Lean vs six sigma in supply chain management
Description
Overview of Lean and 6 Sigma in SCM and Warehouse distribution
Transcript
Prepared by Julian Kalac, P.Eng
Lean Six Sigma Master Black Belt
1
2
4
Shipped on time and customer happy
We Made $$$$
ProductionMaterial
Ship order
CUSTOMER
• No Wasted Time
• No Wasted Money
• No Wasted Resources
• No Wasted Material
? ?
99%
Customer Quality
The truth
5
The Hidden Factory
$5000-material
scrap costs
$35,000 REPRINTS
cost
Lost order
Wrong order shipped
ProductionMaterial
Ship order CUSTOMER
Hidden Factory
6
INSANITY –“Doing the
same thing over and
over again and expecting
different results”
Albert Einstein
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8
“Lean” is a Japanese methodology that
focuses on producing high quality products
FASTER, better and at lowest cost.
Lean is about reducing NVA steps and waste
(scrap, rework,) focusing on the Value Add
work what the customer is paying for
Lean is NOT ELIMINATING JOBS!
The goal is that “you don’t work harder, but
rather smarter”
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| | 10
Customers demand shorter lead times,
improved quality & reduced prices
Increase through-put and quality and reduce
time wasted and frustration by working on
non-value add activities.
Gain new business
Identification and systemic elimination of non-
value add costs and re-alignment of resources
to deliver value to the customer faster, better, &
more consistently
Lean in Manufacturing:
◦ Focus: Eliminate waste, non-value add steps,
process constraints and bottle necks that cause
problems in work throughput
◦ Approach: Intuitive and broad – “inch-deep, mile
wide”
11
Leading to Leading toEliminate
Waste
Reduced
Cycle Times
Increased
Capacity
12
Lean Manufacturing = SPEED
focusses on reducing waste/Non-Value
Add activity and “Speeding” up the
Process cycle Times.
Six Sigma = QUALITY 3.4 PPM
focusses on reducing defects and process
variation
Six Sigma “Quality”+ Lean “Speed” =
PERFORMANCE
Value Added
Typically 95% of all lead time is non-value added
1. Overproduction
2. Waiting
3. Transportation
4. Non-Value Added Processing
5. Excess Inventory/Material
6. Defects
7. Excess Motion
8. Underutilized People
Non-Value Added
5%
| | 14
Lack of cross-functional training
Over relying on a select few while others
are Inadequately trained
Operators are unable to rotate and help
each other out to balance the work-
load
High overtime, increased pressure stress
1
1
1
Cycle Time is dictated by the slowest (bottleneck)
operation in the cell.
40
min
20
min
25
min
15
min
30
min
1
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3
2
•What operation controls the cycle?
•How can you relieve the bottleneck?
Bottleneck Management:
•Maintain buffer in front of bottleneck
– (never starve the bottleneck !)
•Improve bottleneck operation
•Cross train on bottleneck
– Creates a visual work place
– Continuous Improvement
– Cell Support
– Balance activities / operations
20
Pull Systems
Production scheduling method used to link downstream
activities to upstream activities
Work begins based upon a demand signal (kanban) from
a downstream customer, either internal or external
Avoids overproduction, work backlog, and disconnects
within a process
Nothing is produced until the downstream customer
signals a need
KANBAN
◦ A signal to produce
◦ Signal can be an empty square, bin, shelf, cart, or
kanban card
◦ Kanban qty is safety stock used while new order is
delivered
◦ Kanban qty is calculated based on usage, lead time,
delivery time
◦ Can be setup manually or automated
◦ Can extend through electronic notification to
suppliers using automatic messaging and triggers
2
SETUP TIME
◦ Starts when last piece of previous job is
complete; ends when first good piece of next job
is complete
INTERNAL SET-UP: While machine is shut-down
Goal is to reduce Internal setup time, less= better
EXTERNAL SET-UP: While machine is working
◦ Goal is to transfer internal setup activities and
increase external setup time, more= better
Poke yoke = Error Proofing
Eliminate/minimize chance for human error
to avoid mistakes
◦ Prevention Poke Yoke
Stops the process before failures occur
Does not allow defects to pass through the process
High-Level Process Map
Suppliers, Departments,
Customers
Mid-Level Process Map
Specific Area ex Production
Detail-Level Process Map
Specific process/operation
(most commonly used)
Stop
Start
Stop
Start
Start
Stop
Stop
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VA/NVA Ratio= 46%
DPU = ____
RTYield = _____
SCORE CARD:
I’m going to
have coffee
Fill c.
