PROCESS MANAGEMENT—LEAN
AND
SIX SIGMA IN THE SUPPLY CHAIN
Chapter 8
Umar Farooq
Department of Management Sciences
GIK Institute, Pakistan
Introduction
iPhone-7
APPLE
Mi 4
Xiaomi
Which product is more reliable?
Which product is more Expensive?
Lean Thinking
• Supply chain management is all about achieving
low cost along with high levels of quality and
responsiveness throughout the supply chain.
• Lean thinking and Six Sigma quality, two
important operating philosophies that are central
to the success of supply chain management.
Lean Philosophy-Origin
• Lean Manufacturing is sometimes called the
Toyota Production System (TPS) because
Toyota Motor Company’s Eiji Toyoda and
Taiichui Ohno are given credit for its
approach and innovations.
Lean Philosophy-History
• Mr. Sakichi Toyoda invented the power loom in 1902 and in
1926 founded the Toyoda Automatic Loom Works.
• In 1937, he sold his loom patents to finance an automobile
manufacturing plant to compete with Ford and General Motors.
• Sakichi’s son Kiichiro Toyoda was named managing director of
the new facility.
• Kiichiro spent a year in US studying Ford’s manufacturing
system then returned to Japan, and adopted;
• The production of small quantities of automobiles,
• Using smaller, more frequently delivered batches of materials.
• This later was referred to as the just-in-time system within
Toyoda.
Lean Philosophy-History
• Mr. Eiji Toyoda, nephew of Sakichi, too, study in 1936 the
Ford’s automobile manufacturing system and learned;
• Quality improvement activities
• Employee suggestion system
• Introduced the Toyota Creative ideas and Suggestion System
(TCISS) to support the improvement Program.
• The emphasis on this system led Toyota to build a
performance indicator on the number of suggestions made by
the total number of employees.
• In its first year of application, nearly 800 ideas were made
while the company has more than 6000 employees
• In 1976, this ratio was 10.3 suggestions per employee and
then 18.7 in 1980.
Lean Philosophy-History
• Taiichi ohno, manager in Toyoda corporation, realized
during their trips to the U.S. was the tremendous waste
everywhere (referred to as muda in Japan).
• These wastes of labor, inventories, space, time and
processing.
• From this came the idea that parts should be produced
only as needed by the next step in an entire production
process.
• This began to be called the kanban system or JIT
system within Toyoda.
Lean Philosophy-History
• The final two notable people in the development of the
Toyota Production System(TPM) were Shingo, a quality
consultant hired by Toyota, and W. Edwards Deming.
• Shingo developed the concept of poka-yoke in 1961.
• Poka-yoke means error- or mistake-proofing.
• Design processes such that mistakes or defects are prevented
from occurring in the first place.
• Deming created and discussed his fourteen-point quality
management guidelines, as well as his ideas for continuous
improvement.
• In 1957, introduced their first U.S. car—the Toyopet Crown.
• Toyota implemented what they referred to as total quality
control (TQC) with their JIT system.
• In the first quarter of 2007, Toyota sold more vehicles
worldwide than General Motors, ending GM’s 76-year
domination as the world’s largest automaker
Lean Philosophy
• The term lean production essentially refers to the Toyota Production
System.
• A way to eliminate waste and improve efficiency in a
manufacturing environment.
• Lean focuses on the value stream and eliminating MUDA, the
Japanese word for waste.
• Lean manufacturing is the production of goods using less of
everything compared to traditional mass production:
o Less waste,
o Less human effort,
o Less manufacturing space,
o Less investment in tools,
o Less inventory, and less
o Engineering time to develop a new product
Lean Philosophy
• Waste is anything that does not add value from the
customer’s perspective.
Queues
Storage
Inspection
What is Waste?
Lean Philosophy
• Lean was generated from the Just-in-time (JIT)
philosophy of continuous and problem solving.
• Just-in-time is supplying customers with exactly what
they want when they want it.
• With JIT, supplies and components are “pulled”
through a system to arrive where they are needed when
they are needed.
Lean in Supply Chain
• Supply chain management objectives are;
• Achieving low cost along with
• High levels of quality and
• Higher responsiveness throughout the supply chain
❑Lean thinking and
❑Six Sigma
• two important operating philosophies that are central to the success of supply
chain management
The Elements of Lean Production (Cont.)
Waste (Muda) Reduction
oFirms reduce costs & add value by
eliminating waste from the productive
system.
oWaste encompasses wait times,
inventories, material & people
movement, processing steps, variability,
any other non-value-adding activity.
oTaiichi Ohno described the seven wastes.
