TWO DAY PROGRAMME ON LEAN & SIX SIGMA MANUFACTURING PRACTICES Faculty: Prof. A. Rajagopal, HEAD, SQC&OR UNIT INDIAN STATISTICAL INSTITUTE Ph: 0422-2441192

STATISTICS AS A KEY TECHNOLOGY IS NOT MERELY AN OPERATIONAL TOOL FOR PROFITABLE BUSINESS. BUT AS A POWERFUL ACCELERATOR AND CATALYST FOR ECONOMIC DEVELOPMENT PROF: P.C.MAHALANOBIS

ABOUT THE INSTITUTE PIONEERING QUALITY MOVEMENT IN INDIA BY SQC & OR DIVISION OF ISI 70 years of existence as a centre of excellence promoting statistics as a key technology. One of the world’s leading organization recognized as an Institute of National Importance. At the Initiation of founder Prof. P.C.Mahalanobis, Dr.Walter Shewart visited the institute in 1947 to introduce SQC in the industries particularly in the textile sector in a significant way. Successfully demonstrated SQC / SPC not only as operational tool for profitable business but also as a powerful accelerator and catalyst for economic development.

ABOUT THE INSTITUTE

PIONEERING QUALITY MOVEMENT IN INDIA BY

SQC & OR DIVISION OF ISI

70 years of existence as a centre of excellence promoting statistics as a key technology.

One of the world’s leading organization recognized as an Institute of National Importance.

At the Initiation of founder Prof. P.C.Mahalanobis, Dr.Walter Shewart visited the institute in 1947 to introduce SQC in the industries particularly in the textile sector in a significant way.

Successfully demonstrated SQC / SPC not only as operational tool for profitable business but also as a powerful accelerator and catalyst for economic development.

Every year about 100 organizations are benefited in following this approach in different sector, Private – Public – Government, around the country. Over 10,000 projects has been carried out so far. Now Coimbatore Unit is introducing this approach to small scale sector also based on the widespread experience in the application of Textile sector. Objective: Improve Quality Reduce Waste / Rework / Rejection Increase Productivity Best utilization of resources including time.

Every year about 100 organizations are benefited in following this approach in different sector, Private – Public – Government, around the country. Over 10,000 projects has been carried out so far.

Now Coimbatore Unit is introducing this approach to small scale sector also based on the widespread experience in the application of Textile sector.

Objective:

Improve Quality

Reduce Waste / Rework / Rejection

Increase Productivity

Best utilization of resources including time.

The value of time

When, You Don’t Work “On Time”, You Can Explain, “ TIME IS NOT GOOD LONG LIFE WITHOUT QUALITY (OR) QUALITY WITH GIVEN LIFE

Quality Time Price PPM Competitive Edge Willingness to pay TO BE THE FIRST AND FAST PLAYER

TODAY’S BUSINESS ISSUES: Quality and price are two axis of business so long. The Third axis emerged as -"THE TIME"- the factor taking leading position in business. “SPEED" is the need of hour. “To be FAST and to be FIRST has become the challenge". Conventional Business approach is moving towards higher production (Quantity), which some time affects the Quality and may force to sell in discounts or as seconds, and to carry out "High Inventories“ “ Quality in time" at the "least cost" is the mission statement, moving ahead in this changing environment. "Statistical Methodologies" -that study the uncertainties, Analytical approach that economies the cost and which minimizes the waiting time/ idle time through such “No investment”- “No cost tools” enabled to maximize the return on valued resources.

TAKING OF THE BLINDERS… “In strategy it is important to see distant things as if they were close and to take a distanced view of close things” Miyamoto Musashi The Book of Five Rings

COMPETITIVE REQUIRES INNOVATION No existing market share is safe today, no product life is indefinite. Not only is this true for high technology, but it is also true for all consumer products. Competition will tear away market niches and technology advantages from the established business through the weapon of innovation. Companies will become merely a shadow of their ‘glory days’ or will vanish if they do not find a way to re-create their market success through a steady stream of innovative products and customer – oriented solutions.

INNOVATING FOR COMPETITIVENESS Innovation requires the planned abandonment of established, familiar, customary or comfortable ways of working… whether in product or services, competencies or human relationships or the organisation itself. Business Assessment Change Management Break through Planning System Strategic Decision Making Conclusion : Innovation means that you must be organized to allow constant change.

MANAGEMENT OF TIME

TIME CRESIS MANAGEMENT: Crisis involves two aspects. The cresis created by factors within one’s control and such crisis can be avoided. Then those crisis created by factor’s beyond one’s control and have to be faced. Major cresis can be avoid, if we act upon a situation at the right time. More often than not, there are two tendencies that present us from acting at the right time. Postponement of the unpleasant Non recognition of the problem PROCRASTINATION CREATES CRESIS: The tendency to do what ii easy, trouble free, and pleasant and leave for the future the issues that are difficult, Thus the difficult issues keeps piling up. They become irritants. We do not want this because it remind us of our inefficiency and incapacity to face unpleasant issues. A thing undone always remain with us.

TIME CRESIS MANAGEMENT:

Crisis involves two aspects. The cresis created by factors within one’s control and such crisis can be avoided. Then those crisis created by factor’s beyond one’s control and have to be faced.

Major cresis can be avoid, if we act upon a situation at the right time. More often than not, there are two tendencies that present us from acting at the right time.

Postponement of the unpleasant

Non recognition of the problem

PROCRASTINATION CREATES CRESIS:

The tendency to do what ii easy, trouble free, and pleasant and leave for the future the issues that are difficult, Thus the difficult issues keeps piling up. They become irritants. We do not want this because it remind us of our inefficiency and incapacity to face unpleasant issues. A thing undone always remain with us.

DO THE UNPLEASANT FIRST: We can not expect every thing in life to be pleasant. Like the two sides of the coin, the unpleasant always goes with the pleasant. The one who does not postpone making a decision, right or wrong, to fulfill a responsibility, that person alone can be successful. Postponing something because it is unpleasant is wrong. It has the potential to create a crisis and when it occurs, we will be inadequately equipped to face it. RECOGNIZE THE PROBLEM AND ACT : We get used to the problem so much so chronically, that we don’t recognize it as a problem. When there is a problem, we tend to say, “There is no problem, Everything will be alright”. But it will not be all right.

MURPHY’S LAW: What can go wrong, will go wrong. The possibility of something going wrong is much greater than its going right. One can act upon a problem, however small it is, only when the problem is first accepted. Action presupposes a decision, a will, and the will can exists, only when there is recognition. KARMA: “ Everything will be all right if my karma is good”. Karma does not work that way, the theory of karma is not fatalism. It does not justify passing the buck. It pins down the responsibility upon us. so accept problem as it occurs.

DEALING WITH THE ISSUES: For any business man, interference from competitor will be a problem. This is not created by him. This has to be faced. This requires inner strength. It is like learning to drive a car. The instruction cannot reproduce all possible traffic situations. The learner has to deal with particular situation as they occur. EVERY EFFECT IS A CALCULATED RISK: When you make a business projection for the following year, factors like potential demand, availability of raw material, changes in tax structure, shrikes are taken in to account. Since every intelligent effort involves a calculated risk, only two results can be expected from every effort – Success to different degree – Failure to different degree. With every failure, a person seems to become more and more frightened and a time comes when are is not able to act at all. So it is important that we are prepared for failure in our effort, because success may not always come. Our power are limited, and there are factors beyond our control.

ACCEPT LIMITATIONS: To be for failure, it is necessary to recognize one’s limitations. Our knowledge is limited and so we can not avoid many situations from occurring- otherwise we could avoid all accidents. sometime we have the knowledge but our power is limited and we feel helpless . If you permit yourself to be depressed for reasons you seem to have no control over, you become helpless and the outside factors will make you more and more inefficient and ineffective. Depression is a reaction. In action, you have freedom to exercise your will. Acceptance of facts is a precondition to an action, Non –acceptance is an ideal condition for reaction – in fact Non- acceptance itself is a reaction. Non –acceptance does not alter the facts- the reaction creates a chain of reactions. SO ACCEPT THE FACTS AND KEEP ACTION.

TIME PRIORITIZATION: Water, Tumbler, pebbles, sand, stones, grane . All can be accommodated, if it is planned in priority while filling the tumbler without pilferage. We can find time for anything, provided we have passion for it. GOALS MUST BE CLEAR: Nobody works for failure. You do not have to make an effort to achieve a failure. Sometimes people invest in failing business for tax purposes. It is not a real failure. It is a calculated achievement. CORPORATE MANAGER: BE CLEAR ABOUT GOAL. What is to be accomplished. What is expected out of me. I must also know, what I expect of those who works for me. PRIORITIZING GOALS: With out conflict Based on resources (Time, Manpower, resources) Be concern with immediate plan without getting bogged down by the scale of the project.

TIME PRIORITIZATION:

Water, Tumbler, pebbles, sand, stones, grane . All can be accommodated, if it is planned in priority while filling the tumbler without pilferage. We can find time for anything, provided we have passion for it.

GOALS MUST BE CLEAR:

Nobody works for failure. You do not have to make an effort to achieve a failure. Sometimes people invest in failing business for tax purposes. It is not a real failure. It is a calculated achievement.

CORPORATE MANAGER:

BE CLEAR ABOUT GOAL.

What is to be accomplished. What is expected out of me. I must also know, what I expect of those who works for me.

PRIORITIZING GOALS:

With out conflict

Based on resources (Time, Manpower, resources)

Be concern with immediate plan without getting bogged down by the scale of the project.

“ What ever a leader does, other people do. The very thing. What ever the upholds as authority, an ordinary person follows that”. - BHAGAVATGITA. KRISHNA TO ARUGUNA: If you runaway from this battle field, all others will also follow you. If you fail to do what is to be done, others will also do exactly that, because you are leader, whether you like it or not. - Set our Example.

Understanding lean

Lean: A systematic approach to identifying and eliminating waste {non- value-added activities) through continuous improvement in pursuit of perfection by flowing the product at the pull of the customer. Lean champion: Subject matter expert in the tools of lean typically chosen to lead lean training, lean projects, and lean transformation. Lean enterprise: Any organization that continually strives to eliminate waste, reduce costs, and improve quality, on-time delivery, and service levels. Understanding lean

Lean production: The opposite of mass production. Muda: A Japanese word, usually translated as “waste”, that refers to those elements of production that do not add value to the product. Takt Time: The available production time divided by the rate of customer demand. Takt time sets the pace of production to math the rate of customer demand and becomes the heartbeat of any lean system.

