Executive Summary

Our study as part of our Operation Management Course in MDI, aims at studying the lean six sigma application. How lean six sigma evolved and the processes followed in it are covered in detail. The various tools used in each step of the process are also covered.

Detailed analysis of the projects “Technical Call Centre Optimization” & “Carburettor Final Assembly Line Rebalancing” implementing Lean Six Sigma is done. The various methodology used at each step are captured in the report.

Accordingly, we have studied the DMAIC process used in the projects while implementing the lean Six Sigma. A comparative improvement after implementation of Lean Six Sigma is displayed in tabular form at the end.

Introduction

Lean Six Sigma evolved as a concept in 2000s. It combines Lean methods and the Six Sigma approaches which together came to be known as Lean Six Sigma. Through Lean optimization of the enterprise’s value chain, companies can better control key strategic operations and reap new value from their business. Top companies with successful track records of innovation, however, have used Lean Six Sigma for achieving operational excellence as it do more than simply improve processes. It can help leaders find innovation opportunities that are beyond operations, increase financial performance and inherent inclination towards innovation is created in organizations. Lean Six Sigma’s goal is growth, not just cost-cutting. Its aim is effectiveness, not just efficiency.

As the name suggests, Lean Six Sigma is a combination of Lean methods and Six Sigma approaches. The complementary nature of Lean and Six Sigma principles has led to the merger of the two into a single process and quality improvement method.

LEAN

A management philosophy focusing on reduction of the seven wastes (over-production, waiting time, transportation, processing, inventory, motion and scrap) in manufactured products. By eliminating waste, quality is improved, and production time and cost are reduced. Lean “tools” include constant process analysis, “pull” production, and mistake-proofing.

Lean manufacturing or lean production, simply known as “Lean”, is a production practice in which the expenditure of resources for any goal other than the creation of value for the end customer is considered to be wasteful, and thus is a target for elimination. From the customer point of view, who consumes a product or service, “value” is defined as any action or process that a customer would be willing to pay for. Lean is centred on creating more value with less work. Lean manufacturing is a generic process management philosophy derived mostly from the Toyota Production System (TPS) (the term Toyotism is also prevalent) and was identified as “Lean” only in the 1990s.

Lean manufacturing is a variation from efficiency based on optimizing flow; it is focused at increasing efficiency, decreasing waste, and using empirical methods to decide what matters, rather than accepting pre-existing ideas. Lean manufacturing is seen as a more refined version of earlier efficiency efforts, building upon the work of earlier leaders such as Taylor or Ford.

The four goals of Lean manufacturing systems are :

• Improve quality: Customers’ wants and needs should be understood and processes need to be designed to meet their expectations and requirements.
• Eliminate waste: Waste(Muda) is any activity that consumes time, resources, or space but does not add any value to the product or service. There are seven types of waste:

1. Overproduction(occurs when production should have stopped)
2. Waiting (periods of inactivity)
3. Transport(unnecessary movement of materials)
4. Extra Processing (rework and reprocessing)
5. Inventory (excess inventory not directly required for current orders)
6. Motion (extra steps taken by employees due to inefficient layout)
7. Defects (do not conform to specifications or expectations)

• Reduce time: Reducing the time taken to finish an activity from start to finish is an effective ways to eliminate waste and lower costs.
• Reduce total costs: To minimize cost, a company must produce according to customer demand. Overproduction increases a company’s inventory costs due to storage needs.

Lean manufacturing tools & Techniques

• Cellular Manufacturing- It increases mix of products with minimum waste. A cell has orderly arranged equipment and work stations to maintain a smooth flow of material and component through a process
• Continuous improvement (Kaizen)-It can be done by reducing inventory or defective parts. It can use 5S. 5S are- Seiri(??) Sorting, Seiton(??) Straighten or Set in Order, Seiso(??) Sweeping or Shining or Cleanliness, Seiketsu(??) Standardizing, Shitsuke(?) Sustaining the discipline
• Just in Time (JIT)- IT eliminates source of waste by producing right part in right place at right time
• Production smoothing(Heijunka)-In this manufacturers try to keep production as constant as possible on day to day basis
• Standardization of work-It helps in achieving same level of quality
• Total productive maintenance-Preventive, corrective maintenance and maintenance prevention helps in improvement of throughput of each machine

