Implementing Lean in our Organization - Part 1

Problem Definition
There is a sudden surge in volume for one of the product line from daily output of 18,000 to 24,000 per day.

Goal
Increase daily output by 33% without incurring additional capital cost within a period of 3 months.

Current Operating Strategy
This line is currently operating on a 24 work hours per day with 17 direct operators and 15 indirect support staff. It is a fully synchronous line with a total of 23 processes link together by conveyor systems. The initial capital outlay for this line is approximately US$3 Million.

Approach
As the line is currently already working on a 24 hr work day, 5 days week, there is no way to increase the output by working additional hours through daily overtime. Working week end overtime is also not a solution as this would only increases the operating costs, which eventually lead to increase in unit cost.

This facility has been in operation for 10 years, since then, we have increased our daily output from 15,000 to 18,000pcs. Hence, in order to achieve output by another 33%, we need to think “out of the box”. We started with the objective of “Achieving Flow through the entire value stream” – that is from the moment customer order is received until cash is received upon goods sold. To achieve this significant output improvement, we would need to identify and eliminate waste along the value stream, as wastes prohibit FLOW. The 2 Key approaches were to create flow and improve machine output by applying several lean concepts.

1) Create Material Flow from Suppliers to Internal Point of use

Prior to Kaizen, suppliers delivered raw parts based on our consumption. As our consumption was not regular, deliveries from suppliers were not consistent or predictable. Thus, we have a 4 days stock staged at our supermarket to ensure there is enough to raw materials supply to production. Pallets of parts were also issued and staged at the production area causing poor housekeeping.

After Kaizen , parts from key suppliers are delivered to the plant daily, at a fixed time (3x/day) and fixed quantity (based on level schedule). This provides a standard work to suppliers and does not cause any jerk to their processes – hence ensures quality product and upfront supply chain stability. Other part supplies were also improved from weekly to daily deliveries thus reduces inventory in our supermarket. Through these implementations, we are able to reduce inventory in our supermarket from 4 to 1.5 days. Parts delivered to the receiving dock are transferred to line site flow rack in a FIFO manner. Any quantities those are not able to be placed onto the allocated rack space will be staged at the ‘Overflow’ area which indicates an ‘Abnormal’ situation. Action will be taken to resolve this abnormality. (E.g. machine down, hence missed schedule). Overflow quantities also indicate a need to catch up missed production. To create rapid flow in m manufacturing, delivery router will move parts to point of use in small lot size - 15 minute delivery route. (see Figure 1)

Figure 1: Frequent delivery of parts to point of use

Read Part 2 of this series

Lean for your organization contest winning article

We in learnleanblog.com successfully completed the “lean for your organization” contest last month. Among several good quality articles on how to use lean to improve organizational performance, the winning article was submitted by Audrey Cheok. As we promised we emailed him the gift certificate of $200 from Amazon. This is what he had to say.

“The “Lean in our organization” contest gives me the opportunity to put my “Gemba experience” together. It took me a few days to organize my thought process. It has been a good experience, as I need to document it in a simple and systematic approach, describing the Lean concepts that have been implemented to achieve our goal. I would like to thank the organizers for picking me as the winner and giving me this opportunity to share our lean experience

Audrey Cheok
15th Sept 08 ”

As we promised we are publishing the good quality articles on our blog. We are starting with the winning article itself. But since the article is little long to fit into a single post, we thought of breaking it down it in to three articles and will be published over a period of time.

Do not forget to leave your comments on those articles.

Six Sigma Vs Lean Six Sigma

When you think of Six Sigma, you may think of organizations striving to improve quality. The technical term for Six Sigma is a process and methodology for eliminating defects through the development of a disciplined and data-driven approach. The methodology is designed to reduce any defects to 3.4 per million events.

The basic idea of Six Sigma is the development and implementation of improving processes and reducing defects through a series of measurement-based strategies. The two applications most used to do this are the DMAIC and DMADV. DMAIC is an acronym for defining, measuring, analyzing, improving and controlling. This application is used to improve systems and processes that fall below specifications. The DMADV application is also an acronym meaning: defining; measuring; analyzing; designing; and verifying systems in order to improve processes or products that have already gone through the initial Six Sigma quality improvements.

