CHAPTER 1:

WORLD CLASS
MANUFACTURING
MEM673 WORLD CLASS MANUFACTURING
IR.DR.NOOR AZLINA MOHD.SALLEH
 LEARNING
Chapter 1: World-Class
OUTCOMES Manufacturing

World-Class Defined
Features of a World-Class Company
Key to Continuous Improvement
Lessons from the WCM practitioners
Kaizen, Total Quality Control and TPM in a World Class Company
Essential WCM KPI
WORLD CLASS MANUFACTURING
DEFINED Meaning &
SCOPE
It is referred to the practice followed
in a manufacturing organizations, in
order to consistently deliver
exceptional performance, in excess
expectations.

World Class Manufacturers are those

that demonstrate industry best
practices.
 WORLD CLASS MANUFACTURING
DEFINED
AimWorld Class Manufacturing principles apply to all aspect of plant organization, from the quality system to
the maintenance, from cost control to logistic, in a perspective of continuous improvement.

Aiming to compete for quality on a world wide market and becoming competitive in global market.

A position of international manufacturing excellence, achieved by developing a culture based on factors

such as continuos improvement, problem prevention, zero defect tolerance, customer-driven just-in-time
production and total quality management.

World Class Manufacturing (WCM) in fact was born of the collaboration between Flat and the best European
and Japanese expert with the aim to enhance the production standard to recognized world standard.

The system is based on a systematic reduction of all types of lost and waste through the contribution of
everyone and the rigorous use of methods and standards.
Features of a World-Class Company https://www.youtube.com/watch?v=peImK7ELsXY
https://www.youtube.com/watch?v=LUZLATbPkLg
 CLOTHING

F&B RESTAURANT NOT ENOUGH WORKERS

LAUNDRY QUALITY SERVICE FOOD – TIME

CONSUMPTION
BARBER SHOP

SEAFOOD SUPPLIERS

DIY

STATIONERIES

5S at Singapore Restaurant: https://www.youtube.com/watch?v=fTB9X5EibE8

Amalan 5S: https://www.youtube.com/watch?v=lRAsgw895dc

Restaurant 5S: https://www.youtube.com/watch?v=kWQWnl-BmWY

Lean Kitchen 5S: https://www.youtube.com/watch?v=z0G_R40AHGA

Pizza : https://www.youtube.com/watch?v=Atit_jMOd0E
5S Explaination: https://www.youtube.com/watch?v=umUvWLeMZMY
 Augmented
Simulations Advanced Reality
Internet System Cloud Big Data Artificial Cybersecurity
Materials
of Integration Computing Intelligence Autonomous
things Robots

SAFETY SERVICE
SPIRIT
8S
Lean
Productivity
 THE APPROACH -OPERATION

DIAGNOSE ANALYZE PROPOSE IMPLEMENT IMPROVEMENT

WHAT HAPPENED?
DESCRIPTIVE
ANALYTICS

WHY DID IT HAPPEN?

DIAGNOSTIC
ANALYTICS

WHAT WILL HAPPEN?

PREDICTIVE
ANALYTICS

HOW CAN WE MAKE

IT HAPPEN?
PRESCRIPTIVE
ANALYTICS

Dokumen ini dan semua isi kandungan didalamnya adalah milik Kamaruzaman Bin Jahidin. Tidak dibenarkan mencetak semula samada dalam bentuk digital atau salinan asal, sebaran kepada pihak ketiga adalah dengan kebenaran Kamaruzaman Bin Jahidin melainkan atas tujuan penilaian.
 THE PROGRESS & PLAN

DIAGNOSE ANALYZE PROPOSE IMPLEMENT IMPROVEMENT

TO BE DIGITAL DATA DRIVEN

ORGANIZATION STARTING 12/2021
ION
IM IZAT
OPT
N
LIZATIO
ITA
N DIG
LISATIO
A
VISU
N
RM ATIO
O
INF
PHASE1 PHASE 2 PHASE 3
HINDSIGHT INSIGHT FORESIGHT
FROM POWER DRIVEN
TO A VALUE DRIVEN
MANAGEMENT

Dokumen ini dan semua isi kandungan didalmnya adalah milik Kamaruzaman Bin Jahidin. Tidak dibenarkan mencetak semula samada dalam bentuk digital atau salinan asal, sebaran kepada pihak ketiga adalah dengan kebenaran Kamaruzaman Bin Jahidin melainkan atas tujuan penilaian.
 A WAYFORWARD TO SMARTMANUFACTURING

1. MINDEST 4. TALENT
GROWTH MINDSET UPSKILL & RESKILL

2. CULTURE 5. TECHNOLOGY
CHANGE CHOOSE THE RIGHT
MANAGEMENT TECHNOLOGY

3. GOALS 6. ATTITUDE
DEFINING CLEAR NEVER GIVE UP
GOALS

source:aiim.org

Dokumen ini dan semua isi kandungan didalamnya adalah milik Kamaruzaman Bin Jahidin. Tidak dibenarkan mencetak semula samada dalam bentuk digital atau salinan asal, sebaran kepada pihak ketiga adalah dengan kebenaran Kamaruzaman Bin Jahidin melainkan atas tujuan penilaian.
Internal Factors which can make a wcm

Flexibility Discipline

Leads to
ownership Equality

Cell Organization Team

De-layering Autonomy
Management
external Factors which can make a wcm

EXTERNAL RELATIONSHIPS

Supplier Customer
Partnership
development development
 KEY TO
CONTINUOUS
IMPROVEMENT
 https://www.youtube.com/watch?v=M03aX4
01 KUFn0&list=TLPQMjQwMjIwMjB1mh13CM
MqHQ&index=1

https://www.youtube.com/watch?v=HxgPeQ
WORLD CLASS 02 JmhzI

MANUFACTURING
https://www.youtube.com/watch?v=
03 g9P0bjg0mZ8

https://www.youtube.com/watch?v=BNHT3k
04 StYyM&list=TLPQMjQwMjIwMjB1mh13CM
MqHQ&index=5
MANPOWER
MACHINES
MATERIAL
METHODS
Lessons from the WCM practitioner
From Formal to Real Behaviors: How to
Improve Performance in H&S Management
by the Implementation of a Leadership
Based Approach

Simone Cencetti
Head of EHS EMEA Manufacturing and Global
Cordination
 FCA Overview
A global automaker

2
8
FCA Overview Mass
market brands
FCA Overview
Luxury brands
 FCA Overview
Components and Production Systems

6
 Sustainability:
doing well by doing good

7
Sustainability: building a better tomorrow

A strong business is not measured by financial results alone.

For more than a century, dedicated men and women have contributed to building Fiat Group into
a global automaker capable of competing with the very best.

For the Group, achieving such success responsibly has always meant putting people, local
communities and the environment at the center of what we do. Important elements in the creation
of long-term value for stakeholders are our commitment to research and development of
innovative and environmentally superior products and processes, enabling
social and cultural progress, and applying a governance model that assures the principles of
sustainability are an integral part of the development process.

The entire organization is committed to this ambitious challenge, because we understand that our
actions today are vitally important to the well-being and success of future generations.

8
A long story of excellence in Sustainability

1992: Fiat Group First Environmental Report 2004: Fiat Group First
Sustainability Report

2008: First Publication of the Strategic Sustainability Plan

2009: Fiat is admitted in Dow Jones Sustainability Index World, Europe

2010-11-12-13-14: Fiat is confirmed in Dow Jones Sustainability Index

9
What is our “real” final objective?
Reduce incidents?

Reduce H&S risks? Change people behaviors?

35

Create a safety culture?

And HOW?
What do we mean by safety culture?

