Lean/Six Sigma Overview Al Hammonds for EAS 590, Spring 08

1. Lean/Six Sigma OverviewAl Hammondsfor EAS 590, Spring 08

2. Why are we here? • Why do Lean?

3. Lean Thinking • Lean Production = Toyota Production System (TPS) • Identified in a five year ($5 million) MIT study of the worldwide automotive industry • Found that the production system used by Toyota was fundamentally different than traditional mass production

4. Lean Thinking Isn’t New • Lean thinking is more than lean production…it is a business philosophy. • Has roots back to Henry Ford’s production system.

5. Key Definitions FLOW VALUE • Making product flow through production without interruption. • Giving the customer what they want, when they want it, and at the right price.

6. Key Definitions PULL • A customer demand based method of controlling flow of products or services by replenishing in short intervals. STRIVING FOR EXCELLENCE • A culture in which everyone is striving to continually improve.

7. Typical Mass Flow ProcessMaximize Efficiency and Economies of Scale Process 2 Inventory Inputs Outputs Inventory Process 1 Customer Process 3 Rework (Hidden?) • MEASURABLES • Each independent entity maximizes their efficiency • Batch Process – departments compete

8. Lean Production Flow ProcessGoal: Elimination of Waste Inputs Process 1 Process 2 Process 3 Outputs Customer • MEASURABLES • Performance is based on system effectiveness as a whole • Single piece or continuous flow

9. How do you provide value to the customer and make a profit?

10. Defining Value Value Added Activity An activity that transforms or shapes material or information (for the first time) to meet customer requirements. Non-Value Added Activity Those activities that take time or resources, but do not add to the customer requirements.

11. Exercise • Identify examples of Value Added Activities and • Non-value Added Activities • associated with your work.

12. 8 Types of Waste Waste of Correction Waste of Waiting Waste of Over- Production Waste of Motion FLOW Waste of Processing Waste of Inventory Waste of Material Movement Waste of Intellect

13. Traditional Approach Output Output Output Waste Output Waste This is not Lean Cost Plus Mentality Cost + Profit = Price Output Waste

14. Working Toward Lean Output Waste Output Waste Output Output Waste Waste Working Smarter… Not Harder Today’s Reality Price – Cost = Profit

15. Lean Thinking Tools • Identify and plot all steps required to do a process. • Challenge every step by asking the “5 WHY’s” VALUE STREAM MAPPING NOTE!! If there doesn’t seem to be a valid reason for any steps identified in the value stream, consider eliminating the steps from the process.

16. Lean Thinking Tools • 5S’s - Practices that create a workplace suited for visual control and lean manufacturing: • Sort (Seiri) = Keep only what is needed • Straighten (Seiton) = Put everything in order • Sweep (Seiso) = Clean everything • Standardize (Seiketsu) = Make standards obvious – everybody does it the same way • Sustain (Shitsuke) = Institutionalize and continual improvement.

17. Lean Thinking Tools • STANDARDIZED WORK This tool ensures that the best method of conducting each activity is identified and steps are taken to ensure everyone does it this way. • The right people • The right steps • The right sequence • Every time

18. Lean Thinking Tools • MISTAKE PROOFING (Poka-Yoke) Tools and techniques used to prevent people from doing things incorrectly. It can be a simple mechanical device or technique. • Get it right the first time • Set people up for success, not failure

19. Lean Thinking Tools • TOTAL PRODUCTIVE MAINTENANCE (TPM) • A series of methods to ensure that every machine in the production process is always able to perform its required tasks without interruption. • Targets key equipment.

20. Lean Thinking Tools SET UP REDUCTION • On Time Delivery – gives the customers what they want when they want it. • Flexibility – ability to run different types of products. • Increased Capacity – provides more actual production time. • Cycle Time - reducing setup time allows lot size to be reduced, which drives reduced cycle times. • Costs - reducing Work In Process drives lower operational costs (carrying costs, scrap, rework, space utilization, etc.)

21. Lean Thinking Tools • LEVEL SCHEDULING The goal is to produce at the same pace every day minimizing variation in the workload.

22. Lean Thinking Tools • CELLULAR FLOW Machines or processes are side by side with very little inventory between them. The goal is efficient, continuous flow.

23. Lean Thinking Tools • OPERATIONS BALANCING Achieving the best arrangement of people, material, and equipment.

24. Lean Thinking Tools • TAKT TIME Takt time sets the pace of production to match the rate of customer demand (sales) and is the heartbeat of the lean system. Effective Working Time Customer Requirement Takt Time =

25. Who Should Implement Lean Thinking Principles • Product Development Areas • Order Taking and Scheduling Processes • Manufacturing Operations • Logistics • Administrative Systems • Human Resources • ************ EVERYONE! ************

26. Lean Implementation Process LEAN LEVEL SCHEDULING SET UP REDUCTION 12-24 Months PULL/CELL/ STANDARDIZED WORK VALUE STREAM MAPPING WASTE ELIMINATION 5-S/VISUAL CONTROLS COMMUNICATE & TRAIN Leadership & Develop Strategy

27. Why Do Lean ? • Companies implementing Lean Thinking report the following improvements: • Productivity increases 15%-70% • Rejects (PPM) decrease 50%-250% • Inventory turns increase 55% - 70% • Space required decreases 35% - 70% • Employee involvement increases 70% - 95% • Annual savings per employee $1,200 - $3,500

28. What Will Lean Mean? • You will attack waste in all its forms. • You will embrace and celebrate continuous improvement. • The only constant is change.

