LEAN SIX SIGMALEAN SIX SIGMA

1.0 LEAN

Profesor Madya Dr. Muhamad Zameri b. Mat SamanDr. Norhayati bt. Zakuan

UTM

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MAY 2015

Options for Increasing Options for Increasing Contribution

Finance/Finance/MarketingMarketing AccountingAccounting LeanLean

OptionOption OptionOption OptionOption

II R dR d R dR d

SalesSales $100 000$100 000 $150 000$150 000 $100 000$100 000 $100 000$100 000

IncreaseIncrease ReduceReduce ReduceReduceSalesSales FinanceFinance ProductionProduction

CurrentCurrent Revenue 50%Revenue 50% Costs 50%Costs 50% Costs 20%Costs 20%

SalesSales $100,000$100,000 $150,000$150,000 $100,000$100,000 $100,000$100,000Cost of Goods Cost of Goods –– 80,00080,000 –– 120,000120,000 –– 80,00080,000 –– 64,00064,000Gross MarginGross Margin 20,00020,000 30,00030,000 20,00020,000 36,00036,000Finance CostsFinance Costs –– 6 0006 000 –– 6 0006 000 –– 3 0003 000 –– 6 0006 000Finance CostsFinance Costs 6,0006,000 6,0006,000 3,0003,000 6,0006,000SubtotalSubtotal 14,00014,000 24,00024,000 17,00017,000 30,00030,000Taxes at 25%Taxes at 25% –– 3,5003,500 –– 6,0006,000 –– 4,2504,250 –– 7,5007,500ContributionContribution $ 10,500$ 10,500 $ 18,000$ 18,000 $ 12,750$ 12,750 $ 22,500$ 22,500

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ContributionContribution $ 10,500$ 10,500 $ 18,000$ 18,000 $ 12,750$ 12,750 $ 22,500$ 22,500

Changing of Mind SetChanging of Mind SetChanging of Mind SetChanging of Mind SetSelling Price = Cost + Profit

Profit = Selling Price – Costg

The focus should be on reducing costg

The best way to reduce cost is to remove The best way to reduce cost is to remove the waste

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ValueValueValueValue

PricePrice

Price Price

ProfitProfit

Cost

Profit

Cost

T diti l thi ki L thi kiTraditional thinking Lean thinkingCost + Profit = Price Price - Cost = Profit

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Classic Example of WasteClassic Example of WasteClassic Example of WasteClassic Example of Waste

Brick laying in the late 19th centuryy g y

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SolutionSolutionSolutionSolution

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Golf AnalogyGolf AnalogyGolf AnalogyGolf AnalogyIn a four hours golf game, the golf club is g g gin contact with the ball for less than half an hour.◦ The same proportion of value-adding to non-

value-adding time prevails in many factories.

Additional analogies:◦ Waiting for other players = waiting for toolsg p y g◦ Walking = transportation◦ Selecting a club and addressing the ball = Se ect g a c ub a a ess g t e ba

setupDr Zameri 8

The Three Dimensions of WorkThe Three Dimensions of WorkThe Three Dimensions of WorkThe Three Dimensions of WorkValue AddedAny process that changes the nature shape or - Any process that changes the nature, shape or

characteristics of the product, in line with customer requirements

Eg: Assembly welding etc (maximize)- 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 activitiesAll other meaningless, non essential activities- Eg: 7 waste categories

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Objective: To raise the ratio of VA Objective: To raise the ratio of VA to NVA and Wasteto NVA and Waste

Operating Time

Waste NVA VA

ReduceEliminate????

Waste NVA VA

ReduceEliminate????

New Opt Time

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Muda: The Seven Deadly Types of Waste

The Seven WastesWastes DescriptionThe Seven Wastes p

Overproducing Unnecessary production to maintain high utilizationsWaiting Excess idle machine & operator & inventory wait timeWaiting Excess idle machine & operator & inventory wait time

Transportation Excess movement of materials & multiple handling

Over processing Non value adding manufacturing & other activitiesOver-processing Non-value adding manufacturing & other activities

Excess Inventory Storage of excess inventory

Excess Movement Unnecessary movements of employees

Scrap & Rework Scrap materials & rework due to poor quality

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Muda: The Seven Deadly Types of WasteType of Waste Office Examples of Deadly Types of Waste

DefectsData entry errors. Other order entry or invoice errors. Any error that gets passed downstream - only to be returned for correction or clarification. Engineering change y g g gorders. Design flaws. Employee turnover. Absenteeism.