❑ A «safety culture» exists when the health and safety protection values are
fundamental values for the organization.

❑ Safety culture is part of the organizational culture.

❑ It is not possible to create a stand-alone safety culture

❑ The evidence of a safety culture is the commitment of each - individually and in

groups - for safety, to preserve, increase and communicate it. The commitment to
learn, adapt and change (at individual and organizational) behavior based on what
they have learned from the mistakes and in line with these values.

Inserire Titolo Evento 16

How can we create a real (not formal) safety
culture?

OHSAS18001: low effect Campaign: low effect

Special Project: medium effect

The answer is:

The integration of health and safety 37

aspects in the production system!

This is the magic principle

implemented in the
«World Class Manufacturing»
The path towards the excellence in manufacturing

World Class Manufacturing

38
WCM Structure

Safety

Workplace
Quality Maintenance Logistics
O rganization
Cost
Deployment

Total Industrial Total Quality Total Productive

Method Just in Time
Engineering Control Maintenance
& Std

39
Quality Technical Service
Focus Productivity Improvement Efficiency Level

zero wastes zero defects zero zero

Target breakdowns inventory

Values People involvement, value creation, customer satisfaction

WCM Structure

10 Technical Pillars in a 7 seven steps approach

Early
Logistics &
Cost Focused Autonomous Professional Quality Equipment – People
Safety Customer Environment
Deployment Improvement Activities Maintenance Control Product Development
Service
Management

10 Managerial Pillars
Allocation of Motivation
Commitment Competence
Management Clarity of Roadmap to Highly Time & Level of Level of of
of of
Commitment Objectives WCM Qualified Budget Detail Expansion
People Organization Organization Operators

7 S teps in: S afety

Step 7
Fully
Audit System
implem ented
Management initiated Se lf-init iat ed Step 6 safety
ma nagem ent

Step 5
Bronze 50-59 70-84
Autonomous
safety standards
(*Overall
inspection of
Gold
Step 4 safety levels
Autonomous
*Reeva
points points
(Predictive luation if
G eneral countermeasur inspection safety
Ste p 3 inspection for es against
Analysis of
safety safety Te am in itiat ed
control)
accidents (Train and problems)

60-69
grow people
(Analysis of
World Class 85-100
Silver
causes) S etting in s uch a
Ste p 2 ten tativ e wa y that the y
standa rds for care for
points
safety

points
safety)
Countermeasures (Listing all
Step 1 and horizontal safety
problems)
expansion
(Countermeasures Risk
at the similar
as
sessment areas)

Re active Preventive
Strictly Confidential
Proactive
9
P illa r : 0-5 points
WCM Expansion Approach

MODEL AREA EXPANSION AREA PLANT WIDE

41
LEADERSHIP
DEVELOPMENT

▪ Team-
Leaders/Supervisor
KNOWLEDGE
s
CREATION & TRAINING
▪ WCM Engagement
at All Levels
▪ Advanced Methods

▪ Advance
d Waste
Identification
Why WCM?

By the implementation of specific methodologies and tools

provided by WCM an organization begins a trip towards the
development of a new «organizational culture» focused on the
objective to increase the efficiency and effectiveness of the
production taking into consideration the material and huma
resources involved.

42

It’s a long trip, probably a never ending process, but you will be
able to become a real world class company only when the
organization will adopted the new values and changed is culture.
WCM Principles

1. World Class Safety is the foundation of World Class Performance

2. It is introduced and deployed top down with the constant commitment f the
management

3. WCM Leaders have a passion for high standards

4. It is based on the constant, widespread contribution of all those who work at

the company (and not consultancy driven)
43
5. It is a way of working (and not a project). WCM takes place in the
workplace, not in the office

6. Under WCM, no inefficiencies of any kind are acceptable (goal is always

Zero: accidents, service & quality defects, inventory, breakdowns)
WCM Principles

6. It requires methods, tools and standards and rigorous application of

these

7. In a World Class plant all abnormalities are immediately visible (dust &
contamination free, tracking, control charts…)

8. WCM is most effectively learnt by practicing the techniques with the teams
in the plant

9. The power of WCM comes from the involvement of people

44

10. It results in the setting up of a visible, transparent system. It is effective as it

aims to “keep it simple”

11. World Class companies create crisis-level energy

even in the presence of continued success
Process life cycle m

Process
Design

I mpl em
en
ti o
a t n Processes
execution

The processes that can not be measured, can not be improved

The Safety Pillar

26
What is the "Safety Pillar”
Safety is always first.
Nothing is more important than the health and safety of workers.

Managerial Pillars Foundation

The path to implement the Safety Pillar
Management Initiatives Individual initiatives Initiatives Team

STEP 7

STEP 0 Implementation of
the management
STEP 6
system

STEP 5
Policy and standard Safety
Mission of autonomous management fully
Pillar security safety implemented
STEP 4
control
activity self-employment Overall control of
STEP 3
preliminaries safety levels
Overall control countermeasures
STEP 2 preventive against
Training and
personal growth in potential problems
Creating the
STEP 1 initial standard the field of safety

Countermeasures
and horizontal
accident analysis expansion List of all the
problems
analysis of Extension to similar
causes areas

Reactive Preventive Proactive

The Safety Pillar

The Safety Pillar regards all health and safety aspects

It aims to meet the needs of employees, ensuring the continuous
improvement of safety in the workplace with the aim of eliminating the
conditions that could cause incidents, injuries and diseases.
The primary objectives of the Safety Pillar are:
➢The drastic reduction of accidents and incidents
➢The development of a culture of accident prevention
➢The continuous improvement of ergonomics of the workplace
➢The development of specific professional skills

The ultimate goal is zero injuries, zero near misses, zero unsafe
conditions and zero unsafe acts!
The Safety Pillar

The needs to achieve excellence in the Safety Pillar are:

❑Strong Commitment of Top Management
❑Clear responsibilities defined for the line organization
❑The involvement of all workers: the successful implementation of the system
depends on the achievement of awareness for all employees of the responsibility for
their own safety and the safety of other employees
❑Communication and training: safety comes from a proper communication and
training of all employees
❑Skills: the staff shall achieve a level of skills regarding the provisions of the law and
how to work safely
❑Aggressive safety objectives and goals
❑High standards of performance
❑Supportive and competence safety specialist personnel
❑Continuous audits and observations system in place
❑A comprehensive Occupational Health and Safety Management System integrated
in the production system
From a reactive to a proactive approach
The Seven Steps of Safety Pillar can be grouped in three areas
related to the approach in place:
❑Reactive
❑Preventive
❑Proactive

Going ahead with the implementation of WCM tools and

methodologies means to be able to pass from a reactive to a
proactive approach.

This change can be demonstrated

by the effective step’s tools
implementation and exstension

31
From a reactive to a proactive approach
Management Initiatives Individual initiatives Initiatives Team

STEP 7

Implementation of
the management
STEP 6
system?

