This document discusses integrating Lean and Six Sigma approaches to achieve breakthrough improvements in quality, productivity, and competitive position. It outlines key metrics like cost of poor quality, process lead times, inventory turns, and process efficiency that can be improved. Value stream mapping is presented as a tool to identify improvement opportunities and track progress. Linked scorecards are proposed to monitor performance across key areas like profits, products, processes, projects and people.

1. Integrating Lean & Six Sigma Using Value Stream Mapping and Linked Scorecards to Achieve Breakthrough Improvements in Quality, Productivity and Competitive Position Ron Mitchell ASQ, Hamilton, Ontario – 3/10/04

2. Ron Mitchell Ron Mitchell is Director of Lean & Six Sigma Services at Omnex. He is a trainer and consultant with twenty years experience-helping clients understand and apply Lean Manufacturing and Quality Improvement Technologies. Ron studied the Toyota Production System at NUMMI, the joint General Motors and Toyota Motors Corporation facility in Fremont, California; and, he was part of the team that helped launch Synchronous Manufacturing at General Motors. Ron received his training in Quality Management from Dr. W.E. Deming, Dorian Shainin and through The Crosby Quality College. Ron is a Lean Manufacturing Master Black Belt and a Six Sigma Master Black Belt. Ron holds Bachelor’s and Master’s Degrees in Industrial and Organizational Psychology and a PhD – Abd in Behavioral Systems Analysis.

3. Integration & Alignment Lean Six Sigma ISO/TS 16949 New Products ISO 14001 Cost Reductions Mergers/Acquisitions Consolidations/Layoffs New Technology

4. Cost of Poor Quality and Sigma COPQ Sigma PPM Position 20-25% of Sales 2.0 308,537 Non Competitive 15-20% of Sales 3.0 66,807 Average Company 10-15% of Sales 4.0 6,210 5-10% of Sales 5.0 233 <5% of Sales 6.0 3.4 World Class

5. Quality engineering and administration Inspection/test (materials, equipment, labor) Expediting Scrap Rework Rejects Warranty claims Maintenance and service Cost to customers Excess inventory Additional labor hours Longer cycle times Quality audits Vendor control Improvement program costs Process control Opportunity cost if sales greater than plant capacity Cost of Poor Quality (COPQ) “ What about the greatest cost of all… the cost of a lost customer?” Dr. W.E. Deming

8. Extra Handling & Storage Costs Expediting Costs Premium Freight Charges Late Deliveries Long Leadtimes Cost to Customer Excess Inventory Excess Scrap & Rework Cost of Capital Lost Customer Loyalty Excess Labor Costs Opportunity Costs When Potential Sales Greater Than Current Capacity Cost of Poor Flow (COPF) Excess Capital Investments

9. Cost of Poor Flow and Inventory Turns COPF Inventory Turns Competitive Position 20-25% of Sales 8 to 10 Non-Competitive 15-20% of Sales 10 to 20 Average Company 10-15% of Sales 20 to 50 5-10% of Sales 50 to 100 <5% of Sales 100 Plus World Class Company

11. Toyota Production System

13. Show Me the Money!!! Cost of Poor Flow Cost of Poor Quality

15. Managing Change - the Key to Success

19. Profits Products Process Projects People Scorecard Scorecard Scorecard Scorecard Scorecard Linked Scorecards Planning for Improvement Planning Improving

20. Profits Products Process Projects People Scorecard Scorecard Scorecard Scorecard Scorecard Customer Research - Surveys Value Stream Maps Continuous Flow Supermarket Pull Six Sigma Quality SMED/TPM/FIVE S Standards Education Training Resources Feedback Planning for Process Improvement

21. Profits Products Process Projects People Scorecard Scorecard Scorecard Scorecard Scorecard Achieving Process Improvement New Knowledge, Skill, Attitudes and Behaviors Improved Methods & Technology Lean Productivity & Six Sigma Quality (Better, Faster, Cheaper) Customer Satisfaction Increased Sales Increased Margins

