Running Head: SIX SIGMA ANALYSIS ASSIGNMENT 1

Six Sigma Analysis Assignment

Mitchell Kelley

Bellevue University

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Abstract

Six Sigma has been utilized by companies to improve quality, and in turn, business as a

whole for many years now. In the article “What is Six Sigma?” it is described as: “Six

Sigma is a disciplined, data-driven approach and methodology for eliminating defects”

(n.a., n.d.). In this paper we will look at a scenario where a business is not doing as well

as it could. Previous changes were made, but not all of the necessary steps were

followed. Using Six Sigma we will try to make some changes to the processes involved,

and at the same time gather more data that can be used for future further refinements.

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Six Sigma Analysis

Six Sigma has been around awhile now. Utilized to increase quality, and in the

end, increase customer satisfaction. Six Sigma relies heavily on data, past and future.

For to get where we want to be, we have to know where we are.

One of the process that can be used in Six Sigma is the DMAIC process (define,

measure, analyze, improve, control) to figure out where areas of improvement are

needed, and what changes need to be made.

There is another Six Sigma process, DMADV (define, measure, analyze, design,

verify) that is intended for new processes, projects, or perhaps a complete retooling of

an existing process.

Let’s take a look at a sample scenario and see what went wrong, and what can

be done to maybe improve the results:

Scenario: Your company produces refrigerant condensers for use in manufacturing

window air conditioners.  One year ago, your Chief Operations Officer instructed the

Production Manager to institute a Just-In-Time (JIT) production strategy.  This strategy

was intended to improve the company’s Return on Investment (ROI) by reducing the

amount of in-process inventory and its carrying costs.  There was no employee

involvement in the process used to arrive at this decision to employ a JIT production

strategy.  At the end of the first full year under this strategy, ROI in this area had

improved by thirty percent to approximately $130,000.

However, over the past 6 months customer complaints have increased by 20% over the

same period last year.  Customers’ two main complaints regard late shipments during

peak production periods in the hottest summer months, and an increased number of

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defective products that eventually result in dissatisfied end-users and the re-working or

scrapping of returned product.  Sales to your company’s three largest customers have

dropped by fifteen percent in the last quarter (approximately $150,000), as they shifted

some of their purchasing to other producers with lower defective rates and better

shipping records.

Production line employees have stated that the JIT strategy has forced them to cut

corners, since they have tighter production schedules due to receiving raw materials

just when needed as opposed to having some surplus materials on hand.  Logistics

(shipping) has stated that they are not able to meet all delivery due dates because

production cannot always manufacture the quantities required to fill incoming orders in a

timely manner.

The company’s Chief Executive Officer has asked you to investigate the situation and

present your findings, including recommendations about what approach(es) you would

recommend to formulate a solution.

From looking at the data presented to us it seems the main issues have come

during the peak months for the business. This time should be our bread and butter, not

stale bread. The fact that we ended up doing most of the damage to our reputation

during this period shows that it is in need of change.

Not to name any names, but the (JIT) policy was put into effect without

recognizing one of its major drawbacks. James Brack cautions in his work Just in Time

Production (JIT) - Part of the Supply Chain Management Process that: “The main

drawback to this style of operating is that re-order levels are always determined by the

previous demand levels. Therefore, if there is a sudden up-rise in demand, stocks can

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end up being depleted as a consequence. This can have a very negative effect on

customer service and lead to unhappy customers” (2010). This is very evident in how

things ended up turning out in our business.

Maybe the intention was well placed, and according to many leading businesses

around the world, there is merit to the JIT system. However, when instituting this kind of

policy you must take into account all aspects of the potential result.

Hence this other guidance from Importance Of Six Sigma In The Business World.

Six Sigma Online: “An experienced production manager may be the right person to

make quality-improvement decisions but if the decisions are based solely on gut feelings

and preconceived notions, the decisions may not have the desired effect, especially if

the task is to make adjustments in a complex business process” (n.a., n.d.).

One of the prime requirements of an effective JIT process is to have all

participating members on-board. This didn’t happen as the production manager

instituted this policy without seeking any input from the rest of the process owners.

Along with not knowing, or failing to plan for the problem when demand surged, this

doomed the process being a success from the start.

The more puzzling question is where did the data come from? Figure 1 below is

an approximation of how the company was set up and running for the year of the JIT

run. From the sound of the scenario it would appear that most of the data being

collected was feedback from the customers, and plenty of negative feedback at that.

