Six sigma case study-a good approach with example
- 1. Six Sigma Case Study v.2 Dr. Ron Tibben-Lembke SCM 494
- 2. Six Sigma Case Study - POI Paper Organizers International Filing, organizing, and paper shuffling services Uses MSD (metallic securing devices) Increasing complaints from the Paper Shuffling Department (PSD) about MSDs breaking and failing to keep papers together Customers’ papers can get mixed together Purchasing wants to eliminate MSD complaints
- 3. Mission Statement “Put the right information in the right place.” Management created a list of objectives and projects that will support those objectives
- 4. President Director of Paper Shuffling Dept Business Objectives Increase # of orders Minimize production costs Eliminate employee complaints Business Indicators # orders per Month (c chart) Increase # of POI services used by each customer 1. avg. # services used per customer, per quarter 2. St dev. of # serv. used (x-bar and s) Prod costs per month (I-MR chart) # employee complaints per month (c chart) Area Objectives Increase # orders in PSD Increase # Services used by each customer in PSD Minimize production costs in PSD Eliminate PSD employee complaints Area Indicators No. orders in PSD / mo. (c chart) Potential 6 Sigma projects New customer promotions project 1. avg. # services used per PSD cust, per Q 2. St dev. Of # serv. used (x-bar and s) Employee Morale project # PSD employee Complaints/mo (c chart) MSD quality project Production Costs in PSD/mo (I-MR chart) Existing customer promotions project
- 5. Current Costs Management considers costs production costs in PSD to be too high Avg. Production costs of $1.1m per month Standard deviation is $116k. R-bar / d2 = $116,672 Average is “too high” but process is under control
- 6. 1400000 1300000 1200000 1100000 1000000 900000 800000 Subgroup 0 10 20 30 40 50 60 70 Individual Value UCL=1393879 Mean=1096880 LCL=799881 400000 300000 200000 100000 0 Moving Range UCL=364863 R=111672 LCL=0 I and MR Chart for Production C
- 7. Production costs Normally distributed 890000 930000 970000 1010000 1050000 1090000 1130000 1170000 1210000 1250000 1290000 10 5 0 Production Costs in PSD Fr equen cy Histogram of Production Costs in PSD
- 8. Prioritizing Six Sigma Projects Potential Six Sigma Projects Business objective Increase # orders Increase # POI services used by each customer Minimize production costs Eliminate employee complaints Weighted average of potential Weight New Customer Promotions Existing Customer Promotions MSD Quality Employee Morale 0.35 3 3 0 0 0.10 1 3 0 0 0.40 0 0 9 3 0.15 0 0 9 9 1.15 1.35 4.95 2.55
- 9. Starting MSD Project Champion and process owner make initial charter. 1. What is the name of the process? MSD purchasing 2. What is the aim? Purchase MSDs that improve productivity and morale of PSD 3. What is economic rationale? a. Why do it at all? Un-durable clips (<4 bends): lost papers, frustrated employees lead to higher processing costs, inefficient labor costs (60% cannot withstand test) Functionality (broken in box): sorting costs, frustrated employees (60% of boxes have >5 broken MSDs)
- 10. Additional charter questions b. Why do it now? High production costs, complaints c. What business objectives are supported by project? Min. costs, reduce complaints d. Consequences of not doing: lower profits, more employee complaints e. What projects have higher priority? None. 4. What is the problem statement? Low-quality MSDs create additional production costs and employee frustration 5. What is goal or desired state? 100-fold increase in durability 0.6% from 60% 10-fold every 2 years, so 100 over 4 year project 100-fold would take from 600,000 DPMO to 6,000 DPMO, set goal as 4 sigma (p. 739)