maker
with
water
Scoop
Coffee
into
c. maker
Get &
place
Filter in
c. maker
Drink
coffee
Is
taste
OK
Brew
coffee
Pour c.
into cup
Add
cream &
sugar
Water Supply
Process
Shopping
Process
Electricity
Supply
Process
Eating
Equipment
Supply
Process
Tasting
Process
Housekeeping Processes
Transactional&
SupportProcesses
ProcessData
&Information
NVA = Non-value Added Time
VA = Value Added Time
VA Time
NVA Time
Temp of Water= ___
Quality of Water= ___
Pressure of Water= ___
Amount of Coffee= ___
Quality of Coffee= ___
Type of Coffee= ___
Defective Coffee= ___
60 sec 30 sec 60 sec 360 sec 10 sec 60 sec
10 sec 10 sec 5 sec 600 sec 30 sec
SCOR (Supply Chain Operations Reference)
Model:
Structured around Five CORE Process Types
SCOR Model
Customer’s
Customer
Supplier’s
Supplier
Supplier
Internal or
External
Customer
Internal or
External
Your Company
Plan
Make DeliverSource Make /
Repair
DeliverMakeSourceDeliver SourceDeliverSource
Return Return Return
Return Return Return Return Return
Plan Plan
Provides Framework for your Transformation / Improvement Projects.
• Defining the boundaries / scope of the supply chain .
• Evaluate the supply chain’s strengths and weaknesses.
• Industry benchmarks, standardized terms, metrics,
Enables a total enterprise view of a supply chain
2
Product/ServiceValueStream
Processes Processes Process
Start
Process
Finish
Process
Steps
Processes Processes
Organization Customers End-use
Customers
Suppliers
Sub-
Suppliers
Process
Steps
TransactionalProcessSteps
Return Return
Plan
Make DeliverSource Make/Repai
r
DeliverMakeSourceDeliver SourceDeliverSource
Return Return Return Return Return Return
SCOR Supply Chain Model
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Customer
Batch
WIP 1
Test
failures
Batch
WIP 2
Production
Defects
detected
Customer
Defects
Late
Orders
QC
I
Rework
Test
Rejects
QC
I2REWORK1
Sub-Assy
Riveting
Shipping
Supplier
Sub-Assy2
WIP2
Final-Assy
Test 2
Hurry Need
To ship!!!
NVA = 38%
Cost = 32%
DLV+Scrap
VA= 62%
30
15 coils/shift 8 20 26 39 31 10 20
4
13
19
20 8 40 20 20 20
20 20 20 20
Start Loop coils
180 deg
twist & prep
Skin Electric
Press
Coil form
Model
check
M/C tapePre-tape
Final Tape
Apply
Mylar
Micalast
Load
Micalastic
Impregnation
Final
Press &
Cure
Remove
Mylar
Final
gauge
ECP
Tape
ECP
oven
cure
Strand &
Final testPack &
Ship
Stop
Rotation schedule:
Based on the cycle times above every 2Hrs, Rotate Final Taping operators
with operators from “Skinning”, Electric Pressing. Coil forming & Model-
checking.
This will increase productivity from 28 Coils/Day to 40 Coils/Day and
ensure max exposure to F/T not more then 2hrs/day.