23. 8400 pcs/mo Skid = 40 pieces Distributors & Installers Weekly FS = 600 SQ FS = 800 SQ FS = 300 SQ FS = 4000 SQ 9.5 days 7 days 2.4 days 1.9 days 5.2 days 11.4 days 25 seconds 60 seconds 35 seconds 20 seconds 40 seconds Weekly Ship Schedule Weekly Schedule C/T=25 sec. C/O= 90 sec. U/T = 95% QR = 99% SHEAR PUNCH C/T=60 sec. C/O= 0 U/T = 95% QR = 98% FORM C/T=35 sec. C/O=40 min. U/T = 90% QR = 95% 1 C/T = 20 C/O=0 U/T = 99% 1 FS = 600 SQ S. WELD QR = 98% QR = 97% PAINT/BOX 1 1 PRODUCTION CONTROL MRP Weekly PO fax 90/60/30 Day Forecast 90/60/30 Day Forecasts Weekly Order Weekly I Sheets 4000 I 3000 I 1000 I 800 I 2200 I 4800 Lead Time = 37.4 DAYS Value Added Time = 180 sec 2500 Sheets Michigan Steel Co. 10 C/T=40 sec. C/O=0 U/T = 95% SHIPPING Staging

25. Measure Current State Future State Improvement Raw Inventory Days WIP Inventory Days F.G. Inventory Days Process Leadtime Process Efficiency Rolled Throughput Yield Floor Space Labor Productivity Process Scorecard for: DSM Cabinet Body Mfg. 9. 5 Days 16. 5 Days 11. 4 Days 37. 4 Days 88% 2300 SQ Ft. * 105 / OP. * . 02% * Mfg. Only – excludes paint and assembly operation. Availability 90%

26. 8400 pcs/mo Skid = 40 pieces Distributors & Installers Daily Daily Ship Schedule 2 Days 10 PAINT/BOX   Body Cell 2 Days Daily  1 Future State Map DSM Cabinet Body Cell October 7, 2003 TT = 60 sec. U/T Cell Pull Supplier Develop PRODUCTION CONTROL MRP Daily PO fax 90/60/30 Day Forecast 90/60/30 Day Forecasts Daily Order 500 Sheets Michigan Steel Co. SHIPPING Staging 1 Day 40 40 100 C/T = 59 sec. C/O = 90 sec. Uptime = 99% FTQ = 99.9% FS = 875 FS = 4000 SQ C/T=40 sec. C/O=0 U/T = 95% FTQ = 99.9% FTQ FTQ C/O

27. Measure Current State Future State Est. Savings Raw Inventory Days WIP Inventory Days F.G. Inventory Days Process Leadtime Process Efficiency Rolled Throughput Yield Floor Space Labor Productivity Availability Process Scorecard for: ____________________ DSM Cabinet Body Mfg . 9. 5 Days 2 Days 16. 5 Days 1 Day 11. 4 Days 2 Days 37. 4 Days 5 Days 88% 99.9% 2300 SQ Ft. * 875 SQ Ft. * 105 / OP. * 420 / OP. * 90% 99.9% . 02% . 07% * Mfg. only – excludes paint and assembly operation.

28. Measure Current State Future State Savings Raw Inventory Days WIP Inventory Days F.G. Inventory Days Process Leadtime Process Efficiency Rolled Throughput Yield Floor Space Labor Productivity Availability TOTAL SAVINGS Process Scorecard for: ____________________ DSM Cabinet Body Mfg. 9. 5 Days 2 Days $147,100* 16. 5 Days 1 Day $313,404* 11. 4 Days 2 Days $185,484* 37. 4 Days 5 Days 88% 99.9% $2,387,045 2300 SQ Ft2 875 SQ Ft2 $28,500 105 / OP. 420 / OP. $270,000 90% 99.9% $1,034,208 $4,365,741 . 02% . 07% *Fixed cost savings from reduced inventory carrying costs… $3.2 Million in capital savings.

29. Accounting Human Resources Operations Purchasing Sales Strategic Measures – Voice of the Customer/Stakeholder Process Variation Process Measures Voice of the Process Leadership Team Objectives Organizing for Breakthrough Improvement Projects

30. Lean / Six Sigma Improvement Organization

32. Lean / Six Sigma Management Planning Value Stream Maps Lean / Six Sigma Project/Change Management OEE & Quick Pull Continuous T.P.M & Six Sigma 5 S and Changeovers Scheduling Flow (Cells) Error Proofing Quality Process Visual Mgmt. Design Develop Purchase Produce Assemble Inspect Deliver Lean Six Sigma Projects Begin Here

33. Questions & Answers