The Elements of Lean Production (Cont.)
• Waste (Muda) Reduction (Cont.)
Wastes
Description
Overproducing
Unnecessary production to maintain high utilizations
Waiting
Excess idle machine & operator & inventory wait time
Transportation
Excess movement of materials & multiple handling
Over-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
Lean Philosophy
Focus to reduce the 7 Types of Waste
(Sources of Non-Value-Added Activity)
2. Over production
4. Transportation
6. Inventory
5. Over processing
7. Motion
1. Defects, Rejects, Rework
3. Waiting
1. Defects
• Anything that has to be redone, incomplete or incorrect.
• Employees probably know what work often has to be redone, Incorrect or incomplete
work delivered to the next process (the customer)
➢ Results in rework
➢ Causes of defects:
–
–
–
–
Weak process control
Incorrectly processed order
Inadequate education/training/work instructions
Misunderstanding of customer needs
2. Overproduction
• When too much or more of something is produced (e.g., information) or when
something is produced too early and faster, while the downstream customer (internal
or external) waits for something else.
➢ Leads to excessive inventory
➢ Causes of overproduction
–
–
–
–
–
Generating reports that are not needed
Emails sent to people who do not need to receive them
Misuse of automation
Long process setup
Unbalanced work load
3. Waiting
• Waiting for anything – people, task, paper, signatures, approvals, etc.
• This idle time is created when waiting for invoices, copier, parts, materials,
machines, information, signatures, help, approvals, special task, etc.
• Lead to time waste which is money / cost
• Causes of waiting:
–
–
–
–
–
Unbalanced workload
Too few office machines
No clear office protocol
Upstream quality problems
Waiting for a signature approval
5. Transportation
• Transporting time of documents and materials around the office
until the next step. There is an opportunity for the process to
break as work gets lost, misunderstood, etc.
• Minimizing the number of touches in a process is can make a
process lean.
➢ Movement of people that does not add value to the product or
service
➢ Causes of transportation waste:
–
–
–
–
–
–
Poor office layout
Processing extra paperwork
Office processes that are not located near each other
Poor understanding of the process flow
Large batch sizes
Large storage areas
6. Inventory/backlog
Not just an abundance of supply, but also a backlog of work that leads to even greater
waste as workers must spend time and effort managing and working around the backlog
Any supply in excess of one-piece flow
- Often the result of “Overproduction”
- Unbalanced workload
- Improper scheduling
- Unreliable suppliers
Examples:
- Finished Good Inventory
- Work In Process Inventory
- Supplies Inventory
- Staged or “kitted” Inventory
Solutions:
- Make to Customer Order
- Kanban Pull System
- Eliminate Inventory Storage Areas
- Identify bottle-neck
7. Motion
• Excess motion on the part of the worker.
• For example, a poor office layout might require a worker to
spend too much time walking between one point to another
point where work equipment is located.
• Movement of people that does not add value to the product or
service. It is a waste in time and effort.
➢ Causes of motion waste
–
–
–
–
–
Poor people/machine effectiveness
Poor office layout
Inconsistent or no standardized visual work instructions
Poor workplace organization and housekeeping
Extra “busy” movements while waiting
8. Excess processing
• Extra steps or processing that does not add value, from the customer’s
perspective (e.g., obtaining too many signatures or double- or triple-checking of
work, extra testing).
• Effort that adds no value to the product or service from the customers’ viewpoint.
Customer is not paying for the waste…The organization cost will increase.
➢ Causes of extra processing:
– Product changes without process
changes
– True customer requirements
undefined
– Lack of communication
– Redundant approvals
– Emails sent to everyone
Lean Philosophy
• Lean was generated from the Just-in-time (JIT) philosophy of
continuous and problem solving.
• Just-in-time is supplying customers with exactly what they want
when they want it.
• With JIT, supplies and components are “pulled” through a system to
arrive where they are needed when they are needed.
Lean in Supply Chain Management
• Supply chain management objectives are;
• Higher responsiveness throughout the supply chain
• Balance the flow of materials with customer requirements
• Achieving low cost along with
• High levels of quality
• Lean Production emphasizes:
•
•
•
•
Reduction of waste
Continuous improvement
Synchronization of material flows within the organization
Channel integration- extending partnerships in the supply chain
❑Lean thinking and
❑Six Sigma
• two important operating philosophies that are central to the success of supply chain
management
Lean Production & Supply Chain Management
❑Starbucks decided to use lean to improve their daily operations
❑Reduce waste and free up time for its baristas.