Needed: Cross-functional training and ~ 1 week
learning curve to achieve 85% operator efficiency
3
Increased Coil Productivity by 30% from 28 to 40
Coils/day = $420K/Year
Increased direct labour utilization by 26%
=$240K/Year
Reduced in-process scrap from 20% to under 4%
OEE improvement of 24% (from 62% to 84%)
Flexible work Cells & cross functionally trained
workers able to help manage bottleneck efficiently
MOL order on Final Tape exposure complied with
Total Operational Savings = $ 800K
3
The Five Principles of “Lean Thinking”
1. Define Customer demand TAKT TIME)
2. Map out the Current process (value stream)
identify Value and Non Value Add steps
3. Get the product to “flow” faster by
eliminating NVA steps and bottlenecks
4. Eliminate WIP, implement continuous flow
5. Implement POKE YOKE systems to error
proof to improvements
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Lost managemant
time cost
Maintenance
cost
Lost opportunity
Lost assets cost
Rerun cost
Lost
business,
goodwill cost
Lost
credibility
cost
Prevention cost
appraisal cost
Project
rework cost
Litigation
SS Titanic
Management
Waste Costs:
Costs driven by problems and process steps that add no value
to products & services delivered to customers
Appraisal Costs:
Costs incurred to determine the degree
of conformance to customer needs
Prevention Costs:
Costs incurred to keep failure and
appraisal costs to a minimum
Failure Costs:
Costs directly incurred
due to defects internal
to the system or after
delivery to the
customer
THE PROCESS
PROCESS
OUTPUTS
CONTROLLED
VARIABLES
CUSTOMER
PROCESS
INPUTS
UNCONTROLLED
NOISE
VARIABLES
Process Variables
3
σ Methodology that Focuses on Reducing
Process Variation, using data-driven,
measurement-based, statistical methods
to Solve problems, improve performance
σ Focus: Surgical “inch-wide, mile-deep”
investigation and resolution
σ Approach:
σ Data driven solves problems at the
system and root cause level
σ Implement robust control plans for
sustained improvements
What is “Six Sigma”?
An Analytical Methodology that Focuses on Reducing Process Variation
1
)( 2
n
xxi
Sigma = = Deviation
( Square root of variance )
-7
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
7
Axis graduated in Sigma
68.27 %
95.45 %
99.73 %
99.9937 %
99.999943 %
99.9999998 %
result: 317300 ppm outside
(deviation)
45500 ppm
2700 ppm
63 ppm
0.57 ppm
0.002 ppm
between + / – 1
between + / – 2
between + / – 3
between + / – 4
between + / – 5
between + / – 6
=
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•Identify customer
metrics
•Select performances
standards
•Select objectives
•Map the process
•Validate measurement
System (MSA)
•RESULT: Process maps
and good quality data
collected by listening to
the process
•Identify sources of variation & failure points
•Redefine and Re-prioritize
•Establish process capability
•Identify improvement opportunities
•RESULT: The critical sources of variation
identified root causes determined
•Monitor processes to prevent
recurrence of variation, defects
and non-value work
•Maintain performance levels
•find more creative ways to
improve
•fix root causes
•Find/Implement Preventive Fixes
•Deploy changes organization
•RESULT: Performance is more
predictable ; culture changing
•Plan and apply Improve Tools to fix
problems and reduce variation
•Implement improvement opportunities
•RESULT: Improve tools applied, changes
implemented and performance
improvement in place
DMAIC Improvement Model
A Road Map for guiding Improvement Projects
•Identify customer problems
•Identify performances standards
•Identify improvement objectives
•Link problem to the key performance metrics
•Find the right problems
•RESULT: Problem Statement & Project Charter
Define
Measure
AnalyzeImprove
Control
Results
Define
Measure
AnalyzeImprove
Control
Results
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Define
Measure
AnalyzeImprove
Control
Results
Define
Measure
AnalyzeImprove
Control
Results
Applied Learning
Theory Practice
Coached Projects
Training typically
occurs over a 4-6
month period using a
Learn Apply;
Learn Apply; …
format.
