six sigma: dmaic; y=f(x) - vietnam world class · pdf filesix sigma six sigma: dmaic; y=f(x)...

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OperationalExcellence

By Lee Olson

Presentation to INFORMS

Six Sigma

Six Sigma: DMAIC; Y=f(x)

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

Operational Excellence Training

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Objectives

� 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


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Define

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

� Yes


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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

Our Performance Compared to Competitors

Importance to Customers

We’re Better They’re Better

High

Moderate-to-’Low’

• Price• Complaints

• OTD• Quality

• Training

• Complete

• Shared Goals

Top 5 Action Items

Driver Action Description Status Status Description Owner

Original Due

Date

Current

Due Date

Late Supplier Deliveries Monthly reporting to suppliers on delivery &

quality metrics.

On

track

Report Cards Implemented. Adam 5/21 5/21

Late Supplier Deliveries Arrange face to face meetings with top

offenders.

On

track

Meetings Complete with top 10

Suppliers.

Beth 6/15 6/15

Late Supplier Deliveries Review and approve supplier's corrective action

plan.

Caution Corrective Action Plan in Place for 2

major Suppliers

Carlos 7/15 9/15

xyz Cell Always Late Kaizen Event to focus on improving throughput

by 40% and improve labor efficiency by 35%

On

track

Event held 5/1. 25% throughput

improvement in May. Labor Efficiency

Increase of 30%

Doreen 5/21 5/21

Unrealistic Promise Date Focus on custom products to provide realistic

ATP based on inventory and leadtime of

components.

Problem Continued lack of progress. Re-

structured and focused team.

Developing detailed plan.

Earnest 6/15 8/15

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

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Target

Pareto of Drivers

0%

25%

50%

75%

100%

Late

Su

pplie

r

Deliv

eri

es

xy

z C

ell

Alw

ays

Late

Un

realis

tic

Pro

mis

e

Date

Ord

ers

on

Cre

dit H

old

Lo

w Y

ield

on p

art

abc

Eng

ineeri

ng

Cha

nge

Ord

ers

Reason

% Im

pact


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Data Driven Decisions

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

• Y

• Dependent

• Output

• Effect

• Symptom

• Monitor

• Response

• X1 . . . XN

• Independent

• Input-Process

• Cause

• Problem

• Control

• Factor

To get results, should we focus our behavior on the Y or X ?

f (X)f (X)Y=Y=


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2 308,5373 66,8074 6,2105 2336 3.4

σσσσσσσσ PPMPPM

Breakthrough performance gains

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.

(Distribution Shifted ± 1.5σ)

Process

Capability

Process

CapabilityDefects per Million

Opportunities

Defects per Million

Opportunities


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Validated bottom line results

Price

Incr

easeM

ateri

al Cost

s

Volum

e Inc.

with

Leve

rage

Manufa

cturin

g

SG&

A

Volu

me In

c. N

o Leve

rage

Taxes

LaborW

orkin

g Capita

l

Genera

l-5%

Pri

ce R

eductio

nIm

pa

ct

on

Bo

tto

m L

ine

Assuming a 10% change in the factor

Factors


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Define

Methodology

� Define

� Measure

� Analyze

� Improve

� Control


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Roadmap Example

Next Project DefineCustomers, Value, Problem Statement

Scope, Timeline, Team

Primary/Secondary & OpEx Metrics

Current Value Stream Map

Voice Of Customer (QFD)Measure

Assess specification / Demand

Measurement Capability (Gage R&R)

Correct the measurement system

Process map, Spaghetti, Time obs.

Measure OVs & IVs / Queues

Analyze (and fix the obvious)Root Cause (Pareto, C&E, brainstorm)

Find all KPOVs & KPIVs

FMEA, DOE, critical Xs, VA/NVA

Graphical Analysis, ANOVA

Future Value Stream Map

ImproveOptimize KPOVs & test the KPIVs

Redesign process, set pacemaker

5S, Cell design, MRS

Visual controls

Value Stream Plan

ControlDocument process (WIs, Std Work)

Mistake proof, TT sheet, CI List

Analyze change in metrics

Value Stream Review

Prepare final report

Validate Project $

Validate Project $

Validate Project $

Validate Project $

Celebrate Project $

• 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?)

