SERVICE REVAMP
Supply Chain overhaul
Lean Six Sigma Black Belt Sample Project
Sumit K Jha (MBA (Fin), LSSGB, PMP®)
Flow of the Presentation


Define



Measure



Analyze



Improve



Control
Define
Define Measure Analyze Improve Control

Business opportunity

Project cycle time schedule variance

x1- Purchase
schedule ...
Define Measure Analyze Improve Control

Team Charter
Project Title- Service Revamp
Business Case
XYZ executes multiple pro...
Define Measure Analyze Improve Control

Critical to Quality and Critical to Process Chart
Critical to Quality Critical cus...
Define Measure Analyze Improve Control

SIPOC DIAGRAM- Purchase
Starting point: Consignment inward
Supplier
SCM SPOC
SCM S...
Define Measure Analyze Improve Control

SIPOC DIAGRAM- Warehousing
Starting point: Consignment inward
Supplier

Input

End...
Define Measure Analyze Improve Control

SIPOC DIAGRAM- Delivery
Starting point: Material Consignment
Delivery Challan (DC)...
Define Measure Analyze Improve Control

SIPOC DIAGRAM- Installation
Starting point: Material Delivery alert
Supplier
Proje...
Define Measure Analyze Improve Control

Pugh Matrix
Sr.No
Criteria / Objectives
1 Total project cycle schedule variance

C...
Measure
Define

Measure Analyze Improve Control

Fishbone analysis (Cause and Effect Diagram)
Major Categories of causes of Proble...
Define

Measure Analyze Improve Control

Ishikawa Diagram (Cause and Effect Diagram)
Major Categories of causes of Problem...
Define

Measure Analyze Improve Control

Data Measurement Plan
Organizational Measure
process
s/UOM
Total Project
cycle ti...
Analyze
Define

Measure Analyze Improve Control

Validation of Xs
Regression analysis
Regression Analysis: TT versus Del, Warehous...
Define

Measure Analyze Improve Control

Hypothesis testing

Hypothesis testing / ANOVA
Purpose : To test the Hypothesis d...
Improve
Define

Measure Analyze Improve Control

…1/2

List Possible Solutions
Sl
Area
No.

Potential Area for
improvement

Root C...
Define

Measure Analyze Improve Control

…2/2

List Possible Solutions
Sl
No.

Area

14

Delivery

15

Delivery

16

Deliv...
Define

Measure Analyze Improve Control

Technology led efficiency and effectiveness
improvement


XYZ decided to streaml...
Control
Define

Measure Analyze Improve Control

Normality tests and control charts
Process capability of total project schedule v...
Define

Measure Analyze Improve Control

Box plot
Boxplot of total project schedule
variance (Apr 2013 to June 2013)

Valu...
Define

Measure Analyze Improve Control

Normality tests and control charts
Test carried out : Hypothesis testing [ One sa...
Define

Measure Analyze Improve Control

Process Capability - Total Project Cycle Time
Process capability of total project...
Define

Measure Analyze Improve Control

Project Benefit
Initial estimate / COPQ: INR 168 lacs
Project Name

Service Revam...
Define

Measure Analyze Improve Control

Conditions Worksheet
Initial estimate / COPQ: INR 168 lacs
Project Name
Black Bel...
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Service revamp lean six sigma black belt project

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Project- Service revamp
Type- Lean Six Sigma Black Belt Project
Outline- To improve the entire process of getting purchase orders, purchasing, manufacturing, warehousing and installation
Tools/Framework- Six Sigma concepts such as SIPOC, fish bone analysis, control charts and hypothesis testing; statistical tools, Microsoft Dynamic AX
Role- Project manager
Outcome- The successful completion of the project yielded in cost savings of INR 1.61 crores

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Service revamp lean six sigma black belt project