❑Allow baristas to interact with more customers and make more
beverages in the same amount of time while needing fewer
workers and better bottom line for the star bucks.
Evolution Stages towards leanness
Stage 1- Firm is internally focused & functions managed
separately. Performance is monitored based on achieving
departmental goals called the silo effect. Silo effect is reactive &
short-term goal oriented.
Stage 2- Firms have began integrating efforts & resources
among internal functions.
Stage 3- Firm links first tier of suppliers/customers with firm’s
processes.
Stage 4- Firm broadens supply chain influence beyond
immediate or first-tier suppliers & customers.
Lean Production & Supply Chain Management
• Stages of SCM Evolution
1: Internal Focused
•Functional silos
• Top-down
management
• Internal measures
used to monitor
performance
• Reactive, short-term
planning
• No internal
integration
2: Functional
Integration
3: Internal
Integration
4: External Integration
•Focus on internal
•integration of flow •integration with
flow of goods
in firm
suppliers &
customers
• Emphasis on cost •lean activities for
goods &
•integration explored
reduction
nd & 3rd tier
information
w/
2
• Realization of
suppliers &
efficiencies gained •measurement of
supplier
customers
by internal
performance &
•alliance development
integration
customer service
The Elements of Lean Production
The Elements of Lean
Firms with a mature lean program will most likely be practicing a significant
number of these elements
• Waste Reduction
• Lean Supply Chain Relationships
• Lean Layouts
• Inventory & Setup Time Reduction
• Small Batch Scheduling
• Continuous Improvement
• Workforce Empowerment
The Elements of Lean Production
Key Lean Manufacturing Techniques
• 5S
• Six Sigma
• Cellular Manufacturing
• Muda- waste in all aspects of production
• Kanban signal card & part of JIT
• Poka-Yoke- error or mistake-proofing
• SPC- Statistical Process Control
The Elements of Lean Production (Cont.)
• Waste (Muda) Reduction- 5S
• 5S is the name of a workplace organization method that uses a list of five Japanese
words: seiri, seiton, seiso, seiketsu, and shitsuke.
The Elements of Lean Production (Cont.)
The Five S’s
Japanese S-Term
English Translation English S-Term Used
1. Seiri
Organization
Sort
2. Seiton
Tidiness
Set in order
3. Seiso
Purity
Sweep
4. Seiketsu
Cleanliness
Standardize
5. Shitsuke
Discipline
Sustain
The Elements of Lean Production (Cont.)
MUDA Reduction 5-S
• The original Five-S’s came from Toyota and were Japanese words relating to industrial
housekeeping.
• The Five-S’s tell everyone that everything has a place.
• 5S is the building blocks, for a “Kaizen” approach to incremental improvement.
• 5S focuses on the elimination of wastes( Muda) in the work environment.
• When things are in order, it is easier for employees to find product.
• The idea is that by implementing the Five-S’s,
o The workplace will be cleaner,
o More organized and safer,
o Thereby reducing processing waste and
o Improving productivity
The Elements of Lean Production (Cont.)
The Elements of Lean Production (Cont.)
The Elements of Lean Production (Cont.)-5S
• Sort - All unneeded tools, parts and supplies are
removed from the area
• Set in Order - A place for everything and everything
is in its place
• Shine - The area is cleaned as the work is performed
• Standardize - Cleaning and identification methods
are consistently applied
• Sustain - 5S is a habit and is continually improved
• Also - Work areas are safe and free of hazardous or
dangerous conditions
The Elements of Lean Production (Cont.)
The Elements of Lean Production (Cont.)-5S
• Step 1: Seiri, or Sort
• Seiri is sorting through the contents of the workplace and removing unnecessary items.
• Look around the workplace to discover and identify items which are not needed and not
necessary to complete work.
• Classify the items by frequency of use
• How to sort out items? An effective method for recording progress is to tag the items not
needed. This visual control of the not-needed items is often called red tagging.
• What to do with red tagged items? Develop criteria for disposal for not-needed items.
• Find a holding area to put red tagged items.
• While red tagging, ask these questions:
❖Is this item needed?
❖If it is needed, is it needed in this quantity?
❖If it is needed, how frequently is it used?
❖If it is needed, should it be located here?
The Elements of Lean Production (Cont.)
See the difference?