Example for takt time 7.0 Max 11.7 Avg 14.0 Min Takt time 12600 1800 Takt time (Max) = 12600 1080 Takt time (Avg) = 12600 900 Takt time (Min) = 1800 Max 1080 Avg 900 Min Demand 12600 Total seconds 210 Total minutes -0 Other -5 Maintenance -220 Changeover -5 Meetings -10 5S -20 Lunch -10 Breaks 480 Shift Minutes Time Available

Business Process Improvement system

Everyone participates Anything is open to question Look at issues from larger perspective Ideas from anyone is respected Talk to the ideas generated ; not the person No complaining – unless accompanied with solution and action plan No blaming Ground Rules

Everyone participates

Anything is open to question

Look at issues from larger perspective

Ideas from anyone is respected

Talk to the ideas generated ; not the person

No complaining – unless accompanied with solution and action plan

No blaming

Leadership Vision “ Quality . . . is the next opportunity for our Company to set itself apart from its competitors . . . ... Dramatically improved Quality will increase employee and customer satisfaction, will improve share and profitability, and will enhance our reputation. ... “[Six Sigma] is the most important training thing we have ever had. It’s better than going to Harvard Business School.” J.F. Welch

“ Quality . . . is the next opportunity for our Company to set itself apart from its competitors . . .

... Dramatically improved Quality will increase employee and customer satisfaction, will improve share and profitability, and will enhance our reputation.

... “[Six Sigma] is the most important training thing we have ever had. It’s better than going to Harvard Business School.”

J.F. Welch

A Process Is A Collection Of Activities That Takes One Or More Kinds Of Input And Creates Output That Is Of Value To The Customer Definition of a process

6  #2: When convinced of the value of thinking in terms of processes, most people still don’t think in terms of processes  #3:The word “process” generates fear and resistance. Processes All activity takes place in terms of a process.  The quality of the process determines the quality of the output. Shocking lessons  #1: Most people do not think in terms of processes. They would rather think terms of isolated events.

Black Belt Projects Supplier Quality “ Voice Of The Shareholder” (Profitability Analysis) “ Voice Of The Customer” (Surveys) Stakeholder Requirements Customer Requirements Prioritization Core Processes And Output Measures Internal Processes And Output Measures Key Subprocesses And Input Measures Other Stakeholders Employees Lenders Regulators Strategic Focus

Employees

Lenders

Regulators

Pick-Up & Delivery Order/ Leasing Billing Customer Service Equip. Mgmt. Core Process (Level I) Subprocesses (Level 2) CSR Qualifies Customers’ Needs CSR Enters Case In CIS Branch Schedules Repair Servicer Fixes Problem CSR Verifies Customer Satisfaction Customer Calls For Repair CSR Completes Case Subprocesses Through Microprocesses (Level 3 And Below) Levels of Process

The Dimensions Of Process Focus Design Design For Six Sigma Improvement DMAIC Management Process Management 3 Dimensions of Process

BPMS What is BPMS? A nine step methodology designed to create ongoing accountability for managing entire cross-functional processes to satisfy process goals

Why BPMS ? Proven methodology to optimize process performance Establishes value-added metrics to assess process performance – takes the guesswork out of how a process is performing BPMS

Proven methodology to optimize process performance

Establishes value-added metrics to assess process performance – takes the guesswork out of how a process is performing

Step 1: Create Process Mission C O P I Process Mission Statement Key Process Verbatim Issue Requirement  Purpose: Importance: Boundaries: Process Goals: Process Owner Beginning Point End Point S Proc. CTQ Rqmt Output Proc Input Operational Definitions Data Owner Definition Unit How Many DPU  Process Management System Clarify Operational Data Definitions Validate System Data Display Step 3: Document Customer and Process Requirements Step 2:Document Process Step 4:Identify Output and Process Measures Step 5: Build Process Management System Step 6 Establish Data Collection Plan Step 7: Process Performance Monitoring Step 8: Develop Dashboards with Spec Limits and Targets Step 9: Identify Improvement Opportunities Process Management System Trend Chart Problem Pareto Root Cause Corrective Actions          Assess your previous mission/goals Evaluate if your process boundaries have changed Adjust and make corrections Assess current CTQs and if they reflect process Assess if any new CTQs or measures are needed Adjust and make corrections A. Assess if current dashboards are representative Collect Data and populate dashboards Assess performance against targets Adjust and make corrections B. D. E. Develop actions to address variation C. Develop should be process map Create a simple data collection plan BPMS UCL LCL

Assess your previous mission/goals

Evaluate if your process boundaries have changed

Adjust and make corrections

Assess current CTQs and if they reflect process

Assess if any new CTQs or measures are needed

Adjust and make corrections

Assess if current dashboards are representative

Collect Data and populate dashboards

Assess performance against targets

Adjust and make corrections

Develop actions to address variation

Develop should be process map

Create a simple data collection plan

Step-1 : Create Process Mission Define process specific mission. Mission statement of the plant List out preliminary process goals Measurable type Attribute type

Define process specific mission.

Mission statement of the plant

List out preliminary process goals

Measurable type

Attribute type

Step-2 : Define & Document the Process Use SIPOC to define the process. Use flow charts to create & validate process maps. Yet to be incorporated Ready for all plants Flowcharts are to be drawn on four different perspectives on a process What one think the process is. What the process really is. What the process could be. What the process should be.

Use SIPOC to define the process.

Use flow charts to create & validate process maps.

30 Use SIPOC to define the process. Starting at the Top Key business activities can be defined at different levels of the organization:  Level 1 = highest - level view of work in the organization  Level 2 = work that flows across several departments or within a n entire department or work area  Level 3 = a detailed view of of a particular process Filling Sealing Packing New Product development Demand Generation Demand Fulfillment Customer Service Ordering Materials Producing Picking Shipping Mixing Level 1 Level 2 Level 3

35 Which Flowcharting Technique Should I use? Basic Flowchart Activity Flowchart Deployment Flowchart  To identify the major steps of the process and where it begins and ends  To illustrate where in the process you will collect data  To display the complexity and decision points of a process  To identify rework loops and bottlenecks  To help highlight handoff areas in processes between people or functions  To clarify roles and indicate dependencies

31 Types of Flowcharts Useful for Understanding Process Flow  Activity flowcharts Sales Technical Shipping Coordinator  Deployment flowcharts

Activity Flowcharts Activity flowcharts are specific about what happens in a process. They often capture decision points, rework loops, complexity, etc. Hotel Check - out Process 1 Approach front desk 3 Wait 4 Step up to desk 6 Wait 7 Give room number 8 Check bill 10 Correct charges 11 Pay bill NO NO NO YES YES YES Start/End Action/Task Sequence Process Name Date of creation or update & name of creator Clear starting and ending points Clear direction of flow (top to bottom or left to right) Consistent level of detail Key of symbols Numbered steps 2 Is there a line? 5 Clerk available? 9 Charges correct? Decision

Deployment Flowcharts Deployment flowcharts show the detailed steps in a process and which people or groups are involved in each step. They are particularly useful in processes that involve the flow of information between people or functions, as they help highlight handoff areas. Invoicing Process Shipping Customer Elapsed Time 5 days 10 days 7 Reviews weekly report of overdue accounts Sales Billing 6 Receives and records payment 5 Files invoice 3 Sends invoice to customer 4 Notifies billing of invoice 2 Notifies sales of completed delivery 1 Delivers goods 8 Receives delivery 9 Records receipt and claims against this delivery 10 Receives invoice 11 Checks invoice against receipt 12 Pays bill People or groups listed across the top Time flows down the page Horizontal lines clearly identify handoffs Steps listed in column of person or group doing step or in charge

43 Value - Added and Nonvalue - Added Steps Value - Added Step:  Customers are willing to pay for it.  It physically changes the product.  It’s done right the first time. Nonvalue - Added Step:  Is not essential to produce output.  Does not add value to the output.  Includes: • Defects, errors, omissions. • Preparation/setup, control/inspection. • Over - production, processing, inventory. • Transporting, motion, waiting, delays.

47 How to Create an Opportunity Flowchart  Divide page into two sections • Value - added section smaller than cost - added - only section  Time flows down the page  Only join two Value - Added steps with an arrow if there are no Nonvalue - Added steps in between Yes No No No Yes Yes Loop Loop Loop Value - Added Steps Nonvalue - Added Steps

Step-3 : Document Customer & Process Requirements Types of customers. Translating VOC into specific requirements. this is the place for defining the QFD

Types of customers.

Translating VOC into specific requirements.

this is the place for defining the QFD

7 VOC Process Outcomes:  A list of customers and customer segments  Identification of relevant reactive and proactive sources of data  Verbal or numerical data that identify customer needs  Defined Critical - to - Quality requirements (CTQ)  Specifications for each CTQ 1. Identify customers and determine what you need to know 2. Collect and analyze reactive system data then fill gaps with proactive approaches 3. Analyze data to generate a key list of customer needs in their language 4. Translate the customer language into CTQs 5. Set specifications for CTQs

What is Critical to Quality (CTQ)?  What a customer tells us they want from our product / service or process output CTQs are rendered from Voice of Customer (VOC) CTQs must be specific CTQs must be measurable CTQs must be actionable CTQs always have three elements: CTQ Category (also known as an Output Characteristic or CTQ name, e.g. Claims Processing Timeliness) Customer Specification (customer’s requirement of our product/ service or process, e.g. “30”) Unit of Measure (how output is quantified by the customer, e.g. “Days”) CTQ Example: Claims Processing Timeliness: 30 Days Category Specification Unit of Measure What is Critical to Quality

What is Critical to Quality (CTQ)?