Projects that solve
real performance
problems in your
organization are part
of the certification
and learning process
Recognize:
•Find problems
•Link to organization’s needs
•Form teams, define resources
•Understand program req’ts
Deploy:
•Validate improved
performance that
stays in place
•Spread
improvements
across the
enterprise
•Harvest the
performance
improvements
•Change the
culture
To understand where you want to be,
you need to know how to get there.v
Map the Process
Measure the Process
Identify the variables – ‘x’
Understand the Problem –
’Y’ = function of variables -’x’
Y=f(x)
4
2) Clearly Define your Problem and the Impact
Example:
Too many mistakes in purchase request specifications are causing rework
rates of 34%, high costs and late deliveries (less than 50% on time) to our
customers
1) Find
• Customer Issues
• Performance
Reviews
• Meetings
• New Projects
• Failures, Re-work
• Projects
• Continuous
improvement
activities
• Champions
• Stakeholders
• Employees
• SCOR Maps
• Research
• Brainstorm
• Wait until the crisis
hits you
• Value Stream
Maps
3) Clearly State the Initial Scope for your project
(Set targets and timelines!)
Example:
This first phase of this project – by 3Q 2004 – will identify problems and root
causes in the purchase request process, increase first pass yield rates to
95%, reduce the cost of poor quality by 50% and increase on-time
deliveries to our customers to greater than 90%
4) Link improvement targets to customer needs and
organizational objectives
5) Project Plan – Charter, Resources, Milestones
4
3
Process Flow
for Measure Phase
Data
Storage
and
Archiving
Foundations for Wisdom and good decision
making start with Good Data
What data do we need?
Can we use “old” historical data?
Is old data (still) usable?
How was it collected?
Wisdom
Knowledge
Data
Information
Wisdom
Knowledge
Data
Information
Wisdom
Knowledge
Data
Information
Data Selection
Data Integrity Analysis
Data Collection
Measurement System Analysis
Process Mapping
Is your error in the process or in the way you measure it?
Could it be that you actually are “good” but the error in the measurement
system shows that you are not “good”?
Overall Variation
Occurrence-to-
Occurrence ( or Piece-
to-Piece) Variation
Measurement System Variation
Repeatability:
Variation due to gage
or measurement tool
Reproducibility:
Variation due to people or
operators who are measuring
2
Total = 2
Part-Part + 2
R&R
Accurate but not precise – On
average, the shots are in the center of
the target but there is a lot of
variability
Precise but not accurate –
The average is not on the center,
but the variability is small
Source: iSixSigma
46
Organize & Understand your data
Statistical Analysis
Determine significant factors
Sort, Collate, Investigate your data
Wisdom
Knowledge
Data
Information
Wisdom
Knowledge
Data
Information
Wisdom
Knowledge
Data
Information
We know we must change X to create a change in Y…
But how do we know which Xs to change
and how to change them ?
4
Y =f (x1, x2, …)
process output key process input factors
affecting process output
function of
48
P value< 0.5–Significant
Statistical Analysis
0.0250.0200.0150.0100.0050.000
7
6
5
4
3
2
1
0
New Machine
Frequency
0.0250.0200.0150.0100.0050.000
30
20
10
0
Machine 6 mths
Frequency
Is the factor really important?
Do we understand the impact for
the factor?
Has our improvement made an
impact
What is the true impact?
Hypothesis Testing
Regression Analysis
55453525155
60
50
40
30
20
10
0
X
Y
R-Sq = 86.0 %
Y = 2.19469 + 0.918549X
95% PI
Regression
Regression Plot
Apply statistics to validate actions & improvements
P value< 0.5–Significant
The minimum
sample size
required to provide
exactly 5% overlap
(risk). In order to
distinguish the
Delta.
Note: If you are
working with Non-
normal Data,
multiply your
calculated sample
size by 1.1
50
40 50 60 7040 50 60 70
40 60 7050
Population
P value< 0.5–Significant
51
PROBLEM
FINDING
FACT
FINDING
PROBLEM
DEFINITION
IDEA
FINDING
EVAL. &
SELECT
PLAN
ACCEPT
-ANCE
ACTION
1
2
3
4
6
7
8
5
Select
Tool
Analyze Data & Information Apply tools & Make Changes
Six
Sigma
Projects
5S PM/TPM TQM
Rapid Improve-
ment Event
Integrated
Process
Team (IPT)
Establish Baselines/Metrics
Other CI
Tools
Kanban DFSS
ApplytheTool
(1)
(2)
(3)Implement / Deploy Fixes
(0) Identify failure points, bottlenecks and improvement
opportunities from Define-Measure-Analyze Phases
PM = Preventive Maintenance
TPM = Total Productive Maintenance
CI = Continuous Improvement
DFSS = Design for Six Sigma
TQM = Total Quality Management
Maintaining and Improving Control:
Managing Change
Quality Management Systems
What’s Left? What’s Next?
