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Six Sigma Case Study v.2

Six Sigma Case Study v.2. Dr. Ron Tibben-Lembke SCM 494. Six Sigma Case Study - POI. Paper Organizers International Filing, organizing, and paper shuffling services Uses MSD (metallic securing devices)

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Six Sigma Case Study v.2

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  1. Six Sigma Case Studyv.2 Dr. Ron Tibben-Lembke SCM 494

  2. Six Sigma Case Study - POI • Paper Organizers International • Filing, organizing, and paper shuffling services • Uses MSD (metallic securing devices) • Increasing complaints from the Paper Shuffling Department (PSD) about MSDs breaking and failing to keep papers together • Customers’ papers can get mixed together • Purchasing wants to eliminate MSD complaints

  3. Mission Statement • “Put the right information in the right place.” • Management created a list of objectives and projects that will support those objectives

  4. President Director of Paper Shuffling Dept Business Objectives Increase # of orders Business Indicators # orders per Month (c chart) Area Objectives Increase # orders in PSD Area Indicators No. orders in PSD / mo. (c chart) Potential 6 Sigma projects New customer promotions project 1. avg. # services used per customer, per quarter 2. St dev. of # serv. used (x-bar and s) Increase # Services used by each customer in PSD 1. avg. # services used per PSD cust, per Q 2. St dev. Of # serv. used (x-bar and s) Existing customer promotions project Increase # of POI services used by each customer Minimize production costs Minimize production costs in PSD Production Costs in PSD/mo (I-MR chart) Prod costs per month (I-MR chart) MSD quality project # PSD employee Complaints/mo (c chart) Eliminate employee complaints # employee complaints per month (c chart) Eliminate PSD employee complaints Employee Morale project

  5. Current Costs • Management considers costs production costs in PSD to be too high • Avg. Production costs of $1.1m per month • Standard deviation is $116k. • R-bar / d2 = $116,672 • Average is “too high” but process is under control

  6. Production costs Normally distributed

  7. Prioritizing Six Sigma Projects Potential Six Sigma Projects Existing Customer Promotions New Customer Promotions MSD Quality Employee Morale Business objective Weight 0.35 3 3 0 0 0.10 1 3 0 0 0.40 0 0 9 3 0.15 0 0 9 9 1.15 1.35 4.95 2.55 Increase # orders Increase # POI services used by each customer Minimize production costs Eliminate employee complaints Weighted average of potential

  8. Starting MSD Project Champion and process owner make initial charter. • What is the name of the process? MSD purchasing • What is the aim? Purchase MSDs that improve productivity and morale of PSD • What is economic rationale? • Why do it at all? • Un-durable clips (<4 bends): lost papers, frustrated employees lead to higher processing costs, inefficient labor costs (60% cannot withstand test) • Functionality (broken in box): sorting costs, frustrated employees (60% of boxes have >5 broken MSDs)

  9. Additional charter questions • Why do it now? High production costs, complaints • What business objectives are supported by project? Min. costs, reduce complaints • Consequences of not doing: lower profits, more employee complaints • What projects have higher priority? None. • What is the problem statement? • Low-quality MSDs create additional production costs and employee frustration • What is goal or desired state? • 100-fold increase in durability 0.6% from 60% • 10-fold every 2 years, so 100 over 4 year project • 100-fold would take from 600,000 DPMO to 6,000 DPMO, set goal as 4 sigma (p. 739)

  10. More charter questions • What is scope? • Boundaries? When purchasing receives purchase orders, ends when MSD put in inventory • What is out of bounds? How employees use MSDs • What resources? $30,000, including salaries • Who can approve expenditures? Process owner • Can they go over $30,000? No. • What are obstacles? Budget, 21 weeks • What time commitment expected? Friday 8-9am meetings, progress reports • What about regular duties? OT may be required, not in budget

  11. Gantt Chart for Project

  12. MSD Project Benefits • Benefits: • Soft benefits: eliminating complaints from PSD and increasing employee morale • Hard benefits (financial): minimizing labor costs

  13. Labor savings – Clipping expenses • 100 employees, 40 hrs/wk, spend 10% of time clipping = 400 hrs / wk clipping • $25 / hr * 400 hrs * 50 wks = $500,000 annual clipping expenses • 60% clips defective = $300,000? Currently? • 0.62% defective = $3,100? Improved system? • Annually, 20,000 hrs clipping = 10 employees • 60% = 12,000 wasted clipping hours currently • 0.62% = 124 wasted hours under improved system • Need 6 fewer employees • This does not including time lost from clips failing later, on work in process

  14. Material Cost Savings • 300,000 projects per year, 10 clips each =3,000,000 clips needed each year. • 0.60 defect means 1/(1-0.6) = 2.5 clips used for each one needed = 7,500,000 used • 0.0062 means 1/(1-0.0062) = 1.00625 =3,018,000 clips used • Savings of 4,482,000 clips = $44,820 per year

  15. Team Members • Champion • Process Owner • Team Leader – Black Belt • Team member 1 • Team member 2 • Finance representative • IT representative