OverproductionPrinting 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.

InventoriesPurchasing 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...)

Over processing

Relying on inspections, rather than designing the process to eliminate errors. Re-entering data into multiple information systems. Making extra copies. Generating unused reports. Over-processing p y g p g pExpediting. Unnecessarily cumbersome processes (think financial statement period end close, expense reporting, the budget process...)

Human Motion Walking to copier, printer, fax... Walking between offices. Central filing. Going on a "safari" Human Motion g p p g g gto find missing information. Backtracking back & forth between computer screens.

Transportation & Handling

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 WasteType of Waste Office Examples of Deadly Types of Waste

WaitingSlow computer speed. Downtime (computer, fax, phone...). Waiting for approvals. Waiting for information from customer. Waiting for clarification or correction of work received g gfrom upstream process.

Confusion Any missing or misinformation. Any goals or metrics that cause uncertainty about the right thing to do.

Unsafe or un-ergonomic

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

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 Underutilized

human potentialwork. 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 self-directed teams. Not expecting (and measuring) every person to contribute to continuous improvement.improvement.

Summary of WasteSummary of Waste

7 Wastes Office Manufacturing1. Over Production

generating more than what is needed

1. Generate more information than the customer needs right now

2. More information than the process needs

1. Produce to stock based on sales forecasts

2. Produce more to avoid set-ups 3. Large batch process results in needed

3. Create reports no one reads and making extra copies

g pextra output

4. Produce more due to rejects

2. Over Processingthi

1. Repeated manual entry of data 2 Obtaining multiple signatures

1. Over – tight tolerances 2 Extra thicknessprocess things

that customers doesn’t want

2. Obtaining multiple signatures3. Excessive reviews 4. Checking someone’s else work

2. Extra thickness3. Additional process 4. Longer duration 5. 300% Inspection

3. Conveyancemovement of things that are

t l dd d

1. Temporarily locating, filing, stocking and stacking

1. Moving parts in and out of storage 2. Moving material from one

workstation to another

not value added

Summary of WasteSummary of Waste7 Wastes Office Manufacturing

4. Inventoryhave more than

1. Files or documents to be worked on

1. Raw materials 2. Work In Process

customers requirement

2. Office supplies 3. E-mails waiting to be read

3. Finished Goods 4. Consumable supplies

5. Motionf

1. Searching for files 2 G th i i f ti /d t

1. Searching for parts, tools 2 S ti th h t i lmovement of

people that does not add value

2. Gathering information/document 3. Extra clicks of key strokes

2. Sorting through materials 3. Reaching for tools 4. Lifting boxes of parts

6 Waiting 1 System to come back up 1 Waiting for inspection6. Waitingidle time created when things are not ready

1. System to come back up2. Copier machine 3. A handed-off file to come back

1. Waiting for inspection 2. Waiting for information3. Waiting for machine repair 4. Waiting to be processed

7. Reworkwork that contains errors, l k thi

1. Data entry error2. Pricing error 3. Missed information/specification4 L t d

1. Scrap 2. Defects3. Correction 4 Mi i tlacks something 4. Lost records 4. Missing parts

V l St M iValue Stream Mapping

An approach to visualise Material and Information flows in a key Business Process.

