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Mass to Lean to Six Sigma Improvement Path

LeanmetricsAnn Arbor, Mi

to Unlocking

Improvements to Your

of Production

The

Total Cost

Objectives Constantly squeezing fractions of a second from your

workforces’ time standards may be imparting negative return in your total cost of production. With absenteeism increasing and workforce morale on the decline it may be time for a new approach to improving your profit picture.

•To show how tracking your cost of production enhances the Value Stream Mapping exercises you may be performing…

Showing the workforce where they fit into the manufacturing operations , empowering them with tools and resources for making changes to the current way of doing business and rewarding them for their efforts are the answers to reducing your production costs. The objectives of this presentation are three-fold:

•To show the cost reduction potential left after subtracting the baseline costs of production from your total expenditures over a set time period…

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•To transmit the lean/six sigma philosophies to work force personnel through sensory mass to lean to six sigma “hands-on” production simulations…

Presentation OutlineSlide # Description

4 Relevance of value added tracking from customer view

8 Tracking costs (a common denominator)

12 Business Successful course of action

14 Toyota’s Adoption of “Total Budget Control System”

16 Process Cell Composition

20 Work-in-Process Samples and Visual Lean Levels

23 Process and Inventory Cost Tracking Map (Sample)

24 Advantages of a cost tracking map (some of the things

you can accomplish with a completed map)

27 Beyond the map--using DMAIC matrix to address all

expenses incurred to meet production objectives

28 Hands-on training Mass to Lean to Six Sigma philosophy!

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Customer Value Added Definition and Example

Def: Value Added is anything done to a product or service that entices purchase by a typical customer. It can include activities that improve quality, cost or delivery. Examples of Value Added would be: using rust resistant paint, in-process reduction in handling/transporting resulting in lower cost to customer or beating the competition in comparable-product delivery time.

Trying to measure “Value Added ” or answering the question,“How do we measure: quality improvements, the reduction in product cost or impact of faster delivery?” are difficult tasks.

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Process StepC/T=59 secondsChange/Over 1Uptime=93%

2 shifts15,000 sec. avail.

Value Stream Map (VSM)Example

A value stream map (AKA end-to-end system map) takes into account not only the activity of the product, but the management and information systems that support the basic process. The map is formed by showing material levels and process steps that comprise the assembly process. For example…..

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1300 pcs

Process StepC/T=65 secondsChange/Over 2Uptime=96%

2 shifts13,000 sec. avail.

W.I.P.W.I.P.Etc.

W.I.P.

200 pcs

Correlation Between VSM and Improvements to Cost, Quality

or DeliverySince there are no cost inputs to the VSM no direct relationship can be formed between map and product cost.

Additionally, internal/external quality data have no input into the mapping process.

Tracking the lead time from the start of the production flow to the end is the most important aspect of the mapping process because it can impact the customer satisfaction level.

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How the workforce can impact the lead time (and what timeelements are important--conform to lean objectives) are not discernable.

Customer From Value Stream Mapping

?

?

?

?

Benefit

?

8

To get us on the Cost Tracking Path let’s pose the question...

“Have YOU ever tried to corral your spending habits by

establishing a monthly householdbudget?”

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The 2 key elements to constructing a household

budget are:

*gross income

*expenses over the income period

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Increasing Gross Income… Of course, increasing your gross income can be helpful in balancing your monthly budget.

Keeping your expenses in check; therefore, is the key to achieving positive financial success!

Too many times, though, a rise in gross income alters the mindset of the recipients (personal or business) and they increase their spending habits in proportion (or in excess) to the rise in income.

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Some of the items we might focus on to reduce our personal

spending include:*heating/cooling

costs

*telephone

*reading materials

*transportation costs*entertainment

*sporting events

*trash pick-up

*laundry

*food & water

*computer expenses

*restaurant meals

*personal luxuries

*cable

*medical expenses

*taxes

*clothing*late fees

*interest rates

*travel

*vacationdestinations 11

The Following Slides Will Present a Similar Approach to Attaining Financial Success in Your Business…

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If you consider the sales of the product you are making times the quantity produced over a pre-determined time frame as “your gross income”...

…and the expenses you incur to build your products over the same time frame as your

opportunity to lower your Total Cost, you are ready to take the first step towards leaning your

way to improved profitability...

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Lending Further Credence to Total Cost Tracking Here’s an Excerpt From Jeff Liker’s Book…

Shortly after World War II, Toyota nearly went bankrupt, which led to the resignation of the company founder—Kiichiro Toyoda. Toyota pledged to become debt-free. Cost reduction has been a passion since. Taiichi Ohno began eliminating wasted motions on the shop floor. Often this led to removing a worker from the line or cell, to be placed in another job so one less worker had to be hired in the future. Toyota now has a rigorous “Total Budget Control System” in which monthly data are used to monitor the budgets of all the divisions down to the tiniest expenditure.

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The Toyota Way

The Process and Inventory Cost Tracking Map is a result of populating a data base with “point in time” inventory levels, logistic information for all raw materials, process cell data and “conditional format” trigger levels. It captures the direct and indirect (material delivery) labor costs at every process step in your assembly operation--ultimately yielding the

“total value added cost” of your end item product.16

Similar in Appearance to a Value Stream Map but Full of Meaningful Cost

Information for Making Decisions Impacting Your Total Cost of Production…

OPERATION NAME OPERATION ADDRESS

F # of OPERATORS IN CELL 1

M TOTAL COST @ STATION 2S # OF UNITS IN CELL 360 ACTUAL CYCLE TIME 4

OVERSPEED % 5

EFFICIENCY % 6

POOR 7

LEAD TIME THRU CELL 8

# Line Description1 Number of operators in a work cell (or Automatic)2 Total cost at Station (Direct, Indirect + Material)3 Number of units in work cell4 Acutal cycle time of operation5 Overspeed % (Sell rate divided by actual cycle time6 Efficiency % triggers poor, fair or good on following line (Manual input required)7 Efficiency of work cell 8 Lead time through the work cell (based on actual cycle time)

FAIR GOOD

SELL RATE AUTO INPUT FROM DATA BASE SHTS

SYNCHRONOUS MATERIAL FLOW (Line side inventory level)

OPERATION NAME AND ADDRESS

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Process Cell Efficiency, Lead Time and Cost at This Station

The actual cycle time of the process is compared to the sell rate (Takt time) resulting in a percentage of the operator(s) cost per unit of production (input into data base). The “lead time” of built units to get to this point of the process is logged and the labor mentioned above is combined with the labor to deliver each part to the assembly point (resulting in optimal cost per unit @ every process station).