Practical Problem

ProblemDefinition

• 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

ProblemSolution

• Identify the likely X’s• 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 X’s• Move the distribution; Shrink the spread; Confirm the results

Problem Control

• Mistake Proof the process (Poka-Yoke)

• Tolerance the process• Measure the final capability

• Place appropriate process controls on the critical X’s

• Document the effort and results

• Standard Work • TPM

IdentifyProblem

• 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

� What do you want to know?

� How do you want to see what it is that you needto know?

� What type of tool will generate what it is that youneed to see?

� What type of data is required of the selected tool?

� Where can you get the required type of data?

Problem Solving

Plan Execute

Execute PlanCrane Co. Op. Ex. Methodology Originated by MBBs; D. Braasch, J. Davis, R. Duggins, J. O’Callaghan, R. Underwood, I. Wilson

Op

era

tio

nal E

xcellen

ce M

eth

od

olo

gy

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


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DefineKey Items

� Customers, Value, Problem Statement

� Scope, Timeline, Team

� Primary/Secondary & OpEx Metrics

� Current Value Stream Map

� Voice Of Customer (QFD)

(Quality Function Deployment)


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Project SelectionImpact

� Business Impact

• Revenue Growth

• Cost Reduction

• Capital Reduction

• Key Business Objectives

• On Time Delivery

• Lead Time

• Quality

• Customer Satisfaction

� Impact on Operational Excellence Metrics


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Evaluate and Rank SuggestionsEffort and Risk

� 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


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Evaluate and Rank Suggestions

Example tool to rank projects

0106-01 Project Rating.xls

#

Mfg

(M)

or

Admin

(A) Project Description

Re

ve

nu

e G

row

th

Co

st

Re

du

cti

on

Ca

pit

al R

ed

uc

tio

n

Ke

y B

us

ine

ss

Ob

jec

tiv

e

On

Tim

e D

eliv

ery

Le

ad

Tim

e

Qu

alit

y

Cu

sto

me

r

Sa

tis

fac

tio

n

To

tal

Imp

act

Pe

op

le R

es

ou

rce

s

Ca

pit

al R

es

ou

rce

s

Du

rati

on

of

Pro

jec

t

To

tal

Eff

ort

Te

ch

nic

al R

isk

Ma

na

ge

me

nt

Ris

k

To

tal

Ris

k

Variable weightings 20% 15% 10% 15% 20% 5% 5% 10% 100% 50% 20% 30% 100% 40% 60% 100%

1 A Customer Billing Errors 0 2 0 4 4 2 2 5 2.4 2 1 3 2.1 1 4 2.8

2 MWarranty

scrap warranty vs sales0 2 0 1 1 0 3 3 1.1 4 4 5 4.3 4 2 2.8

3 A Vendor Delivery Performance 0 2 2 2 5 4 3 0 2.2 1 1 3 1.6 1 2 1.6

4 M On Time Shipping Performance 2 1 2 4 5 0 1 5 2.9 4 1 2 2.8 1 3 2.2

5 A

Hiring and Retention

20% - 24% Turnover 0 3 0 2 1 0 3 2 1.3 3 2 4 3.1 1 4 2.8

6 ANew Product Development Cycle Time

3 4 2 5 3 3 4 5 3.6 5 3 5 4.6 5 5 5.0

7 MManufacturing Maintenance

Tooling Maintenance0 3 0 1 2 3 1 0 1.2 1 4 1 1.6 1 1 1.0

8 A Day Sales Outstanding (DSO) 0 0 4 2 0 0 0 0 0.7 1 0 2 1.1 1 1 1.0

9 M FTY of 65% on product 123 4 4 2 5 4 4 5 5 4.1 2 1 1 1.5 2 1 1.4

RiskProject Information Impact Effort

Project Ranking

1

2

3

4

5

6

7

8

9

0

1

2

3

4

5

1 2 3 4 5

Effort

Imp

act

ProjectNumber

Risk =Ball Size n

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


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Measure

� 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


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Analyze(and fix the obvious)

� 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


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Improve

� 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


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Control

� 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


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Basic ImplementationRoadmap

Understand and DefineEntire Value Streams

Deploy Key Business Objectives- Measure and target (metrics)