  1. 1. SERVICE REVAMP Supply Chain overhaul Lean Six Sigma Black Belt Sample Project Sumit K Jha (MBA (Fin), LSSGB, PMP®)
  2. 2. Flow of the Presentation  Define  Measure  Analyze  Improve  Control
  3. 3. Define
  4. 4. Define Measure Analyze Improve Control Business opportunity Project cycle time schedule variance x1- Purchase schedule variance x2-Warehouse schedule variance x3- Delivery schedule variance x4- Installation schedule variance
  5. 5. Define Measure Analyze Improve Control Team Charter Project Title- Service Revamp Business Case XYZ executes multiple projects for its clients. Timely delivery of goods according to the specification is paramount for the business success of XYZ. Timely delivery is measured in terms of total project cycle time. The project starts with getting an order from the client. The date of delivery is decided. The project goes through four key stages- 1) Purchase, 2) Delivery, 3) Warehouse and 4) Installation. The increase in the total cycle time leads to liquidated damages, which can be severe in the industry that XYZ operates in. Goal statement Metric Current level Goal / Target Target date Total project -0.59 +ve 30th Jun 2013 schedule variance mean CPk 0.6 >1 30th Jun 2013 Phase Define Measure Analyze Improve Control Project plan Start End st Feb 2012 1 29th Feb 22012 1st March 31st March 1st April 30th April 1st May 31st December 1st Jan 30th Jun Opportunity Statement Pain- Liquidated damages Impact of pain in Rs. (or soft)- INR 5 crores per year Sigma Level- 3.14 Project scope Process under improvement: Project execution Starts with: Generation of purchase order Ends with: Installation of equipments Team Selection Remarks Done Done Done Done Done Champion:: CEO GB / BB: Mr. Sumit K Jha Member: Plant Head Member: Production manager
  6. 6. Define Measure Analyze Improve Control Critical to Quality and Critical to Process Chart Critical to Quality Critical customer Customer requirement issues Installation on Timely installation Late delivery time Voice of business Project not executed on time Business issues Liquidated damages due to late installation Voice of customer Goods not delivered on time No customer Installed Installed Customer complaints equipment should equipment not complaints regarding give pre-stated working properly regarding specification not performance quality met increasing Critical business Critical for requirement processes On-time installation Project cycle time brought within the customer specification Remark 1. Voice of customer and voice of business to be prioritized to those which are related to project objective 2. Use VOB or VOC or both depending on the project objectives
  7. 7. Define Measure Analyze Improve Control SIPOC DIAGRAM- Purchase Starting point: Consignment inward Supplier SCM SPOC SCM SPOC SCM SPOC SCM SPOC End point: Delivery task assignment Input Process Approval Data After approval, SCM releases a Purchase order based on the Entry in AX / XYZ approval MIS Data Entry in AX / In case of other than back to back orders, get confirmation from XYZ MIS the distributor for releasing their internal PO to OEM Data Entry in AX / SCM determines date and address of delivery from the vendor XYZ MIS SCM updates date of delivery to all stakeholders through email and on Google docs. Exact date of delivery is not in hands of SCM and thereby SCM will update tentative date to all Data Entry in AX / stakeholders. XYZ MIS - Raw material required for production - Peripherals (SCM to fix date of deliery with Vendor in such a way that it is stayed for least amount of time at warehouse). SCM also update delivery address. Output Customer PO Vendor Actionable Data Entry Vendor in AX / XYZ MIS Actionable Data Entry Vendor in AX / XYZ MIS Actionable Data Entry System in AX / XYZ MIS Data Entry in AX / At this stage, Zonal hubs are not in place and thereby cannot be Actionable Data Entry System XYZ MIS made at hubs. Also, because of logistics concerns, delivery to in AX / XYZ MIS customer's address directly is also difficult. Processes for above two options can be made once SCM starts implementing it. Based on tentative delivery date, Projects team to send an email Data Entry in AX / to Commercial team for Performa Invoice preparation date. Actionable Data Entry Commercial Project SPOC XYZ MIS Performa Invoice should be available with Logisitics SPOC 7 in AX / XYZ MIS team days before DC date. SCM SPOC
