Improving Your Bottom Line


               Making Kentucky
              manufacturers more
                 competitive
Why Manufacturing?

 13% of the nation’s total Gross Domestic Product
 (GDP)
 Nearly 14.3 million employees
 Average annua...
Competitiveness Challenges

 Rapidly advancing technology
 Customer demands – faster, better, cheaper
 Offshore competitio...
How Will Firms Compete?


It’s all about
    ... Innovation
          …Productivity
                 …Speed
2 Key Tools for Competitiveness


      Lean Manufacturing / Lean Office

                 Six Sigma
KMAC

 Mission: Increase the competitiveness of Kentucky
 manufacturers
 Private, not-for-profit corporation
 Statewide op...
Productivity Improvement

 Lean Manufacturing / Lean for the Office
 Facilities Planning & Layout
 Process Improvement
 Pr...
Quality Improvement

 Quality Systems
 ISO and QS/TS Standards
 Six Sigma
 Statistical Process Control
 Poka-Yoke / Error ...
Product Improvement

 New Product Development
 –   Accelerate to Market for Small & Medium Enterprises
     (ATOM-SME)
 Va...
Business Improvement

 Strategic Planning
 Meeting Facilitation
 Performance Measurement
 Financial Planning
Benefits

 Expertise
  –   Staff of seasoned manufacturing professionals
 Results
  –   Proven track record will all types...
FY06 Client-Reported Results

 Increased Sales: $21 Million
 Retained Sales: $12 Million
 Annual Cost
 Savings: $4.8 Milli...
Lean Manufacturing
   Lean Office
What is Lean?

A systematic approach to identifying and eliminating
waste (non-value added activities) through
continuous ...
Defining Value-Added Activities

VALUE ADDED:
  Increases the market form or function of the product or service


NON-VALU...
Lean = Eliminating the Wastes

                  Value Added   •   Overproduction
Non-Value Added                 •   Wait...
Lean Tools

               Continuous Improvement

     Pull/Kanban          Cellular/Flow      TPM

  Quality at Source  ...
Value Stream Mapping

 Visually document current material & information
 flow
 –   Identify non value-added activities
 – ...
5S System

 Designed to improve workplace organization and
 standardization
Visual Workplace

 Simple signals providing an immediate
 understanding of a situation or condition
 –   Kanban cards
 –  ...
Plant Layout
                                QC                   Ship
        Raw Stock                    Rec



       ...
Standardized Work

 Tasks organized in the best known sequence
 Most effective combination of:
 –   People
 –   Materials
...
Batch Reduction


The best batch size is:

             ONE PIECE FLOW

                    Make One . . . Move One!
Teams

 More flexible
 Greater productivity & use
 of resources
 Collaborative & cross-
 functional
 More creative & innov...
Quality at the Source


            Quality built
            Operators inspect
            –   Necessary equipment
      ...
Point of Use Storage

 Materials are stored
 where used
  –   Simplifies physical
      inventory tracking,
      storage,...
Quick Changeover


 Changing over a process to
 produce a different product
 in the most efficient manner
Pull/Kanban

 Push System
 –   Production based on
     forecasts or schedules
 Pull/Kanban System
 –   Production based o...
Cellular Flow

 Linking of manual and machine operations into the
 most efficient combination of resources
  –   Flexible ...
Total Productive Maintenance

 Systematic approach to the elimination of equipment
 downtime as a waste factor
 Designed t...
Going Lean

 Training in Lean tools
 Using Lean tools in improvement events
  – Kaizen Events
 Organizational / Cultural c...
Improvements Achieved with Lean

                        0%   25%   50%   75%   100%

Lead Time Reduction

Productivity In...
Six Sigma
Definition of Six Sigma



       Methodology
      for disciplined
   quality improvement
History of Six Sigma

 Originated at Motorola in the early 1980s
 Process modified by others
 Implemented by IBM & Allied ...
Goal of Six Sigma

 Optimize process capability by identifying and
 minimizing variation
 Virtual elimination of all defec...
Cost of Poor Quality

 Scrap/Rework
  –   Materials, labor costs, disposition
      costs
 Warranty Costs
  –   Customer c...
Competitive Performance

Sigma Level   Cost of Poor Quality    Performance
    2           >40% of sales        Non-compet...
Benefits of Improved Quality

 Bottom-line cost savings
 Greater customer satisfaction
 Increase in throughput
 Reduction ...
Six Sigma Core Philosophies

 Values defect-prevention over defect-detection
 Emphasizes reducing variation in processes
 ...
Six Sigma Characteristics

 Defined, problem-solving approach
 Data-driven
 Project-based
 Commitment and support from the...
Problem-Solving Approach