52
Control Tools:
• POKA YOKE
• Control Charts
• Statistical Process Control (SPC)
Document
Procedures and
Best Practices
Create Visual
Controls and
“Dashboards”
Update
Deployment Plan
Complete
Control
FMEA
Update and Deploy
Communication Plan
Execute
Deployment Plan
Document Other
Opportunities
Prepare and
Implement
Control Plan
Report out, Hand-
off and Closure
Prepare and
Implement Training
Plan
Process Flow Diagram for Control Phase:
53
Key Process
Input Variable
Key Process
Output Variable
Process
Specification
(LSL, USL,
Target)
Capability (Cp,
Cpk, DPMO) and
date
Measurement
Technique
Sample Size
Sample
Frequency
Control Element Contigency Remedial Audit
Phone Call
LSL – NA
TGT- 10 sec
USL – 30 secs
Cpk=.85
05 Dec 03
Call Center
Manager
Dashboard 30 1/2 hourly
CCM to adjust
seated agents
CCM to reprioritize
worload to meet
specification
Daily report to be
examined by
Supervisor N
New Customer
LSL – NA
TGT- 15 min
USL – 30 min
Cpk=. 48
05 Dec 03
New Acct Dept
Visual Display 100 Weekly
Nacct Mgr to
monitor and adjust
new Acct Reps
Nacct Mgr to
reprioritize
Monthly report to
NAM regional
manager Y
New Accounts 0 Field defects
DPMO = 66289
05 Dec 03
New Acct Dept
Visual Display 100 Weekly
Nacct Mgr to
monitor and adjust
new Acct Reps
Nacct Mgr to use
Pareto Analysis to
determine defect
category
Monthly report to
NAM regional
manager Y
Lead Time
LSL – NA
TGT- 5 Days
USL – 10 Days
Cpk = 1.43
05 Dec 03
Operations
Dashboard 30 Daily Ops Mgr Review
Identify trend root
cause
Director Review
Weekly N
Customer
Expedite Expedite Order 0 Expedited
DPMO = 24721
05 Dec 03
Operations
Dashboard 25 Weekly Ops Mgr Review
Identify trend root
cause
Director Review
Monthly Y
Key Process Input Variable
Key Process Output Variable
Process Specification or Target Output Value
Current Performance Value
Sample Size
Sample Frequency
Control Element
Contingency Plans
Remedial Plans
Is the
Performance
Audited
DPMO / Control Chart
20000
25000
30000
35000
40000
45000
50000
55000
60000
65000
70000
75000
80000
85000
90000
95000
100000
2/5/2001
2/19/2001
3/5/2001
3/19/2001
4/2/2001
4/16/2001
4/30/2001
5/14/2001
5/28/2001
6/11/2001
6/25/2001
7/9/2001
7/23/2001
8/6/2001
8/20/2001
9/3/2001
9/17/2001
10/1/2001
10/15/2001
10/29/2001
11/12/2001
11/26/2001
12/10/2001
12/24/2001
DPMO
Baseline
DPMO
UCL
LCL
Mean
Goal
Process
Change
REGIONAL
CONTROL
BEGINS
PAST BKLOG PAST BKLOG P-DUE PAST
UNITS DUE PM DUE LUBE SVC DUE
REGION ASSIGN PM DAYS LUBE DAYS GOAL SVC
NETWORK 2327 1 0 107 4 93 77
CENTRAL 151 0 0 8 4.8 6 8
F.B.U. 74 0 0 0 0 3 2
MIDWEST 178 2 1 9 4.6 7 3
NORTHEAST 312 0 0 33 9.7 12 18
SOUTHERN 389 0 0 43 10.1 16 36
WESTERN 259 0 0 19 6.7 10 11
TOTAL 3689 3 0 219 5.4 150 155
OFFLINE 203 4 1.8 37 16.8 1 4
NEW ACCOUNT EXCEPTION SUMMARY 12/08/2003
Item
No. Problem/Opportunity Benefit
Person(s)
Responsible
Due
Date
%
Complete Comments
1
2
3
4
5
6
7
8
Kaizen Event Newspaper
Team: Kaizen Event:
Kaizen Newspaper
The Control Plan
explains how the