Where was the company’s own data being collected? Or was it dependent on the

customer after the product had been delivered?

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Figure 1.

Since all major companies have some sort of quality assurance we need to

assume it is also here, but either from being understaffed or under-utilized they didn’t

catch enough defects before they went out for delivery.

New Process

After looking at the previous year it’s easy to see where improvements can be made.

While JIT can be an effective money saver as far as excess inventory is concerned, it

must be treated with respect, respect for the customers. Since this won’t be a complete

retooling we can use the DMAIC method. Figure 2 shows what an updated, improved

process may look like.

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Figure 2.

Starting with define, let’s work on two things which up to this point have been

directly related: customer satisfaction and quality. Followed closely by the original goal

of reducing excess inventory. JIT can still be utilized for most of the year but will be

modified directly prior to and during the peak demand months.

We’ve analyzed and identified areas where we need to improve, namely quality

and customer satisfaction.

How do we improve? A rigorous training program in the production process will be

conducted. Steps in the manufacture of refrigerant units will be carefully laid out.

Manufacturing consistencies will be stressed, and then stressed again. This is the

number one way to bring up quality. Repetition of the correct procedures every time will

ensure quality. But, managers stressing the need to push production faster than normal

risk the chance of throwing out even the best plans.

So what do we need to do? Forecast. When does the rush start? Which units are

the most popular during the peak time? Here is where we deviate slightly from JIT. First

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we identify the most often ordered equipment during peak time. That data is available

from our sales records.

If you notice in figure 2, from the warehouse we have excess for high demand.

This is where we are going to ramp up production prior to the peak time and stockpile

some extra units. The amount will be a best guess scenario from the latest year’s data.

We don’t want too much to kill our JIT benefits, but we need some to take the pressure

off of manufacturing during the peak. Kind of an overflow, pull from when needed,

restock when able. Maybe it doesn’t get us through the whole peak period, but lessens

the impact. Our number one goal should be to reclaim the business we lost so maybe

we use the units to supply the customers that had negative experiences with us last

year.

Here’s where our quality assurance is going to come into play. Meetings with the

QA manager will let us know what their capacity is for testing. And what percentage of

units are likely to be able to be tested during the peak period. We probably won’t be able

to test 100% unless they hire more staff which isn’t in the budget. We still have two

options when not testing all products. Maintain a random selection, or once again, focus

on our past customers to make sure we give them the best product we are capable of to

gain back their business. It’s a risky proposition to focus on one area instead of a larger

overall section. The most gains are still going to be realized from proper training in the

production area.

Six Sigma is highly dependent on data. Our data points are going to be increased

by a large amount. We will have data from the warehouse on inventories throughout the

process. Shipping will allow us to see what was delivered on time, and what was

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delayed. Quality Assurance will track the defects, and if and how much the defects

increased during the peak time. Customer service will be proactive, calling the customer

and checking on satisfaction before the customer has a chance to call us. This data will

be used to evaluate how successful or not these changes are.

Minor changes can be made on the fly, but it will take a breakdown of the data to

see if we met our improvement goals. Few things are perfect out of the gate. We saw

the results the first time around, this time may have its own growing pains, but we will

have enough data to make informed tweaks this time around. This will help us control

the end results.

Conclusion

Six Sigma can work, but it’s highly data dependent. Without data you have to use

other means of process improvement. Six Sigma is also fancy on paper, but doesn’t

work if it is not followed through on the company floor. By all members. Who knows if

our restructured process will be beneficial? But it’s a data gathering, change of practice

attempt at correcting deficiencies from previous methods. Only a thorough breakdown of

the results after the trial period will show us where we are, and if we have reached

where we wanted to be. If not, we follow it again and work on the deficient processes.

References

Brack, J. (2010) Just in Time Production (JIT) - Part of the Supply Chain Management

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Process. Order Fulfillment. Retrieved from:

http://ezinearticles.com/?Just-in-Time-Production-(JIT)---Part-of-the-Supply-

Chain-Management-Process&id=3530450

Importance Of Six Sigma In The Business World. Six Sigma Online. Aveta Business

Institute (n.a., n.d.). Retrieved from:

http://www.sixsigmaonline.org/six-sigma-training-certification-

information/articles/importance-of-six-sigma-in-the-business-world.html

Six Sigma. “What is Six Sigma?” (n.a., n.d.). Retrieved from:

http://www.isixsigma.com/new-to-six-sigma/getting-started/what-six-sigma/