• Sort - All unneeded tools, parts and supplies are removed from the are
The Elements of Lean Production (Cont.)-5S
The Elements of Lean Production (Cont.) – 5S
• Seiton, or Set in order
• Seiton is putting the necessary items in their place and
providing easy access. This is an action to put every
necessary item in good order, and focuses on efficient and
effective storage methods.
• Actions:
• Make sure that all unnecessary items are eliminated
from the workplace.
• Taking into account of the work flow, decide which
things to put where.
• Outline locations of equipment, supplies, common areas
and safety zones with lines:
• Workers should answer these questions:
❖What do I need to do my job?
❖Where should I locate this item?
❖How many of this item do I really need?
Lean Tools & Techniques
5s House Keeping
• Seiton, or Set in order
The Elements of Lean Production (Cont.) – 5S
• Seiton, or Set in order
o Divider lines define aisle ways and
work stations.
o Marker lines show position of
equipment.
o Range lines indicate range of
operation of doors or equipment.
o Limit lines show height limits related
to items stored in the workplace.
o Tiger marks draw attention to safety
hazards.
o Arrows show direction.
The Elements of Lean Production (Cont.) – 5S
The Elements of Lean Production (Cont.) – 5S
The Elements of Lean Production (Cont.) – 5S
•
•
•
•
•
•
Seiso, or Sweep (Clean)
Adopt cleaning as a daily activity and as a part of inspection.
Clean the workplace before starting of the job and before closing the job.
Find ways to prevent dirt and contamination.
Identify and tag every item that causes contamination.
5S “owner” check-sheets should be maintained on daily basis. An
example of a check sheet
The Elements of Lean Production (Cont.) – 5S
• Seiketsu, or Standardize
• The first three 5S principles have been implemented, it is time to
concentrate on best practices for the work cell.
• Seiketsu helps to turn it into natural, standard behavior.
• Actions:
❖Create procedures and forms for regularly evaluating the status
of the first three S’s.
❖Standardize red tag procedures and holding area rules.
❖Standardize procedures for creating position lines, and labeling
of all items.
❖Standardize cleaning schedules using the “5S Owner Check
Sheets”.
❖Standardize for documenting and communicating 5S
The Elements of Lean Production (Cont.) – 5S
• Shitsuke – (Sustain)
• This is the hardest part of the process.
• 5S won’t work if you don’t continue to execute.
• People tend to return to old habits unless new ones are
instilled and actively managed.
• Once you’ve reorganized work areas, cleaned, and created
standards, the real work is in 6 months or a year.
• Regular meetings, inspections, and real emphasis all help.
The Elements of Lean Production (Cont.)
Lean Supply Chain Relationships
• Suppliers & customers work to remove waste, reduce cost, & improve
quality & customer service
• JIT purchasing includes delivering smaller quantities, at right time,
delivered to the right location, in the right quantities
• Firms develop lean supply chain relationships with key customers.
Mutual dependency & benefits occur among these partners.
• Safety stocks of raw material !!!
• Safety stocks of finished goods to avoid stock-outs !!!!
• Customers and suppliers can help to define the value added material and
activities.
The Elements of Lean Production (Cont.)
The Elements of Lean Production (Cont.)
Lean Layouts
• Move people & materials when & where needed,
ASAP
• Lean layouts are very visual (lines of visibility
are unobstructed) with operators at one
processing center able to monitor work at another
• Manufacturing cells
▪ Process similar parts or components saving
duplication of equipment & labor
▪ These similarly processed parts are termed
part families.
▪ U-shaped to facilitate easier operator and
material movements within the cell.
The Elements of Lean Production (Cont.)
The Elements of Lean Production (Cont.)
The Elements of Lean Production (Cont.)
The Elements of Lean Production (Cont.)
The Elements of Lean Production (Cont.)
Inventory & Setup Time Reduction
• Excess inventory is a waste
• Just as water hides boat-damaging rocks beneath its
surface, so excess inventory hides value damaging
problems along the supply chain
• But reducing inventory levels causes production
problems
• Common purpose tools should be used.
• Once problems are detected, they can be solved.
• The end result is a smoother running organization
with less inventory investment.
• Another way to reduce inventory levels is to reduce
purchase order quantities and production lot sizes.
The Elements of Lean Production (Cont.)
Relationship between Order Quantity, Lot Size, and Average Inventory
When order quantity/lot size Q = 100, avg. inventory = 50; when Q is reduced to 50, avg. inventory falls to
25.