 What a customer tells us they want from our product / service or process output

CTQs are rendered from Voice of Customer (VOC)

CTQs must be specific

CTQs must be measurable

CTQs must be actionable

CTQs always have three elements:

CTQ Category (also known as an Output Characteristic or CTQ name, e.g. Claims Processing Timeliness)

Customer Specification (customer’s requirement of our product/ service or process, e.g. “30”)

Unit of Measure (how output is quantified by the customer, e.g. “Days”)

CTQ Example: Claims Processing Timeliness: 30 Days

Category Specification Unit of Measure

23 Example: CTQ Tree Need Drivers CTQs General Specific Hard to measure Easy to measure Ease of Operation and Maintenance Operation Low qualification of operator Easy to setup (training / documentation) Digital Control Maintenance MTBF Maintenance Documentation Minimum special tools / equipment required Modification Cost Mistake Proofing and One of 7 Management Tools – Tree diagram Standardization Down time

Establishing a Performance Standard A performance standard translates customer needs into quantified requirements for our product or process Customer Need CTQ Product/ Process Characteristic Measure Specification/ Tolerance Limit(s) Target 95 % 90% Defect Definition Below 90% Better Throughput % Trained No. Trained against no. identified for training in a chosen subject

A performance standard translates customer needs into quantified requirements for our product or process

Step 3 – Document Customer/Process Requirements VOC Guidelines Your Outputs Key Issues Customer Requirements CTQ’s Voice of Customer Outputs of your process are designed to satisfy customer needs profitably Customer needs are stated in the language of the customer Clarification of the customer’s language identifies the key issues Defined as customer performance requirements of a product or service Key issues are translated into customer requirements Sample CTQ’s Reliability Durability Accuracy Timeliness Failure Recovery Efficiency Cost Savings Easy to Use Quick Response Internal Customers Leadership Process Owners Stakeholders External Customers Clients Consumers Regulators Brokers VOC Translation Process BPMS

Step 3 – Document Customer/Process Requirements VOC Guidelines

Measurement Criteria The measure must be important The measure must be easy to understand The measure is sensitive to the right things and insensitive to other things The measure promotes appropriate analysis/action The measure must be easy to get Step 4 – Identify Output/Process Measures: Measurement Matrix Guidelines BPMS Process Input Variables (X’s) Process Variables (X’s) Output Variables (Y’s)

Measurement Criteria

The measure must be important

The measure must be easy to understand

The measure is sensitive to the right things and insensitive to other things

The measure promotes appropriate analysis/action

The measure must be easy to get

CTQ Template

BPMS Objectives : Consolidate work performed in steps 1-5 onto one concise page which captures the essence of your process. Establish process specs/targets, control limits, and response plan for out-of-control/under-performing metrics. Why Is This Important? : A process management system allows a process owner to quickly respond to performance trends. It is an enabler for process optimization. Tools : Control Plan Step 5 – Build Process Mgmt. System

Step-5 : Build Process Management System Measures & Targets. Monitoring System. Contingency Plan.

Measures & Targets.

Monitoring System.

Contingency Plan.

BPMS Data Collection Roadmap Step 6 – Establish Data Collection Plan Guidelines Develop Operational Definitions & Procedures Operational Definitions Collecting Data Sampling Plan for Data Consistency & Stability Validating Measurement Systems Begin Data Collection Training Data Collectors Making Data Collection Activities “Error Proof” Continue Improving Measurement Consistency Creating Monitoring Procedures

Operational Definitions

Collecting Data

Sampling

Validating Measurement Systems

Training Data Collectors

Making Data Collection Activities “Error Proof”

Creating Monitoring

Procedures

Data Collection Plan

BPMS Step 6 – Establish Data Collection Plan Guidelines Decision to Collect New Data Is there existing data to help with problem solving mission? Is current data enough? Does the current data meet the process needs? Is the team just using data that is available? Decision to Sample It is often impractical or too costly to collect all of the data Sound conclusions can often be drawn from a relatively small amount of data One BB to finalise sampling strategy Validating Measurement Systems Data is only as good as the measurement system used to gather it. Measurement systems must be validated to ensure data is free from errors There are a variety of techniques to validate data – consult a Quality representative or refer to your six sigma training Review the measurement system periodically to ensure consistency and stability over time Data Collection Considerations Can the new data be generated through systems modifications? Can data collection be integrated into existing work processes? Is all data being collected necessary to calculate process measures? Can some data collection efforts be curtailed because they don’t add value?

Is there existing data to help with problem solving mission?

Is current data enough?

Does the current data meet the process needs?

Is the team just using data that is available?

It is often impractical or too costly to collect all of the data

Sound conclusions can often be drawn from a relatively small amount of data

Data is only as good as the measurement system used to gather it. Measurement systems must be validated to ensure data is free from errors

There are a variety of techniques to validate data – consult a Quality representative or refer to your six sigma training

Review the measurement system periodically to ensure consistency and stability over time

Can the new data be generated through systems modifications?

Can data collection be integrated into existing work processes?

Is all data being collected necessary to calculate process measures?

Can some data collection efforts be curtailed because they don’t add value?

BPMS Step 7 – Process Performance Monitoring Guidelines Purpose of Control Charts Determine whether or not process variation is due to special cause or common cause variation Determine whether the process is in control or out of control Upper Control Limit Average Lower Control Limit Measurement Time

Purpose of Control Charts

Determine whether or not process variation is due to

special cause or common cause variation

Determine whether the process is in control or out of

control

Process Performance Monitoring All Repetitive activities of a process have a certain amount of fluctuation . Input, Process & Output measures will fluctuate. Variation is the ‘Voice of the Process’ – Learn to Listen to it and Understand it.

All Repetitive activities of a process have a certain amount

of fluctuation .

Input, Process & Output measures will fluctuate.

Variation is the ‘Voice of the Process’ – Learn to Listen to it

and Understand it.

BPMS Step 7 – Process Performance Monitoring Charts

BPMS Key Considerations How do you want the information displayed? To what level do you want to drill down in the information? How might you want to segment the information for making critical decisions? Who should access the information? What supporting information do you want to see? Lower level dashboards should roll-up to higher level dashboards. Identify Universe of Potential Measures Narrow List of Measures Data Collection Determine Measures w/Best Relationship to CTQ’s Finalize Dashboard Dashboard Creation Roadmap Step 8 – Develop Dashboards Guidelines

Key Considerations

How do you want the information

displayed?

To what level do you want to drill

down in the information?

How might you want to segment

the information for making critical

decisions?

Who should access the

information?

What supporting information do

you want to see?

Lower level dashboards should

roll-up to higher level dashboards.

External Environmental Information Dashboard Indicators Internal Environmental Information Process Review Satisfied with Indicators? Continue Control Actions Yes Plan/Implement Improvement Actions to Correct No Action Troubleshoot DMADV QC/SGA/ Quick Hit/ DMAIC Identify Problem Diagnose Root Cause Remedy Cause Process Improvement Process Redesign (process not capable of performing to standards) Step 9 – Operate Process Management System & Identify Improvement Opportunities No

Business Big Y’s Project Y Process Y’s Y Y Y Y Key output metrics that are aligned with strategic goals/objectives of the business. Big Y’s provide a direct measure of business performance. Key output metrics that summarize process performance Key project metric defined from the customer’s perspective Any parameters that influence the Y X 1 X 2 X 3 Project Y Alignment Management PROCESS

Project Identification Customer wants and needs should drive our actions! Who’s the customer? What does he/she think is critical to quality? Who speaks for the customer? What’s the business strategy? Who in the business holds a stake in this? Who can help define the issues? What are the processes involved?

Who’s the customer?

What does he/she think is critical to quality?

Who speaks for the customer?

What’s the business strategy?

Who in the business holds a stake in this?

Who can help define the issues?

What are the processes involved?

A Great Project Should… Be clearly bound with defined goals If it looks too big, it is Be aligned with Strategic Business Objectives and initiatives It enables full support of business Should have high Impact the Bottom Line Be felt by the customer There should be a significant impact Work with other projects for combined effect Global business initiatives Show improvement that is locally actionable Relate to your day job Focus on key CTQ’s

Be clearly bound with defined goals

If it looks too big, it is

Be aligned with Strategic Business Objectives and initiatives

It enables full support of business

Should have high Impact the Bottom Line

Be felt by the customer

There should be a significant impact

Work with other projects for combined effect

Global business initiatives

Show improvement that is locally actionable

Relate to your day job

Focus on key CTQ’s

Selecting the Right Projects Six issues in selecting a project: Process Feasibility (Is it doable?) Measurable impact Potential for improvement Resource support within the organization Project interactions Top priorities based on impact and performance: strategic issues Low Medium High Low Impact Medium Impact High Impact Delivered CTQ Importance Performance

Six issues in selecting a project:

Process

Feasibility (Is it doable?)

Measurable impact

Potential for improvement

Resource support within the organization

Project interactions

Project Prioritization Matrix The desirability of a project increases as you move from the lower right to the upper left, and as the circle gets larger Low Med Hi EFFORT Low Med Hi IMPACT Increasing Desirability Low Med Hi Probability of Success

The desirability of a project increases as you move from the lower right to the upper left, and as the circle gets larger

Success Factors Project scope is manageable Project has identifiable defect Project has identifiable impact Adequate buy-in from key stakeholders To Be Successful… Set up project charter and have it reviewed Measure where defects occur in the process Assess and quantify potential impact up front Perform stakeholder analysis Common Pitfalls Inadequately resourcing the project Duplicating another project Losing project momentum Picking the easy Y, not the critical Y Avoiding Pitfalls Identify and get committed resources up front Research the project database and translate from other projects where possible Set up milestones and a communications plan Project Selection

Success Factors

Project scope is manageable

Project has identifiable defect

Project has identifiable impact

Adequate buy-in from key stakeholders

To Be Successful…

Set up project charter and have it reviewed

Measure where defects occur in the process

Assess and quantify potential impact up front

Perform stakeholder analysis

Common Pitfalls

Inadequately resourcing the project

Duplicating another project

Losing project momentum

Picking the easy Y, not the critical Y

Avoiding Pitfalls

Identify and get committed resources up front

Research the project database and translate from other projects where possible

Set up milestones and a communications plan

A Good Project A good project: Problem and Goal Statements are clearly stated Defect and opportunity definition is clearly understood Does not presuppose a solution Clearly relates to customers and their requirements Aligns to the business strategy Uses the tools effectively Is data driven

A good project:

Problem and Goal Statements are clearly stated

Defect and opportunity definition is clearly understood

Does not presuppose a solution

Clearly relates to customers and their requirements

Aligns to the business strategy

Uses the tools effectively

Is data driven

A Bad Project A bad project: Is not focused – scope is too broad Is not clear on what you are trying to fix May be an already-known solution mandated without proper investigation Is difficult to see linkage to customer needs Is not clearly aligned with business objectives Has little or no use of tools Is anecdotal – not data driven

A bad project:

Is not focused – scope is too broad

Is not clear on what you are trying to fix

May be an already-known solution mandated without proper investigation

Is difficult to see linkage to customer needs

Is not clearly aligned with business objectives

Has little or no use of tools

Is anecdotal – not data driven

Project Chartering A Charter: Clarifies what is expected of the team Keeps the team focused Keeps the team aligned with organizational priorities Transfers the project from the Champion to the improvement team

A Charter:

Clarifies what is expected of the team

Keeps the team focused

Keeps the team aligned with organizational priorities

Transfers the project from the Champion to the improvement team

Five Major Elements Of A Charter Business Case Explanation of why to do the project Problem and Goal Statements Description of the problem/opportunity and objective in clear, concise, measurable terms Project Scope Process dimensions, available resources Milestones Key steps and dates to achieve goal Roles People, expectations, responsibilities

Business Case

Explanation of why to do the project

Problem and Goal Statements

Description of the problem/opportunity and objective in clear, concise, measurable terms

Project Scope

Process dimensions, available resources

Milestones

Key steps and dates to achieve goal

Roles

People, expectations, responsibilities

The Goal Statement The Goal Statement then defines the team’s improvement objective Definition of the improvement the team is seeking to accomplish? Starts with a verb (reduce, eliminate, control, increase) Tends to start broadly - eventually should include measurable target and completion date Must not assign blame, presume cause, or prescribe solution! S pecific M easurable A ttainable R elevant T ime Bound

The Goal Statement then defines the team’s improvement objective

Definition of the improvement the team is seeking to accomplish?

