LEAN SIX SIGMA 1.0 LEAN Profesor Madya Dr. Muhamad Zameri b. Mat Saman Dr. Norhayati bt. Zakuan UTM MAY 2015 Dr Zameri 1
Options for Increasing Contribution Marketing Option Finance/ Accounting Option Lean Option Increase Reduce Reduce Sales Finance Production Current Revenue 50% Costs 50% Costs 20% Sales $100,000 000 $150,000 000 $100,000 000 $100,000 000 Cost of Goods 80,000 120,000 80,000 64,000 Gross Margin 20,000 30,000 20,000 36,000 Finance Costs 6,000 6,000 3,000 6,000 Subtotal 14,000 24,000 17,000 30,000 Taxes at 25% 3,500 6,000 4,250 7,500 Contribution $ 10,500 $ 18,000 $ 12,750 $ 22,500 Dr Zameri 2
Changing of Mind Set Selling Price = Cost + Profit Profit = Selling Price Cost The focus should be on reducing cost The best way to reduce cost is to remove the waste Dr Zameri 3
Value Price Price Price Price Profit Cost Profit Cost Traditional thinking Lean thinking Cost + Profit = Price Price - Cost = Profit Dr Zameri 4
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Classic Example of Waste Brick laying in the late 19 th century Dr Zameri 6
Solution Dr Zameri 7
Golf Analogy In a four hours golf game, the golf club is in contact with the ball for less than half an hour. The same proportion of value-adding to nonvalue-adding time prevails in many factories. Additional analogies: Waiting for other players = waiting for tools Walking = transportation Selecting ect a club and addressing the ball = setup Dr Zameri 8
The Three Dimensions of Work Value Added - Any process that changes the nature, shape or characteristics of the product, in line with customer requirements - Eg: Assembly, welding etc. (maximize) Non Value Added - Any work carried-out, which is necessary under current conditions, but dose not increase product value - Eg: part movement, tools changing etc. (minimize) Waste - All other meaningless, non essential activities - Eg: 7 waste categories Dr Zameri 9
Objective: To raise the ratio of VA to NVA and Waste Operating Time Waste NVA VA Eliminate???? Reduce Waste NVA VA New Opt Time Dr Zameri 10
Muda: The Seven Deadly Types of Waste Wastes The Seven Wastes Description Overproducing Unnecessary production to maintain high utilizations Waiting Excess idle machine & operator & inventory wait time Transportation Over-processing Excess Inventory Excess Movement Scrap & Rework Excess movement of materials & multiple handling Non-value adding manufacturing & other activities Storage of excess inventory Unnecessary movements of employees Scrap materials & rework due to poor quality 11
Muda: The Seven Deadly Types of Waste Type of Waste Defects Overproduction Inventories Over-processing Human Motion Transportation & Handling Office Examples of Deadly Types of Waste Data entry errors. Other order entry or invoice errors. Any error that gets passed downstream - only to be returned for correction or clarification. Engineering change orders. Design flaws. Employee turnover. Absenteeism. Printing paperwork (that might change) before it is needed. Processing an order (that might change) before it is needed. Any processing that is done on a routine schedule - regardless of current demand. Purchasing or making things before they are needed (think office supplies, literature...). Things waiting in an (electronic or physical) In Box. Unread email. Any form of batch processing (e.g. transactions, reports...) Relying on inspections, rather than designing the process to eliminate errors. Re-entering data into multiple information systems. Making extra copies. Generating unused reports. Expediting. Unnecessarily cumbersome processes (think financial statement period end close, expense reporting, the budget process...) Walking to copier, printer, fax... Walking between offices. Central filing. Going on a "safari" to find missing information. Backtracking back & forth between computer screens. Movement of paperwork. Multiple hand-offs of electronic data. Approvals. Excessive email attachments. Distributing unnecessary cc copies to people who don't really need to know.
Muda: The Seven Deadly Types of Waste Type of Waste Waiting Confusion Unsafe or unergonomic Office Examples of Deadly Types of Waste Slow computer speed. Downtime (computer, fax, phone...). Waiting for approvals. Waiting for information from customer. Waiting for clarification or correction of work received from upstream process. Any missing or misinformation. Any goals or metrics that cause uncertainty about the right thing to do. Office work conditions that cause carpel tunnel, eye fatigue, chronic back pain, or that compromise the health and productivity of workers in any way. Underutilized human potential Restricting employee's authority and responsibility to make routine decisions. Having highly paid staff do routine tasks that don't require their unique expertise. Not providing the business tools needed to perform and continuously improve each employee's assigned work. Not trusting your people to stop production to stop and fix a problem (jidoka). Not trusting your people to be responsible for the cleanliness, maintenance, and organization of their own work area. Not trusting people with a flat organization structure of largely selfdirected teams. Not expecting (and measuring) every person to contribute to continuous improvement.