  8. 8. Define Measure Analyze Improve Control SIPOC DIAGRAM- Warehousing Starting point: Consignment inward Supplier Input End point: Delivery task assignment Process Output Customer On receipt of material at Warehouse gate, Security checks for Material / Security documents, condition of goods, and allow the goods to be taken Data Entry in AX / XYZ Consignment Transporter personnel inside after making entries in the Security material inward register MIS inward and stamping the documents. In case of any damage or short receipt of goods, security SPOC immediately informs warehouse supervisor / executive. Security Data Entry in Data Entry in AX / XYZ Warehouse Supervisor mentions the fact on acknowledgement and POD and personnel AX / XYZ MIS Supervisor MIS gives copies to transporter. However, security will inward all material. SCM to do Purchase return on a later date. Warehouse Data Entry in Data Entry in AX / XYZ SCM SPOC Supervisor executive inturn informs SCM about the damage. Supervisor AX / XYZ MIS MIS Data Entry in SCM SPOC initiates discussion with supplier and finance for Actionable Data Entry Supplier / SCM SPOC Finance team AX / XYZ MIS insurance claim depending upon price of the damaged item. in AX / XYZ MIS Warehouse SPOc completes barcode scanning activity and Warehouse Data Entry in Actionable Data Entry NA verifies the serial numbers mentioned on documents received with SPOC AX / XYZ MIS in AX / XYZ MIS material. Incase of any discrepancy, informs to SCM spoc. Warehouse Data Entry in Warehouse executive generate goods receipt note after checking Actionable Data Entry NA Executive AX / XYZ MIS purchase order details. in AX / XYZ MIS Warehouse Data Entry in Warehouse executive sends all original documents to SCM at Actionable Data Entry SCM SPOC Executive AX / XYZ MIS corporate office and keeps a copy of it for their record. in AX / XYZ MIS Warehouse Data Entry in Physical transfer of packed goods from Stores to Logistics Actionable Data Entry Logistics Executive AX / XYZ MIS Warehouse SPOC in AX / XYZ MIS Data Entry in Status of SO will change to " Dispatched" and Delivery task is Actionable Data Entry System System AX / XYZ MIS automatically assigned to Logistics SPOC in AX / XYZ MIS
  9. 9. Define Measure Analyze Improve Control SIPOC DIAGRAM- Delivery Starting point: Material Consignment Delivery Challan (DC) courier Supplier Input Material Consignment DC End point: End customer update Process Output Customer Warehouse SPOC will courier DC to the Zonal Data Entry in AX / Project SPOC Zonal head Head of relevant region once DC is generated. XYZ MIS Zonal head receives DC document. The Zonal Head manually assigns the task to the Actionable data entry Zonal head Engineer in AX Actionable data entry available Zonal engineer for Permit Documentation in AX Engineer coordinates with consultant for Actionable data entry Engineer Consultant Actionable data entry Permit document preparation. Refer road in AX permit process for details. in AX Actionable data entry Zonal head / Engineer couriers the Permit to Actionable data entry Zonal head Courier material delivery address in AX in AX Material Receipt of material at Material delivered via Transporter transporter location Transporter Logistics SPOC Consignment Material Receipt Docket number of Delivery entered in AX & Data Entry in AX / Google docs XYZ MIS Logistics SPOC Note / POD / DC System Material Transporter delivers Material to end customer Delivery of Customer/Wareho Consignment location Consignment Transporter use Data Entry as per Transporter updates the POD in website MIS in Transporters' POD against LR no/Docket no portal Transporter System Tracking the booked On availability of POD date, SCM SPOC to Data Entry in AX / consignment no update the AX. XYZ MIS SCM SPOC AX