Starts with a verb (reduce, eliminate, control, increase)

Tends to start broadly - eventually should include measurable target and completion date

Must not assign blame, presume cause, or prescribe solution!

8 Steps To Bind A Project Identify the customer Who receives the process output? (May be an internal or external customer) Define customer expectations and needs Ask the customer Think like the customer Rank or prioritize the expectations Clearly specify your deliverables tied to those expectations What are the process outputs? (tangible and intangible deliverables) Rank or prioritize the deliverables Rank your confidence in meeting each deliverable

Identify the customer

Who receives the process output?

(May be an internal or external customer)

Define customer expectations and needs

Ask the customer

Think like the customer

Rank or prioritize the expectations

Clearly specify your deliverables tied to those expectations

What are the process outputs? (tangible and intangible deliverables)

Rank or prioritize the deliverables

Rank your confidence in meeting each deliverable

Identify CTQ’s for those deliverables What are the specific, measurable attributes that are most critical in the deliverables? Select those attributes that have the greatest impact on customer satisfaction Map your process Map the process as it works today (as is) Map the informal processes, even if there is no formal, uniform process in use Determine where in the process the CTQ’s can be most seriously affected Use a detailed flowchart Estimate which steps contain the most variability 8 Steps To Bind A Project

Identify CTQ’s for those deliverables

What are the specific, measurable attributes that are most critical in the deliverables?

Select those attributes that have the greatest impact on customer satisfaction

Map your process

Map the process as it works today (as is)

Map the informal processes, even if there is no formal, uniform process in use

Determine where in the process the CTQ’s can be most seriously affected

Use a detailed flowchart

Estimate which steps contain the most variability

8 Steps To Bind A Project Evaluate which CTQ’s have the greatest opportunity for improvement Consider available resources Compare variation in the processes with the various CTQ’s Emphasize process steps which are under the control of the team conducting the project Define the project to improve the CTQ’s you have selected Define the defect to be attacked

Evaluate which CTQ’s have the greatest opportunity for improvement

Consider available resources

Compare variation in the processes with the various CTQ’s

Emphasize process steps which are under the control of the team conducting the project

Define the project to improve the CTQ’s you have selected

Define the defect to be attacked

Project Selection Workshop 2 Ways : Top- down method – More effective & High impact projects. (Through CTQ selection workshop) Bottom-up method – Low impact & High numbers of projects

2 Ways :

Top- down method – More effective & High impact projects.

(Through CTQ selection workshop)

Bottom-up method – Low impact & High numbers of projects

List down the Strategic Business Objectives List down the Key Focus Areas to achieve the SBOs Prioritize the KFAs List down the core processes List the impact of the core processes on the KFAs Rank and prioritize the core processes List down the performance indicators for the prioritized list of core processes Rank and Prioritize the CTQs Generate projects list from CTQs CTQ Selection Workshop

List down the Strategic Business Objectives

List down the Key Focus Areas to achieve the SBOs

Prioritize the KFAs

List down the core processes

List the impact of the core processes on the KFAs

Rank and prioritize the core processes

List down the performance indicators for the prioritized list of core processes

Rank and Prioritize the CTQs

Generate projects list from CTQs

Step 1 - List down the Strategic Business Objectives & Key focus areas of your plant/deptt. CTQ Selection Workshop 3 2 1 Wtg KFAs SBO’s Sl.No

Step 1 - List down the Strategic Business

Objectives & Key focus areas of your

plant/deptt.

CTQ Selection Workshop Step 2 Core Processes of Each Function Impact of Core Processes on each KFA Sl # Key Focus Areas Wtg of KFAs Core Process 1 Core Process 2 Core Process 3 Core Process 4 Core Process 5 Core Process 6 Core Process 7 Core Process 8 Core Process 9 Core Process 10 Process Absolute Importance (Column Sum : Sum of scores the process wrt SO) Process Relative Importance (Realative Importance = Absolute Importance / Total) List your process and What level of impact it will have on the KFA , 1=Low, 3=Medium, 9=High

CTQ Selection Workshop Step3 Priority of CTQs Sl # Process CTQs / Metrics As Is Must Be Gap Ease to Implement Impact on Margins Translation Opportunity Root Causes Already Known with Confidence? (Yes / No) Is Problem Because of Variability? (Yes / No) Data Availability on Xs and Y Priority 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 1=Low 1=High 1=Low 3=Low to Medium 3 = Medium to High 3=Low to Medium Priority = 5=Medium 5=Medium 5=Medium Gap*Ease*Impact*Translation 7=Medium to High 7=Low to Medium 7=Medium to High 9=High 9=Low 9=High

CTQ Selection Workshop Step-4 : List of projects

Front line Project Selection

Thinking line for Project Selection Thinking line for Front-line project selection : Cost saving projects Cost avoidance projects Reliability/Process improvement projects Quality/ Customer/Competitor oriented projects. Ease of operation projects. Knowledge management projects. Material handling projects .

Cost saving projects

Cost avoidance projects

Reliability/Process improvement projects

Quality/ Customer/Competitor oriented projects.

Ease of operation projects.

Knowledge management projects.

Material handling projects .

Production cycle time

PAY BACK WORKING: Existing Contribution in Rs. 4744113.0 Contribution after Modernization in Rs. 6859511.0 Increase in Contribution in Rs. 2115398.0 Pay Back Period in Months 31.0 ADVANTAGES: High Speed machines *High end product * High end market Higher productivity (Present 35.91 gss is chronic problem in 80’s) Cost reduction due to productivity utilization increase and way the minimization. Turnover increase with investment “State of the art Technology ” Branded Product Lead Supplier Fast Pay Back and first Player

PAY BACK WORKING:

Existing Contribution in Rs. 4744113.0

Contribution after Modernization in Rs. 6859511.0

Increase in Contribution in Rs. 2115398.0

Pay Back Period in Months 31.0

ADVANTAGES:

High Speed machines *High end product * High end market

Higher productivity (Present 35.91 gss is chronic problem in 80’s)

Cost reduction due to productivity utilization increase and way the minimization.

Turnover increase with investment “State of the art Technology ”

Branded Product

Lead Supplier

Fast Pay Back and first Player

Note: The Financial Overheads need to be taken after contribution, with present worth of future returns. EARLIER INTERNAL SCHEME: Only replacement Horizontal not vertically No increase turnover even after modernization Substance medium product in medium market Space kept idle

Note:

The Financial Overheads need to be taken after contribution, with present worth of future returns.

EARLIER INTERNAL SCHEME:

Only replacement Horizontal not vertically

No increase turnover even after modernization

Substance medium product in medium market

Space kept idle

PRODUCTION CYCLE TIME Time gap between the starting time to produce a completed item (or Batch, ready for dispatch) till the next item (or Batch ) is started. The total time is production cycle time. CONTINUOUS IMPROVEMENT: Continuous Improvement View of Losses of Deviations from Normal

L(y) =K(y-m) 2 = Taguchi Loss Function Where, y = the value of the quality characteristic for a particular item of product or service, m = the nominal value for the quality characteristic, and k = a constant, A/ d 2 A = the loss (cost) of exceeding specification limits (e.g., the cost to scrap a unit of output), and d = the allowable tolerance from the nominal value that is used to determine specification limits. LOSS FUNCTION :

The Continuous definition of quality, return to the sample of the production of stainless steel ball bearings, Every millimeter higher or lower than 25mm causes a loss that can be expressed by the following Taguchi Loss function: L(y) = K(y-m) 2 = (A/d 2 )(y-m) 2 = (Rs.1.00/ 5 2) (y-25mm) 2 = (0.04)(y- 25mm) 2 if 20  y  30, L(y) = Rs.1.00, if y < 20 or y > 30 Table shows the values of L(y) for the Quality characteristic (diameter of ball bearings) ILLUSTRATION:

ORDERING TIME, SETUP TIME, OPTIMUM PRODUCTION QUANTITY

The basic principle of inventory optimization and materials management is to minimize the competing costs of having either too little or too much in inventories of raw material, work in process, or finished goods. Inventories provide indispensable buffers to improve the leveling of production activity, but they constitute a major investment of the funds of most firms. The traditional method of timing production runs and inventory replenishment has been by reorder point. INVENTORY OPTIMIZATION AND MATERIAL REQUIREMENTS PLANNING

Reorder point control should be replaced with MRP for production items and by DRP (distribution requirement planning) for finished goods inventories. Under reorder point, total costs of inventory policy (TC) are generally taken to include the following as the most important cost elements: TC = setup costs (or procurement costs) + holding costs + stock out costs A first approximation to the cost categories of this equation is to specify the total cost to be (for never stock situation) For D= Annual Demand, p=price per unit

The procurement or setup cost is “c” dollars per order, and the order or production run amount is “Q” units per batch. If the item is produced, it is at a daily rate of “r” and depleted at a daily rate of “d”. The value for the effective rate of interest, i, is often taken to be about 30 percent, to include the opportunity cost of capital. insurance, obsolescence, and other costs of holding.

The above TC equation is minimized when This equation is for the case of setting up a machine to run the item to a certain inventory level, then running that machine on another item until stocks are nearly depleted. The economical production quantity, or EPQ, is the approximate optimal value of units per batch to manufacture, assuming simplistic uniform demand rates for finished goods with simplified work centers. Although reorder point continues to be commonly used, superior total planning control is possible with computer-based MRP. Economical Production Quantity (EPQ):

INVENTORY THEORY AND MODELING: Proper control of inventory requires a delicate balance and careful, detailed planning. To the controller who sees funds tied up in material in the warehouse, work-in- process inventory, and finished goods not shipped, the natural reaction is that inventories are too high. To the production superintendent faced with the prospect of interrupted deliveries or silent production lines due to inadequate raw, in-process, or finished materials, the response must be that inventories are too low. Therefore, a balance is needed between holding large quantities to satisfy the latter and frequent stock replenishment to satisfy the former. This might be represented, as in below figure

If the replenishment quantity q is represented on one axis and the total inventory cost in dollars is represented on the other. Many reasons exist for keeping inventory. They include: to improve customer service; to hedge against demand surges and variation of production level; to take advantage of favorable prices; to ensure against error and loss; and to avoid production stoppage. Overproduction for any of these reasons can, on the other hand, increase costs through high investment and low capital turnover, material obsolescence, spoilage an deterioration, storage and handling excesses, and inefficient use of space due to overcrowding.