 Uses a defined approach (DMAIC)
 –   Define the project
 –   Measure the baseline process capab...
Data-Driven

              Based on data rather than
              perception
              Uses statistical tools during
...
Project-Based

 Project selection is critical
 –   Should advance organization’s strategic initiatives
 –   Have impact on...
Top Level Leadership

                Requires leadership,
                commitment and active
                support f...
Six Sigma – The Players

 The Champion
 Black Belt
 Green Belt
 Quality Process
 Analyst
KMAC’s Approach to Six Sigma

 Developed specifically for small- and mid-sized
 manufacturers
 –   Affordable
 –   Flexibl...
Two Part Approach

 On-Site Deployment Planning & Mentoring
 –   Helps the company gain the most benefit from
     impleme...
Lean and Six Sigma

 Two powerful tools to help a
 company improve:
 –   Quality
 –   Productivity
 –   Bottom-line results
Lean & Six Sigma Together

 Use Lean to:
 –   Reduce or eliminate non-value-
     added activities
 Use Six Sigma to:
 –  ...
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Improving Your Bottom Line

  1. 1. Improving Your Bottom Line Making Kentucky manufacturers more competitive
  2. 2. Why Manufacturing? 13% of the nation’s total Gross Domestic Product (GDP) Nearly 14.3 million employees Average annual wage of $45,916 Conducts two-thirds of all private sector R&D Every $1 in manufactured goods generates an additional $1.43 worth of economic activity
  3. 3. Competitiveness Challenges Rapidly advancing technology Customer demands – faster, better, cheaper Offshore competition from low wage countries – China’s average wages are: 25% of Mexico’s 10% of Hong Kong & Taiwan’s 3% of U.S.’
  4. 4. How Will Firms Compete? It’s all about ... Innovation …Productivity …Speed
  5. 5. 2 Key Tools for Competitiveness Lean Manufacturing / Lean Office Six Sigma
  6. 6. KMAC Mission: Increase the competitiveness of Kentucky manufacturers Private, not-for-profit corporation Statewide operations Industry-driven Board of Directors Kentucky affiliate of the national Manufacturing Extension Partnership (MEP) program
  7. 7. Productivity Improvement Lean Manufacturing / Lean for the Office Facilities Planning & Layout Process Improvement Problem Solving Training Employee Development Team Building & Team Leader Development
  8. 8. Quality Improvement Quality Systems ISO and QS/TS Standards Six Sigma Statistical Process Control Poka-Yoke / Error Proofing
  9. 9. Product Improvement New Product Development – Accelerate to Market for Small & Medium Enterprises (ATOM-SME) Value Engineering / Design for Manufacturability
  10. 10. Business Improvement Strategic Planning Meeting Facilitation Performance Measurement Financial Planning
  11. 11. Benefits Expertise – Staff of seasoned manufacturing professionals Results – Proven track record will all types of industry – A national leader among MEP Centers for delivering quantifiable, bottom-line impacts to clients Value – Clients realize significant returns on their investments in KMAC services
  12. 12. FY06 Client-Reported Results Increased Sales: $21 Million Retained Sales: $12 Million Annual Cost Savings: $4.8 Million New Investment: $27 Million
  13. 13. Lean Manufacturing Lean Office
  14. 14. What is Lean? A systematic approach to identifying and eliminating waste (non-value added activities) through continuous improvement by flowing the product at the pull of the customer.
  15. 15. Defining Value-Added Activities VALUE ADDED: Increases the market form or function of the product or service NON-VALUE ADDED: Does not add market form or function or is not necessary ESSENTIAL NON-VALUE ADDED: Cannot be eliminated completely
  16. 16. Lean = Eliminating the Wastes Value Added • Overproduction Non-Value Added • Waiting • Transportation • Non-Value Added Processing • Excess Inventory • Defects • Excess Motion • Underutilized People Typically 95% of all lead time is non-value added
  17. 17. Lean Tools Continuous Improvement Pull/Kanban Cellular/Flow TPM Quality at Source POUS Quick Changeover Standardized Work Batch Reduction Teams Value 5S System Visual Plant Layout Stream Mapping
  18. 18. Value Stream Mapping Visually document current material & information flow – Identify non value-added activities – Quantify non value-added lead time Create an ideal future state – Eliminate wastes & simplify processes Results in development of a Lean Implementation Action Plan – Prioritized improvement projects – Determines Lean Tools to be applied
  19. 19. 5S System Designed to improve workplace organization and standardization
  20. 20. Visual Workplace Simple signals providing an immediate understanding of a situation or condition – Kanban cards – Color-coded dies, tools, pallets
  21. 21. Plant Layout QC Ship Raw Stock Rec Screw QC Shear Stamp Machine Lathe Drill Brake Assembly Mill Weld Grind Finish Parts Stock
  22. 22. Standardized Work Tasks organized in the best known sequence Most effective combination of: – People – Materials – Methods – Machines