  10. 10. Define Measure Analyze Improve Control SIPOC DIAGRAM- Installation Starting point: Material Delivery alert Supplier Project SPOC Input Material Delivery alert in AX Actionable data entry in AX Project SPOC Call center Tele calling SPOC Zonal head / Actionable data Support Manager entry in AX Service engineer Actionable data entry in AX Service engineer HIR Data Entry Service engineer HIR Data Entry End point: Delivery task assignment Process Output Project Team SPOC to retrieve a dump of updated POD file from Actionable data entry in AX AX Actionable data entry in Project SPOC to forward the dump to Call centre SPOC AX for Telecalling Call centre SPOC telecall on POD sites to check for site Appointment with readiness customer The zonal Head assigns task to engineer Engineer goes to Customer site for installation. If the material is partially delivered, Zonal SPOC to take a call on whether engineer Customer visit will visit the site for installation or will wait till full delivery is done. Engineer installs HIR Data Entry Engineer carries an HIR form HIR Data Entry Customer Acceptance Customer Signs on physical HIR form of installed material Customer HIR Data Entry Service engineer Data Entry in AX / Engineer calls up Zonal head / SD (Service delivery SPOC) & XYZ MIS provides HIR number against SO number Zonal head / SD Data Entry in AX / Zonal head / SD (Service delivery SPOC) uploads the scan HIR (Service delivery XYZ MIS on FTP SPOC) Call Centre SPOC Tele calling Service SPOC Telecall Service SPOC Feedback Rating Service SPOC Feedback Rating AnalyXYZ Customer visit Call Centre SPOC pulls dump form the FTP and uploads in system and flashes report Customer AX Call center SPOC Customer Service engineer Customer Customer HIR form HIR form Zonal head / SD Data Entry in AX / XYZ (Service MIS delivery SPOC) Actionable data entry in FTP AX for Telecalling Data Entry in AX / XYZ All stakeholders MIS and feedback / AX verification Call center executive calls on the same / next day of HIR date / Feedback Issue resolved date Call center SPOC to take CSAT on set of parameters (parameters Feedback Verification to be defined) Call center SPOC to collate the score of every monthly and sends Decision Making / it to all stakeholders. Actions taken Customer Customer Stakeholders
  11. 11. Define Measure Analyze Improve Control Pugh Matrix Sr.No Criteria / Objectives 1 Total project cycle schedule variance CTC 9 CTQ 9 CTK 3 CTG 9 Sum 30 2 Installation schedule variance 9 9 3 9 30 3 Delivery schedule variance 3 9 9 9 30 4 Warehouse schedule variance 9 3 9 9 30 5 Purchase schedule variance 9 9 9 9 36 6 Procurement schedule variance 9 1 9 9 28 7 Defect Density in production 9 3 9 3 24 8 No display defect % 9 9 9 3 30 9 10 Electro-static Density (ESD) Torque 9 9 3 9 9 1 3 3 24 22 11 Procurement Quality 9 9 3 9 30 12 Skill Index (Manufacturing unit) 9 1 1 9 20 13 Collections cost planned vs. actual 9 1 3 3 16 14 Warehousing cost planned vs. actual 9 3 1 1 14 15 Delivery cost planned vs. actual 9 3 1 1 14 16 % units delivered vs. ordered 3 3 1 3 10 17 Installations cost planned vs. actual 9 1 3 3 16
  12. 12. Measure
  13. 13. Define Measure Analyze Improve Control Fishbone analysis (Cause and Effect Diagram) Major Categories of causes of Problem Statement
  14. 14. Define Measure Analyze Improve Control Ishikawa Diagram (Cause and Effect Diagram) Major Categories of causes of Problem Statement
  15. 15. Define Measure Analyze Improve Control Data Measurement Plan Organizational Measure process s/UOM Total Project cycle time schedule variance Ratio X1 Purchase schedule variance Ratio X2 Warehouse schedule variance Ratio X3 Delivery schedule variance Ratio Installation schedule variance Ratio Y X4 Operational definition Planned number of days Actual number of days /Planned number of days Planned number of days Actual number of days /Planned number of days Planned number of days Actual number of days /Planned number of days Planned number of days Actual number of days /Planned number of days Planned number of days Actual number of days /Planned number of days Data source Measurement Organizational / Controllable/ Frequency Project Level Uncontrollable As per Project Organization/ Plan Project Controllable AX AX Monthly Organization/Pro Controllable ject AX Monthly Organization/Pro Controllable ject AX AX As per Project Organization/Pro Controllable Plan ject As per Project Organization/Pro Controllable Plan ject