Regardless of where your organization is at, Six Sigma stands to reduce or save companies a substantial amount of money each project, provided that there is a certified Black Belt heading up the projects.

Lean Six Sigma, on the other hand, takes the principles of lean and Six Sigma, and marries the two concepts to produce an even better system—producing speed and quality by improving and streamlining the processes, creating excellent customer service and products. While speed has a negative connotation that working fast creates hastily put-together work, Lean Six Sigma focuses on streamlining the core processes in order to make them flow smoothers and produce on time.

It is important to understand when you are looking at Lean Six Sigma principles that when we’re talking about “speed” it does not equate to the same thing as schedule. More specifically, speed is how quickly something gets done, and schedule is when it is due to be finished. Again, speed is not how hastily a project can be done, but how to streamline the core processes, by breaking down the processes into smaller more efficient cycles, in order to get a project done swiftly, yet producing quality work with little or no defects.

In essence, Six Sigma and Lean Six Sigma are both great improvement process exercises. However, in the describing the differences between the two, it seems that to get to Lean Six Sigma, your organization should incorporate Six Sigma into your process improvement and then engage in Lean Six Sigma to speed up the processes after you have broken down the systems into smaller components.

Read the post: What is lean six sigma?

Recommended Book

What is Lean Six Sigma?

Your organization has gone through Six Sigma training and has a Black Belt on staff to guide your organization to improving processes to reduce defects. You’ve administered both applications successfully—the DMAIC (define, analyze, improve and control), and the DMADV (define, measure, analyze, design and verify systems). Yet, you keep hearing something about Lean Six Sigma. What exactly is it? Below we will go through what Lean Six Sigma is and how it can best benefit your organization.

Lean Six Sigma is taking the Six Sigma and integrating it with lean principles to reduce defects, increase speed and quality. In essence, streamlining the core processes. When people think of speed, there is usually has a negative connotation associated with it. However, in this context, it is improving a process, by reducing the cycle time helping to make the process run more smoothly with little or no defects yet increasing the pace in which the process is completed.

When you are implementing Lean Six Sigma into your organization, it is important to remember that together the concept is a balanced process that will help your organization to improve its service quality within a set time limit. One is not better than the other, and together they provide a way in which to make your organization better than it already is or was.

Taking each of these concepts separately, lean principles focuses on speed and flow, while Six Sigma is focused on customer needs and reducing the variation in processes to eliminate defects and rework. While most people are out to prove one better than the other, together the two principles make a logical choice in making for a World Class Organization.

When your organization moves to implement Lean Six Sigma principles, it is important to remember that knowledge creation can sometimes get in the way of improving the flow of creating knowledge. More specifically, project management tendencies can hinder knowledge creation since project management practices are usually forcing choices early on in the process rather than what all of the potential possibilities might be.

For instance, if you determine a solution without exploring all the different possibilities and find out much farther down the road that the solution has a major flaw, there will be a lot of rework. This leads to frustration and costing the project more money than originally budgeted, rather than finding ways in which to reduce defects and produce cost savings.

In essence, if your organization implements Lean Six Sigma, rather than one over the other, you will find that your process improvement efforts will be more efficient, improving quality and speed while reducing your costs and defects.

Read the first post of this series: Introduction to Six Sigma

Introduction to Six Sigma

Six Sigma is a process improvement tool used to measure quality in order to reduce or eliminate defects. The thought behind Six Sigma is that it is a way of approaching a process that is disciplined, using data to eliminate defects and reduce the variation of these processes. How can your organization benefit from it? In many ways, but Six Sigma is a commitment to improving your whole organization, not just a few things here and there.

More specifically, while the above explanation of Six Sigma may seem simple, Six Sigma is actually fairly complicated because the process is entrenched in mathematics and statistical methodology. For example, the goal of Six Sigma is to produce a process where there are no more than 3.4 defects per million opportunities.

What is a defect and how would you define opportunities within Six Sigma? A defect is anything that is outside of the customer’s specification, while an opportunity is the chances for a defect to occur during the process. Let’s take a look at a simple calculation. Suppose you produce 100,000 gadgets in a week, and it is discovered that the defect rate is 15 defects per 100,000. When using a Sigma calculator, your results are:

DPMO: 150
Defects (%): 0.02
Yield (%): 99.99
Process Sigma: 5.12

What exactly do these numbers mean? Let’s break it down ever further so you can see what exactly you’re looking at. DPMO is “defects per million opportunities”. Since the goal of true Six Sigma is to only have 3.4 defects per million opportunities, looking at 150 defects doesn’t seem like that is too good.