STEP 5
standard Security
autonomous management fully
STEP 4 security? implemented
control
self-employment? Overall control of
STEP 3
security levels
Overall control? countermeasures
STEP 2 preventive against
Training and
potential problems
Creating the personal growth in
STEP 1 initial standard the field of safety
Countermeasures
and horizontal
accident analysis expansion? List of all the
problems
analysis of Extension to similar
causes areas

Reactive Preventive Proactive

From a reactive to a proactive approach
Management Initiatives

Methodological Standards Methodological Standards

0 1 2 3 4 5 6 7 0 1 2 3 4 5 6 7

1. Management initiated safety activities 1.Safety standardization and horizontal expansion

2. 5S 2.Safety standards gap analysis
3. 5W + 1H, 5Whys 3.Safety responsibility matrix, safety communication
4. Knowledge of all safety legal requirements system, green cross
and company standards and compliance 4.Visual safety standards, PPE, Risk assessment
analysis
5.Safety RCA inclusive of near misses and unsafe
5. The Heinrich pyramid acts + TWTTP and suitable countermeasures
6. S – matrix 6.Incident trend analysis
7. Accident analysis, safety RCA of injury 7.Periodic safety audits by senior management,
incidents and their countermeasures Management SMAT, shift manager SMAT
9.Basic safety standards for pedestrianization, 8.Effective reporting of non-injuries incidents
control of vehicles, work at height, machinery
safety guarding, etc. 10. Occupational health checkup and follow up

10.Emergency plan and facilities for accident,

fire, explosion, etc.
53
From a reactive to a proactive approach

How to go beyond reactive approach to get widespread pro-

activeness through effective management leadership and
accountability.

Example of tools and standards:

➢ General Inspection for Safety - Smat Audit

➢ Check list Supervisor
➢ Visual Management

54
 Individual initiatives
How to extend the capacity to highlight
unsafe acts and unsafe conditions in order Methodological Standards

to get risks assessment and events 0 1 2 3 4 5 6 7

prevention effectiveness.

Example of some tools and standards:

➢Operator SMAT: Safety Management Audit Training

➢Human Error Root Cause Analysis (HERCA)
➢World Class Level Root Cause Analysis - Recognition,
Judgment and Act (WCL RCA – RJA)
➢System to prevent people from making mistakes

55
Motivating people and develop leadership
Increase personal involvement by Develop personal leadership:
motivating people to change: ✓Promote personal leadership attitude

✓Ask for opinions creating the right ambient

✓Give feedback – Always! ✓Stimulate leadership by creating

✓Coherence throughout the conditions
organization ✓Create team activitites
✓Recognize results ✓………………………..
✓Implement initiatives focused on
people needs
✓………………………..

Example of tools and standards: ➢ TWTTP

➢ Visual Management
➢ Motivating initiatives
➢ Health Promotion Programs 56
Autonomous and Team initiated safety

Initiatives Team
Workers analyze existing or potential problems and
define necessary solutions directly where they are Methodological Standards
present
0 1 2 3 4 5 6 7

The objective is to attack the Unsafe Conditions and

Unsafe Acts by the total involvement of the organization
with the use of specific tools. It means the
implementation of a constant process of independent
verifications at the work-place

Example of tools and standards:

➢Autonomous inspections
➢Safety Captain
➢Risk Prediction
➢Risks Hunting

57
In conclusion

To build a true safety culture we must create an environment where safety

is a core value of the business organization, and more importantly, within
the hearts of the individuals.

The approach we have implemented to obtain our results is based to:

✓The involvement of all people who work at all levels of the organization
✓The guidance of an appropriate leadership
58
✓The application of methodologies and tools typical of WCM
✓The continuous verification according to a system of KPIs and Audit
✓The dissemination and standardization of results
We are aware that is a long and demanding process but our experience is
demonstrating that it is possible …….
Kaizen
(CONTINOUS IMPROVEMENT)

in a World Class Company

Examples of Kaizen:

-Reduction in manpower numbers in assembly line.

-5S at warehouse.
- Automation in quality control inspection.
Others????
 MAN BEHIND KAIZEN

§ Masaaki Imai is known as the developer of Kaizen. He is

known as the “Lean Guru” and the father of Continuous
Improvement

§ According to him In simple words Kaizen means improvement.

Kaizen strategy calls for never-ending efforts for improvement
involving everyone in the organization – managers and workers
alike.
3

§ Author of books like Kaizen(1986)Key to Japans Competitive

success and Gemba Kaizen(1997)

http://en.wikipedia.org/wiki/Masaaki_Imai
 KAIZEN METHODOLOGY

§ Finding out the pain area

§ Analysis of the pain area

§ 3M„s Considered with the 4M„s

§ 3M‟s MURA, MURI, MUDA

§ muda ("non-value-adding work") 5
§ muri ("overburden")

§ mura ("unevenness")

§ 4M‟s MAN, MACHINE, MATERIAL,

METHOD
http://en.wikipedia.org/wiki/Kaizen
 WHO DOES KAIZEN ? WHY ?

§ WHY ?
§ Maintenance
§ Objective of the maintenance
function is to maintain current
technological, managerial, and
operating standards
§ Innovation
§ Improvement function is aimed at
improving current standards.

§ WHO ?
§ Kaizen
Ongoing improvement involves
everyone
§ Top management

§ Managers

§ Workers
4

http://www.kaizen.com/
5S+2S
TYPES OF WASTES
• Mura(Unevenness) is avoided through Just In Time
MURA systems which are based on little or no inventory, by
supplying the production process with the right part, at
the right time, in the right amount

• Muri(overburden) can be avoided through

MURI standardized work. To achieve this a standard
condition or output must be defined to assure effective
judgment of quality.

• Muda(non-value-adding work) Can be avoided by

MUDA identifying and eliminating non value adding and
unnecessary activities

6
 GEMBA KAIZEN

¢ Gemba is a Japanese word meaning 'real place,' where the real action
takes place. In business, Gemba is the „shop floor‟ or „production place‟
where the value-adding activities to satisfy the customer are carried out.

¢3 Ground rules for practicing Kaizen in Gemba are: -

1.Housekeeping,
7
2.Muda elimination.
3.Standardization.

http://www.gemba.com/
 BENEFITS OF KAIZEN
v Kaizen Reduces Waste like inventory
waste, time waste, workers motion
v Kaizen Improves space utilization,
product quality
v Results in higher employee moral and job
satisfaction, and lower turn-over.
v Toyota is well-known as one of the
leaders in using Kaizen. In 1999 at one
U.S. plant, 7,000 Toyota employees
submitted over 75,000 suggestions, of
which 99% were implemented. 12
TOTAL QUALITY
CONTROL

in a World Class Company

Differences
between tqc, tqm,
qc,qa
 Problem solving
process
A comprehensive statistical process control system uses seven tools to reduce variability
and eliminate waste
1) Histogram

2) Check sheet

3) Pareto chart

4) Cause-and-effect diagram

5) Scatter Diagram

6) Stratification Diagram

7) Control chart
7 Tools for Quality Control

A comprehensive statistical process control system uses seven tools to reduce variability
and eliminate waste
1) Histogram

2) Check sheet

3) Pareto chart

4) Cause-and-effect diagram

5) Scatter Diagram

6) Stratification Diagram

7) Control chart
80
Basics of Statistics
&
7 QC Tools

8
1
What is Statistics?

§ Statistics is a branch of mathematics working with data collection, organization, analysis,

interpretation and presentation.

§ Characteristics of Statistics:
• It Simplifies mass of the data
• Helps to get concrete information about any problem
• Helps for reliable and objective decision making
• It presents facts in precise and definite form
• It facilitates comparison (Measures of central tendency, measures of dispersion)
• It facilitates predictions (Time series, regression analysis)
• Helps in formulation of suitable policies

8
2
Two Branches of Statistics
Descriptive Statistics Inferential Statistics
Concerned with describing the target Make inferences from samples and
population generalizes them with population
Organizes, analyze and present the data in Compares, test, predicts future outcomes
meaningful form
Final results are shown in form of charts, Final result in the probability scores
tables, graphs
Describes a data which is already known Tries to make conclusions about the
population that is beyond the data
available
Tools: Tools:
Measures of central tendency (Mean, Hypothesis testing, Analysis of variance.
Mode, Median)
Spread of data (Range, standard deviation)
8
3
Measures of Central Tendency

§ Descriptive measures that indicates where the center or typical value of variable lies in collected
set of measurements are called as Measures of central tendency.
§ Measures of central tendency are often referred as averages.
§ The Mean, Median, Mode are the valid measures of central tendency.