Summary of Waste 7 Wastes Office Manufacturing 1. Over Production generating more than what is needed 2. Over Processing process things that customers doesn t want 3. Conveyance movement of things that are not value added d 1. Generate more information than the customer needs right now 2. More information than the process needs 3. Create reports no one reads and making extra copies 1. Repeated manual entry of data 2. Obtaining multiple signatures 3. Excessive reviews 4. Checking someone s else work 1. Temporarily locating, filing, stocking and stacking 1. Produce to stock based on sales forecasts 2. Produce more to avoid set-ups 3. Large batch process results in extra output 4. Produce more due to rejects 1. Over tight tolerances 2. Extra thickness 3. Additional process 4. Longer duration 5. 300% Inspection 1. Moving parts in and out of storage 2. Moving material from one workstation to another
Summary of Waste 7 Wastes Office Manufacturing 4. Inventory have more than customers requirement 5. Motion movement of people that does not add value 1. Files or documents to be worked on 2. Office supplies 3. E-mails waiting to be read 1. Searching for files 2. Gathering information/document t 3. Extra clicks of key strokes 1. Raw materials 2. Work In Process 3. Finished Goods 4. Consumable supplies 1. Searching for parts, tools 2. Sorting through h materials 3. Reaching for tools 4. Lifting boxes of parts 6. Waiting 1. System to come back up 1. Waiting for inspection idle time created when things are not ready 2. Copier machine 3. A handed-off file to come back 2. Waiting for information 3. Waiting for machine repair 4. Waiting to be processed 7. Rework work that contains errors, lacks something 1. Data entry error 2. Pricing error 3. Missed information/specification 4. Lost records 1. Scrap 2. Defects 3. Correction 4. Missing i parts
Value Stream Mapping An approach to visualise Material and Information flows in a key Business Process.
Current State Value Stream
Future State Value Stream
Lean Implementation Lean Assessment Radar Chart Team Member Involvement Flow Order levelling 10,0 9,0 8,0 7,0 6,0 50 5,0 4,0 3,0 2,0 1,0 00 Self-evaluation tool 0,0 based on questionnaire Gap-analysis: analysis: current vs. future lean state Training 5S Quality Assessment Score Material Control Continuous Flow Visual Controls TPM Target Score
Example Lean Office Preapre draft Q&A Question distribute Manually Answer Finalize Result Q&A Inspect Belters gathering Collect Answer Send result to Training Send to Belters Prepare final Q&A Q&A Inspect Spaghetti Diagram Preapre draft Q&A Export to Web Exam Arrangement Bl Belters gathering Exam Arrangeme nt Oli Online answers Print out Q&A Correcting Answer Certificatio n Arrangeme nt H/Over Certificate Certification H/Over Problem:Preparing Examination activity contribute NVA job Result Reduction of waiting time waste Arrangement Send result to Training System generate result Certificate 2 or 3 works combined running in same time Simplified flow Total NVA 235min to 85min ( Reduction 64% ) Total VA 775min to 635min ( Reduction 18% ) Total Activity reduce 7 to 5 (Reduction 28.6%)
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Six Sigma Background In 1986, Smith & Galvin, from Motorola developed the six sigma quality improvement process Objective: to improve quality reduce error rate zero defect. Six Sigma is used to describe how well the process variation meets the customer s requirement. Focus on stable and capable process The error rate for Six Sigma processes: 3.4 Defects Per Million Opportunities (DPMO)
Six Sigma Objective The fundamental objective of the Six Sigma methodology is the implementation of a measurementbased strategy that focuses on process improvement and variation reduction through the application of Six Sigma Improvement Projects Dr Zameri 23
Six Sigma Strategy Reduce Variation Improvement Dr Zameri
Variation Example Dr Zameri 25
Case Study: Customer Satisfaction at Counter UCL N SA ATISFACTIO Target LCL Investigate & take corrective action Morning Midday A Noon Morning Midday A Noon Morning Midday A Noon Morning Midday A Noon Morning Midday A Noon Monday Tuesday Wed Thursday Friday Dr Zameri 26
A 6 Sigma Process Lower Specification Limit Customer target Upper Specification Limit 0.00017% 1.7 ppm 0.00017% 17 1.7 ppm 6σ 6σ = 99.7966% of data inside the limits (C p = 2) 0.00034% of points will be outside of the specification limits ie. defects (= 3.4 parts per million out of spec.)