100
50
avg. inventory
for Q=100
25
avg. inventory for Q=50
Time
The Elements of Lean Production (Cont.)
Small Batches Scheduling
• Small batch scheduling drives down costs by:
• Reducing purchased, WIP, & finished goods inventories.
• Allows to detect and catch defects before its too late.
• Makes the firm more flexible to meet customer demand.
• Small production batches are accomplished with the use of
kanbans.
• Kanban (Sign or Billboard) is a permission slip or authority to
pull the material from upstream supply chain partner.
• When manufacturing cells need parts or materials, they use a kanban
to signal their need for items from the upstream manufacturing cell,
processing unit, or external supplier.
• That is why a lean system is also known as a pull system.
• Kanbans generate demand for parts at all stages of production
creating a “pull” system.
Original Kanban board, Toyota
The Elements of Lean Production (Cont.)
• Small Batches Scheduling
Small Lot Size Approach
Short setup times
AAA BBB CCC DDD AAA BBB CCC DDD AAA
9 product changes
Large Lot Size Approach
Long setup times
AAAAAAAA-----BBBBBBBB ------CCCCCCCC----- 3 product changes
Time
The Elements of Lean Production (Cont.)
• Lets see what is Kanban bin System
• A Kanban (a light, flag or sign) Pull System
Output area
Input area
Input area
Output area
Final assembly line
External
supplies
Mfg. Cell A
Work cell A
Mfg. Cell B
Withdrawal Kanban Production Kanban
Movement of matl. into
Work cell A creates a
movement kanban to the
external supplier
Movement of matl. to input
area of Work cell B creates a
production kanban to Work
cell A
Movement of matl. into Work
cell B creates a movement
kanban to Work cell A
Movement of finished
component to assembly line
creates a production kanban to
Work cell B
The Elements of Lean Production (Cont.)
A Kanban Pull System
• Inventories are not allowed to accumulate beyond the size of each container and the number
of containers in the system.
• When containers are full, production stops until another production kanban is encountered.
• To determine the number of containers or kanban card sets:
# of containers =
DT(1 + S)
C
Where:
• D = the demand rate(number of units to be produced) of the complete assembly line;
• T = the time for a container to make an entire circle through the system, from being filled,
moving, being emptied, and returning to be filled again;
• C = the container size, in number of parts; and
• S = the safety stock factor, from 0 to 100 percent.
The Elements of Lean Production (Cont.)
A Kanban Pull System-Example
• The assembly line demand is twenty of Part 1 per hour for Work Cell B, and the
standard container used for this part holds five Part 1’s. If it takes two hours for a
container to make a circuit from Work Cell B to the assembly line and back
again, and if it is desired to carry 10 percent excess of Part 1 in the system, then
find out the number of containers needed in the system?
# of containers =
DT(1 + S)
C
• D = the demand rate of the assembly line;
• T = the time for a container to make an entire circle
through the system, from being filled, moving, being
emptied, and returning to be filled again;
• C = the container size, in number of parts; and
• S = the safety stock factor, from 0 to 100 percent
The Elements of Lean Production (Cont.)
A Kanban Pull System
• Assembly line demand = D = 20 parts-1/hour
• Container Size = C = 5 parts
• Time for container to complete a circuit = T = 2 hours
• Safety stock = S = 10%
# of containers =
# of containers =
DT(1 + S)
C
20×2 (1 + 0.1)
5
# of containers = 8.8 or 9 containers
The Elements of Lean Production (Cont.)
A Kanban Pull System
• We can also calculate the maximum inventory of the system.
• The maximum inventory for this system would then be the total number of
containers times the container size.
Maximum Inventory = Number of Containers × Container Size
• Find out the maximum Inventory of previous example
Maximum Inventory = 9× 5
= 45 parts1
The Elements of Lean Production (Cont.)
Continuous Improvement (Kaizen)
• Lean systems are never-ending work in progress
• Compact layouts are designed to allow work to flow sequentially and quickly.
• Purchase orders and production batches are small.
• Suppliers struggle to deliver frequently and on time.
• Workers strive to maintain output levels while spending more time during the day,
setting up machines for small production runs.
• Continuous approach to reduce process, delivery, & quality problems, such as
machine breakdown problems, setup problems, & internal quality problems is called
Kaizen means “Change for Good”.
Workforce Commitment
• Managers must support Lean Production by providing subordinates with the skills,
tools, time, & other necessary resources to identify problems & implement solutions.
Lean Systems and the Environment
Lean green practices:
• Reduce the cost of environmental management.