Two basic concepts of control models need to be cognized: Transaction reporting periodic review. TRANSACTION REPORTING: Transaction reporting requires continuous, accurate updating of stock records to determine when a replenishment order should be initiated. Frequent stock activity, high volume requirements, and identifiable individual units may make this type of system more desirable. This system may entail perpetual (or continuous) record processing: e.g., reporting the use of each item and continuous monitoring of stock levels. When a predetermined reorder point is reached, an economic order quantity acquisition is initiated. This reorder point is set to ensure that sufficient stock is available to carry the production process until the replenishment supply is received.

Two basic concepts of control models need to be cognized:

Transaction reporting

periodic review.

TRANSACTION REPORTING:

Transaction reporting requires continuous, accurate updating of stock records to determine when a replenishment order should be initiated. Frequent stock activity, high volume requirements, and identifiable individual units may make this type of system more desirable. This system may entail perpetual (or continuous) record processing: e.g., reporting the use of each item and continuous monitoring of stock levels. When a predetermined reorder point is reached, an economic order quantity acquisition is initiated. This reorder point is set to ensure that sufficient stock is available to carry the production process until the replenishment supply is received.

A second concept is that records will be reviewed periodically (weekly, monthly, quarterly, etc.) and if the level of inventory for that ; item has fallen below a certain target level, anew ) order will be placed. If it has not, the record will be , returned to the file for review again at the end of the next period. Target levels, period lengths, and e replenishment quantities are dependent on frequency of use, replenishment lead time, and criticality of item. This system is usually more difficult to establish but results in lower clerical cost to maintain stock control. Both transaction reporting and periodic review systems can be maintained manually or by computer, if the inventory system is of sufficient size to warrant computer control. EXAMPLE: A manufacturer uses wooden pallets for unit load shipping of the product. These pallets are used regularly at rate of 100 per month and purchased from a vendor Rs. 3.50 per pallet. They are stored in an unheated but covered shed until needed, 19 and it is estimated that it costs 20 percent of the unit value to pay for the investment and storage costs. PERIODIC REVIEW:

A fixed cost of 150 in clerical time and processing is incurred every time a replenishment order is processed. If pallets are available when needed, re -handling of the unit load of final product is necessary at a cost of Rs10 per unit. Delivery normally takes from 6 to 10 days from the time of order, and 6, 7, 8, 9, or 10 days are equally likely. To determine the EOQ, the following is considered: If C = replenishment cost S = storage cost I = number of inventory turnovers per year T = total cost per year for storage and replenishment R = rate of demand Q = order quantity (EOQ)

then Q can be calculated to be the order quantity which results in the lowest cost T Q =  (2CR/S) =  (2(50) (100)/ (0.2)(3.50))= 120 Pallets/ Order. I = ( R ) (Number of Months)/ Q = (100)(12)/ 120 = 10 Turnovers/ Year In this example, a transaction system is to be used, and a reorder point needs to be determined which will provide protection during the reorder period of 6 to 10 days. Since it is equally likely that delivery can be at any time between 6 and 10 days, inclusive, the reorder point will be selected at the point that gives a cost balance between overstocking during the lead time and under stocking. Each time period of days from 6 to 10 has 1 chance in 5 of occurring in the replenishment cycle. By weighting the chances of various delivery possibilities by the cost of overstocking versus under- stocking, a weighted average of delivery days can be computed which establishes a basis of the reorder points.

In this example it may be computed as follows: Number of items demanded per day = 100/20* = 5 . *20 days assumes a 5-day workweek Average cost of overstocking = (5)( 3.50)(1/5)(x- 5) where x = delivery period between 6 to 10 days Average cost of under stocking =(10 X 1/5)[10-(x -5)] Solving for x as the point where the weighted-average overstocking cost equals the weighted-average under stocking cost: (5)(3.50)(1/5)(x- 5) = (10)(1/5)(10 -x) 3.5x- 17.5 = 20 -2x 5.5x = 37.5 x= 6.8

The weighted-average delivery period for the purpose of planning the reorder point is 6.8 days. Reorder point = (100/20)(6.8) = 34.0 In summary, place an order for pallets when the pal- let inventory drops to 34. Thus, you will provide an economical stock system for pallets as long as the costs and d factors or the delivery time factors do not change.

Pay back time

PAYBACK TIME Payback Time is a rough – and – ready model that is looked upon disdain by many academic theorists . Payback sometimes called payout or payoff. Yet pay back is most widely used decision model, and it certainly is an improvement over the criterion of urgency or postponability. Further more, it is a handy device Where precision in estimates of profitability is not crucial and preliminary screening of a rash of proposals is necessary Where a weak cash and –credit position has a heavy bearing on the selection of investment possibilities and Where the contemplated project is extremely risky.

Payback Time is a rough – and – ready model that is looked upon disdain by many academic theorists . Payback sometimes called payout or payoff. Yet pay back is most widely used decision model, and it certainly is an improvement over the criterion of urgency or postponability.

Further more, it is a handy device

Where precision in estimates of profitability is not crucial and preliminary screening of a rash of proposals is necessary

Where a weak cash and –credit position has a heavy bearing on the selection of investment possibilities and

Where the contemplated project is extremely risky.

The Payback Calculations follows: P=I/O Where P= Payback Time, I= Initial increment amount invested and O= The uniform annual incremental each inflow from operations. Essentially, payback is a measure of the time, it will take to recoup in the form of cash from operations only the original amount invested. Given the useful life of an assets and uniform cash flows, the less payout period , the greater the profitability or given payback period, the greater useful life of the asset, the greater the profitability. Note that, payback does not measure profitability, it does measure how quickly investment amount may be recouped. An investment’s main objective is profitability, not recapturing the original outlay. If a company wants to recover its investment outlay rapidly it need not bother spending in the first place. Then payback time is ZERO; NO WAITING TIME is needed.

The Major weakness of the payback model is its neglect the profitability. Continuous Technological up gradation is required to be in the competition. The profit earned is ploughed back, with additional investment in order to enhance the growth of the organization Such options involves various alternatives and working for return on investment. Firstly the technical feasibility is examined reliably predication is a valuable activity to design reliable systems. Failure have to be identified and proacted System need to be designed that is robust

The Major weakness of the payback model is its neglect the profitability.

Continuous Technological up gradation is required to be in the competition.

The profit earned is ploughed back, with additional investment in order to enhance the growth of the organization

Such options involves various alternatives and working for return on investment.

Firstly the technical feasibility is examined reliably predication is a valuable activity to design reliable systems.

Failure have to be identified and proacted

System need to be designed that is robust

Design Review: Determine if the product will actually work as desired and meet the customer’s requirements Determine if the new design is producible and inspectable Determine if the new design is maintainable and repairable Financial Feasibility: Net income Margin on Sales = Sales

Design Review:

Determine if the product will actually work as desired and meet the customer’s requirements

Determine if the new design is producible and inspectable

Determine if the new design is maintainable and repairable

Financial Feasibility:

Net income

Margin on Sales =

Sales

RETURN ON INVESTMENT (ROI): The return on investment is measured by adding back interest to net income after taxes and dividing by total assets. It is a measure of the after –tax profitability with which the firm’s total resources have been employed. Return on investment = Net income + interest Total Sales =192,000 + 40,000 2,000,000 ROI=I= S-P P Where P= The amount borrowed (or the amount invested ) S= The amount paid back (or the amount collected) at the end of the year

RATE OF RETURN: For example, assume the following situation. Invest Rs.10,000 in a laborsaving machine. Labor savings = Rs 2500 per year. Useful life = 10 years. Company desires 10 percent return on investment. Machine will be depreciated for tax purposes over 10 years on a straight-line basis. Company has 50 percent tax rate. Machine will have no salvage value. Annual Cash-Flow Computations: Compute the annual cash flow as follows (in this example, the savings are the same each year): Cash in from labor savings ………………………………………….Rs. 2500 Cash out for taxes ………………………………………………… Rs. 750* Annual Net cash inflow……………………………………………..Rs.1750 * Income subject to tax = Rs2500- Rs.1000 depreciations = Rs.1500 at 50% = Rs750

RATE-OF-RETURN CALCULATIONS: The investment outlay is Rs.10,000. The annual cash savings is Rs . 1750. A 10 percent return is desired. Look at Table B-4. Under the 10 percent column, read down to 10 years. The factor is 6.44. Multiply 6.44 by the annual savings of Rs.1750. The result is Rs.11,270. This means that the present value of the future cash inflows of Rs.1750 per year is worth Rs.11,270 today if a 10 percent return on investment is desired. Since the investment is only Rs.10,000 and the present value of future inflows is Rs.11,270, the investment would be made. If the actual return is desired, divide the investment by the annual savings, Rs.10,000/Rs1750 = 5.71, Again, look at Table B.4 and read across from year 10. The factor 5.71 is between 12 % and 14 % or about 13% return on investment.

COMPLEXITIES: Variable Annual Savings : The cash savings generated from a capital project are seldom the same for each year of the life of the project. The savings may be different because of the use of accelerated depreciation, varying production levels, changes in tax rates, and other related items. The discounted cash-flow concept can be used with varying annual savings in two ways, as illustrated in the following example company has the opportunity to invest Rs.1000 in e of four alternative projects. Each project has an estimated life of 6 years and a total return of Rs.1800. The flow of the savings is as shown in this array. Rs Rs Rs Rs Rs Rs Rs Rs

0 2 4 6 8 10 12 14 16 18 20 30% 20% 10% 0 30% 20% 10% 0 Rate of return Reciprocal pf Payback Period RECIPROCAL OF PAYBACK PERIOD COMPARED WITH RATE OF RETURN

INTERNAL RATE OF RETURN: One approach is to calculate the rate of return on each project. The internal rate of return is the rate which is being earned on the unamortized balance of the investment, such as the rate on a home mortgage. Using Table B-4, the calculation is made using a trial-and-error approach. What rate will bring the future cash flow back to Rs.1000 today? The rates are, Project A: 25 + percent Project : 30 + percent Project C: 16 percent Project D: 25 percent

NET PRESENT VALUE : The net present value of an investment is the difference between future cash inflows discounted at a specified rate and the amount of the original investment. If a desired rate of return is known, the present value of the future flow can be determined. Assume the company wants a 20 percent return on investment. The present-value factors for 20 percent for each year are given in Table B-2. Applying these factors to the flows for the four projects, a present value for each project is as follows: Project investment Present Value Net Present @ 20% A Rs.1000 Rs. 1092 Rs. 92 B 1000 1188 188 C 1000 996 - 4 D 1000 1142 142 Refer the table B-2

Using the net-present-value (NPV) approach, we see that project B has the highest net present value. Projects A, B, and D all have positive net present values, which mean that these projects all return more than 20 percent. Project B has the highest NPV, which makes it the most attractive alternative. Project C, with a negative NPV, returns slightly less than 20 percent. How would you rank projects if the original outlay is different? The one with the highest investment is likely to have the highest absolute Rupee NPV but may have a smaller return. Projects of this nature can be ranked by the use of a profitability index.