  23. 23. Batch Reduction The best batch size is: ONE PIECE FLOW Make One . . . Move One!
  24. 24. Teams More flexible Greater productivity & use of resources Collaborative & cross- functional More creative & innovative
  25. 25. Quality at the Source Quality built Operators inspect – Necessary equipment – Established standards – Process documentation
  26. 26. Point of Use Storage Materials are stored where used – Simplifies physical inventory tracking, storage, and handling
  27. 27. Quick Changeover Changing over a process to produce a different product in the most efficient manner
  28. 28. Pull/Kanban Push System – Production based on forecasts or schedules Pull/Kanban System – Production based on actual demand using Kanbans to signal replenishment
  29. 29. Cellular Flow Linking of manual and machine operations into the most efficient combination of resources – Flexible layout – Simplify flows – Minimize materials handling – Make use of people
  30. 30. Total Productive Maintenance Systematic approach to the elimination of equipment downtime as a waste factor Designed to maximize the productivity of equipment for Its entire life
  31. 31. Going Lean Training in Lean tools Using Lean tools in improvement events – Kaizen Events Organizational / Cultural changes – Move toward team environment – Defined problem-solving approach – Performance metrics that support Lean
  32. 32. Improvements Achieved with Lean 0% 25% 50% 75% 100% Lead Time Reduction Productivity Increase WIP Reduction Quality Improvement Space Utilization
  33. 33. Six Sigma
  34. 34. Definition of Six Sigma Methodology for disciplined quality improvement
  35. 35. History of Six Sigma Originated at Motorola in the early 1980s Process modified by others Implemented by IBM & Allied Signal Adopted by General Electric in 1995 – Broadly deployed – By 1998, GE claimed $750 million in net benefits
  36. 36. Goal of Six Sigma Optimize process capability by identifying and minimizing variation Virtual elimination of all defects – No more than 3.4 defects per million opportunities (DPMO) – 99.9996% acceptable
  37. 37. Cost of Poor Quality Scrap/Rework – Materials, labor costs, disposition costs Warranty Costs – Customer credits, return/restocking costs, penalties Lost Sales – Lost revenues, cost of gaining new customers
  38. 38. Competitive Performance Sigma Level Cost of Poor Quality Performance 2 >40% of sales Non-competitive 3 26% - 40% of sales 4 16% - 25% of sales Average 5 1% - 15% of sales 6 < 1% of sales World Class
  39. 39. Benefits of Improved Quality Bottom-line cost savings Greater customer satisfaction Increase in throughput Reduction in waste and rework Improvement in process capability
  40. 40. Six Sigma Core Philosophies Values defect-prevention over defect-detection Emphasizes reducing variation in processes – Tackles root causes of poor performance Is customer-focused by driving improvement in areas most important to your customers
  41. 41. Six Sigma Characteristics Defined, problem-solving approach Data-driven Project-based Commitment and support from the top level
  42. 42. Problem-Solving Approach Uses a defined approach (DMAIC) – Define the project – Measure the baseline process capability – Analyze when, where and how often defects occur – Improve process capability to reach a Six Sigma level – Control the process to maintain the gain
  43. 43. Data-Driven Based on data rather than perception Uses statistical tools during the DMAIC process Calls for training in “statistical thinking” for many; advanced statistics and project management for some
  44. 44. Project-Based Project selection is critical – Should advance organization’s strategic initiatives – Have impact on a Critical to Quality (CTQ) characteristic – Should have bottom-line financial impact – Begin and end with performance measure
  45. 45. Top Level Leadership Requires leadership, commitment and active support from top level management Leaders should use Six Sigma to drive strategic improvement – Six Sigma projects should support strategic goals
  46. 46. Six Sigma – The Players The Champion Black Belt Green Belt Quality Process Analyst
  47. 47. KMAC’s Approach to Six Sigma Developed specifically for small- and mid-sized manufacturers – Affordable – Flexible – Focuses on implementation of Six Sigma not just training – Emphasizes bottom-line results
  48. 48. Two Part Approach On-Site Deployment Planning & Mentoring – Helps the company gain the most benefit from implementing Six Sigma Online Six Sigma Training – Provides an affordable way to train Black Belts, Green Belts, and Quality Process Analysts
  49. 49. Lean and Six Sigma Two powerful tools to help a company improve: – Quality – Productivity – Bottom-line results
  50. 50. Lean & Six Sigma Together Use Lean to: – Reduce or eliminate non-value- added activities Use Six Sigma to: – Improve value-added activities – Solve complex problems uncovered by Lean or those requiring advanced analysis
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