• Improved environmental performance.
• Increase the possibility that firms will adopt more advanced
environmental management
Carbon-neutral- offsetting the carbon footprint of a firm’s operations .
Lean systems has a strong relation with environmental improvement.
The Origins of Six Sigma Quality
Six Sigma
• What is meant by Sigma?
• Sigma- standard deviation.
•Six Sigma seeks to improve the quality of process outputs by
identifying and removing the causes of defects.
• Pioneered by Motorola in 1987
• In the 1980s, a senior engineer at Motorola, Mikel Harry, was
experimenting with problem solving using statistical analyses.
• A statistics-based decision-making framework designed to make
significant quality improvements.
• Near quality perfection (the statistical likelihood of non-defects
99.99967% of the time)
•Motorola saved more than $ 15 billion in the first 10 years of its
Six Sigma effort.
The Origins of Six Sigma Quality
Learning Curve
The Origins of Six Sigma Quality
Six Sigma Metrics- Defects per Million Opportunities (DPMO)
Improvement Needed
Good
Virtually Perfection
# of std dev
above the mean
% of defect-free
output
DPMO
2
69.15
308,537
2.5
84.13
158,686
3
93.32
66,807
3.5
97.73
22,750
4
99.38
6,210
4.5
99.865
1,350
5
99.977
233
5.5
99.9968
32
6
99.99966
3.4
SIX SIGMA
How good is good enough?
99.9% is already VERY GOOD
But what could happen at a quality level of 99.9% (i.e., 1000 ppm),
in our everyday lives (about 4.6)?
•
4000 wrong medical prescriptions each year
•
•
More than 3000 newborns accidentally falling
from the hands of nurses or doctors each year
Two long or short landings at American airports each day
• 400 letters per hour which never arrive at their destination
The Origins of Six Sigma Quality
• We can find out the six sigma level by calculating DPMO (Defects per million
opportunities).
• OFD = Opportunities for a defect to occur or Number of possible causes of
defect
The Six Sigma Quality
• Blake, owner of Speedy Pizza, a home delivery pizza operation, keeps track of
customer complaints. For each pizza delivery, there are three possible causes of
complaints: a late delivery, a cold pizza or an incorrect pizza. Each week, Blake
calculates the rate of delivery “defects” per total pizza deliveries, and then uses
this information to determine his company’s Six Sigma quality level. During the
past week, his company delivered 620 pizzas. His drivers received sixteen late
delivery complaints, nineteen cold pizza complaints and five incorrect pizza
complaints.
DPMO =
DPMO =
Number of defects
×1,000,000
(OFD per unit) (Number of Units)
40
(3) (620)
×1,000,000
= 21505
defective pizza deliveries
per million pizza deliveries
The Origins of Six Sigma Quality
Six Sigma Metrics- Defects per Million Opportunities (DPMO)
Improvement Needed
Good
Virtually Perfection
# of std dev
above the mean
% of defect-free
output
DPMO
2
69.15
308,537
2.5
84.13
158,686
3
93.32
66,807
3.5
97.73
22,750
4
99.38
6,210
4.5
99.865
1,350
5
99.977
233
5.5
99.9968
32
6
99.99966
3.4
The Origins of Six Sigma Quality
Six Sigma Metrics- Defects per Million Opportunities (DPMO)
Improvement Needed
Good
Virtually Perfection
# of std dev
above the mean
% of defect-free
output
DPMO
2
69.15
308,537
2.5
84.13
158,686
3
93.32
66,807
3.5
97.73
22,750
4
99.38
6,210
4.5
99.865
1,350
5
99.977
233
5.5
99.9968
32
6
99.99966
3.4
Elements of Six Sigma
The DMAIC Improvement Cycle
Define
Measure
Analyze
Improve
Control
Elements of Six Sigma
The DMAIC Improvement Cycle
Elements of Six Sigma
The DMAIC Improvement Cycle
• What is DMAIC?
• A logical and structured approach to
problem solving and process improvement.
• An iterative process (continuous
improvement)
• A quality tool which focus on change
management style.
Elements of Six Sigma
The DMAIC Improvement Cycle
• Define: Identify customers and their service or product requirements.
• Measure: Prepare a data-collection plan and determine what to measure and
how to measure it.
• Analyze: Perform a process analysis using the performance data collected
• Improve: Design an improvement plan; then remove the causes of process
variation by implementing the improvement plan.
• Control: Monitor the process to assure that performance levels are
maintained.