  16. 16. Analyze
  17. 17. Define Measure Analyze Improve Control Validation of Xs Regression analysis Regression Analysis: TT versus Del, Warehouse, Installation, Purchase The regression equation is TT = 0.0367 + 0.477 Del + 0.418 Warehouse + 0.0389 Installation + 0.0059 Purchase Predictor Coef SE Coef T P Constant 0.036663 0.007122 5.15 0.000 Del 0.47732 0.02402 19.88 0.000 Warehouse 0.41843 0.02402 17.42 0.000 Installation -0.03893 0.01459 -2.67 0.008 Purchase 0.00587 0.01459 0.40 0.687 S = 0.0490296 R-Sq = 72.3% R-Sq(adj) = 72.2% Analysis of Variance Source DF SS MS F P Regression 4 8.1775 2.0444 850.44 0.000 Residual Error 1302 3.1299 0.0024 Total 1306 11.3074 Source DF Seq SS Del 1 7.4316 Warehouse 1 0.7283 Installation 1 0.0172 Purchase 1 0.0004 Inference Delivery ,Warehouse and Installation are most significant x's to the Y of Total project cycle time schedule variance
  18. 18. Define Measure Analyze Improve Control Hypothesis testing Hypothesis testing / ANOVA Purpose : To test the Hypothesis derived during the measure phase out of the data and CE diagrams Null Hypothesis, H0 : Alternate Hypothesis, H1 : Q4 mean = Q8 mean Q4 mean < Q8 mean
  19. 19. Improve
  20. 20. Define Measure Analyze Improve Control …1/2 List Possible Solutions Sl Area No. Potential Area for improvement Root Cause Suggested Action Points 1 Installation Delay in Installation of Material at customer site Manpower Shortage Pre planning of deployment of engineers for installation on the Dispatch date ( Estimated time of travel and task completion documented) 2 Installation Delay in Installation of Material at customer site Delay in Installation of Installation Material at customer site Manpower Shortage Manpower Shortage Delay in Installation of Material at customer site Manpower Shortage Delay in Installation of Material at customer site Delay in Installation of Material at customer site Delay in Installation of Material at customer site The average Timeline for delivery of material (receipt of material at Parwanoo Warehouse) is significantly higher than the target. Delay in delivery of Material to XYZ warehouse from Suppliers/OEM’s Delay in delivery of Material to XYZ warehouse from Suppliers/OEM’s Manpower Shortage Manpower Shortage Manpower Shortage 3 4 Installation 5 Installation 6 Installation 7 Installation 8 Warehouse 9 Warehouse 10 Warehouse 11 Warehouse 12 13 Delay of Material at Warehouse Delay in Material delivery Warehouse timeline ( Supplier ) Delay in Material delivery Warehouse timeline ( Supplier ) Low Easy to Visible Manpower Capital implement short term RPN Utilization utilization and cascade benefits 9 9 9 9 36 9 9 9 9 36 1 9 3 3 16 1 9 3 3 16 1 9 3 3 16 1 9 3 3 16 1 9 3 3 16 Delay in permit Strict adherence Online permit documentation started documentation for some states.(Karnataka , Andhra, WB, Orrisa ,MP) 9 3 9 9 30 Delay in permit Circulation of pending DC status to Zonal SPOC for documentation permit documentation. 9 9 9 9 36 Delay in permit Permit documentation activity to start with XYZ PO documentation generation 1 9 3 3 16 1 9 3 3 16 1 9 3 3 16 1 9 3 3 16 Delay in permit documentation Delay in permit documentation Product trainings conducted for engineers Auto assignment of tasks to Engineer task force via AX HHHT terminals to be carried by Engineer for generation of online HIR with intimation to XYZ for installation Auto Material issue and replacement on request by engineers with triggers and escalation GPS tracking of engineers by the Zonal head for optimum utilization of resources Contract based manpower planning model to be worked out for remote locations Automation of Permit documentation task assignment via AX Triggers and escalations to be incorporated based on the Task assignment module Delay in permit Development of registered office premises al all documentation strategic location to avoid permit documentation