• Value-Stream Mapping -“A value stream map identifies every action required to design, order, and make a specific product. The actions are sorted into three categories: (1) those that actually create value as perceived by the customer; (2) those which create no value but are currently required by the product development, order filing, or production systems; and (3) those actions which don’t create value as perceived by the customer and can be eliminated immediately”
• Pull Systems -Pull systems require thinking of production flow in the reverse direction: later processes pull on earlier processes to pick only the right part, in the quantity needed, and exactly when needed

• Other waste reduction techniques- Other techniques could be zero defect, setup reduction & line balancing

Six Sigma

“Six Sigma is an organized and systematic method for strategic process improvement and new product and service development that relies on statistical methods and the scientific method to make dramatic reductions in customer defined defect rates.”

It was originally developed at Motorola by Bill Smith in 1986 and later promoted by GE. Six Sigma improves the quality of process outputs by identifying and removing the causes of defects and minimizesvariabilityinmanufacturing andbusiness processes. In six sigma, a defect is defined as any output that does not meet the customer specifications.

The philosophy of Six Sigma is the use of data and statistical analysis tools for systematic processes improvement. Process data are gathered and analyzed to determine average process performance and the output quality variation.

Task Force:It creates a specific infrastructure of people and the task force of a six sigma process is as follows:

1. Executive Leadership-The CEO and other members of top management, responsible for setting up a vision for Six Sigma implementation, empower the other role holders with the freedom and resources to explore new ideas for improvements
2. Champions- Help choose projects, interview black belts candidates, review projects, tie projects or business needs, remove barriers and drive six sigma into their functions. They also act as mentors to the Black Belts
3. Master Black Belts-Develop tools and teaching materials, conduct all training and communication sessions, coaches on six sigma, mentor Black belts and Green belts and assist champions.
4. Black Belts-Full time project work, change agents, expert application of tools, focus on six sigma project execution.
5. Green Belts- Apply six sigma tools and methodology in everyday work, critical success factors for business wide results in six sigma implementation “critical mass”.
6. Yellow Belts- Trained in the basic application of Six Sigma management tools, work with the Black Belt throughout the project stages and are often the closest to the work.

Implementation methods-Two most popular step-by-step methods are:

DMAIC for improving an existing business process

DMADV for new product or process designs

These processes are explained as follows:

DMAIC – Define, Measure, Analyse, Improve, Control.

• Define: Define the project purpose and scope. Identify high level processes for improvements. Determine the customer needs and benefits.
• Measure: Baseline data on current processes. Pinpoint problem locations and occurrences. Identify potential areas for improvements.
• Analyse: Identify root causes and validate root causes against captured data. Determine improvements that need to be made.
• Improve: Implement improvements that have been determined to address the root causes of the major issues.
• Control: Perform before and after analysis, monitor systems, document results and determine next step recommendations.

DMADV – Define, Measure, Analyse, Design, Verify.

• Define: Prepare charter, assemble the team, prepare project plans, assess risk.
• Measure: Understand/analyse requirements, translate requirements into measures, set performance targets, deploy needs to requirements (QFD).
• Analyse: Conduct functional analysis, resolve contradictions, generate design concepts, deploy requirements to functions (QFD 2) evaluate/select design concepts.
• Design: Develop design elements, deploy functions to elements (QFD 3), cascade requirements, stack capabilities, test/optimise design, deploy to process variables (QFD 4).
• Verify: Launch pilot, verify/validate design, plan for transition to production, manage product lifetime.

Sigma levels

The tablebelow gives long-term Defects per million opportunities (DPMO) values corresponding to various short-term sigma levels.

Lean Six Sigma

Lean Six Sigma is a combination of Lean methods and Six Sigma approaches.

Lean Six Sigma builds on the knowledge, methods and tools derived from decades of operational improvement research and implementation Lean approaches focus on reducing cost through process optimization. The Lean Six Sigma approach draws on the philosophies, principles and tools of both.