- Align and involve all employees- Develop and motivate

Define, Measure, Analyze, ImproveIdentify root causes, prioritize, eliminate waste,

make things flow and pulled by customers

Control-Sustain Improvement

-Drive Towards Perfection

Identify Customer Requirements

Vision (Strategic Business Plan)

Continuous Improvement (DMAIC)

Identify Customer Requirements

Opera

tion

al E

xcelle

nce T

rain

ing

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Resource

Implement lean concepts in top 3 volume lines

establish pareto of drivers for OTD

IT

Operations

Quality

Engineering

Maintenance

Marketing

Leaders have ability to map a value stream

Metrics module in all appropriate training sequences

Training projects demonstrate flowdown of metics to

operational level

Develop culture of teams

Improve Customer Focus

Educate/Get Everyone Involved

Improve the Metrics

Training

Es

tab

lish

track

ing

of O

TD

in e

very c

ell

Imp

rove

On

Tim

e D

elive

ry to 9

8%

Train workers in how

our products are used by our m

ajor customers

Complete 1 Leadership LGB training course

Trainees participate in customer survey

Complete 3 functional LGB training courses

Bring reps from top 10 customers in for plant tours

100% Completion of LGB Projects

Co

nd

uct in

tervie

ws

with

top

10

cu

sto

me

rs

Tra

in fu

nctio

na

l lea

de

rs a

s L

GB

s

Tra

in le

ad

ers

hip

tea

m a

s L

ea

n G

ree

n B

elts

(LG

B)

Your A

nnual Break

through

Objectives

Your Manager's 1-Year

Breakthrough

Objectives

Indicator's and Goals

Benefits

Top 5 Action Items

Driver Action Description Status Status Description Owner

Original Due

Date

Current

Due Date

Late Supplier Deliveries Monthly reporting to suppliers on delivery &

quality metrics.

On

track

Report Cards Implemented. Adam 5/21 5/21

Late Supplier Deliveries Arrange face to face meetings with top

offenders.

On

track

Meetings Complete with top 10

Suppliers.

Beth 6/15 6/15

Late Supplier Deliveries Review and approve supplier's corrective action

plan.

Caution Corrective Action Plan in Place for 2

major Suppliers

Carlos 7/15 9/15

xyz Cell Always Late Kaizen Event to focus on improving throughput

by 40% and improve labor efficiency by 35%

On

track

Event held 5/1. 25% throughput

improvement in May. Labor Efficiency

Increase of 30%

Doreen 5/21 5/21

Unrealistic Promise Date Focus on custom products to provide realistic

ATP based on inventory and leadtime of

components.

Problem Continued lack of progress. Re-

structured and focused team.

Developing detailed plan.

Earnest 6/15 8/15

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

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Target

Pareto of Drivers

0%

25%

50%

75%

100%

Late

Supplie

r

Deliv

eries

xyz C

ell

Alw

ays

Late

Unre

alis

tic

Pro

mis

e

Date

Ord

ers

on

Cre

dit H

old

Low

Yie

ld

on p

art

abc

Engin

eering

Change

Ord

ers

Reason

% Im

pact


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Does it work?.

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

199973 companies

Ralston PurinaQuaker OatsHilton Hotels

Coca-ColaUnilever

etc.

The top companies in Customer Satisfaction grow MVA atnearly twice the rate of their poor-performing counterparts.

$23

$42

0

10

20

30

40

50

Low High

Customer Satisfaction Index Score

Mark

et V

alu

e A

dd

ed

In Billions $


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What about Lean, TOC, TQM

� Six Sigma

• Remove defects, minimize variance

� Lean

• Remove waste, shorten the flow

� TOC

• Remove and manage constraints

� TQM

• Continuous Improvement

Value Stream Map - Current State

Customer

Demand = 45 per day2 shifts

Stamping

342

CT=1sec

Co=1 hr.

Uptime=85%

S. Weld # 1

CT=3 min

Co=10 min.

Uptime=70%

I

I

II

Coils5 days

CT= 15 min

Co=0 min.