Dashboard
Works and what
to do if
performance
goes out of
controlImprovement Actions and Activities
Updated: __/__/__ By:________
5
DPMO / Control Chart
20000
25000
30000
35000
40000
45000
50000
55000
60000
65000
70000
75000
80000
85000
90000
95000
100000
2/5/2
0012/19/20013/5/2
0013/19/20014/2/2
0014/16/20014/30/20015/14/20015/28/20016/11/20016/25/20017/9/2
0017/23/20018/6/2
0018/20/20019/3/2
0019/17/200110/1/2001
10/15
/2001
10/29
/2001
11/12
/2001
11/26
/2001
12/10
/2001
12/24
/2001
DPMO
Baseline
DPMO
UCL
LCL
Mean
Goal
Process
Change
REGIONAL
CONTROL
BEGINS
5
Control Limits
-7
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
7
DPMO / Control Chart
20000
25000
30000
35000
40000
45000
50000
55000
60000
65000
70000
75000
80000
85000
90000
95000
100000
2/5/2
0012/19/20013/5/2
0013/19/20014/2/2
0014/16/20014/30/20015/14/20015/28/20016/11/20016/25/20017/9/2
0017/23/20018/6/2
0018/20/20019/3/2
0019/17/200110/1/2001
10/15
/2001
10/29
/2001
11/12
/2001
11/26
/2001
12/10
/2001
12/24
/2001
DPMO
Baseline
DPMO
UCL
LCL
Mean
Goal
Process
Change
REGIONAL
CONTROL
BEGINS
Lean Manufacturing
Value Stream Mapping
Line Balancing
Continuous Flow
PULL system
KANBAN
Set Up reduction
(SMED)
Poke Yoke/Error
Proofing
5S
Six Sigma
DMAIC, SIPOC process
Gage R&R
FMEA
Hypothesis Testing
Regression
Statistical Analysis
Process Capability Cp, Cpk
Roll Throughput Yield
Design of Experiments
Control Charts
57
“Lean” focuses on:
The systematic elimination of waste
and re-alignment of resources to
deliver value to the customer faster,
better, & more consistently
Supply Chain Management:
Mapping your processes
through the entire business
enterprise with standard elements
“Six Sigma” focuses on:
Use of analytical and methodical fact based
problem solving methods
Drastically reduce variation then control and
manage whatever variation is left over
Increase predictability, accuracy and precision
Product and Services
Cash/Funding
Information
Customer’s
Customer
Supplier’s
Supplier
SupplierSupplier CustomerCustomerYour Company
PlanPlan
Make DeliverSourceSource Make /
Repair
DeliverMakeSourceDeliver SourceDeliverDeliverSource
ReturnReturn ReturnReturn ReturnReturn
ReturnReturn ReturnReturn ReturnReturn ReturnReturn ReturnReturn
PlanPlan PlanPlan
LSL USLẊ
Theory of
Constraints:
Find & eliminate
the bottle necks
Business
Process Re-
engineering:
Start over
VA Time
NVA Time
FLOW
Numbers, words, quantities,
values stored sitting in piles or
queues waiting for future use
Charts, summaries, spread
sheets, etc. that organize the
data
Presentations, plans and tools
that explain and communicate
the information
Processes, organizations and
team using the information to
improve, manage, build
systems and develop cultures
Push the data “up” to become Wise
Always
loop
back to
check
the data
Wisdom
Knowledge
Data
Information
Where are you
looking from?
The WISDOM TOWER: Changing Perspectives
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