The principle of Lean Six Sigma is “the activities that cause the customer’s critical-to-quality issues and create the longest time delays in any process offer the greatest opportunity for improvement in cost, quality, capital, and lead time”. This principal highlights the strength of focusing on customer needs and shortening lead times. Although Lean and Six Sigma focus on different improvement goals, the reduction of waste and process variation, an analysis of each method shows that the methods complement each other.

The theories guiding Lean and Six Sigma methodologies are different but complementary. While Lean concentrates on the identification and elimination of waste, Six Sigma seeks to reduce process variation. “Lean removes the non-value-added and Six Sigma adds value to the value-added step of the process by reducing variation”. Both seek to improve the process.

• Lean assumes that waste removal will speed up the process thereby improving business performance.
• Six Sigma assumes that process variations cause process problems and that reducing process variation will improve business performance.

The key to comparing the two improvement methods is not only the focus of each but the secondary effects.

Processes improved independently.

When Lean is added to Six Sigma, slow processes are challenged and replaced with more streamlined workflows. Additionally, the data gathered during Lean Flow implementation helps identify the highest impact Six Sigma opportunities. When Six Sigma is added to Lean, a much-needed structure is provided that makes it easier to consistently and predictably achieve optimum flow. The two methodologies work so well together, that a new, integrated, Lean Six Sigma approach, with its own unique characteristics, has been defined and incorporated by several leading organizations, including Xerox Corporation

Application

Carburettor Final Assembly Line Rebalancing

The project involved the application of lean six sigma and had duration of around 5 months. The team comprised of –

• Assembly Supervisor
• Assembly Setup Operator
• Engineering
• Maintenance Manager

The process involved the application of DMAIC methodology which is summarised as below-

DEFINE

In this phase, the purpose and scope of the project is defined to get a basic understanding of what needs to be done. Customer expectations of quality are determined and an estimate drawn for the timelines and the costs involved. Primary and secondary metrics are designed and charted and tools like pareto charts are used to determine the project focus.

To understand the process, the input process output diagram (IPO) was used. It is a diagram used for describing all activities as a process, showing the inputs (sources of variation) and outputs (measures of performance) of a process.

For this process they were defined as follows –

Inputs

• Customer demand – This involved gauging the customer perception of quality and aligning the process with the same.
• Materials and fixtures – This involved improvement in the lead time by improving set up time of fixtures and delivery time of materials to the point of use.
• Procedure Variation – This involved reducing the variation in processes in terms of procedures followed and time taken at work stations in the assembly process.
• Number of Operators – This involved improving the labour productivity in terms of labour cost incurred per unit.
• Operator Training – This involved training the operators to reduce process variation at the work stations.

Process

• The process is a carburettor assembly and the project focuses on re balancing the assembly line.

Output

• To reduce the labour or the number of operators by 30%.
• Increase First Pass Yield (FPY) from 97% to 99%.
• To balance the work load and reduce process variations.
• To improve the overall productivity.
• To satisfy the customers and meet their expectations.

The project goals are –

• Reduce the head count by 30% (8 to avg. 5.5)
• Increase FPY by 2% (97% to 99%)
• Reduce costs
• Balance work flow by reducing multiple levels of variation from part to part
• Satisfy demands of the customer

MEASURE

The goal of this phase is to fully understand the current status of the process as to how it works to identify the areas of improvement. This entails three key tasks: creating a detailed process map, gathering baseline data and summarizing and analyzing the data. The response variables need to be identified and system capability need to be measured.

For the assembly process, the baseline data was collected and summarised as below –

• First Pass Yield (FPY) = 97%
• Units/Operator/Hour = 11.23
• Actual cost / unit = 3.85

ANALYSE

The objective of this phase is to identify all the possible causes of the problem and then identify the actual cause using appropriate tools. Some of the commonly used tools are –

• Time Observation
• Fish bone Diagram
• Takt Time
• Future State Maps
• Percent Loading
• Standard Work Combination
• Graphical Analysis, Multi-Variance, ANOVA and basic statistical tools to identify the likely families of variability
• Initial DOE tool.
• Pareto charts
• Histograms
• Scatter diagrams
• FMEA

The tool used in this case is the fish bone diagram. The main causes that were identified for the variation in process flow and excessive costs were identified in the following aspects –

• Machine
• Materials
• Environment
• Manpower
• Measurement
• Methods

Of these potential sub causes, three were identified as the actual causes –

• Labour rates
• Unbalanced work loads
• Insufficient training

The Takt time for the 8 elements involved in the process was 36.4 seconds and was unevenly distributed among the elements.