Current State Value StreamCurrent State Value Stream

Future State Value StreamFuture State Value Stream

Lean ImplementationLean ImplementationLean ImplementationLean Implementation

Order levellingLean Assessment

5 06,07,08,09,0

10,0

Material ControlFlowLean Assessment

Radar Chart

0 01,02,03,04,05,0

Continuous FlowTeam Member

Involvement• Self-evaluation tool 0,0

Visual ControlsTraining

• Self-evaluation tool based on questionnaire

Gap analysis: current

TPM

Quality

5S

• Gap-analysis: current vs. future lean state

QualityAssessment Score Target Score

Example Example –– Lean Office Lean Office

Preapre draft Q&A

Question distribute

Manually Answer

FinalizeResult

Q&AInspect

ExamArrangeme

Beltersgathering

Collect Answer

CorrectingAnswer

Send toBelters

Certification

Send resultto Training

S h tti Di

Prepare finalQ&A

Q&AInspect

Arrangement

Print outQ&A

AnswerBelters nArrangeme

ntH/Over

Certificate

Problem:Preparing Examination activity contribute NVA job

Result• Reduction of waiting time waste

Spaghetti Diagram

Preapre draft Q&A

Export to H/OverCertification • Reduction of waiting time waste• 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% )

Export to Web

B l O li

Send result to Training

H/Over Certificate

Certification Arrangement

S

ExamArrangement

Total VA 775min to 635min ( Reduction 18% )• Total Activity reduce 7 to 5 (Reduction 28.6%)

Belters gathering

Online answers

Systemgenerate result

2.0 SIX SIGMA

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Six SigmaSix SigmaSix SigmaSix SigmaBackground

I 1986 S h & G l f M l ◦ 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 g

process variation meets the customer’s requirement.◦ Focus on stable and capable processFocus on stable and capable process◦ The error rate for Six Sigma processes: 3.4

Defects Per Million Opportunities (DPMO)

Six Sigma Objective Six Sigma Objective Six Sigma Objective Six Sigma Objective

The fundamental objective of the SixThe fundamental objective of the Six Sigma methodology is the implementation of a measurementimplementation of a measurement-based strategy that focuses on process improvement andprocess improvement and variation reduction through the application ofapplication of Six Sigma Improvement Projects

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Six Sigma StrategySix Sigma Strategy

Reduce Variation Improvement

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Variation ExampleVariation Example

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Case Study: Customer Satisfaction at CounterCase Study: Customer Satisfaction at Counter

UCL

N

Target

ATISFA

CTIO

LCL

SA

Investigate & take corrective action

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A‐Noon

Wed Thursday

Morning Midday A‐NoonMorning

Tuesday

Midday A‐Noon Morning MiddayMidday A‐Noon

Monday

Morning Midday A‐NoonMorning

A 6 Sigma ProcessA 6 Sigma ProcessCustomer target

Lower Specification Limit Upper Specification Limit

0.00017%1 7

0.00017%1.7 ppm1.7 ppm

6σ6σ

0.00034% of points will be outside of the specification limits ie. defects= 99.7966% of data inside the limits (Cp = 2)

p p(= 3.4 parts per million out of spec.)

Relating Sigma to Defect LevelsRelating Sigma to Defect Levelsg gg gDPMO (Defects Per DPMO (Defects Per Million Opportunities)Million Opportunities) Error Free RateError Free Rate

Six SigmaSix Sigma 3.43.4 99.9997%99.9997%

Million Opportunities)Million Opportunities) Error Free RateError Free Rate

Five Sigma Five Sigma 233233 99.977%99.977%

Four SigmaFour Sigma 6,210 6,210 99.4%99.4%

Three Sigma Three Sigma 66,81066,810 93%93%

Two SigmaTwo Sigma 308,500308,500 69%69%Two SigmaTwo Sigma 308,500308,500 69%69%

One SigmaOne Sigma 691,500691,500 31%31%

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Six Sigma MethodologySix Sigma Methodology-- DMAICDMAIC

Define

• Review Project Charter: Description, scope, objectives, schedule• Develop team, Validate VOC- SIPOC

Measure

• Measure the existing system/process performance. Value Stream, Process FlowId if Measure • Identify wastes

• Determine possible area of improvement to reduce/eliminate the gap between current performance & desired goal – Brainstorming, FBD

Analyze • Reduce/eliminate wastes

• Select & prioritize solution

Improve • Perform risk assessment- FMEA, pilot the solution

• Institutionalize the improved system

Control

p y• Use statistical tools to monitor stability of the new system, audit the results.