§ Mean (Average):
Represents the sum of all values in a dataset divided by the total number of the values. A mean
score is an average score, often denoted by X. It is the sum of individual scores divided by the
number of individuals. Thus, if you have a set of N numbers (X1, X2 , X3 , . . . XN )
The mean of those numbers would be defined as:

X = (X1 + X2 + X3 + . . . + XN) / N = [Σ Xi ] / N
8
4
Measures of Central Tendency

§ Median:
The middle value in a dataset that is arranged in ascending order (from the smallest value to the
largest value). If a dataset contains an even number of values, the median of the dataset is
the mean of the two middle values.

§ Mode:
Defines the most frequently occurring value in a dataset. In some cases, a dataset may contain
multiple modes while some datasets may not have any mode at all.

8
5
Measures of Variability of data

§ Variability (also called spread or dispersion) refers to how spread out a set of data is. Variability
gives you a way to describe how much data sets vary and allows you to use statistics to compare
your data to other sets of data.

§ Range
The range is the amount between your smallest and largest item in the set. You can find the range
by subtracting the smallest number from the largest.
The range is a simple measure of variation in a set of random variables. It is difference between the
biggest and smallest random variable.

Range = Maximum value - Minimum value

8
6
Measures of spread of data

§ Standard Deviation
The standard deviation tells you how tightly your data is clustered around the mean (the average). A
small SD indicates that your data is tightly clustered — you’ll also have a taller bell curve; a large
SD tells you that your data is more spread apart.

The standard deviation of a population is defined by the following formula:

σ = sqrt [Σ (Xi - X) 2 / N]

Where σ is the population standard deviation, X is the population mean, Xi is the ith element from
the population, and N is the number of elements in the population.
8
7
Statistical Thinking

§ It is well recognized that in order to maintain and improve our competitiveness, we need to
continually improve all aspects of our business at an increasing rate.

§ Statistical Thinking provides a common methodology for Continuous Improvement that is

applicable to everything we do.

Process

Variability Data

8
8
Elements of Statistical Thinking

The four elements of statistical thinking are:

§ Notion of process
(Detail understanding of the process flow)

§ Understanding and dealing with variation

(Identifying causes of variation, dealing with identified causes to remove their effect)

§ Understanding and appropriate use of statistical tools

(Knowledge of statistical processes, so one can pick the tool that will aid most at each step)

§ Systematic approach to process improvement

(Using logical systematic formal approaches with varying emphasis and level of detail) 9
History behind 7 QC Tools

§ The 7 basic tools of quality originated in japan when the country was undergoing major quality
revolution and became a mandatory topic as a part of Japanese industrial training program.

§ These tools are simple graphical and statistical techniques which help in solving critical quality
related issues.

§ These basic tools are often associated with kaoru ishikawa, a Japanese who is credited as a heavy
weight in quality management and who is especially known for the development of quality circle
and ishikawa or fishbone diagram.

§ Kaoru believed that you will be able to solve 95% of problems around you if you wisely use the 7
quality tools.

90
Histogram

Histograms or Frequency Distribution Diagrams are bar charts showing the distribution pattern of
observations grouped in convenient class intervals and arranged in order of magnitude.

Histograms are useful in studying patterns of distribution and in drawing conclusions about the
process based on the pattern.

Key Concept behind plotting Histogram are

1)Data always has a variation
2)Variation has a pattern
3)Patterns can be seen easily, when plotted pictorially

91
Histogram – An Example
§ The following table shows
observations of layer thickness on
semiconductor wafers

§ The histogram shows frequency

distribution against metal thickness

92
Check Sheet

§ Also called: defect concentration diagram

§ A check sheet is a structured, prepared form for collecting and analyzing data. This is a
generic data collection and analysis tool that can be adapted for a wide variety of purposes.

§ Measure of DMAIC – collection of data

§ Specify the type of data to be collected, the part or operation number, the date, the analyst, and
any other information useful in diagnosing the cause of poor performance

§ A trial run to validate the check sheet layout and design

93
A Check Sheet to Record Defects in Aerospace

Time-oriented summary is particularly valuable in looking for trends or other meaningful patterns
15
Pareto Chart

§ The Pareto Chart shows the relative frequency of defects in rank-order, and thus provides a
prioritization tool so that process improvement activities can be organized to "get the most bang
for the buck", or "pick the low-hanging fruit“

§ Used both in Measure and Analyse step of DMAIC

§ Pareto chart does not automatically identify the most important defects, but only the most
frequent

§ When the list of defects contains a mixture of those that might have extremely serious
consequences and others of much less importance, one of two methods can be used:
• Use a weighting scheme to modify the frequency counts.
• Accompany the frequency Pareto chart analysis with a cost or exposure Pareto chart
95
Pareto Chart – An Example

§ Following is an example of paint defects from an automotive assembly plant:

§ After reviewing the chart above, there is no question which defect to work on first.
§ If you learned that it costs $10 to fix a Dirt defect, while Sag defects cost $100 to correct, Sags
would probably be the highest priority.
96
Cause and Effect Diagram

§ Once a problem has been identified, we have to look for possible sources of this problem

§ Cause and effect diagram is used in the analyze and improve steps of DMAIC to find potential
causes

§ Also known as Ishikawa diagrams, these methods finds its application in both manufacturing and
service industry

§ Several alternative classification methods of the causes

97
Cause and Effect Diagram………….(Continued)

§ 5Ms used in manufacturing industry

• Machine(Technology), Method (process),Material (Includes Raw Material etc.), Man Power
(Physical/mental work), Measurement (Inspection)
• Some people have included three more Ms Mother Nature, Management and
Maintenance

§ 8Ps used in marketing

• Product/Service, Price, Place, Promotion, People/personnel, Process, Physical Evidence,
Packaging

§ 5Ss used in the service industry

• Surroundings, Suppliers, Systems, Standard documentation skills, Scope of work

98
Cause and Effect Diagram – An Example

99
Scatter diagram

§ Useful plot for identifying a potential relationship between two variables.

§ Let us say data is collected in pairs for two variables(x and y)

§ The shape of plot of y against x will give us some indication of relationship between x and y

§ Scatter diagrams are very useful in regression modelling

§ It must be kept in mind that scatter diagram gives potential relationship and not causality

§ Designed Experiments may give us some causality

10
0
Scatter Diagram – An example

§ Following is a example of plot to show if there is any relationship between Metal recovery and
Reclaim flux.

§ The scatter diagram indicates a strong positive correlation between metal recovery and flux
amount
10
1
Stratification Diagram

§ Stratification is defined as the act of sorting data, people, and objects into distinct groups or
layers. It is a technique used in combination with other data analysis tools.

§ It is used when data analysis may require separating different sources or conditions

§ Here are examples of different sources that might require data to be stratified:
• Equipment
• Shifts
• Departments
• Materials
• Suppliers
• Day of the week
• Time of day
• Products 23
Stratification – An Example

§ The ZZ-400 manufacturing team wants to test whether

product purity and iron contamination were related, but
the plot did not demonstrate a relationship.

§ Then a team member realized that the data came from

three different reactors. The team member redrew using
a different symbol for each reactor’s data

§ The data from reactor 2 and reactor 3 are circled. Even

without doing any calculations, it is clear that for those
two reactors, purity decreases as iron increases.

§ However, the data from reactor 1, the solid dots that are
not circled, do not show that relationship. Something is
different about reactor 1. 24
Control Charts

§ Variability is inherent in all manufacturing processes. These variations may be due to two causes
i. Random / Chance causes (un-preventable).
ii.Assignable causes (preventable).