- 11. More charter questions 6. What is scope? a. Boundaries? When purchasing receives purchase orders, ends when MSD put in inventory b. What is out of bounds? How employees use MSDs c. What resources? $30,000, including salaries d. Who can approve expenditures? Process owner e. Can they go over $30,000? No. f. What are obstacles? Budget, 21 weeks g. What time commitment expected? Friday 8-9am meetings, progress reports h. What about regular duties? OT may be required, not in budget
- 12. Gantt Chart for Project Steps Resp. Week 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Define BA X X X X X X Mesure BA X X Analyze BA X X X Improve BA X X X X X X Control BA X X X X
- 13. MSD Project Benefits 7. Benefits: a. Soft benefits: eliminating complaints from PSD and increasing employee morale b. Hard benefits (financial): minimizing labor costs
- 14. Labor savings – Clipping expenses 100 employees, 40 hrs/wk, spend 10% of time clipping = 400 hrs / wk clipping $25 / hr * 400 hrs * 50 wks = $500,000 annual clipping expenses 60% clips defective = $300,000? Currently? 0.62% defective = $3,100? Improved system? Annually, 20,000 hrs clipping = 10 employees 60% = 12,000 wasted clipping hours currently 0.62% = 124 wasted hours under improved system Need 6 fewer employees This does not including time lost from clips failing later, on work in process
- 15. Material Cost Savings 300,000 projects per year, 10 clips each =3,000,000 clips needed each year. 0.60 defect means 1/(1-0.6) = 2.5 clips used for each one needed = 7,500,000 used 0.0062 means 1/(1-0.0062) = 1.00625 =3,018,000 clips used Savings of 4,482,000 clips = $44,820 per year
- 16. Team Members Champion Process Owner Team Leader – Black Belt Team member 1 Team member 2 Finance representative IT representative
- 17. SIPOC Start Purchasing receives order from Paper Shuffling Department Purchasing agent calls vendor Does vendor have MSD in stock? Place order with vendor Receive order from vendor Store product received into inventory (new boxes go on bottom back of shelf) PSD removes products from inventory PSD uses Product Stop No Yes -Suppliers -Inputs -Process -Outputs -Customers
- 18. Voice of the Customer What emotions come to mind when you think about MSDs? What needs and wants come to mind when you think about MSDs? What complaints or problems would you like to mention about MSDs? 3 themes: Variation in durability Variation in color Variation in functionality (# broken MSDs in each box) CTQ-Critical to Quality factors Tech Specs Ability to withstand bending >= 4 bends w/o breaking The number of different MSD colors = 1 color of MSDs The number of broken MSDs in a box. <= 5 broken in box
- 19. Project Objectives 1. Decrease (direction) the percentage that cannot withstand four or more bends without breaking (measure) bought by the purchasing department (process) to 0.62 percent (goal) by Jan. 1, 2005 (deadline). Go for 4 sigma! 2. Decrease (direction) the percentage of boxes of MSDs with more than five broken clips (measure) bought by the purchasing deparment (process) to 0.62 percent (goal) by Jan. 1, 2005 (deadline) Go for 4 sigma! 3. What happened to colors?
- 20. Measure phase-I Operationally Define CTQs Operational definition for CTQ1: Durability Take top-front box Close eyes, randomly pull one out Count number of bends until breaking Do not count bend being made when it breaks If >= bends, then MSD conforms, else defective