Uptime=100%

2 shifts

CT= 67 minCo= 23 min

FTY = 67%2 shifts

ShippingI

I81

202122

Assembly Test

90

1XDaily

90/60/30 dayForecasts

Order Entry

ProductionControl

MRP

6 WEEKForecast

Suppliers Weekly

Fax

WEEKLY SCHEDULELead Time - 34 Days

5 days

1 sec

7.6 days

3 min

1.8 days

15 min

2.7 days

67 min

4.5 days

4 min

2 days

Lead Time =23.6 days

1 shift1 shift

CT= 4 minCo=0

Uptime=100%2 shifts

Competitive Lead Time = 3 Days

Takt Time= 18.2 Minutes

Orders/day= 36

Queue = 1.5 Days

Touch Time = 89 min

Customer


Stamping

342

CT=1sec

Co=1 hr.

Uptime=85%

S. Weld # 1

CT=3 min

Co=10 min.

Uptime=70%

I

I

II

Coils5 days

CT= 15 min

Co=0 min.

Uptime=100%

2 shifts


FTY = 67%2 shifts

ShippingI

I81

202122

Assembly Test

90

1XDaily


Order Entry

ProductionControl

MRP

6 WEEKForecast

Suppliers Weekly

Fax


5 days

1 sec

7.6 days

3 min

1.8 days

15 min

2.7 days

67 min

4.5 days

4 min

2 days


1 shift1 shift

CT= 4 minCo=0

Uptime=100%2 shifts



Orders/day= 36

Queue = 1.5 Days

Touch Time = 89 min

Competitive LT = 3 days

Takt Time = 18.2 min

Customer DataOn-Time Delivery

Demand = 45/day

Customer


Stamping

342

CT=1sec

Co=1 hr.

Uptime=85%

S. Weld # 1

CT=3 min

Co=10 min.

Uptime=70%

I

I

II

Coils5 days

CT= 15 min

Co=0 min.

Uptime=100%

2 shifts


FTY = 67%2 shifts

ShippingI

I81

202122

Assembly Test

90

1XDaily


Order Entry

ProductionControl

MRP

6 WEEKForecast

Suppliers Weekly

Fax


5 days

1 sec

7.6 days

3 min

1.8 days

15 min

2.7 days

67 min

4.5 days

4 min

2 days


1 shift1 shift

CT= 4 minCo=0

Uptime=100%2 shifts



Orders/day= 36

Queue = 1.5 Days

Touch Time = 89 min

Raw = 5 days

WIP = 12.1 days

FG = 6.5 days

Inventory

Customer


Stamping

342

CT=1sec

Co=1 hr.

Uptime=85%

S. Weld # 1

CT=3 min

Co=10 min.

Uptime=70%

I

I

II

Coils5 days

CT= 15 min

Co=0 min.

Uptime=100%

2 shifts


FTY = 67%2 shifts

ShippingI

I81

202122

Assembly Test

90

1XDaily


Order Entry

ProductionControl

MRP

6 WEEKForecast

Suppliers Weekly

Fax


5 days

1 sec

7.6 days

3 min

1.8 days

15 min

2.7 days

67 min

4.5 days

4 min

2 days


1 shift1 shift

CT= 4 minCo=0

Uptime=100%2 shifts



Orders/day= 36

Queue = 1.5 Days

Touch Time = 89 min

Touch Time = 89 min

Flow of ValueLead Time

Lead Time = 23.6 days

Customer


Stamping

342

CT=1sec

Co=1 hr.

Uptime=85%

S. Weld # 1

CT=3 min

Co=10 min.

Uptime=70%

I

I

II

Coils5 days

CT= 15 min

Co=0 min.

Uptime=100%

2 shifts


FTY = 67%2 shifts

ShippingI

I81

202122

Assembly Test

90

1XDaily


Order Entry

ProductionControl

MRP

6 WEEKForecast

Suppliers Weekly

Fax


5 days

1 sec

7.6 days

3 min

1.8 days

15 min

2.7 days

67 min

4.5 days

4 min

2 days


1 shift1 shift

CT= 4 minCo=0

Uptime=100%2 shifts



Orders/day= 36

Queue = 1.5 Days

Touch Time = 89 min

CT (67) > Takt Time (18)

ConstraintsOTD, Lead Time

Max Wip = 7.6 days

Customer


Stamping

342

CT=1sec

Co=1 hr.

Uptime=85%

S. Weld # 1

CT=3 min

Co=10 min.

Uptime=70%

I

I

II

Coils5 days

CT= 15 min

Co=0 min.