The Six Sigma ApproachThe Six Sigma ApproachDMAICDMAIC

Define the problem orControl by Define the problem or opportunity.standardising solution

and monitoring performance. DefineControl

Measure the current performance andImprove by

i l tiMeasureImprove 6σ

performance and capabilityimplementing

potential solutions. Analyse

Analyse to identify root causes.

The Role of Statistics in Six SigmaThe Role of Statistics in Six Sigma

Practical ProblemStatistical ControlDefineControl

Measure

Analyse

Improve 6σ

Statistical Solution y

Statistical ProblemStatistical Solution

Practical SolutionPractical Solution

3.0 LEAN SIX SIGMA

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What Is Lean Six Sigma?

Systematic approach to reducing process defects h d d i d ithat produce undesired outcomes - in our case,

improving the decision making regarding inventory purchasespurchases

DMAIC – Define, Measure, Analyze, Improve, , , y , p ,Control

Team focus to problem solving - each of us are experts in certain areas of the inventory process and

h h i li d k l d f ti f theach have specialized knowledge of portions of the process

Improvement Methodologies of LSSImprovement Methodologies of LSS

Methodologies

A Comparison between 2 Most Proven and Popular Application - Generic Survey Findings

Six Sigma – GE, Motorola Lean Thinking – Toyota, Airbus

Concepts

Guidelines for implementation

1. Reduce variation

1. Define 4. Implement2. Measure 5. Control 3 Analysis

1. Remove waste

1. Identify value 4. Pull2. Identify value stream 5. Perfection

Focused

Assumptions

3. Analysis

1. Problem focused – cost and variation

1. A problem exists

3. Flow

1. Flow focused – cycle time and WIP

1 Waste removal improve performancePrimary Effect

Secondary Effects

p2. Figures and numbers are valued 3. System output improves when

variation improved

1. Uniform process output

1. Waste removal improve performance 2. Small improvement better than system

analysis

1.Reduced flow time

Weaknesses 1. Uniform process output

1. Less waste 4. Improved quality2. Fast throughput 3. Less inventory

1. Less variation 4. Flow2. Less inventory 5. Improved quality3. New accounting system

1. System interaction not considered2. Process improved independently

1. Statistical or system analysis not valued

Improvement Methodologies of LSSImprovement Methodologies of LSS

A Comparison between 2 Most Proven and Popular Application -Generic Survey Findings

MethodologiesInfrastructure

Motivation and Career

Six Sigma – GE, Motorola

Champions, Sponsors, Master, Black and Green Belts

Some incentive and frequent career

Lean Thinking – Toyota, Airbus

Champions, Sponsors, Masters and Experts

H h d i tiCareer Development

Type of Data Analysis

Usage of Resources

Some incentive and frequent career development

Advanced Statistical Analysis preferred

Everybody’s job ( Yellow / Green Belts )

Haphazard incentive or career development

Basic Data Analysis

E er bod ’s jobUsage of Resources

Process / ProductOriented

Selection of Projects

y y j ( )Dedicated Resources – Black Belts

Process Centered Some Product Centered

Everybody’s job

Process Centered

Related to organization strategicSelection of Projects

Project Review

Strong Tendency towards

Related to organization Strategic initiatives

Gated Review at the end of each DMAIC phase

Related to organization strategic initiatives and Popular projects

Gated review based on Value Stream Annual Plan – monthly review

towards Analysis with Statistical Techniques Action ( Kaizen Events ) with Industrial Engineering Techniques

Improvement Methodologies of LSSImprovement Methodologies of LSS

It’s not Sigma or Lean Methodologies Lean Sigma – Lockheed Martin

It’s not Sigma then Lean

B t It’

Concepts Remove waste and variations

Guideline for implementation

DMAIC Approach

But It’s implementation

Focused Value Improvement, cost, cycle time, variation and WIP improvement

Assumptions Work consistency and stability enhancedAssumptions Work consistency and stability enhanced

Primary Effect Speed and Quality

Secondary Effect

Less waste and variationLess inventory Less quality problems

Weaknesses None – statistical techniques are requiredWeaknesses None statistical techniques are required only when absolutely necessary

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