  21. 21. Define Measure Analyze Improve Control …2/2 List Possible Solutions Sl No. Area 14 Delivery 15 Delivery 16 Delivery 17 Delivery 18 Delivery 19 Delivery Delay by transporter 20 Delivery Delay by transporter 21 Delivery 22 Delivery 23 Delivery 24 Delivery 25 Delivery Root Cause Delay by transporter Delay by transporter Delay by transporter Delay by transporter Delay by transporter Delay by transporter Delay by transporter Delay by tranporter Delay by transporter Delay by transporter Suggested Action Points Easy to Low Capital Manpower Visible short implement and RPN utilization Utilization term benefits cascade Proper Monitoring and tracking by phone and mail 9 9 9 9 36 Daily tracking of material from Transporters website 9 9 9 9 36 Flashing of transporters tracker to transporter to transporter in order to deliver 9 9 9 9 36 MIS report from transporters to track material 9 9 9 9 36 9 9 9 9 36 1 9 9 1 20 1 9 9 1 20 1 9 9 1 20 1 9 9 1 20 1 9 9 1 20 1 9 9 1 20 1 9 9 1 20 Timely up-dation of POD by monitoring of transporters website Synchronization of XYZ AX with transporters website to flash delivery reminders to transporter and online updating of the POD HHHT terminals to be carried by Transporters SPOC for generation of online POD with intimation to XYZ for installation SLA based payment deduction form transporters Payout SLA's to be incorporated in the agreement for every transporter Deduction form transporters payout in case of Damaged delivery Strict SLA adherence in case of DOA and Wrong delivery GPS tracking of every transporter truck to be informed on the status of all deliveries
  22. 22. Define Measure Analyze Improve Control Technology led efficiency and effectiveness improvement  XYZ decided to streamline the activities with the help of ERP solution. The process maps have been created to restructure the activities and bring more efficiency within them  Technologies such as handheld devices to capture the information from the vouchers has been created. It has the capability to transmit the data that can be easily fed into the ERP  This has allowed for the information flow to be quick and precise. Most of the delays that were happening earlier was due to late and imprecise information flow
  23. 23. Control
  24. 24. Define Measure Analyze Improve Control Normality tests and control charts Process capability of total project schedule variance (Jul 2012 to Sep 2012)
  25. 25. Define Measure Analyze Improve Control Box plot Boxplot of total project schedule variance (Apr 2013 to June 2013) Value plot (Q4- Apr 2012 to Jun 2012, Q8- Apr 2013 to Jun 2013)
  26. 26. Define Measure Analyze Improve Control Normality tests and control charts Test carried out : Hypothesis testing [ One sample / t test / Paired etc., ] / One way ANOVA / Two way ANOVA Probability plot of project schedule variance (Mar 2013 to Jun 2013) IMR for project schedule variance (Mar 2013 to Jun 2013)
  27. 27. Define Measure Analyze Improve Control Process Capability - Total Project Cycle Time Process capability of total project schedule variance (Mar 2013 to Jun 2013) • • • The Process Capability has increased from 0.8 to 1.11 . The process control chart is stable with no outliers in Individual Chart . Therefore there has been a considerable improvement in the process
  28. 28. Define Measure Analyze Improve Control Project Benefit Initial estimate / COPQ: INR 168 lacs Project Name Service Revamp Black Belt (Candidate) Sumit K Jha Financial Benefits (Numbers in INR lacs) 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Direct savings (Liquidated damages) 5 15 30 40 90 Increased revenues - 15 20 23 58 Reduced costs - 2 5 7 15 Working capital changes - 1 1.7 2.4 5.1 Investment/ loan changes - - - - Total 5 33 56.7 72.4 Non-Financial Benefits Improved csat score Signature Approvals MBB Name XYZ Date Champion Name CEO Date Finance Name CFO Total 168.1
  29. 29. Define Measure Analyze Improve Control Conditions Worksheet Initial estimate / COPQ: INR 168 lacs Project Name Black Belt (Candidate) Financial Benefits Calculation formulas Approvals Service Revamp Sumit K Jha 1) Reduction in liquidated damages, which is levied if the goods are not delivered in time. The liquidated damages have come out to be less than INR 2) 10 lacs in the control phase. 3) 4) 1) Sum of (Project delivered late* % liquidated damages clause in the project) 2) Signature MBB Name XYZ Date Champion Name CEO Finance Name CFO
  30. 30. Thank You

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