PROFITABILITY INDEX: Project A has the lowest Rupee NPV. It also has the lowest investment outlay. The index shows, how- ever, that it has the highest return; i.e., the Rupee received discounted at 20 percent are higher relative to the investment than the Rupee received in either project B or project C. Rs. Rs. Rs. Rs. Rs. Rs.

TABLE : B-1 PRESENT VALUE OF RS.1 RECEIVED AT END OF THE YEAR INDICATED Present Value =1/(1+i) n

TABLE : B-2 PRESENT VALUE OF RS.1 RECEIVED AT MIDDLE OF THE YEAR INDICATED Present Value =1/(1+i) n-1/2

TABLE : B-3 PRESENT VALUE OF RS.1 RECEIVED AT END OF EACH YEAR FOR N YEARS

TABLE : B-4 PRESENT VALUE OF RS.1 RECEIVED AT MIDDLE OF EACH YEAR FOR N YEARS

Emulating the bench mark of Koba Yashi – Mitsubishi Success Model

The Keys Small group activity a. One suggestion per month per person. b. Short standing meetings to stress efficiency. Cleaning and Organizing KEY: 1 Measured Management Objectives ( Safety, Horizontal Hierarchy, Clear Instruction from TOP) KEY: 2 KEY: 3

Reducing Inventory. (Work - in - Progress) a. All activity that don’t add value to product are wasteful. KEY: 4

QUICK CHANGEOVER TECHNOLOGY Any one should be able to perform a quick changeover ever in new environments. Accept the change to shorten all changeovers to less than one cycle time. KEY: 5

Any one should be able to perform a quick changeover ever in new environments.

Accept the change to shorten all changeovers to less than one cycle time.

Value Analysis of Manufacturing Methods (Improvement in Methods) Ask “WHY” five times for every motion of activity. Modular a management of predetermined Time standards (i) Material Handling Method KEY: 6

Ask “WHY” five times for every motion of activity.

Modular a management of predetermined Time standards

(i) Material Handling Method

Zero Monitor Production Monitoring is a form of Waste Watching the running machine? KEY: 7

Monitoring is a form of Waste

Watching the running machine?

Integrating Functions Reduce the inventory at the joining points. Reduce the “Joints” and make seamless. Planned Maintenance activity. KEY: 8

Reduce the inventory at the joining points.

Reduce the “Joints” and make seamless.

Planned Maintenance activity.

Maintaining Machines and Equipment Prepare Preventive maintenance group Full employee involvement in study groups KEY: 9

Prepare Preventive maintenance group

Full employee involvement in study groups

KEY: 10 WORK FLOOR TIME POLICES Encourage the workers to do the next day’s preparation before they go home at night.

Encourage the workers to do the next day’s preparation before they go home at night.

KEY: 11 QUALITY ASSURANCE SYSTEM Next process is customer. No bad product to the next process. Workers perform inspection on their own product.

Next process is customer.

No bad product to the next process.

Workers perform inspection on their own product.

We must build quality in the processes themselves! I’ll inspect what I make

POKA YOKA

KEY: 12 DEVELOPING YOUR SUPPLIERS Treat external as internal division. Technical Support.

Treat external as internal division.

Technical Support.

KEY: 13 ELIMINATING WASTE WITH A “ TREASURE MOUNTAIN MAP” Only do those actions customer will pay.

Only do those actions customer will pay.

KEY: 14 EMPOWER WORKER TO MAKE IMPROVEMENTS Expand processing capability in the improvement corner. Building through Low-cost Automation Devices.

Expand processing capability in the improvement corner.

Building through Low-cost Automation Devices.

KEY: 15 SKILL VERSATALITY AND CROSS TRAINING

KEY: 16 PRODUCTION SCHEDULING

KEY: 17 EFFICIENCY CONTROL Decide on standard times for each process. Compare the standard times to actual times.

Decide on standard times for each process.

Compare the standard times to actual times.

KEY: 18 USING MICROPROCESSORS Mechatronics. Learnt about sensors and how they are used.

Mechatronics.

Learnt about sensors and how they are used.

KEY: 19 CONSERVING ENERGY AND MATERIALS Quantify the importance of conservation by showing energy and material costs as a percentage of total costs.

Quantify the importance of conservation by showing energy and material costs as a percentage of total costs.

KEY: 20 LEADING TECHNOLOGY - SITE TECHNOLOGY There is no interest in the progress of the other players in the industry. People in the factory are content with the current site technology. The factory is about on par with the rest of the industry.

There is no interest in the progress of the other players in the industry.

People in the factory are content with the current site technology.

The factory is about on par with the rest of the industry.

Taiichi Ohno's original enumeration of the seven wastes plus underutilized people. These are: Eight wastes Overproduction : Making more, &quot;earlier, or faster than the next operation needs it. Waiting for the next process, worker, material, information, or equipment. Transportation: unnecessary transport of materials. Overprocessings of anything that does not add value. Inventories more than the absolute minimum required to meet customer demand. Motion: unnecessary movement (like waiting) of people. Production of defective parts or information. Not fully utilizing employees brain power, skills, experience, talents and creativity.

Overproduction : Making more, &quot;earlier, or faster than the next operation needs it.

Waiting for the next process, worker, material, information, or equipment.

Transportation: unnecessary transport of materials.

Overprocessings of anything that does not add value.

Inventories more than the absolute minimum required to meet customer demand.

Motion: unnecessary movement (like waiting) of people.

Production of defective parts or information.

Not fully utilizing employees brain power, skills, experience, talents and creativity.

Value stream mapping

Value stream mapping – from rfq to delivery Determine the process family. Draw the current state map Create a future state map Develop the action plan to get to the improved future state.

Determine the process family.

Draw the current state map

Create a future state map

Develop the action plan to get to the improved future state.

Four steps to Value stream mapping Step 1: product development Identify customer requirements, Define method of delivery, and Define typical quantity requirements. This value stream can serve more than one customer, but be sure to use similar primary processes. Use a pencil rather than a computer.

Identify customer requirements,

Define method of delivery, and

Define typical quantity requirements.

Step 2: process design Cycle time (Operator and Machine cycle time) Changeover times, Average inventory queue, Average production batch size, Number of operations at each process, Package or container size, Available time (take out break and lunch times), Scrap rate, Machine up-time (availability), and Number of product variations. Perform an upstream walk-through for each process step, observing and documenting as much of the following as possible.

Cycle time (Operator and Machine cycle time)

Changeover times,

Average inventory queue,

Average production batch size,

Number of operations at each process,

Package or container size,

Available time (take out break and lunch times),

Scrap rate,

Machine up-time (availability), and

Number of product variations.

Step 3: preparation Record as much information as is pertinent in the process description box. Step 4: planning Develop a future state map, Dream about perfection (Imagineering), Think outside the box, Develop alternatives to the current state map that are muda free, and Focus on velocity .

Develop a future state map,

Dream about perfection (Imagineering),

Think outside the box,

Develop alternatives to the current state map that are muda free, and

Focus on velocity .

1% error Adds Directly to The Bottom Line

This business was very focused on its core processing activity, but less focused on the support functions. One of these support functions was the off-line handling and managing of its molds, which were quite fragile and breakable. This was considered to be a less important activity than production and, as long as the molds were ready for production as required, Plant Management largely ignored this activity. Also, the budget for this section was relatively small; in anyone year they would spend about $200,000 on the replacement of molds that were broken off line. As this was only about 1% of costs, the activity was never previously targeted in typical cost reduction programs. 1 % error Adds Directly to The Bottom Line

As part of an operational review, this organization investigated its 1 %errors and this previously ignored cost. A comparison with similar plants showed that it was possible to operate with almost zero breakages and that the current expense could be eliminated with better handling and management. The procedures from the other plants were adopted to address the issue. This resulted in breakages being almost eliminated. Focusing on this previously ignored 1 % error and adopting simple procedural changes added $200,000 to the bottom line. Contd…

Process capability

PROCESS CAPABILITY RATIO The concept of Process Capability Ratio (PCR), was defined as PCR = USL – LSL / 6 σ (two – sided) For one – sided upper specifications only, the PCR is defined as PCR U = USL - µ / 3 σ ( upper) And for one – sided lower specifications only, the PCR id defined as PCR L = µ - LSL / 3 σ ( Lower) The PCR aids in the evaluation of processes with respect to their specification limits.

Recommended Minimum values of the Process Capability Ratio 1.60 1.67 Safety, strength, or critical parameter, new process 1.45 1.50 Safety, strength, or critical parameter, existing process 1.45 1.50 New processes 1.25 1.33 Existing processes One – Sided Specification Two – sided Specification

Process follow out for a normally distributed characteristics (One-sided specifications). For Two sided Double the value of Y- axis

INDICES OF PROCESS CAPABILITY SHORT TERM CAPABILITY

LONG TERM CAPABILITY

Example: PCRs AS FRACTION NONCONFORMING PCRs may be translated into an expected fraction nonconforming, assuming a normal distribution for the characteristic of interest. For instance , a PCR = 1.25 for a two –sided specification indicates that PCR = USL – LSL / 6 σ = 1.25 So that USL – LSL = 7.5 σ and Z = 3.75 σ / σ = 3.75 More extensive tabulation from Normal Distribution Table, show that, 1 – Φ (3.75) = 0.000088 Since we are considering a two – sided specification, the expected fraction non conforming is 2 (0.000088) = 0.00018. Currently, quality controllers are concerned with parts per million (ppm) defective. For PCR = 1.25, we expect 180 ppm non conforming.