§ Control charts was developed by Dr. Walter A. Shewhart during 1920's while he was with Bell
Telephone Laboratories.

§ These charts separate out assignable causes.

§ Control chart makes possible the diagnosis and correction of many production troubles and brings
substantial improvements in the quality of the products and reduction of spoilage and rework.

§ It tells us when to leave a process alone as well as when to take action to correct trouble
10
4
Control Charts : Basics Concepts

Mean and Range :

§⎯X - Mean is the average of a sub-group
§R - Range is the difference between the minimum and maximum in a sub-group

Control Charts for Variables

§Charts depleting the variations in ⎯X and R with time are known as ⎯X and R charts.

§⎯X and R charts are used for variable data when the sample size of the subgroup is 2-5.

§When the subgroup size is larger, s Charts are used instead of R charts where s is the standard
deviation of the subgroup.

10
5
Important Notations

X quality X sample mean of X ( X -

characteristic bar)
n sample R Sample
Range
size Maximum value - Minimum
value

k number of R Mean of ranges

R k
samples
X sample mean ( X - ˆ estimatedstandarddeviation of
bar) X

nX
10
6
Control Limits for X-bar Chart

Since we are plotting sample means on the X-

bar chart, the control limits are based on the
distribution of the sample means

The control limits are therefore

ˆ
UCL X 3 UCL X A2
n R

ˆ
LCL X 3
n A2 is a factor that depends on the n, the sample size,
LCL X A2
R and will be given in a table. 28
X Bar and R Chart – An Example

A company that makes soft drinks wants to monitor the sugar content of its drinks.
The sugar content (X) is normally distributed, but the means and variances are unknown.
The target sugar level for one of its drinks is 15 grams.
The lower spec limit is 10 grams. The upper spec limit is 20 grams.
The company wants to know how much sugar on average is being put into this soft drink and how
much variability there is in the sugar content in each bottle.
The company also wants to know if the mean sugar content is on target.
Lastly, the company wants to know the percentage of drinks that are too sweet and the percentage
that are not sweet enough.

(Next section)

10
8
X Bar and R Chart Example

To obtain this information, the company decides to sample 3 bottles of the soft drink at 3 different
time each day:
•10 A.M,
•1:00 P.M. and
•4:00 P.M.
For the past two days, the following data were collected:

10
9
 LCL X A2 R
X-bar Chart Factor, A2 X 15.33

15.33
R 8.5
n A2 1.02(8.5)
2 1.88 FromTable, the values are as below,
3 1.02 6.66
4 0.73 n 3
5 0.58 UCL X A2 R
A2 1.02

15.33
1.02(8.5)

11
24.0 0
§ The process mean is therefore stable and
predictable and, consequently, we can
estimate it.
X-bar Chart for Sugar Content
30.00
§ Our best estimate of the mean is the center
25.00
line on the control chart, which is the overall
mean (X-double bar) of 15.33 grams. 20.00
15.00
10.00
§ If the process remains in control, the 5.00
company can predict that in the future will 0.00
have a sugar content of, on average, 15.33 10 1 4 10 1 4
grams.
Hour Hour

1 2
§ This prediction, however, indicates that
Day
there is a problem with the location of the
mean.

§ The process mean is off target by 0.33 grams

(15.33 -15.00). 32
R Charts

§ Monitors the process variability (the variability of X)

§ Tells us when the process variability has changed or is about to change.

§ R chart must be in control before we can use the X-bar chart.

§ Rules for detecting changes in variance:

• If at least one sample range falls above the upper control limit, or there is an upward trend
within the control limits, process variability has increased.
• If at least one sample range falls on or below the lower control limit, or there is a downward
trend within the control limits, process variability has decreased.

11
2
X Bar and R Chart – An Example……….(Continued)

Factors for R Chart

n D3 D4
LCL 0(8.5)
n 3
2 0 3.27 0
3 0 2.57 D3 0
UCL 2.57(8.5)
4 0 2.28 D4
5 0 2.11 2.57 21.85

11
3
§ Since all of the sample ranges fall within the
control limits, the R chart is in control.
R Chart for Weight
§ The standard deviation is stable and
predictable and can be estimated 25
20 R
15 LCL
§ This does not necessarily mean that the 10 UCL
amount of variation in the process is R-bar
acceptable. 5
0
10 1 4 10 1 4

§ Continuous improvement means the company Hour Hour

should continuously reduce the variance. 1 2

Day
§ Since the process variation is in control,
management action is required to reduce the
variation.
11
4
Interpreting the charts

§ In interpreting patterns on the chart, we must first determine whether or not the R chart is in
control
• You must eliminate assignable causes from R chart first
• Never attempt to interpret the x chart when the R chart indicates an out-of-control condition

§ Typical patterns may be seen and interpreted from the charts.

§ The main elements of an SPC chart are:

• The data itself, which is data in order over time, usually shown as distinct data points with
lines between.
• The mean of the data.
• The upper and lower control limits (UCL and LCL), which are set depending on the type of SPC
chart.
11
5
Cyclic Pattern

§ Such a pattern on the chart may result from systematic environmental changes such as
temperature, operator fatigue, regular rotation of operators and/or machines, or fluctuation in
voltage or pressure or some other variable in the production equipment.

§ R charts will sometimes reveal cycles because of maintenance schedules, operator fatigue, or tool
wear resulting in excessive variability.

11
6
Mixture

§ A mixture is indicated when the plotted points tend to fall near

or slightly outside the control limits, with relatively few points
near the centre line

§ A mixture pattern can also occur when output product

from several sources (such as parallel machines) is fed into a
common stream

Shift in process level

§ Shifts may result from the introduction of new workers; changes
in methods, raw materials, or machines; a change in the
inspection method or standards
11
7
Trend

§ Continuous movement in one direction

§ Causes-gradual wearing out or deterioration of a tool or some other critical process component,
operator fatigue, seasonal influences, such as temperature

11
8
Stratification

§ Tendency for the points to cluster artificially around the center line

§ Incorrect calculation of control limits, sampling process collects one or more units from several
different underlying distributions within each subgroup

11
9
TQC CASE STUDY:
ROLLS ROYCE
 2

How to Carry Out Problem Solving BACK Map NEXT

Scope Objectives & Principles

Prerequisites
1. Understand Gate 2. Apply a Gate
Start the problem Check problem follow-up Check
solving list process list
approach

3. Apply
Gate
structured
Check
list problem solving
End (8D)
 3

Scope BACK Map NEXT

This ‘How To’ will enable you to:

•Understand techniques for practical problem solving and develop an approach for applying
them
•Understand and apply a practical problem solving process used to manage the majority of
problems encountered – the problem follow-up process or 3Cs (concern, cause,
countermeasure)
•Understand and apply the 8D process (8 Disciplines)

© 2019Rolls-Royce
 4

Objective and Principles BACK Map NEXT

Level
Definition: A problem is anything that deviates
from the ideal situation or standard Standard
Deviation – size of the
problem
•Three main factors to consider: Actual
• The standard
• The deviation away from the standard
• Time elapsed (for history / trend) Time

•Effective problem
•Problem solving is about logically and solving is only finished
methodically analysing the process, evidence when we can:
and behaviours to: • conclusively prove the causes that we have
• protect the customer and downstream identified
areas from further escapes • demonstrate that we have delivered a sustained fix
• isolate non-compliance • implement the fix in all similar products and
• determine the root cause of problems (& processes required
escapes) and fix it permanently
© 2019Rolls-Royce
 5