  16. Start SIPOC Purchasing receives order fromPaper Shuffling Department • -Suppliers • Inputs • Process • Outputs • Customers Purchasing agentcalls vendor No Does vendorhave MSDin stock? Yes Place order withvendor Receive order fromvendor Store productreceived intoinventory (newboxes go on bottomback of shelf) PSD removesproducts from inventory PSD uses Product Stop

  17. Voice of the Customer • What emotions come to mind when you think about MSDs? • What needs and wants come to mind when you think about MSDs? • What complaints or problems would you like to mention about MSDs? • 3 themes: • Variation in durability • Variation in color • Variation in functionality (# broken MSDs in each box) • CTQ-Critical to Quality factors Tech Specs • Ability to withstand bending >= 4 bends w/o breaking • The number of different MSD colors = 1 color of MSDs • The number of broken MSDs in a box. <= 5 broken in box

  18. Project Objectives • 1. Decrease (direction) the percentage that cannot withstand four or more bends without breaking (measure) bought by the purchasing department (process) to 0.62 percent (goal) by Jan. 1, 2005 (deadline). Go for 4 sigma! • 2. Decrease (direction) the percentage of boxes of MSDs with more than five broken clips (measure) bought by the purchasing deparment (process) to 0.62 percent (goal) by Jan. 1, 2005 (deadline) Go for 4 sigma! • 3. What happened to colors?

  19. Measure phase-I Operationally Define CTQs • Operational definition for CTQ1: Durability • Take top-front box • Close eyes, randomly pull one out • Count number of bends until breaking • Do not count bend being made when it breaks • If >= bends, then MSD conforms, else defective

  20. Operationally Define CTQ2 - Functionality • Take top-front box • Count the number of broken clips • If number of broken is <= 5, box is conforming • If number is > 5, box is defective • Use same boxes for both operational definitions

  21. Measure Phase-II Gage repeatability and reproducibility • 10 top-front boxes tested by 2 inspectors, each box twice • Gage (or gauge) run chart shows no difference between the measurements from the two different inspectors

  22. CTQ Baselines • Hourly inspections for both CTQs • Durability is # bends for one MSD before breaking • Functionality is # of broken clips • Yield is percentage of batches passing the standard • 6/16 passed each • Very similar to claim of 60% unacceptable

  23. I-MR charts show durability not stable over time. • Different vendors, but deal with that soon

  24. Durability “dot plot” – shows how many boxes had a particular durability level • Graph doesn’t look like Normal distribution • Maybe Poisson distribution

  25. C-chart not in control, shift 2 tester bent more slowly, caused it to last longer

  26. C-chart for Functionality under control

  27. Dot-plot for Functionality • Dot-plot for Functionality looks Normally distributed

  28. X’s also could be defined in measure phase Start Purchasing receives order fromPaper Shuffling Department Purchasing agentcalls vendor No Does vendorhave MSDin stock? Yes Place order withvendor Receive order fromvendor MSDs placed into inventory (new boxes go on the bottom back of shelf) PSD removesbox from inventory PSD uses MSDs Stop DetailedProcess Map X1 – Vendor (Ibix or Office Optimum) X2 – Size (Small or Large) X3 – Ridges (With or Without) X4 = Cycle time from order to receipt for MSDs X5 = Discrepancy in count from order placed and order received X6 = Cycle time to place product in inventory X7 = Inventory shelf time (in days) X8 = Type of usage (Large stack of paper or Small stack of paper)

  29. Operational Definitions for each X • X1 – Vendor Ibix Office Optimum • X2 – Size Small Large • X3 – Ridges With Without • X8 – Usage Large stack Small stack • X4 – Cycle time, ordering to receipt (days) • X5 – Discrepancy: # ordered vs. received • X6 – Cycle time to place in inventory (days) • X7 – inventory shelf life (in days) Perform gage study on each, to make sure we can measure consistently (repeatability and reproducibility)

  30. Baseline Data • Every hour for 2 weeks – 80 samples • Collect info about: • X1 vendor • X2 size • X3 ridges • Y1 Durability • Y2 Functionality • Other factors studied separately

  31. Sample Day Hour X1 X2 X3 X7 Durability Function 1 Mon 1 1 0 0 7 2 5 2 Mon 2 0 1 0 7 2 9 3 Mon 3 0 0 1 7 10 7 4 Mon 4 0 1 0 7 1 4 5 Mon 5 0 0 0 7 7 3 6 Mon 6 0 1 1 7 2 5 7 Mon 7 0 1 1 7 1 9 8 Mon 8 0 0 0 7 7 5 9 Tue 1 0 1 0 8 2 8 10 Tue 2 0 1 0 8 1 7 11 Tue 3 0 1 0 8 1 13 12 Tue 4 1 1 1 8 9 5 13 Tue 5 1 1 0 8 9 9 14 Tue 6 1 1 1 8 10 11 15 Tue 7 1 1 1 8 10 11 16 Tue 8 0 0 1 8 8 9 17 Wed 1 1 1 1 9 8 11 18 Wed 2 1 0 0 9 1 11 19 Wed 3 1 1 1 9 10 11 20 Wed 4 0 0 0 9 7 11 21 Wed 5 1 1 1 9 9 9 22 Wed 6 0 0 1 9 9 5 23 Wed 7 1 0 1 9 2 11 24 Wed 8 1 0 0 9 1 10 25 Thu 1 1 0 1 10 1 14 26 Thu 2 0 1 1 10 1 10 27 Thu 3 1 1 1 10 8 13 28 Thu 4 0 0 1 10 10 12 29 Thu 5 0 0 0 10 7 14 30 Thu 6 0 1 1 10 3 13