Elements of Six Sigma
Six Sigma Training Levels
Levels
Description
Yellow Belt
Basic understanding of Six Sigma Methodology and tools. Role is to be an effective
team member on process improvement project teams. Usually works part-time on
the six sigma project.
Green Belt
A trained team member allowed to work on small, carefully defined Six Sigma
projects, requiring less than a Black Belt’s full-time commitment. They spend
approximately 25 percent of their time on Six Sigma projects of their own or in
support of Black Belt projects.
Black Belt
Thorough knowledge of Six Sigma philosophies and principles. Coaches successful
project teams. Identifies projects and selects project team members. Acts as an
internal consultant, mentors Green Belts and project teams, provides feedback to
management.
Master Black Belt A proven mastery of process variability reduction, waste reduction and growth
principles and can effectively present training at all levels. Directs Black and Green
Belts on the performance of their Six Sigma projects and also provides guidance and
direction to management teams
Elements of Six Sigma
The Statistical Tools of Six Sigma
• Flow Diagramso Annotated boxes representing
process to show the flow of
products or customers.
o ovals representing wait periods,
connected by arrows to show the
flow of products or customers
through the process.
o Diamond shape represent
decision
• Check Sheets• to determine frequencies for
specific problems.
Elements of Six Sigma
The Statistical Tools of Six Sigma
• Pareto Charts• for presenting data in an organized
fashion, indicating process problems
from most to least severe.
• Cause-and-Effect Diagrams
(Fishbone or Ishikawa diagrams)• used to aid in brainstorming &
isolating the causes of a problem.
Elements of Six Sigma
The Statistical Tools of Six Sigma
• Process Mapping: First step to evaluate any manufacturing or
service process.
• Flow diagrams use annotated boxes representing process actions and
ovals to represent wait periods, connected by arrows to show the flow
of products through the process
Elements of Six Sigma
The Statistical Tools of Six Sigma
• Process Mapping:
• Restaurant
• Customer arrives at restaurants vicinity and park their cars. They enter
into dinning area and ask for a free table. Staff give him a table and
brings the menu. Customer select food items and place an order to staff.
Staff deliver this order to kitchen and after food get ready serve it to the
customer. Customer eats food and pays bill and leave the restaurant.
Elements of Six Sigma
The Statistical Tools of Six Sigma
Process Map for
Customer Flow
at a Restaurant
Elements of Six Sigma
The Statistical Tools of Six Sigma
• The check sheet is a form (document) used to collect data in real time
at the location where the data is generated.
• The data it captures can be quantitative or qualitative.
• When the information is quantitative, the check sheet is sometimes
called a tally sheet.
oTo quantify defects by type
oTo quantify defects by location
oTo quantify defects by cause (machine, worker)
Elements of Six Sigma
The Statistical Tools of Six Sigma
• Check Sheet: Allow users to determine frequencies for specific problems
Problem
M
Tu
W
Th
F
Sa
Su
long wait
//////
/////
////////
//////
/////////
//////////
////
//
/
/
///
//
cold food
Tot
%Tot
48
34.0
9
6.3
wrong food
/////
//
/
//
/////
///
/
19
13.5
bad server
//////
///
/////
/
//////
//
/
24
17.0
/
//
/
///
/
8
5.7
/////
/////
15
10.6
/////
///////
14
9.9
/
4
2.9
141
100
bad table
room temp
//
No parking
//
other
Totals
17
/
//
14
23
///
13
34
33
7
Elements of Six Sigma
The Statistical Tools of Six Sigma
• Pareto Chart:
• The charts are useful for presenting data in an organized fashion,
indicating process problems from most to least severe.
• It is more fruitful for organization to solve the most severe problems
first.
• The most of a firm’s problem “events” are accounted for by just a
few of the problems.
• It is based on the work of Vilfredo Pareto, a nineteenth-century
economist.
Elements of Six Sigma
The Statistical Tools of Six Sigma
60
50
40
30
20
10
0
Series1
long
wait
bad
server
wrong
food
48
24
19
room
no
temp. parking
15
14
cold
food
bad
table
Other
9
8
4
Elements of Six Sigma
The Statistical Tools of Six Sigma
• Cause-and-Effect Diagram:
oOnce a problem has been identified, cause-and-effect diagrams can be used
to aid in brainstorming and isolating the causes of a problem.
oIt is also called, fishbone diagrams or Ishikawa diagrams
• Four M’s (4 M):
oManpower, Machine, Material, Methods
oThe four groups of causes are the standard classifications of problem causes
oIn almost all cases, problem causes will be in one or more of these four areas.