29. Lean is a never ending journey. It is a systematic approach to the identification and elimination of waste and non-value added activities through continual improvement in all products and services.

30. Six Sigma

31. The History of Six Sigma • 1987: Motorola initiates Six Sigma • 1988: Some early successes and failures • 1993: AlliedSignal embraces Six Sigma • 1995: GE adopts Six Sigma (Jack Welch) • 1996: Six Sigma starts to grow • 2000: Six Sigma continues its evolution

32. Cost of Poor Quality (COPQ) What is COPQ ? Quantify the size ($) of the problem in languagethat will have impact on upper management Why is COPQ Important ? Identify major opportunities for cost reduction Identify opportunities for reducing customer dissatisfaction & associated threats to salability Stimulate improvements through publication Prioritize the opportunities

33. Why Focus on COPQ? Price Erosion Profit Profit Profit Cost of Cost of Poor Quality Poor Quality COPQ COPQ COPQ Total Cost to manufacture Theoretical Theoretical Theoretical and deliver Costs Costs Costs products Which Feels Better??

34. The Cost of Poor Quality “Iceberg” Traditional Quality Costs Rejects Administration Inspection Disposition Warranty Concessions Scrap Rework (tangible) Additional Costs of Poor Quality (intangible) More Setups Expediting Costs Late Delivery Lost Sales Lost Customer Loyalty Long Cycle Times Engineering Change Orders Lost Opportunity Hidden Factory (Difficult or impossible to measure) Average COPQ approximately 15% of Sales

35. What is Six Sigma? • A philosophy? • A problem solving methodology? • A set of tools? • A metric?

36. Six Sigma Has Four Dimensions Philosophy Metric Tools Methodology

37. Benefits of Six Sigma Cost-of-Quality decreased - from 30.1% before 1988 - to 7.4% after 1993 Aim for: - 8% Revenue Growth per year - 6% Productivity Improvement per yearforever Gross Savings of$1,225M in 1998

38. Some Companies Known to be Formally Applying the Six Sigma Methodology Motorola Texas Instruments AlliedSignal General Electric Sony DuPont Ford Motor Company Polaroid Dow Chemical Lockheed Martin Toshiba Bombardier Noranda/Falconbridge CitiGroup BMW Xerox Raytheon Coca-Cola ICI Explosives Dell Computers Seton Medical Centers American Express Maytag Pioneer Hi-Bred International Seagate Technology Millard Refrigerated Services Canadian Marconi Avery Dennison BBA Group PLC Crane Korean Heavy Industries Nokia Pechiney Siebe Thermo King GenCorp IBM Maple Leaf Foods

39. Is 99% Good Enough? 99% Good (3.8 Sigma) 99.99966% Good (6 Sigma) 20k lost articles of mail per hour Unsafe drinking water for almost 15 minutes each day 5,000 incorrect surgical operations per week Two short or long landings at most major airports each day 200,000 wrong drug prescriptions each year No electricity for almost seven hours each month Seven articles lost per hour One unsafe minute every sevenmonths 1.7 incorrect surgical operations per week One short or long landing every five years 68 wrong prescriptions per year One hour without electricity every 34 years

40. The Goals of Six Sigma $ Customer Satisfaction Yield Improvement Defect Reduction The bottom line: Higher net income

41. Six Sigma is About Leadership 20% 80% Change Leadership Technical Skills

42. Continual Improvement... Ongoing efforts Incremental improvement Quantum improvement Performance Six Sigma Projects Time

43. Performance Umbrella A Performance Organization Change management Continuous improvement tools Lean manufacturing Safety practices Kaizen ISO and QS-9000 practices Statistical process control Preventive maintenance TQM Six Sigma

44. Six Sigma Levels DFSS Black Belts Lean Green Belts White Belts “Nike” Sweet Fruit Design for Manufacturability Process Entitlement Bulk of Fruit Process Characterization and Optimization Low Hanging Fruit Simple Tools Ground Fruit Logic and Intuition - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - We don't know what we don't know We can't act on what we don't know We won't know until we search We won't search for what we don't question We don't question what we don't measure Hence, We just don't know

45. The Infrastructure

46. Roles • Executive • Champion • Process Owner • Master Black Belt • Black Belt • Green Belt

47. Exercise: • You are the GM of a very successful cinema with many employees. You will be out of the country for three months and have asked your staff to fax you a weekly report each Monday morning. What information (measures) would you like to see in that fax? Hollywood Inc. Weekly Report

48. Exercise: • You are heading to the cinema with some friends . . . • The movie you would like to see is playing in several cinemas in your area. All are about the same travel time from your home, charge the same amount, have the same stadium seating, and are showing movies at the same time. What criteria do you use to choose?

49. Critical to Who’s Satisfaction? A A Supplier Perspective Customer Perspective (Theatre) (Movie Goers) Management) Good Popcorn è Ticket Sales è No Sticky Floors è Concession Sales è Clean Restrooms è Labor/Work Force Costs è Short Lines è Profit Reports è Good, funny, entertaining movies è Other... è . . . So why do such differences in perspective exist ? What does this imply for a Six Sigma Project?

50. Being Customer Driven CTQs Voice of the Customer Critical to Quality Characteristics Process Capability