  32. Sample Day Hour X1 X2 X3 X7 Durability Function 31 Thu 7 0 0 0 10 9 13 32 Thu 8 1 1 1 10 8 11 33 Fri 1 0 1 0 1 2 0 34 Fri 2 0 1 0 1 2 1 35 Fri 3 0 1 0 1 1 6 36 Fri 4 0 1 0 1 3 3 37 Fri 5 0 1 0 1 2 2 38 Fri 6 1 1 0 1 10 6 39 Fri 7 0 0 1 1 10 0 40 Fri 8 0 1 0 1 2 0 41 Mon 1 0 1 1 4 3 4 42 Mon 2 0 1 0 4 3 7 43 Mon 3 0 1 1 4 3 3 44 Mon 4 0 0 0 4 10 2 45 Mon 5 1 1 0 4 8 5 46 Mon 6 0 1 1 4 3 4 47 Mon 7 1 0 0 4 1 4 48 Mon 8 0 0 1 4 10 5 49 Tue 1 1 1 1 5 11 6 50 Tue 2 1 0 1 5 3 4 51 Tue 3 1 1 0 5 10 6 52 Tue 4 1 0 1 5 3 5 53 Tue 5 1 0 0 5 2 4 54 Tue 6 0 0 0 5 9 5 55 Tue 7 0 0 1 5 9 5 56 Tue 8 0 1 0 5 3 7 57 Wed 1 0 0 1 6 9 5 58 Wed 2 1 1 0 6 9 7 59 Wed 3 0 0 0 6 9 5 60 Wed 4 1 0 0 6 2 6

  33. Sample Day Hour X1 X2 X3 X7 Durability Function 61 Wed 5 1 0 1 6 2 5 62 Wed 6 1 1 1 6 10 5 63 Wed 7 0 1 0 6 1 7 64 Wed 8 0 1 0 6 2 5 65 Thu 1 0 0 1 7 10 7 66 Thu 2 1 1 0 7 9 5 67 Thu 3 1 0 0 7 1 7 68 Thu 4 0 1 0 7 2 5 69 Thu 5 1 0 1 7 1 6 70 Thu 6 0 1 0 7 1 5 71 Thu 7 1 0 0 7 1 8 72 Thu 8 1 1 1 7 10 5 73 Fri 1 0 1 1 8 3 7 74 Fri 2 1 1 1 8 9 7 75 Fri 3 1 0 0 8 1 13 76 Fri 4 0 1 1 8 2 8 77 Fri 5 0 1 1 8 3 9 78 Fri 6 1 1 1 8 8 10 79 Fri 7 1 0 1 8 3 11 80 Fri 8 0 0 1 8 10 11 Legend: X1 = Vendor (0 = Office Optimum and 1 = Ibix) X2 = Size (0 = Small and 1 = Large) X3 = Ridges (0 = Without and 1 = With) X7 = Inventory shelf time, in days

  34. Baseline results • Durability 0.4625 • Functionality 0.425 • X1: Office Optimum 56.25% • X2: Small 42.50% • X3: Without ridges 50% • X7: Shelf life average 6.5 days • X7: Shelf life st. dev 2.5 days

  35. Vendor (X1) and Durability Maybe Ibix is more durable? Ibix Off Opt.

  36. Size (X2) and Durability Maybe small is more durable? Large Small

  37. Ridges (X3) and Durability Maybe ridges are more durable? Ridges No ridges

  38. Shelf Life (X7) and Durability

  39. Vendor (X1) and Functionality Maybe Ibix is more functional? Ibix Off Opt.

  40. Size (X2) and Functionality Maybe large is more functional? Large Small

  41. Ridges (X3) and Functionality Maybe ridges are more functional? Ridges No ridges

  42. Shelf Life (X7) and Functionality

  43. Conclusions • Durability – no large effects from any X’s. • Vendor (X1=1 = Ibix) improves functionality • Size (X2=1= large) improves functionality • Ridges (X3=1) seem to improve functionality • Shelf Life (X7) – lower values have better functionality • Best plan is to buy Ibix large MSDs with ridges

  44. Office Ibix small Lg No with Shelf Opt. Ridges Ridges Life

  45. Conculsions – 2 • Best to buy • Ibix • Small • With Ridges • Shelf life doesn’t matter?

  46. X1=Off Opt X1=Ibix Small Large No ridges Ridges

  47. Conclusion? • Ridges don’t seem to affect durability • Buy small Office Optimum, or Large Ibix!

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