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Line-side Material Flow Levels and Takt Time (Sell Rate)

Visual Indication of Control Part Meeting Stock Level

Takt Time (seconds) = Sell Rate of Product

Visual Indication of Meeting Line-side Stock LevelVisual Indication of Meeting Line-side Stock Level

Visual Indication of Meeting Line-side Stock LevelVisual Indication of Meeting Line-side Stock Level

FM

S

60

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Keeping low levels of stock at line side: improves quality, provides better access to parts (improved ergonomics) and reduces

cycle time (thus getting operation closer to takt time).

Importance of Line-side Material Flow Levels and Takt Time (Sell

Rate)

speeds the Order to Revenue money stream . . . More importantly it

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Cost of Work-In-Processand Visual Lean Indication

(Sample) Note: There is a W.I.P. bank after

each process station.

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TYPICAL W.I.P. INVENTORY

INV.

INVENTORY ADDRESS

SURGE UNITS+TRANSITS

COST OF SURGE+TRANSITS

POOR FAIR GOOD

INVENTORY LEAD TIME

Quantity & CostOf Units Between

Process Steps Visual LeanLevel of WIP

Work-in-Process Levels and Impact on the Production Flow

• MASS PRODUCTION promotes the premise that there is safety in having huge batches of work-in-process parts between process steps but when considered from a lean standpoint…..

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huge batches of work-in-process stock

slow the Order to Revenue money stream . . .

Building the Cost Flow Map Using Process and Inventory Cells

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Visual Depiction of Your Main Process Flow . . . . . .

Sub-Assembly Feeding Main Line . . . . . . .

Second Sub-Assembly to Main Line . . . . . .

Main Line

Sub # 1

Sub # 2

Note: Completed dataNote: Completed database will automaticallybase will automaticallyshow your entireshow your entiremanufacturing flow in thismanufacturing flow in this

vviissuuaall format……format……

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Process and Inventory Cost Tracking Map Sample

CopyofProcess_Inventory_and_SMF_Cost_Flow_Map(213).pdf

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Note: Click mouse to advance to next slide

Some of the Advantages of Having a Completed Cost Flow Map:

It’s a relevant communication tool that can be used by management and the workforce to make decisions impacting total cost.

Process cell efficiency when combined with WIP levels prior to and after the cell can be indications of a restriction to production flow.

Material logistics impact: travel distance for each part, # of parts per container and return dunnage distances are evaluated from a minimal cost per unit standpoint.

It gives a visual depiction of each process station’s conformance to plant objectives for line-side material levels.

It shows work-in-process levels and their measurement on a leanness scale. (Including actual surge and units in-transit)

24The mapping process can be cascaded to 2nd & 3rd tier suppliers.

Additional Advantages of Having a Completed Cost Flow Map:

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For new model programs it can optimize direct/indirect labor (including incoming material storage locations).

It can show the per unit cost differential for manual vs. automated processes.

The map can reflect varying “takt” times (production fluctuations)and their impact on unit cost.

The map can be divided up among work groups to promote a concentrated focus on sub-assembly cost optimization efforts.

Relevant data from the map can be used in “make” vs. “buy” decisions.

Having a tool that shows the value added impact (not only to your cost of production) but also steers your workforce down the road to continuous improvement will lead to additional uses and opportunities not identified in the above bullet points…

Quote from Jeff Liker’s book, “The Toyota Way”… . . . . . . . . . “From the executives “up to” the shop floor workers performing the value-added work, Toyota challenges people to use their initiativeand creativity to experiment and learn.”

The Completed Cost Flow Map Allows You to the Minimal

Material and Labor Cost for Each Unit of Production…

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Taking the cost per unit (mentioned above) times your production volume over a given time frame can now be subtracted from your total expenditures incurred during that time period. What’s left is a myriad of opportunities to lower your total cost of production.

Engage/empower your workforce in addressing each opportunity and reward their efforts with a portion of the improvements obtained.

SEE

Use a Six Sigma Structured Approach for Improving Your Manufacturing Operations…

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Equip Your Work Force with DMAIC Improvement Tools Commensurate with Each Opportunity (See SAMPLE MATRIX) . . .

MatrixApplicationTemplate

(Sample).pdf

Here’s How to do That ..........

Note: The path to Six Sigma problem solving starts witha “hands-on” feeling for Mass Manufacturing’s drawbacks followed by the smooth flow inherent in Lean Manufacturing’sflow…

Note: Click mouse to advance to next slide

Getting Started…

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Mass to Lean to Six Sigma via “hands-on” simulations…Car Wash Assembly Process.

See it, feel it, hear it by actually experiencing the transformation.

Learning points from simulations:

Note: Click Mouse to advance to next slide

Leanmetrics, Inc.

• Contact Information:

• Email: leanmetrics@aol.com• Address: Leanmetrics, Inc.

5199 West Ellsworth Road

Ann Arbor, Michigan 48103Attn: John Hamman

734-474-3618

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