Uptime=100%

2 shifts


FTY = 67%2 shifts

ShippingI

I81

202122

Assembly Test

90

1XDaily


Order Entry

ProductionControl

MRP

6 WEEKForecast

Suppliers Weekly

Fax


5 days

1 sec

7.6 days

3 min

1.8 days

15 min

2.7 days

67 min

4.5 days

4 min

2 days


1 shift1 shift

CT= 4 minCo=0

Uptime=100%2 shifts



Orders/day= 36

Queue = 1.5 Days

Touch Time = 89 min

CO = 23 min

CO = Changeover

Setup TimesOP Margin, Lead Time

CO = 1 hour

Customer


Stamping

342

CT=1sec

Co=1 hr.

Uptime=85%

S. Weld # 1

CT=3 min

Co=10 min.

Uptime=70%

I

I

II

Coils5 days

CT= 15 min

Co=0 min.

Uptime=100%

2 shifts


FTY = 67%2 shifts

ShippingI

I81

202122

Assembly Test

90

1XDaily


Order Entry

ProductionControl

MRP

6 WEEKForecast

Suppliers Weekly

Fax


5 days

1 sec

7.6 days

3 min

1.8 days

15 min

2.7 days

67 min

4.5 days

4 min

2 days


1 shift1 shift

CT= 4 minCo=0

Uptime=100%2 shifts



Orders/day= 36

Queue = 1.5 Days

Touch Time = 89 min

MaintenanceOTD, Lead Time

Uptime = 70%

Customer


Stamping

342

CT=1sec

Co=1 hr.

Uptime=85%

S. Weld # 1

CT=3 min

Co=10 min.

Uptime=70%

I

I

II

Coils5 days

CT= 15 min

Co=0 min.

Uptime=100%

2 shifts


FTY = 67%2 shifts

ShippingI

I81

202122

Assembly Test

90

1XDaily


Order Entry

ProductionControl

MRP

6 WEEKForecast

Suppliers Weekly

Fax


5 days

1 sec

7.6 days

3 min

1.8 days

15 min

2.7 days

67 min

4.5 days

4 min

2 days


1 shift1 shift

CT= 4 minCo=0

Uptime=100%2 shifts



Orders/day= 36

Queue = 1.5 Days

Touch Time = 89 min

QualityFTY = 67%

Customer


Stamping

342

CT=1sec

Co=1 hr.

Uptime=85%

S. Weld # 1

CT=3 min

Co=10 min.

Uptime=70%

I

I

II

Coils5 days

CT= 15 min

Co=0 min.

Uptime=100%

2 shifts


FTY = 67%2 shifts

ShippingI

I81

202122

Assembly Test

90

1XDaily


Order Entry

ProductionControl

MRP

6 WEEKForecast

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5 days

1 sec

7.6 days

3 min

1.8 days

15 min

2.7 days

67 min

4.5 days

4 min

2 days


1 shift1 shift

CT= 4 minCo=0

Uptime=100%2 shifts



Orders/day= 36

Queue = 1.5 Days

Touch Time = 89 min

What is the pitch time?

Flow of ValueOTD, Lead TimeWho is setting the pace?


� D efine

M easure

A nalyze

I mprove

C ontrol

Making it happen

Three major roles

� Implementer• Learns the tools• Works the process• Solves day to day problems

� Manager• Learns the methodology• Manages a value stream• Reviews project teams

� Leader• Establishes the vision for the future• Sets priorities• Encourages

Where do you need to focus?


� D efine

M easure

A nalyze

I mprove

C ontrol

What Is a Sigma?

� A metric that indicates how well a process is performing.

• Higher is better

• Measures the capability of the process to perform defect-free work

• Also known as “z”, it is based on standard deviation for continuous data

• For discrete data it is calculated from DPMO


� D efine

M easure

A nalyze

I mprove

C ontrol

Units of Measure

The Normal Curve and Capability

LSL USL

Poor Process Capability

Very High Probability of Defects

LSL USL

Excellent Process

Capability

Very Low Probability of Defects

Very High Probability of Defects

Very Low Probability of Defects

Low SigmaLow SigmaHigh SigmaHigh Sigma

Units of MeasureUnits of Measure

µµ

Units of Measure

Performance

Limit Probabilityof a Defect

Area of Yield

six sigma: dmaic; y=f(x) - vietnam world class · pdf filesix sigma six sigma: dmaic; y=f(x)...

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