IMPROVE

The goal of the DMAIC Improve phase is to identify a solution to the problem that the project aims to address. This involves brainstorming potential solutions, selection solutions to test and evaluating the results of the implemented solutions. Often a pilot implementation is conducted prior to a full-scale rollout of improvements. Some of the tools are –

• Historical DOE
• Full factorial DOE
• Fractional Factorial DOE
• Residual Analysis
• Solution design matrix
• Pilot

The actions that were taken were –

• Re-balance Assembly Line
• Re-measure process
• Standardize work area
• Organize work area
• Re-develop control charts for FPY
• Throughput and Cost/ Unit
• Implement the solutions

As a result, the Takt time got evenly distributed among the 8 elements at the same level. The improved data is summarised below –

• First Pass Yield (FPY) = 99%
• Units/Operator/Hour = 13.42
• Actual cost / unit = 3.72

CONTROL

The primary objective of theDMAICControl phase is to ensure that the gains obtained during Improve are maintained long after the project has ended. To that end, it is necessary to standardize and document procedures, make sure all employees are trained and communicate the project’s results. In addition, the project team needs to create a plan for ongoing monitoring of the process and for reacting to any problems that arise. The tools used are –

• Mistake proofing
• X-bar & R chart
• I & MR chart
• p – Chart
• c-chart

A control plan was developed to hold the gains with the following aspects –

• Process Control Instructions were developed.
• These inform operators of correct procedure methods and also include critical quality characteristics of the process.

So, project summary scorecard before and after the completion can be put as follows –

Technical Call Center Optimization

The project involved the application of lean six sigma and had duration of around 5 months. The team comprised of –

• Sales and marketing
• Technical Services
• Information Technology

The process involved the application of DMAIC methodology which is summarised as below-

DEFINE

In this phase, the purpose and scope of the project is defined to get a basic understanding of what needs to be done. Customer expectations of quality are determined and an estimate drawn for the timelines and the costs involved. Primary and secondary metrics are designed and charted and tools like pareto charts are used to determine the project focus.

To understand the process, the input process output diagram (IPO) was used. It is a diagram used for describing all activities as a process, showing the inputs (sources of variation) and outputs (measures of performance) of a process.

For this process they were defined as follows –

Inputs

• Incoming calls from consumers
• Incoming emails from consumers
• Tech personnel attributes
• Order Entry
• Motorsports/events
• Product Information
• Shipping direct sales
• Organisation of tech department

Process

• The process is about the Holly Tech Department wherein the tech service representative is involved in receiving calls, providing product information, trouble shooting customer problems and making sales.

Output

• To reduce the abandonment rate of calls
• To reduce the abandonment rate of emails
• To increase the warranty.
• To get voice of customers and satisfy them.

The project goals are –

• To have less than 7% call drop rate
• Increase tech sales to 250k $

MEASURE

The goal of this phase is to fully understand the current status of the process as to how it works to identify the areas of improvement. This entails three key tasks: creating a detailed process map, gathering baseline data and summarizing and analyzing the data. The response variables need to be identified and system capability need to be measured.

For the tech service department, the baseline data was collected for the year 2002, 2003 and January to May 2004 and summarised as below –

• Total calls received
• Total Calls answered
• Abandonment rate

Then another thing done to measure the current process performance was the event attendance study and the lunch shift/staff study.

The graph above shows that the dropped call rates increased as the manhours at the events increased which shows that the event attendance was one of the major causes of the inefficiencies in the process.