Objective and Principles BACK Map NEXT

‘Standard’ approach Problem description

Problem definition (5W&1H)

Grasp the
situation /
understand Locate area / Point of Cause (POC)
the problem
Implement Containment

Establish Direct Cause

Investigate and (5 Whys / 7Ms)
countermeasure Determine Root Cause
(MUST address root cause)
Countermeasure

Follow-up / monitor / close

© 2019Rolls-Royce
 6

Prerequisites BACK Map NEXT

Knowledge:
•Existing problem solving activities

Commitment:
•Buy-in from the team (including the support team) to establish a problem solving
process, and to support its effective operation

© 2019Rolls-Royce
 7
1. Understand the problem solving BACK Map NEXT
approach
Understand problem solving approaches
•The visual management system should allow
problems to be highlighted and dealt with
immediately, in “real time”
•The responsibilities should be clear and visual
showing when to solve problems, when to
escalate problems and how to respond to problem
escalation
•The environment and leadership support should
enable all employees to have a basic capability to
solve problems using a structured approach

© 2019Rolls-Royce
 8
1. Understand the problem solving BACK Map NEXT
approach
Understand problem solving approaches
Risk impact of
• There are numerous approaches to Complexity failure
problem solving considering
complexity, time to complete analysis, Six Sigma
projects (belts)
and risk impact of failure
• The majority of problems can be 8D Problem
solved with a simple Solving
Concern/Cause/Countermeasure Visual
(3Cs) process and a structured management
problem solving methodology (eg. 8D 3Cs
process) Intuition /
discussion with
expert

Time to complete
© 2019Rolls-Royce
 9
Gate checklist 1: Understand the problem BACK Map NEXT
solving approach
þ Team visual management includes problem solving to manage issues
þ The problem solving process is defined and managed, including
þ Responsibilities
þ Escalation
þ Leadership support
þ The problem solving approach is understood and chosen techniques selected for application

© 2019Rolls-Royce
 10

2. Apply a problem follow-up process BACK Map NEXT

Applying the 3Cs – Concern, Cause,

Countermeasure
•A 3C sheet is a key visual management tool that helps to
share and clearly communicate problem volume and status

•The problem follow-up sheet enables anyone to raise a

problem, follow a structured process and share progress
towards problem resolution

Concern Cause Countermeasure

• Identify the concern • Find the root cause of the concern •Identify and implement actions that
• Implement any containment actions permanently address the root cause

© 2019Rolls-Royce
 11

2. Apply a problem follow-up process BACK Map NEXT

Applying the 3Cs – Concern, Cause, Countermeasure

The unique identifier gives The problem Concern: The sheet title box
an idea of the volume of keep it simple and use provides
problems raised. The date facts and data. Use Ws traceability to the
shows how long a problem and 1 H where individual and the
has been open. Raiser id - appropriate (what, where, related problem
for further information. who, why, when, how). activity.

© 2019Rolls-Royce
 12

2. Apply a problem follow-up process BACK Map NEXT

Applying the 3Cs – Concern, Cause, Countermeasure

The problem Cause: describe The problem Countermeasure: The Status

counterme tracks the
the root cause if known. A risk describe the root cause if known.
asure ‘who’ problem to
containment may also be A risk containment may also be
and ‘when’ closure,
required. Root cause analysis required. Root cause analysis
is agreed confirmed
techniques may include the use techniques may include the use of
of a fishbone (or Ishikawa) a fishbone (or Ishikawa) diagram (not by the raiser
allocated). of the
diagram or a ‘5 Whys’ approach. or a ‘5 Whys’ approach.
problem.

© 2019Rolls-Royce
 13

2. Apply a problem follow-up process BACK Map NEXT

Applying the 3Cs – Concern, Cause,

Countermeasure
•Regular reviews should be held to confirm progress, share
status and take action where required

•Wherever possible, problems and concerns should be solved

by the local team

•In some cases, for example repeat concerns, more help may
be required

•An escalation process should be implemented to enable

support to be allocated to overcome more difficult issues
• The 3C process is a great tool for recording, visualising
and solving problems to continuously improve
Single 3C strips can be separated
performance to be worked on by individuals or
teams
© 2019Rolls-Royce
 14
Gate checklist 2: Apply a problem follow- BACK Map NEXT
up process
þ The problem follow-up process is understood by all
þ The principles of the 3C sheet are incorporated into the applied follow-up process
þ The problem follow-up process is being managed, with
þ Regular reviews taking place within local team
þ Escalation being supported
þ Root cause issues are being resolved

© 2019Rolls-Royce
 15

3. Apply structured problem solving (8D) BACK Map NEXT

Plan-Do-Check-Act thinking through the 8 disciplined steps (8D)

© 2019Rolls-Royce
 16

3. Apply structured problem solving (8D) BACK Map NEXT

8D problem solving report ‘on a single page’

© 2019Rolls-Royce
 17

3. Apply structured problem solving (8D) BACK Map NEXT

0: Implement immediate containment and 1:Form the team

prepare • Identify key stakeholders & develop a
•Define initial problem symptoms communication plan
•Engage stakeholders • Identify team members
•Review problem type history • Full time / part time
•Have we seen it before? • Sponsor / investigation owner / coach
•Is emergency action necessary? • Develop top level plan
•Is an 8D appropriate?

© 2019Rolls-Royce
 18

3. Apply structured problem solving (8D) BACK Map NEXT

2: Define the Problem 3: Develop containment action

•Describe the problem • Protect the customer and your company
• What, where, who, why, when and how? • Evaluate the risk
(5Ws & 1H) • Contain – Locate, Check, Sentence, Record
•Establish objectives • Maintain the supply chain
•Build a timeline of events • Read across
•Define boundaries Graphs & control sheets
• What extent of the value stream is involved? Pareto diagrams
Check sheets
•Collect and analyse data Scatter diagram Stratification
• Decisions based on facts Histogram Cause & effect (fishbone) diagrams
• Use 7 Quality tools (break down the problem)
© 2019Rolls-Royce
 19

3. Apply structured problem solving (8D) BACK Map NEXT

Establish the Point of Cause (POC)

Process 5 Process 6 Process 7 Problem!

Can we see the

Yes Yes Yes
problem here?
Process 4

Yes
Process 3 Process 2 Process 1

Yes No No

Point of cause?

© 2019Rolls-Royce
 20

3. Apply structured problem solving (8D) BACK Map NEXT

Grasp the situation using ‘5Ws & 1H’

• To understand and communicate the problem effectively, use the 5Ws & 1Htools:

Ø What?
Ø Where?
Ø Who?
Ø Why?
Ø When?
Ø How?

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 21

3. Apply structured problem solving (8D) BACK Map NEXT

4: Identify and Verify Root Cause 5: Identify Corrective Action

• Identify possible causes • Develop possible solutions
• Escape • Escape
• Problem • Problem
• Management system failure • Management system failure
• Evaluate them • Evaluate solutions
• Verify them • Best effectiveness / time / cost balance
• Check for multiple causes • Verify actions address all the causes

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3. Apply structured problem solving (8D) BACK Map NEXT

‘5 Whys’ Root Cause Analysis (RCA)

How many times do you ask why?
•Until you establish the Root Cause of the problem
The Root Cause:
•Rarely obvious
•Established theory may be tested by switching the problem on and off
Containment:
•Often countermeasures cannot be implemented immediately; a containment action will
be required
•Implement on the spot to prevent the abnormal occurrence, maintaining the required
Customer requirement rate
•A containment must never be interpreted as a countermeasure! Implement with an agreed
target closure date, and follow-up with frequent progress / status reviews.