THE SIGMA CONVERSION GUIDELINES Short - Term To Long - Term FROM Short - Term Long - Term No Action - 1.5  + 1.5  No Action

Product quality

WHEN TO USE DPO AND WHEN DPU? e -dpo denotes the probability that an opportunity will not have a defect. e -dpu denotes the probability that a unit will be defect free. In most practical situations, we have more than one CTQ (critical-to-quality) characteristics associated with a product and hence more than one opportunity of defect. Hence it is more rational to use e -dpo as a measure of yield. However, if the possible number of opportunities is infinitely large, then e -dpu should be used as a measure of yield.

e -dpo denotes the probability that an opportunity will not have a defect.

e -dpu denotes the probability that a unit will be defect free.

In most practical situations, we have more than one CTQ (critical-to-quality) characteristics associated with a product and hence more than one opportunity of defect. Hence it is more rational to use e -dpo as a measure of yield.

However, if the possible number of opportunities is infinitely large, then e -dpu should be used as a measure of yield.

PERFORMANCE MEASURES AT A GLANCE d: Number of defects dpu: Defects per unit dpo: Defects per opportunities Dpmo: Defects per million opportunities Zst: Short term sigma rating Zlt: Long term sigma rating = Zst + 1.5 Y tp: Through put yield Y rt: Rolled through put yield Cp: Process capability (Potential) index Cpk: Process capability (performance) index PPM: Parts per million defects

Yes

NO

YIELD: THE CLASSICAL PERSPECTIVE Y final == S / U where Y final == Final yield U == Number of units tested S == Number of units that pass Is the classical calculation of yield con-elated to other- major business metrics? -Yield has always been considered a very important metric for guiding the business; however, no correlation is observed between yield and profit margin. How can this be explained?

IDEA OF ROLLED THROUGHPUT YIELD Suppose we say that there are 5 key tasks which must be executed ( without error) in order to successfully prepare a report, viz writing, typing, Xeroxing, collating and binding . Suppose that each of these tasks are operated at 3 σ level. The probability of not getting a defect at any of these stages is 0.9973. Then the probability of preparing an error free report is given by 0.9973 x 0.9973 x 0.9973 x 0.9973 x 0.9973 = 0.9866. If there are 18 such reports prepared, then the total number of opportunities for non-conformance would be 5 xI8=90. The probability of 100% conformance to all requirements would be 0.9866 18 = 0.7840. Thus the rolled throughput yield is given by y tp = 78.40%.

Suppose we say that there are 5 key tasks which must be executed ( without error) in order to successfully prepare a report, viz writing, typing, Xeroxing, collating and binding .

Suppose that each of these tasks are operated at 3 σ level. The probability of not getting a defect at any of these stages is 0.9973.

Then the probability of preparing an error free report is given by 0.9973 x 0.9973 x 0.9973 x 0.9973 x 0.9973 = 0.9866.

If there are 18 such reports prepared, then the total number of opportunities for non-conformance would be 5 xI8=90.

The probability of 100% conformance to all requirements would be 0.9866 18 = 0.7840.

Thus the rolled throughput yield is given by y tp = 78.40%.

In an organization the rate for winding, machine, laminating and processing Departments are 80%,98%,68%, & 99%. What is the YRT, YNA, PPM. In the process of producing 7500 units 50 defects were observed. The total type id defects that could have occurred were 10. Find DPU, TOP, DPO & YFT. The yield of 96%. What is the PPM Level? What is the PPM level for DPU of 2.5? EXERCISES

In an organization the rate for winding, machine, laminating and processing Departments are 80%,98%,68%, & 99%. What is the YRT, YNA, PPM.

In the process of producing 7500 units 50 defects were observed. The total type id defects that could have occurred were 10. Find DPU, TOP, DPO & YFT. The yield of 96%. What is the PPM Level?

What is the PPM level for DPU of 2.5?

The 10 steps And Minimizing inventory investment

Ensure consistent sign in and sign out of goods. Identify rush periods and level load activity accordingly. Step #1: Get Organized Arrange warehouse/ store in a logical and orderly manner. Appropriate shelving/ racking High- frequency items closest to entry / exit Group like products Clearly identified names and code numbers Ensure a high standard of housekeeping at all times. Use visual management techniques. Location indicators Reorder indicators Line marking

Ensure consistent sign in and sign out of goods.

Identify rush periods and level load activity accordingly.

Arrange warehouse/ store in a logical and orderly manner.

Appropriate shelving/ racking

High- frequency items closest to entry / exit

Group like products

Clearly identified names and code numbers

Ensure a high standard of housekeeping at all times.

Use visual management techniques.

Location indicators

Reorder indicators

Line marking

Step #2: Apply the Fundamentals with Rigor Use the fundamentals of supply chain management and stock calculation to set and review holding requirements. Step #3: Focus on Function, not Cost Recognize that the function of inventory is to maintain a supply promise to customers and manage the inventory to fulf1l this need. Inventory that does not move does not fulfi1 this need Base stocking policy on movement and service and not cost of product .

Use the fundamentals of supply chain management and stock calculation to set and review holding requirements.

Recognize that the function of inventory is to maintain a supply promise to customers and manage the inventory to fulf1l this need.

Inventory that does not move does not fulfi1 this need

Base stocking policy on movement and service and not cost of product .

Step #4: Identify and Focus on Leverage Points The key steps of cost in inventory are the ownership of the item and the length of time of ownership. To minimize cost, activities should focus on eliminating ownership (as opposed to access) and/or minimizing the time between gaining ownership and shipping/using the item. Step #5: Limit and Prioritize Resources Limiting the funds available for investment in inventory will drive the need to prioritize inventory and extract greater value from the investment.

The key steps of cost in inventory are the ownership of the item and the length of time of ownership.

To minimize cost, activities should focus on eliminating ownership (as opposed to access) and/or minimizing the time between gaining ownership and shipping/using the item.

Limiting the funds available for investment in inventory will drive the need to prioritize inventory and extract greater value from the investment.

Step #6: Work on the 1% errors A key 1% error in inventory management is the tracking of receipts and delivery. By ensuring that the systems are followed and records kept, the data will be available to make sound stocking decisions. Step #7: Eliminate Duplication This includes duplication of items, but also duplication of locations and duplication of safety stock. Step #8: Question Everything The assumptions made when inventory levels were first set may no longer be valid. Have supply dynamics changed? Have customer needs/usage changed? Has our appetite for risk changed? Review inventory assumptions on a regular basis.

A key 1% error in inventory management is the tracking of receipts and delivery. By ensuring that the systems are followed and records kept, the data will be available to make sound stocking decisions.

This includes duplication of items, but also duplication of locations and duplication of safety stock.

The assumptions made when inventory levels were first set may no longer be valid. Have supply dynamics changed? Have customer needs/usage changed? Has our appetite for risk changed?

Review inventory assumptions on a regular basis.

Step #9: Take Some Chances Seek to use innovations that do not have an obvious direct payback. For example, apply visual management techniques- Arrange for consignment stocks if this has not been your policy. Remember to understand and manage the risks. Step #10: Ignore Tradition Review what is preventing further improvement and change it! Review e-business changes that might provide further opportunity.

Seek to use innovations that do not have an obvious direct payback. For example, apply visual management techniques-

Arrange for consignment stocks if this has not been your policy. Remember to understand and manage the risks.

Review what is preventing further improvement and change it!

Review e-business changes that might provide further opportunity.

Quality tools with jidoka and poka yoke

Andon: A Japanese word meaning light or lantern. It is triggered by an abnormal condition or machine breakdown. It is a form of communication indicating that human intervention is required. Many times these are presented like a stoplight (red = stop, yellow = caution, green = go). Poke – yoke (error Proofing): low – cost, highly reliable devices or innovations that can either detect abnormal situations before they occur in a production process, or, if they occur, will stop the machines or equipment and prevent the production of defective products, those that prevent errors by an operator, and those that detect errors by an operator and give a warning, and those that defects in products and prevent further processing of them.

Heijunka: A method of leveling production for mix and volume. jidoka: This defect detection system automatically or manually stops production and/or equipment whenever an abnormal or defective condition arises. Any necessary improvements can then be made by directing attention to the stopped equipment and the worker who stopped the operation. The jidoka system posits faith in the worker as a thinker and allows all workers the right to stop the line on which they are working. It is now called autonomation in English. Continuous flow production: A production system where products flow continuously rather than being separated into lots. No work in process is built up.

Manufacturing resource planning (MRP II): MRP as just defined, plus capacity planning and a finance interface to translate operations planning into financial terms, and a simulation tool to assess alternate production plans. ERP is enterprise wide resource planning waste. Material requirements planning (MRP): A computerized system typically used to determine the quantity and timing requirements for production and delivery of items (both customers and suppliers). Using MRP to schedule production at various processes will result in push production, since any predetermined schedule is only an estimate of what the next process will actually need. Overall equipment effectiveness (oee): A machine’s overall equipment effectiveness is the product of its availability. Performance efficiency, and first – pass yield.

First- pass yield (fpy): The time required to complete one cycle of an operation. The time elapsing between a particular point in one cycle and the same point in the next cycle. If cycle time for every operation in a complete process can be reduced to equal takt time, products can be made in single-piece flow. Cycle time The quality rate, is the percentage of units that complete a process and meet quality guidelines with out being scrapped, rerun, retested, reworked, returned, or diverted into an off-line repair area. FPY is calculated by dividing the units entering the process minus the defective units by the total number of units entering the process.

Mistake - Proofing emphasizes the detection and correction of mistakes before they become defects delivered to customers. It puts special attention on the one constant threat to any process: human error. Mistake – Proofing is simply to pay careful attention to every activity in the process and to place checks and problem prevention at each step. It’s a matter of constant, instantaneous feedback, rather like the balance and direction data transmitted from a cyclist’s ears to brain, keeping his or her bike upright and on the path. MISTAKE - PROOFING (OR POKA – YOKE)

USES OF MISTAKE – PROOFING Mistake – Proofing can be used to: Fine – tune improvements and process designs from DMAIC projects. Gather data from processes approaching Six Sigma performance. Eliminate the kinds of process issues and defects needed to take a process from 4.5 to 6 Sigma. BASIC STEPS IN MISTAKE – PROOFING Mistake – Proofing is best applied after completion of a through FMEA prediction and prevention review. Then we can Identify possible errors that might occur despite preventive actions. Determine a way to detect that an error or malfunction is taking place or about to occur. Identify and select the type of action to be taken when an error is detected.

USES OF MISTAKE – PROOFING

Mistake – Proofing can be used to:

Fine – tune improvements and process designs from DMAIC projects.

Gather data from processes approaching Six Sigma performance.

Eliminate the kinds of process issues and defects needed to take a

process from 4.5 to 6 Sigma.

BASIC STEPS IN MISTAKE – PROOFING

Mistake – Proofing is best applied after completion of a through FMEA

prediction and prevention review. Then we can

Identify possible errors that might occur despite preventive actions.