Relating Sigma to Defect Levels DPMO (Defects Per Million Opportunities) Error Free Rate Six Sigma 3.4 99.9997% Five Sigma 233 99.977% Four Sigma 6,210 99.4% Three Sigma 66,810 93% Two Sigma 308,500 69% One Sigma 691,500 31% 9
Six Sigma Methodology- DMAIC Define Review Project Charter: Description, scope, objectives, schedule Develop team, Validate VOC- SIPOC Measure the existing system/process performance. Value Stream, Process Flow Measure Identify wastes Analyze Determine possible area of improvement to reduce/eliminate the gap between current performance & desired goal Brainstorming, FBD Reduce/eliminate wastes Improve Select & prioritize solution Perform risk assessment- FMEA, pilot the solution Control Institutionalize the improved system Use statistical tools to monitor stability of the new system, audit the results.
The Six Sigma Approach DMAIC Control by standardising solution and monitoring performance. Control Define Define the problem or opportunity. Improve by implementing potential solutions. Improve 6σ Analyse Measure Measure the current performance and capability Analyse to identify root causes.
The Role of Statistics in Six Sigma Statistical Control Practical Problem Control Define Improve 6σ Measure Statistical Solution Analyse Statistical Problem Practical Solution
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What Is Lean Six Sigma? Systematic approach to reducing process defects that produce undesired doutcomes - in our case, improving the decision making regarding inventory purchases DMAIC Define, Measure, Analyze, Improve, Control Team focus to problem solving - each of us are experts in certain areas of the inventory process and each hhave specialized dknowledge of portions of fthe process
Improvement Methodologies of LSS A Comparison between 2 Most Proven and Popular Application - Generic Survey Findings Methodologies Concepts Guidelines for implementation Focused Assumptions Primary Effect Secondary Effects Weaknesses Six Sigma GE, Motorola 1. Reduce variation 1. Define 4. Implement 2. Measure 5. Control 3. Analysis 1. Problem focused cost and variation 1. A problem exists 2. Figures and numbers are valued 3. System output improves when variation improved 1. Uniform process output 1. Less waste 4. Improved quality 2. Fast throughput 3. Less inventory 1. System interaction not considered 2. Process improved independently Lean Thinking Toyota, Airbus 1. Remove waste 1. Identify value 4. Pull 2. Identify value stream 5. Perfection 3. Flow 1. Flow focused cycle time and WIP 1. Waste removal improve performance 2. Small improvement better than system analysis 1.Reduced flow time 1. Less variation 4. Flow 2. Less inventory 5. Improved quality 3. New accounting system 1. Statistical or system analysis not valued
Improvement Methodologies of LSS Methodologies Infrastructure Motivation and Career Development Type of Data Analysis Usage of Resources Process / Product Oriented Selection of Projects Project Review Strong Tendency towards A Comparison between 2 Most Proven and Popular Application - Generic Survey Findings Six Sigma GE, Motorola Champions, Sponsors, Master, Black and Green Belts Some incentive and frequent career development Advanced Statistical Analysis preferred Everybody s y job ( Yellow / Green Belts ) Dedicated Resources Black Belts Process Centered Some Product Centered Related to organization Strategic initiatives Gated Review at the end of each DMAIC phase Analysis with Statistical Techniques Lean Thinking Toyota, Airbus Champions, Sponsors, Masters and Experts Haphazard incentive or career development Basic Data Analysis Everybody s job Process Centered Related to organization strategic initiatives and Popular projects Gated review based on Value Stream Annual Plan monthly review Action ( Kaizen Events ) with Industrial Engineering Techniques
Improvement Methodologies of LSS It s not Sigma or Lean It s not Sigma then Lean But It s Methodologies Lean Sigma Lockheed Martin Concepts Guideline for implementation Focused Remove waste and variations DMAIC Approach Value Improvement, cost, cycle time, variation and WIP improvement Assumptions Primary Effect Work consistency and stability enhanced Speed and Quality Secondary Effect Less waste and variation Less inventory Less quality problems Weaknesses None statistical techniques are required only when absolutely necessary
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