 shift 5 days 1 sec CT=3 min Co=10 min. Uptime=70% 1 shift 7.6 days 3 min

81 CT= 15 min Co=0 min. Uptime=100% 2 shifts 1.8 days 15 min

122 CT= 67 min Co= 23 min FTY = 67% 2 shifts

202 CT= 4 min Co=0 Uptime=100% 2 shifts

90 Lead Time =23.6 days Touch Time = 89 min 2 days 4 min

2.7 days 67 min

4.5 days

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Making it happen
Three major roles Implementer
Learns the tools Works the process Solves day to day problems

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Manager
Learns the methodology Manages a value stream Reviews project teams

Where do you need to focus?

Leader
Establishes the vision for the future Sets priorities Encourages

Operational Excellence Training