Determine a way to detect that an error or malfunction is taking place or about to occur.

Identify and select the type of action to be taken when an error is detected.

DIFFERENT KIND OF ERRORS Forgetfulness – Rail gate closing Errors due to misunderstanding – Steps on break car with auto transmission Errors in identification – Bill amount Errors made by Amateurs Wilfull errors – No cars at sight crossing in red. In advertent errors – Crossing without noticing Errors due to slowness – Delays, step on break Errors due to lack of standards – To discretion Surprise errors – Malfunction without warning Intentional errors – Crimes Mistake happen for many reasons, but almost all can be prevented if we take the Time to identify when and why they happen.

DIFFERENT KIND OF ERRORS

Forgetfulness – Rail gate closing

Errors due to misunderstanding – Steps on break car with auto transmission

Errors in identification – Bill amount

Errors made by Amateurs

Wilfull errors – No cars at sight crossing in red.

In advertent errors – Crossing without noticing

Errors due to slowness – Delays, step on break

Errors due to lack of standards – To discretion

Surprise errors – Malfunction without warning

Intentional errors – Crimes

Mistake happen for many reasons, but almost all can be prevented if we take the

Time to identify when and why they happen.

The basic types of “Mistake – Proofing Device” are: Control: An action that self – corrects the process, like an automatic spell –checker / corrector. Shutdown: A procedure or device that blocks or shuts down the process when an error occurs. Example. The automatic shutoff feature of a home iron. Warning: This alerts the person involved in the work that something is going wrong. Example. A seat – belt buzzer. So is a control chart that shows that a process may be “out of control”.

Some common types of Mistake –Proofing measures include: Color-and shape-coding of materials and documents Distinctive shapes of such key items as legal documents Symbols and icons to identify easily confused items Computerized checklists, clear forms, best-in-class, up-to-date procedures and simple workflows will help to prevent errors from becoming defects in the hands of customers.

Some common types of Mistake –Proofing measures include:

Color-and shape-coding of materials and documents

Distinctive shapes of such key items as legal documents

Symbols and icons to identify easily confused items

Computerized checklists, clear forms, best-in-class, up-to-date procedures and simple workflows will help to prevent errors from becoming defects in the hands of customers.

MISTAKE – PROOFING “DOS AND DON’TS” DO’s: Try to imagine all conceivable errors that can be made. Use of all your creative powers to brainstorming clever ways to detect and correct errors as part of the work process itself. DON’TS: Fall into the “ to error is human” mindset. Rely on people to catch their own errors all the time.

MISTAKE – PROOFING “DOS AND DON’TS”

DO’s:

Try to imagine all conceivable errors that can be made.

Use of all your creative powers to brainstorming clever ways to detect

and correct errors as part of the work process itself.

DON’TS:

Fall into the “ to error is human” mindset.

Rely on people to catch their own errors all the time.

IMPLEMENTING THE LEAN KAIZEN

Vision Statement Broad Objectives Foster a commitment to continuous improvement with in- creased visibility of how we use time. Reduce or eliminate activities that do not add value. Foster a commitment to a high level of quality-doing the right things right the first time. Apply state-of-the-art tools for waste reduction and quality improvement. Change the management culture from &quot;traditional&quot; to &quot;team oriented,&quot; enhancing employee involvement at all levels. Employ statistical management techniques as a new language for all employees, identifying problems when they occur, and resolving them at the lowest possible level in the organization. Train employees to be team leaders, facilitators, and team members in accordance with the new culture. Foster innovation and commitment to being world class all levels. Promote the use of consensus decision- making whenever possible as the foundation for the new culture.

Foster a commitment to continuous improvement with in- creased visibility of how we use time. Reduce or eliminate activities that do not add value.

Foster a commitment to a high level of quality-doing the right things right the first time.

Apply state-of-the-art tools for waste reduction and quality improvement.

Change the management culture from &quot;traditional&quot; to &quot;team oriented,&quot; enhancing employee involvement at all levels.

Employ statistical management techniques as a new language for all employees, identifying problems when they occur, and resolving them at the lowest possible level in the organization.

Train employees to be team leaders, facilitators, and team members in accordance with the new culture.

Foster innovation and commitment to being world class all levels.

Promote the use of consensus decision- making whenever possible as the foundation for the new culture.

Market Imperatives Compress lead-time from six weeks to two weeks. Improve on-time delivery performance from 75 to 95 percent. Current Conditions Backlog: 2-3 weeks (shippable orders) Setup times: punch, 45 minutes brake, 40 minutes hardware, 30 minutes spot weld, 25 minutes Material management: batch-push Subcontract lead times: 1-2 weeks Lot sizes: 90 days Inventory turns: 8 turns/year Lead time: 5-8 weeks (including outside processes) Facilities layout: process functional, multiple buildings Quality: Cost = 2% of sales Productivity: Rs. 8500 per employee/year (Rs. 12000 direct labour)

Compress lead-time from six weeks to two weeks.

Improve on-time delivery performance from 75 to 95 percent.

To – be Vision Backlog: 3 days maximum (shippable orders) Setup times: punch, 9 minutes brake, 12 minutes hardware, 5 minutes spot weld, 9 minutes Material management: demand pull Subcontract lead times: 2-3 days Lot sizes: 2 weeks Inventory turns: 20 turns/year Lead time: 9-11 days (including outside processes) Facilities layout: cellular, single building Quality: cost < 1 % of sales Productivity: Rs. 10000 per employee/year (Rs. 130000 direct labor)

Model-line personnel will exhibit the following characteristics: Accept only zero quality rejections; Are not passive witnesses; Keep the flow; Continually suggest improvement; Are interested in production goals; Know how to do their jobs; Know how to do others' jobs; Can stop the line; Assist their teammates. Predict and avoid problems; Measure their own output; Measure their own quality; Understand the product; Understand the process; Call in resources as needed; Communicate, cooperate, collaborate; and Are team players and team leaders.

Accept only zero quality rejections;

Are not passive witnesses;

Keep the flow;

Continually suggest improvement;

Are interested in production goals;

Know how to do their jobs;

Know how to do others' jobs;

Can stop the line;

Assist their teammates.

Predict and avoid problems;

Measure their own output;

Measure their own quality;

Understand the product;

Understand the process;

Call in resources as needed;

Communicate, cooperate, collaborate; and

Are team players and team leaders.

Role of Steering Team: Visits other successful companies; Provides organizational development through training; Generates, revises, maintains the vision; Develops and communicates the vision and plan, formally and informally; Acts as strong sponsor for the entire improvement process; Remains visible in the implementation process; Sets the example (good at the fundamentals); Demonstrates the new values of absolute quality and waste elimination; Models pro-active behavior; Begins and ends meetings on time; Uses consensus decision-making; Supports &quot;do it right the first time&quot;; Directs, informs, and guides the continuous improvement coordinator, outside consultants, and model-line team in a collaborative manner;

Visits other successful companies;

Provides organizational development through training;

Generates, revises, maintains the vision;

Develops and communicates the vision and plan, formally and informally;

Acts as strong sponsor for the entire improvement process;

Remains visible in the implementation process;

Sets the example (good at the fundamentals);

Demonstrates the new values of absolute quality and waste elimination;

Models pro-active behavior;

Begins and ends meetings on time;

Uses consensus decision-making;

Supports &quot;do it right the first time&quot;;

Directs, informs, and guides the continuous improvement coordinator, outside consultants, and model-line team in a collaborative manner;

Cond… Resolves disagreement by consensus; Meets periodically (not less than monthly) to review the progress of the program; Encourages and sponsors program activities and strongly sponsors the successful adaptation of the new philosophy at The Jobbe Shoppe; Chooses problem/opportunity areas for teams to work on; Creates guidelines and provides support to team (for example, defines boundaries, expectations); Meets with team leaders and program coordinator to review problem statement, milestones, and action plans; Manages change by spreading and demonstrating (by action) the new values; and Ensures the proper resources are assigned to accomplish the task within budget and schedule

Resolves disagreement by consensus;

Meets periodically (not less than monthly) to review the progress of the program;

Encourages and sponsors program activities and strongly sponsors the successful adaptation of the new philosophy at The Jobbe Shoppe;

Chooses problem/opportunity areas for teams to work on;

Creates guidelines and provides support to team (for example, defines boundaries, expectations);

Meets with team leaders and program coordinator to review problem statement, milestones, and action plans;

Manages change by spreading and demonstrating (by action) the new values; and

Ensures the proper resources are assigned to accomplish the task within budget and schedule

Role of the Continuous Improvement Coordinator Coordinates with steering team members; Reports status and problem areas to facilitate corrective action when needed; Establishes ongoing education program in collaboration with steering team; Ensures that teams have a fully developed project plan; Supports the teams in using quality improvement processes, applying Just-in Time (JIT) techniques, and developing as a team; Aids the team leaders in preparing for meetings, provides feedback on team meetings; Provides a link between team leaders and the steering team; Keeps up to date on world-class technologies; Instructs on general problem-solving techniques; Prepares and delivers team training on selected topics, serves as resource person to supervisors, team leaders, and members;

Coordinates with steering team members;

Reports status and problem areas to facilitate corrective action when needed;

Establishes ongoing education program in collaboration with steering team;

Ensures that teams have a fully developed project plan;

Supports the teams in using quality improvement processes, applying Just-in Time (JIT) techniques, and developing as a team;

Aids the team leaders in preparing for meetings, provides feedback on team meetings; Provides a link between team leaders and the steering team;

Keeps up to date on world-class technologies;

Instructs on general problem-solving techniques;

Prepares and delivers team training on selected topics, serves as resource person to supervisors, team leaders, and members;

Cond… Monitors progress of the teams, consults on use of techniques; Shares experiences and results of team activities with others; and Observes group dynamics and works with team leader to design and implement activities that contribute to team health; Leads the team through the problem -solving process reflected in the project plan and schedule; Teaches/refreshes quality improvement and waste reduction JIT techniques; Communicates team progress to the team; Communicates/coordinates with supervisor and program coordinator, especially before and after team meetings; Shares experience and knowledge; Fulfills administrative duties; and Encourages team member participation.

Monitors progress of the teams, consults on use of techniques;

Shares experiences and results of team activities with others; and

Observes group dynamics and works with team leader to design and implement activities that contribute to team health;

Leads the team through the problem -solving process reflected in the project plan and schedule;

Teaches/refreshes quality improvement and waste reduction JIT techniques;

Communicates team progress to the team;

Communicates/coordinates with supervisor and program coordinator, especially before and after team meetings;

Shares experience and knowledge;

Fulfills administrative duties; and

Encourages team member participation.

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