© 2019Rolls-Royce
 23

3. Apply structured problem solving (8D) BACK Map NEXT

Taiichi Ohno’s ‘5 Whys’ example

Problem: Robot stops operating suddenly
1st Why: Why did it stop?
No power as the fuse melted…
2nd Why: Why did the fuse melt?
Current draw was too high for the fuse which overloaded…
3rd Why: Why did it overload?
Excessive friction through inadequate bearing lubrication…
4th Why: Why was the lubrication inadequate?
The oil pump was not drawing enough oil… Why was the oil
5th Why: pump not drawing enough oil? The pump shaft was worn…
Why was the pump shaft worn?
6th Why: The oil was contaminated with abrasive particles…
Why was the oil contaminated?
7th Why: No oil filter on the intake pump…

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 24

3. Apply structured problem solving (8D) BACK Map NEXT

7Ms Root Cause Analysis

(RCA) Fishbone/Ishikawa
Diagram

• Causal factor – removal may reduce the risk of a problematic outcome but won’t remove it with any certainty
• Root cause – removal / countermeasure will prevent a problem occurring
• Addressing a causal factor instead of the root cause does not solve the problem, so we need to determine the problem
root cause through Root Cause Analysis

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 25

3. Apply structured problem solving (8D) BACK Map NEXT

6: Implement Corrective Action 7: Define and plan Preventative action

•Project management • Identify opportunities for similar problems
• Plan • Look for systematic causes
• Timing • Identify changes, reinforcements &
• RACI (responsible, accountable, consulted, improvements
informed) • Develop and implement action plans
• Remove containment
• Validate that actions do what they should 8: Recognise the team
• Document the investigation
• Look at lessons learnt
• Recognise the team effort / celebrate
© 2019Rolls-Royce
 26
Gate checklist 3: Apply structured problem BACK Map
solving (8D)
þ A structured problem solving process is understood by all
þ Appropriate training of structured problem solving has taken place (incl. the 7 quality tools)
þ The principles of the 8 Disciplines are incorporated into the applied process
þ The structured problem solving process is being managed, with
þ Regular reviews of status and process effectiveness
þ Escalation being supported
þ Root cause issues are being resolved

© 2019Rolls-Royce
 EXAMPLE OF
8D KAIZEN REPORT
EXAMPLE OF A3 REPORT
Essential WCM
KPI

in a World Class Company

KPI EXAMPLES FOR THE
MANUFACTURING
INDUSTRY
 KEY PERFORMANCE
INDICATORS
A manufacturing KPI or metric or target is a well-
defined measurement to monitor, analyze and
optimize production processes regarding their
quantity, quality as well as different cost aspects. They
give manufacturers valuable business insights to meet
their organizational goals.
 KPI=TARGET
• Define Targets for monitoring Quality, Cost, Delivery/Speed), Safety &
Morale/People (QCDSM) at 3 levels: Company, Department and Frontline
WorkTeams.
• The targets should be such that can be monitored on a daily
basis.
• Exceptions can happen only when a Category has multiple
Parameters – For example Unscheduled Stoppages (measured
Daily) and Energy Consumption (measured Monthly) under the
Cost Category.
 1a]. Set the Company
QCDSM targets/KPI

• Chief Executive along with Senior Team members to define the

measures and monitoring mechanism.
• Examples of Targets
Company Targets
Overall Targets of the company which can be measured on a
Daily Basis e.g. Customer Complaints, Breakdowns, On Time
Delivery, Accidents, Attrition
 1b] Set QCDSM targets/KPI
for all Departments
• Every Department to have its own QCDSM Targets - exceptions can be made only for
departments which have less than 5 People.
• Department Head along with Direct Reportees / Supervisors to decide basis Company Targets.
CEO to guide / facilitate the process.
• Department Targets should be aligned with the Company’s Targets but not necessarily in the
same Category.
• For example Unscheduled Breakdowns is a Cost Category measure for the Company but a
Quality Category measure for the Maintenance Team. Similarly OEE can be a Cost Category
measure for the Company but a Delivery/Speed Category measure for the Production
Department.
• Targets for which the Department can be held responsible for example Customer Rejections
(Production), Equipment Downtime (Maintenance), Material Stockout (Purchase), Manhours
lost due to Accidents, Absenteeism
1c] Set QCDSM targets for all
Frontline Workteams
• Every Frontline WorkTeam having 10 or more people should have its own
QCDSM Targets. Production / Operations may have many WorkTeams.
• Workteams having less than 10 members can be combined to ensure complete
alignment.
• Every person should be a part of a Team having QCDSM Targets.
• WorkTeam Leader / Supervisor alongwith Workers in team to decide basis
Department or Company Targets. CEO / Department Head to guide / facilitate
the process.
• Targets for which the Frontline Workteam can be held responsible for example
Rework (Production),Preventive Maintenance Schedule Adherence
(Maintenance), Steam Availability (Utility), Near misses,
Suggestions/Innovations
 PRODUCTION
VOLUME
Evaluate your production volume over
time

• The first manufacturing KPI

example will give you an
overview of what your
factories are able to produce
in a month, a semester or a
year. You then have the big
picture of what your business
is handling and when.
Comparing it to previous
similar periods with the help
of a dashboard is a good
indicator of evolution, to stop
anomalies, regress or
progress.
• A good production volume is
one that satisfies demand but
does not leave too much
inventory in stocks.
 • One of the most important manufacturing metrics
to track is production downtime. If your machines
are not working, the result is money that can’t be
made : reducing your downtimes to a minimum
must be your goal number one to avoid further lost
profit.
PRODUCTION • When downtime happens, it is necessary to report
DOWNTIME the reasons why it occurred, as it is the only way
you can track the problems, assess them, and then
Optimize your acknowledge what needs to be solved.
maintenance • Downtime can also be planned, when the
regularly equipment needs maintenance, or during lunch
breaks and shifts: that way, you can not only
optimize it, but also keep it under control by
preventing machines out of service, or inventories
running out of stocks taking you by surprise.
Performance Monitor
Monitoring will help you improve processes, boost profitability, and evaluate the effectiveness of
your equipment.
 PRODUCTION COSTS
Monitor the costs implied in
the production
• The production cost by product specifies how
much each component of the product costs and
how much it represents for the finished
product. Breaking down this manufacturing
metric into the various types of costs will tell
which ones are making the biggest part of unit
and can help to to track different expenses that
can be optimized.

Performance Indicators
• Tracking these production costs over time is a
Measure the overall costs per unit your business has over
good thing to know how they evolve and if you
a production cycle and see if that makes you profitable manage, at the end of the day, to stay under the
in regard to the sales price you want to set. target price per unit you set in order to make it
profitable.
OVERALL OPERATIONS EFFECTIVENESS (OOE)
Evaluate the efficiency of your operations
• One of the production metrics that include availability in its calculations
as well as standard time and off standard time, the overall operations
effectiveness (OOE) looks into total operations time as the maximum
value. That means that you need to multiply the performance with
quality and availability, where availability equals the actual production
time divided by the operating time.
• To have a clearer picture and avoid manual calculations, you can take a
look at our visual example and let modern software instantly visualize
the progression over time and compare between different periods. That
way, you will eliminate the hassles of static spreadsheets and generate
instant insights.
Performance Indicators
Track this metric in order to have a clearer picture of how
your manufacturing process is running and improvements over
time.
 OVERALL EQUIPMENT
EFFECTIVENESS (OEE)
Assess the scheduled
efficiency of your equipment
• If you need to paint a full picture of quality KPIs in
manufacturing, you need to include the overall
equipment effectiveness (OEE). This metric
includes scheduled time only, hence, if the
machine is not scheduled or maintenance is
performed, the OEE doesn’t include this time.
• Essentially, the metric combines performance,
quality, and availability, the 3 focal points of
calculating the OEE, and ensuring that you’re
running your manufacturing facility effectively. It
would also make sense to use automating
features of intelligent software that will notify you
as soon as an anomaly occurs. That way, you can
immediately spot issues and act accordingly.
Performance Indicators
Use this metric to evaluate the
overall effectiveness of your equipment,
whether it’s a single piece or the entire line of
production.
TOTAL EFFECTIVE EQUIPMENT PERFORMANCE (TEEP)
Monitor the overall efficiency of your equipment