However, there is more that goes into determining the amount of defects in order to have truly implemented Six Sigma, such as knowing if there is one specification limit or two. This affects the Upper and Lower standard deviations between the customer specifications and the process. The Process Sigma is 5.12, which as it increases from zero to six, the variation in the process around the mean value decreases. As the value of the process sigma increases, the variation decreases creating a process with zero defects.

Six Sigma literally means the number of standard deviations away from the mean, or the average, as indicated on a bell curve. This is also known as the normal distribution. Thus when calculating the mean, Six Sigma allows for 3.4 defects per million. In essence, if you are making one million widgets, then you should only have 3.4 defects per that million widgets produced. The rest of the widgets fall under the “normal distribution” as indicated on the bell curve. Below is an example of what the bell curve looks like—indicating the deviation from the mean, which is Zero, or the target.

When looking at the graph above, LSL is the Lower specification limit, and the USL is the upper specification limit. Again, Six Sigma allows for six process standard deviations between the mean in the process and what the customer’s specification limit. As your value process stigma increases from zero to six, then the variation in your process around the mean will decrease. This indicates that if your value of process sigma is high enough then when the process reaches zero variation you have reached zero defects.

Six Sigma quality is not easy to achieve, particularly when you roll throughput yield into the mix, resulting in yields of each process is multiplied together to obtain the final yield. In short, this is the percentage of good widgets that are produced in a given process. For instance, if there are four different processes, each having a four percent (4%) yield the total throughput yield is calculated as: .99 x .99 x .99 x .99 = 96%. This is a great example of how Six Sigma can work and how when the proper check points are established within each process, no defects are passed onto the next process or stage within production.

This is a lot to process at this basic level, but in essence, Six Sigma and the role of the professional is to quantify the process performance, which is the short and long term capability, taking the process entitlement and process shift, to create the right strategy in order to reach the determined performance objective. One thing to remember when determining what your short term and long term capability is, that when you decrease your process variation, your process sigma increases, resulting in greater customer satisfaction and lower costs.

Read more on lean six sigma

Lean six sigma series on learnleanblog

Here in the blog we have already discussed many aspects of lean and lean six sigma. Lean six sigma may be the hottest topic in manufacturing today. More and more people are opting in to the combination of control of six sigma with the flexibility, speed and continuous improvement of lean. So I thought of producing a series of posts lean 6 sigma. Since I had limitations on time, I out sourced this task of doing the research and writing the content. It was nicely done and therefore I am ready to publish those on learnleanblog. Below are the posts topics we are going to cover in this series.

1. Introduction to Six Sigma
2. What is lean six sigma
3. Six Sigma Vs Lean sigma

This is the first time I am posting content created by a third party on this blog. I thought it might add some flavor to the blog. Please let me know your ideas on this. You can leave a comment on by clicking the comment link below.

Lean for your organization contest – Results!

Contest “lean for your organization” is successfully concluded. Now it is the time to let you know the results. Before that, I must thank all of you who participated in the contest for your valuable time and knowledge. I will publish the articles in the upcoming posts.

Before announcing the winner, I must say it was a very tight contest for the first place. Article provided by A.K.Bhargava, Jennifer Eliuk, Satish, Ladwa were among them. They gave a good challenge to for the first place winner.

There are others who submitted good quality articles like Binyam Teshale, Jess Ulloa and Tuan Newlin. All of your articles will be published in the blog in the time to come.
OK, now to the winner…. The winning article was about improving the productivity of an organization. They have obeyed concepts of lean in every stage of the process from identifying the problem to analysis of the root causes to solution development to the implementation and post go live. As a result they have achieved more than originally aimed for.

OK, OK the winner is….
Audrey Cheok ….

Congratulations Audrey. I will send you the gift certificate within next week… your article will be published on the learnleanblog.com as well.

Thanks for all the others for their participation. Learnleanblog.com really appreciates your efforts to share your knowledge with the world. Look forward for more competitions on leanleanblog.com