- 21. Operationally Define CTQ2 - Functionality Take top-front box Count the number of broken clips If number of broken is <= 5, box is conforming If number is > 5, box is defective Use same boxes for both operational definitions
- 22. Measure Phase-II Gage repeatability and reproducibility 10 top-front boxes tested by 2 inspectors, each box twice Gage (or gauge) run chart shows no difference between the measurements from the two different inspectors
- 23. Box Inspector Count Functionality 1 1 1 10 1 1 2 10 1 2 1 10 1 2 2 10 2 1 1 9 2 1 2 9 2 2 1 9 2 2 2 9 3 1 1 5 3 1 2 5 3 2 1 5 3 2 2 5 4 1 1 4 4 1 2 4 4 2 1 4 4 2 2 4 5 1 1 5 5 1 2 5 5 2 1 5 5 2 2 5 Box Inspector Count Functionality 6 1 1 9 6 1 2 9 6 2 1 9 6 2 2 9 7 1 1 6 7 1 2 6 7 2 1 6 7 2 2 6 8 1 1 6 8 1 2 6 8 2 1 6 8 2 2 6 9 1 1 9 9 1 2 9 9 2 1 9 9 2 2 9 10 1 1 11 10 1 2 11 10 2 1 11 10 2 2 11
- 24. Gage name: Date of study: Reported by: Tolerance: Misc: Runchart of Fuctionality by Box, Inspector 11 10 9 8 7 6 5 4 Fuctionality Box 1 2 3 4 5 1 2 11 10 9 8 7 6 5 4 Fuctionality Box 6 7 8 9 10
- 25. CTQ Baselines Hourly inspections for both CTQs Durability is # bends for one MSD before breaking Functionality is # of broken clips Yield is percentage of batches passing the standard 6/16 passed each Very similar to claim of 60% unacceptable Hour Dura-bility Function -ality Shift 1-Hr1 5 12 Shift 1-Hr2 7 4 Shift 1-Hr3 3 8 Shift 1-Hr4 2 6 Shift 1-Hr5 9 1 Shift 1-Hr6 2 5 Shift 1-Hr7 1 11 Shift 1-Hr8 1 9 Shift 2-Hr1 12 6 Shift 2-Hr2 9 6 Shift 2-Hr3 3 9 Shift 2-Hr4 1 5 Shift 2-Hr5 1 4 Shift 2-Hr6 1 5 Shift 2-Hr7 1 9 Shift 2-Hr8 4 10 Yield 0.375 0.375
- 26. 15 10 5 0 -5 Individual Value Subgroup 0 5 10 15 UCL=12.21 Mean=3.875 LCL=-4.458 10 5 0 Moving Range 1 UCL=10.24 R=3.133 LCL=0 I and MR Chart for Durability I-MR charts show durability not stable over time. Different vendors, but deal with that soon
- 27. 7 6 5 4 3 2 1 0 1 2 3 4 5 6 7 8 9 10 11 12 Durability number of boxes box Durability “dot plot” – shows how many boxes had a particular durability level Graph doesn’t look like Normal distribution Maybe Poisson distribution
- 28. C-chart not in control, shift 2 tester bent more slowly, caused it to last longer
- 29. C-chart for Functionality under control
- 30. Dot-plot for Functionality Dot-plot for Functionality looks Normally distributed
- 31. Detailed Process Map Start Purchasing receives order from Paper Shuffling Department Purchasing agent calls vendor Does vendor have MSD in stock? Place order with vendor Receive order from vendor MSDs placed into inventory (new boxes go on the bottom back of shelf) PSD removes box from inventory PSD uses MSDs Stop No Yes X1 – Vendor (Ibix or Office Optimum) X2 – Size (Small or Large) X3 – Ridges (With or Without) X4 = Cycle time from order to receipt for MSDs X5 = Discrepancy in count from order placed and order received X6 = Cycle time to place product in inventory X7 = Inventory shelf time (in days) X8 = Type of usage (Large stack of paper or Small stack of paper) X’s also could be defined in measure phase
- 32. Operational Definitions for each X X1 – Vendor Ibix Office Optimum X2 – Size Small Large X3 – Ridges With Without X8 – Usage Large stack Small stack X4 – Cycle time, ordering to receipt (days) X5 – Discrepancy: # ordered vs. received X6 – Cycle time to place in inventory (days) X7 – inventory shelf life (in days) Perform gage study on each, to make sure we can measure consistently (repeatability and reproducibility)
- 33. Baseline Data Every hour for 2 weeks – 80 samples Collect info about: X1 vendor X2 size X3 ridges Y1 Durability Y2 Functionality Other factors studied separately