• In comparison to the OEE that measures the scheduled production time, the total
effective equipment performance (TEEP) includes the total hours that are fully
productive, meaning 24h/day, 365days/year. Similar to other metrics focused on
effectiveness, this production KPI also considers availability, performance, and
quality. In a perfect world, the TEEP amounts to 100%, meaning the facility is always
running, at optimal speed, and without faulty products. The goal is to increase the
percentage as much as possible, and actually identify the untapped potential that
your facility is dealing with. That way, you, as a manufacturer, have the possibility to
increase production without investing in new equipment.
Performance Indicators
This metric will help you to evaluate how much of the production
process you don’t utilize; hence, it makes sense to track it
regularly to reassess your production plan.
 CAPACITY UTILIZATION
Maximize the use of your
capacities
This is one of the manufacturing efficiency metrics that
will answer this important question. Equipment is
expensive, the building where your production is
located – expensive, machines that are producing your
goods – expensive. The point is to maximize the
capacity utilization so that your machines work at an
ideal cycle time and determine whether you need to
scale your production or understand whether you
have issues somewhere in the process. Issues can
cause monetary losses, and inefficiencies in your
capacity management, where every machine and
product counts.
Performance Indicators
Maximize your capacities in order to avoid effects on
the effectiveness of your machines and
facility. Otherwise, you will face monetary losses in the
long run.
 DEFECT DENSITY
Track the damaged items
right away
Evaluating defect density is an important task in the production
environment. This is a key quality indicator that is easy to gauge.
The defect density pinpoints the number of defective products
divided by the total number of products produced. A
manufacturing metric like this one will let you compare the quality
of your different products. It is helpful in identifying areas where
problems occur and will let you take the measures to what must be
rectified. Working with this metric alongside others like the right
first time KPI will lead to increased efficiency in your production
process and ultimately, avoid useless expenses that’ll save money.
Performance Indicators
Try to keep your defect density as low as possible and compare it
to industry benchmarks.
 RATE OF RETURN
Measure how many items
are sent back
Very similar to its retail counterpart, the rate of return
evaluates the percentage of products that are sent
back to you. Returns are expenses that could be
avoided, as they are products that need to be
processed all over again. They may come back to you
for any kind of reason: defect, wrong packaging, non-
compliance, etc. Analyze these reasons in order to
tackle the root cause of the problem and avoid further
returns. Doing so will not only save you money but also
earn you a better image in the eyes of your clients,
which will see you as more reliable. You can also
assess which products are more subjected to returns,
to polish your analysis.
Performance Indicators
Try to keep the rate of return as low as possible and
assess the reasons for these returns for your different
products.
 ON-TIME DELIVERY
Ensure your products are delivered on time
Our list of most prominent manufacturing KPI examples continues with on-
time delivery. This is a straightforward metric that shows the percentage of
products delivered on time, and the goal should be 100%. The customers
are important, and, if they receive your products on time, satisfaction will
increase and the relationship will flourish. On a side note, if your employees
manage to fulfill 100% of deliveries on time, it would make sense to reward
them and keep their motivation strong. Here it would make sense to keep
the realistic production schedule, maintain accurate material inventories,
and create a culture focused on quality – your customers will, ultimately, be
grateful.
Performance Indicators
The higher the percentage, the better chances you have to increase
customer satisfaction. Don’t forget to reward your employees as well.
 RIGHT FIRST TIME
Measure your production
performance
Having to rework a product is costly and reveals certain
inefficiency in your supply chain. With this manufacturing metric,
you will know how often you are able to produce something
without any defect over the whole production process. After
measuring your ratio, the important move is to examine where and
when the failure happens, find the root cause of this issue and
work on it to avoid similar problems in the future. Comparing it to
similar time periods over the years is an interesting analysis to do.
Setting a target percentage is also a good incentive to perform
better.
Performance Indicators
Right first time = (Number of impeccable products / total products)
x 100. Once you have evaluated this ratio, set a target you want to
exceed.
 ASSET TURNOVER
Acknowledge your assets in relation to your revenue

The asset turnover is actually more of a financial than a manufacturing KPI.

However, it is highly used in many different industries because of the
important insights it provides. It represents the value of your business
revenue (or sales) relative to the value of your assets. It is a good efficiency
indicator when it comes to assessing if your assets are generating value or
not, and is all the more important if you evolve in an asset-heavy industry
such as the manufacturing industry. It is interesting to compare this ratio,
but it can only be done within the same industry – of course, an online retail
company will have a really different one.
Performance Indicators
Asset turnover = revenue / total assets. The higher this ratio the better, as it
means that you generate more revenue per dollar of asset.
 UNIT COSTS
Track & optimize your units’ costs over time
This manufacturing KPI evaluates the total costs involved in the
production of one item, including the fixed costs and the variable
ones. This unit cost can also be broken down to show all the costs
(labor, warehousing, equipment, material, etc.) and analyze what
are the major inputs and how much they represent in the total.
Note that sometimes, due to volatile energy costs, for instance,
they cannot be measured accurately. Showing them with a trend
over time helps in analyzing the evolution and see if your business
manages to stay under the target unit costs fixed, so as to have a
profitable product.
Performance Indicators
Identify production processes you can optimize to decrease unit
costs over time.
 RETURN ON ASSETS
Track your company’s
capacity to generate profit
• Return on asset (ROA) is another manufacturing
metric borrowed to sales, as the asset turnover. It
shows how profitable your business is relative to
your overall assets; that is to say that this
indicator measures how efficient you are at using
assets to generate profit
• This can be also seen as a return on investment
(ROI). It is a good indicator of performance
because it tackles both the income statement and
the assets a company needs to support its
business activities.
Performance Indicators
Return on asset = net income / total assets. Once
again, the higher this percentage, the better for your
company. Benchmark to other businesses in your
industry.
 MAINTENANCE COSTS
Evaluate how much your
equipment costs
• Measuring this manufacturing KPI is critical to know which
equipment needs more work than others, where the resources
should be focused, and what kind of preventative measures
can be implemented to optimize that maintenance for the
future.
• Set a target cost for correct maintenance that leaves enough
money aside for other investments and try to reach it.
Compare your preventive and corrective costs, as the latter
should be inferior to the former, if done well.
Performance Indicators
Try to optimize maintenance costs over time and adjust your
target accordingly.
REVENUE PER EMPLOYEE
Measure the success of
your workforce
• This KPI for manufacturing gives a strong signal
for evaluating the efficiency and productivity
levels – the higher the amount, the greater the
productivity. In essence, it shows the success of a
manufacturing company and it’s connected to the
financial department since it directly includes
costs.
• This KPI in manufacturing is usually monitored by
C-level management, as it depicts a clear picture
of whether the business is growing or needs
additional strategic evaluation and optimization.
Keep in mind the revenue will change according
to geographies, subsidies, and the level of
automation that is incorporated into the facility.
Cheaper labor costs mean less automation since
more human-based workforce can take over the
machines.
Performance Indicators
Ensure your revenue per employee is steadily growing
in order to ensure the whole company is on its path to
sustainable development.