Machinery
Material
Washing machine breaks
Run out
of food
Late deliveries
Not enough
tables
Cooking delays
Inadequate
waiting area
Too much overbooking
Can’t find
customers
Methods
New automated
cooking bays
Untrained
servers, cooks
Preference to
VIPs
No supervision
No system
for food or
drink pickup
Needs frequent
maintenance
Credit card scanner
breaks
LONG WAIT
Understaffed shifts
High turnover
Poor hiring practices
Manpower
Elements of Six Sigma
The Statistical Tools of Six Sigma
• Statistical Process Control (SPC) :
•Allows firms to:
• visually monitor process performance
• compare the performance to desired levels or standards
• take corrective action
• Firms:
• gather process performance data
• create control charts to monitor process variability
• then collect sample measurements of the process over time and plot on charts.
• Control charts are graphic representations of process performance over
time, showing the desired control limits.
Elements of Six Sigma
• Variations:
• If the sample means fall within the acceptable
control limits and appear normally distributed,
the process is in statistical control.
Natural variations:
• expected and random (can’t control).
• When only natural variations are present, the
process is in statistical control. (e.g;
Environmental or Noise)
Assignable variations:
• have a specific cause and can be identified and
eliminated (can control)
•Because of a special cause
Variable data:
• continuous, (e.g., weight, time and length)
Attribute data:
• indicate some attribute such as color &
satisfaction, or beauty.
Elements of Six Sigma
The Statistical Tools of Six Sigma
• Variable Control Charts : When there are variations in process measures, samples
of data are collected and the sample means are plotted onto control charts.
• Monitor the stability of the process
• Determine whether the process is stable and ready to be improve
• x-bar chart: tracks central tendency of sample means (Process Mean)
• R-chart: tracks sample ranges or the variation within each sample. (Process
Range)
Steps:
1. Gather data when the process is in control.
2. Calculate the mean & the range for each sample.
3. Calculate the overall mean and average range of all the samples. Use the x-means to
calculate the upper & lower control limits.
4. Use the means & control limits to construct x-bar and R control charts.
5. Collect samples over time and plot.
Elements of Six Sigma
The Statistical Tools of Six Sigma
k
R
k
x
x
=
i =1
k
i
R
=
i =1
i
k
where k indicates the number of samples and i indicates the specific sample
Elements of Six Sigma
The Statistical Tools of Six Sigma
The Hayley Girl Soup Co., a soup manufacturer, has collected process
data in order to construct control charts to use in their canning facility.
They collected 24 samples of four cans each hour over a 24-hour period,
and the data is shown below for each sample
Gather data when the
process is in control.
Calculate the mean & the
range for each sample.
k
R
k
x
x
=
i =1
k
i
R
R = xmax - xmin
=
i =1
k
i
R = (Max – mini = 12.2 - 11.6)
Calculate the mean & the
range for each sample.
k
R
k
x
x
=
i =1
k
i
R
=
i =1
k
i
Calculate the overall
mean and average
range of all the
samples. Use the xmeans to calculate
the upper & lower
control limits.
x
R
For x-bar
UCLx =
x
+ A2R
LCL x =
x
- A2 R
Find out the control
limits of x-bar and R
control charts.
For R-chart
UCLR = D4 R
LCLR
= D3 R
where A2, D3, and D4 are constants based on the size of each sample
A2, D3, and D4 values table
Find out the upper and lower control limits
for both the x -chart and the R-chart, for a
sample size of four
Find out the control
limits of x-bar and R
control charts.
For x-bar
UCLx =
x
+ A2R
LCL x =
x
- A2 R
For R-chart
UCLR = D4R
LCLR
= D3R
X = 11.96
R = 0.39
Find out the upper
and lower control
limits for both the x
-chart and the Rchart, for a sample
size of four
X = 11.96
R = 0.39
Use the means & control
limits to construct xbar and R control
charts.
Elements of Six Sigma
The Statistical Tools of Six Sigma
• Once a good set of control charts have been created and samples from
the process are being statistically monitored, then;
1) Collect samples of size 4–5 periodically (depending on the type of
process and ease of data collection).
2) Plot the sample means on both control charts, monitoring whether or
not the process is in control.
3) When the process appears out of control, use check sheets, Pareto
charts and fishbone diagrams to investigate causes and eliminate
process variations.
4) Repeat steps 1–3.