- 34. Sample Day Hour X1 X2 X3 X7 Durability Function 1 Mon 1 1 0 0 7 2 5 2 Mon 2 0 1 0 7 2 9 3 Mon 3 0 0 1 7 10 7 4 Mon 4 0 1 0 7 1 4 5 Mon 5 0 0 0 7 7 3 6 Mon 6 0 1 1 7 2 5 7 Mon 7 0 1 1 7 1 9 8 Mon 8 0 0 0 7 7 5 9 Tue 1 0 1 0 8 2 8 10 Tue 2 0 1 0 8 1 7 11 Tue 3 0 1 0 8 1 13 12 Tue 4 1 1 1 8 9 5 13 Tue 5 1 1 0 8 9 9 14 Tue 6 1 1 1 8 10 11 15 Tue 7 1 1 1 8 10 11 16 Tue 8 0 0 1 8 8 9 17 Wed 1 1 1 1 9 8 11 18 Wed 2 1 0 0 9 1 11 19 Wed 3 1 1 1 9 10 11 20 Wed 4 0 0 0 9 7 11 21 Wed 5 1 1 1 9 9 9 22 Wed 6 0 0 1 9 9 5 23 Wed 7 1 0 1 9 2 11 24 Wed 8 1 0 0 9 1 10 25 Thu 1 1 0 1 10 1 14 26 Thu 2 0 1 1 10 1 10 27 Thu 3 1 1 1 10 8 13 28 Thu 4 0 0 1 10 10 12 29 Thu 5 0 0 0 10 7 14 30 Thu 6 0 1 1 10 3 13
- 35. Sample Day Hour X1 X2 X3 X7 Durability Function 31 Thu 7 0 0 0 10 9 13 32 Thu 8 1 1 1 10 8 11 33 Fri 1 0 1 0 1 2 0 34 Fri 2 0 1 0 1 2 1 35 Fri 3 0 1 0 1 1 6 36 Fri 4 0 1 0 1 3 3 37 Fri 5 0 1 0 1 2 2 38 Fri 6 1 1 0 1 10 6 39 Fri 7 0 0 1 1 10 0 40 Fri 8 0 1 0 1 2 0 41 Mon 1 0 1 1 4 3 4 42 Mon 2 0 1 0 4 3 7 43 Mon 3 0 1 1 4 3 3 44 Mon 4 0 0 0 4 10 2 45 Mon 5 1 1 0 4 8 5 46 Mon 6 0 1 1 4 3 4 47 Mon 7 1 0 0 4 1 4 48 Mon 8 0 0 1 4 10 5 49 Tue 1 1 1 1 5 11 6 50 Tue 2 1 0 1 5 3 4 51 Tue 3 1 1 0 5 10 6 52 Tue 4 1 0 1 5 3 5 53 Tue 5 1 0 0 5 2 4 54 Tue 6 0 0 0 5 9 5 55 Tue 7 0 0 1 5 9 5 56 Tue 8 0 1 0 5 3 7 57 Wed 1 0 0 1 6 9 5 58 Wed 2 1 1 0 6 9 7 59 Wed 3 0 0 0 6 9 5 60 Wed 4 1 0 0 6 2 6
- 36. Sample Day Hour X1 X2 X3 X7 Durability Function 61 Wed 5 1 0 1 6 2 5 62 Wed 6 1 1 1 6 10 5 63 Wed 7 0 1 0 6 1 7 64 Wed 8 0 1 0 6 2 5 65 Thu 1 0 0 1 7 10 7 66 Thu 2 1 1 0 7 9 5 67 Thu 3 1 0 0 7 1 7 68 Thu 4 0 1 0 7 2 5 69 Thu 5 1 0 1 7 1 6 70 Thu 6 0 1 0 7 1 5 71 Thu 7 1 0 0 7 1 8 72 Thu 8 1 1 1 7 10 5 73 Fri 1 0 1 1 8 3 7 74 Fri 2 1 1 1 8 9 7 75 Fri 3 1 0 0 8 1 13 76 Fri 4 0 1 1 8 2 8 77 Fri 5 0 1 1 8 3 9 78 Fri 6 1 1 1 8 8 10 79 Fri 7 1 0 1 8 3 11 80 Fri 8 0 0 1 8 10 11 Legend: X1 = Vendor (0 = Office Optimum and 1 = Ibix) X2 = Size (0 = Small and 1 = Large) X3 = Ridges (0 = Without and 1 = With) X7 = Inventory shelf time, in days
- 37. Baseline results Durability 0.4625 Functionality 0.425 X1: Office Optimum 56.25% X2: Small 42.50% X3: Without ridges 50% X7: Shelf life average 6.5 days X7: Shelf life st. dev 2.5 days
- 38. Vendor (X1) and Durability Maybe Ibix is more durable? Ibix Off Opt.
- 39. Size (X2) and Durability Maybe small is more durable? Large Small
- 40. Ridges (X3) and Durability Ridges No ridges Maybe ridges are more durable?
- 41. Shelf Life (X7) and Durability
- 42. Vendor (X1) and Functionality Maybe Ibix is more functional? Ibix Off Opt.
- 43. Size (X2) and Functionality Maybe large is more functional? Large Small
- 44. Ridges (X3) and Functionality Ridges No ridges Maybe ridges are more functional?
- 45. Shelf Life (X7) and Functionality
- 46. Conclusions Durability – no large effects from any X’s. Vendor (X1=1 = Ibix) improves functionality Size (X2=1= large) improves functionality Ridges (X3=1) seem to improve functionality Shelf Life (X7) – lower values have better functionality Best plan is to buy Ibix large MSDs with ridges
- 47. Office Ibix small Lg No with Shelf Opt. Ridges Ridges Life
- 48. Conculsions – 2 Best to buy Ibix Small With Ridges Shelf life doesn’t matter?
- 49. X1=Off Opt X1=Ibix Small Large No ridges Ridges
- 50. Conclusion? Ridges don’t seem to affect durability Buy small Office Optimum, or Large Ibix!
- 51. Functionality Main Effects Age seems to be biggest factor, ridges, Vendor
- 52. Functionality Interaction Plot X2=small X2=large No ridges Ridges
- 53. Improve Phase Conduct experiment to determine ideal parameter values