A change was introduced for a few days wherein the two shift was changed to three shifed and the following results were observed:

Total calls lost previous to the 3 shift implementation – 104

Total calls lost during the 3 shift – 61

Total calls lost after – 118

ANALYSE

The objective of this phase is to identify all the possible causes of the problem and then identify the actual cause using appropriate tools. Some of the commonly used tools are –

• Time Observation
• Fish bone Diagram
• Takt Time
• Future State Maps
• Quality Function Deployment
• Percent Loading
• Standard Work Combination
• Graphical Analysis, Multi-Variance, ANOVA and basic statistical tools to identify the likely families of variability
• Initial DOE tool.
• Pareto charts
• Histograms
• Scatter diagrams
• FMEA

The tools used in this case is the fish bone diagram and the quality function deployment.

From the fish bone diagram, the main causes that were identified for the variation in process flow and excessive costs were identified in the following aspects –

• Materials
• Manpower
• Process
• Miscellaneous

Of these potential sub causes, these were identified as the actual causes –

• Product training
• Event attendance
• Lunch and breaks
• Phone system

The quality function deployment was done and the following house of quality was prepared:

Clearly from the diagram we can see that the maximum weights are coming out for the two technical specifications that is the Tech Training and the Inter Dept Communication/Information and the focus need to be on these two aspects in order to satisfy the customer expectations or the voice of the customers.

IMPROVE

The goal of the DMAIC Improve phase is to identify a solution to the problem that the project aims to address. This involves brainstorming potential solutions, selection solutions to test and evaluating the results of the implemented solutions. Often a pilot implementation is conducted prior to a full-scale rollout of improvements. Some of the tools are –

• Historical DOE
• Full factorial DOE
• Fractional Factorial DOE
• Residual Analysis
• Solution design matrix
• Pilot

Tech service constraints were identified and following steps were taken:

Constraint – Tech phones not staffed adequately.

• Eliminate time spent out of the office at events.
• Stagger lunch breaks from 2 shifts to 3 shifts.
• Look at making more staff available between 4 p.m. and 5 p.m.

Constraint – Break down in flow of customer order entry and status check due to inefficient

order entry system and lack of computer training.

• Set up all Technicians for order entry.
• Provide BPCS training and support through Customer Service.

Constraint – Inter-Department information flow from customer statement of problem through resolution.

• Worked with Quality and Product Management to develop SOP’s and a customer acceptable problem resolution time frame.

Constraint – The lack of an efficient access to product information to Technicians

• Engineering to place new product and product change information on intranet .
• Provide Tech training to retrieve and convenient placement of product information.

Waste – One Tech person mans the phone Saturday’s (at overtime pay) to provide support for CSK warranty program averaging only 2.3 calls per Saturday.

• Eliminated Saturday support due to lack of CSK program utilization.

CONTROL

The primary objective of theDMAICControl phase is to ensure that the gains obtained during Improve are maintained long after the project has ended. To that end, it is necessary to standardize and document procedures, make sure all employees are trained and communicate the project’s results. In addition, the project team needs to create a plan for ongoing monitoring of the process and for reacting to any problems that arise. The tools used are –

• Mistake proofing
• X-bar & R chart
• I & MR chart
• p – Chart
• c-chart

A control plan was developed to hold the gains with the following aspects –

• Monthly meeting to evaluate performance
• Corrective action to be identified and put into place for drop rate exceeding 4 %.

So, project summary scorecard before and after the completion can be put as follows –

Conclusion

Importance of Lean six Sigma in operations strategy can be downplayed in thinking of them in terms of process improvement and cost reduction. But this perspective is competitively short sighted. Industry leaders are using Lean Six Sigma approaches to surface significant innovation opportunities that have far-reaching impacts on their businesses. Not only their operations are changing but also their products and services, their target markets and, in some cases, even the fundamental design of their business models.

Improvements that could be easily seen after implementation of Lean Six sigma were quite dominant and the improvement was clearly visible.

For “Technical Call Centre Optimization” call drop rate decreased by 84% and sales increased by 79% while for “Carburettor Final Assembly Line Rebalancing” decrease in head count was 37.5% and saving from labour cost was about 33%.

This showed that the results generated after tweaking the process innovatively after application of Lean Six Sigma leads to considerable saving and in long run it is tremendously beneficial for the businesses.

References

• http://www.isixsigma.com/
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