Making the Case for Quality Optimizing Purchasing Processes Saves $1 Million • UsingtheDMAIC method,aSixSigma improvementteamat MWMINTERNATIONAL MotoresinBrazilimproved thecompany’ssupplier selectionprocess. • KnownastheMoving Forwardteam,thisgroup appliedawidevariety ofqualitytoolstoreduce theprice/weightratiofor bolts,akeycomponent forthecompany’sdiesel engineproducts. • Bystreamliningprocesses, reducingvariability,and increasingefficiency, theyearlongproject helpedreduceengine boltcostsby$1million. • Theteamsharedits successstorywitha worldwideaudiencewhen itparticipatedinthefinal roundofcompetitioninthe 2009InternationalTeam ExcellenceAwardProcess. AtaGlance... Often the simple things create the biggest impact. But could a change in purchasing processes for the most basic manufacturing components, like bolts, actually lead to $1 million in savings, increased effi- ciency, and reduced process variation? When a multidisciplinary Six Sigma improvement team tackles the issue, the answer is a resounding yes! About MWM INTERNATIONAL MWM INTERNATIONAL Motores is a wholly-owned subsidiary of Navistar, a major worldwide diesel engine manufacturer and current leader in diesel engine technology and development in Latin America. Operations include a technology and business center in São Paulo, Brazil, as well as three South American manufacturing sites—São Paulo; Canoas, Brazil; and Jesus Maria, Argentina. The company’s engine products range from 2.5 to 9.3 liters and from 50 to 375 cv and serve a wide range of markets in the vehicular, agricultural, industrial, and marine sectors. Among MWM INTERNATIONAL’s customers are Ford, GM, Volvo, Volkswagen, New Holland, Troller, and Valtra. Focusing on Purchasing Activities to Reduce Waste As an engine maker, MWM INTERNATIONAL uses more than 400 different bolts in its manufactur- ing operations, which led to inefficient purchasing strategies for this commodity. Because bolts are a standardized product, both the material and production processes are similar for the entire range of existing bolts. Therefore, MWM INTERNATIONAL officials believed it was reasonable to expect a linear relationship between the price of bolts and steel—the raw material from which they are made. The relationship is expressed in a formula called linear price performance or LPP. This comparative method evaluates price and measurement correlation in kilograms, linear meters, square meters, or liters. LPP is calculated by dividing price per a measurement unit, as shown in the examples below. price price weight = LPP or length = LPP Company leaders surmised that finding a way to optimize the organization’s purchasing processes for engine bolts would reduce the LPP, thus lowering costs and reducing waste. This Six Sigma improvement project was identified as a result of the company’s culture of continu- ous improvement, whereby MWM INTERNATIONAL officials consistently pursue opportunities to develop n ...

1. Making the Case for Quality
Optimizing Purchasing Processes
Saves $1 Million
• UsingtheDMAIC
method,aSixSigma
improvementteamat
MWMINTERNATIONAL
MotoresinBrazilimproved
thecompany’ssupplier
selectionprocess.
• KnownastheMoving
Forwardteam,thisgroup
appliedawidevariety
ofqualitytoolstoreduce
theprice/weightratiofor
bolts,akeycomponent
forthecompany’sdiesel
engineproducts.
• Bystreamliningprocesses,
reducingvariability,and
increasingefficiency,
theyearlongproject
helpedreduceengine
boltcostsby$1million.
• Theteamsharedits
successstorywitha

2. worldwideaudiencewhen
itparticipatedinthefinal
roundofcompetitioninthe
2009InternationalTeam
ExcellenceAwardProcess.
AtaGlance...
Often the simple things create the biggest impact. But could a
change in purchasing processes for the
most basic manufacturing components, like bolts, actually lead
to $1 million in savings, increased effi-
ciency, and reduced process variation? When a multidisciplinary
Six Sigma improvement team tackles
the issue, the answer is a resounding yes!
About MWM INTERNATIONAL
MWM INTERNATIONAL Motores is a wholly-owned
subsidiary of Navistar, a major worldwide
diesel engine manufacturer and current leader in diesel engine
technology and development in Latin
America. Operations include a technology and business center
in São Paulo, Brazil, as well as three
South American manufacturing sites—São Paulo; Canoas,
Brazil; and Jesus Maria, Argentina.
The company’s engine products range from 2.5 to 9.3 liters and
from 50 to 375 cv and serve a
wide range of markets in the vehicular, agricultural, industrial,
and marine sectors. Among MWM
INTERNATIONAL’s customers are Ford, GM, Volvo,
Volkswagen, New Holland, Troller, and Valtra.
Focusing on Purchasing Activities to Reduce Waste
As an engine maker, MWM INTERNATIONAL uses more than

3. 400 different bolts in its manufactur-
ing operations, which led to inefficient purchasing strategies for
this commodity. Because bolts are
a standardized product, both the material and production
processes are similar for the entire range of
existing bolts. Therefore, MWM INTERNATIONAL officials
believed it was reasonable to expect a
linear relationship between the price of bolts and steel—the raw
material from which they are made.
The relationship is expressed in a formula called linear price
performance or LPP. This comparative
method evaluates price and measurement correlation in
kilograms, linear meters, square meters, or
liters. LPP is calculated by dividing price per a measurement
unit, as shown in the examples below.
price price
weight
= LPP or
length
= LPP
Company leaders surmised that finding a way to optimize the
organization’s purchasing processes for
engine bolts would reduce the LPP, thus lowering costs and
reducing waste.
This Six Sigma improvement project was identified as a result
of the company’s culture of continu-
ous improvement, whereby MWM INTERNATIONAL officials
consistently pursue opportunities to
develop new projects that follow the define, measure, analyze,
improve, and control (DMAIC) method-
ology. The organization uses the following tools to help

4. pinpoint new process improvement projects:
by Janet Jacobsen
July2009
ASQ www.asq.org Page1of4
http://www.asq.org
http://www.asq.org
• Voice of the customer, to identify customer requirements.
• Voice of the process, to learn about process capability.
• Process or value stream maps, to understand the
organization’s processes.
• Failure mode and effects analysis (FMEA), to discover
possible failures.
• Critical-to-quality (CTQ) trend analysis, to identify good and
bad trends.
From the onset,
the team involved
stakeholders—
both internal
and external—
in the effort.
Stakeholders,
listed in Table 1,
played key roles
in mapping a
project charter
and with

5. brainstorming
and process-
mapping exercises
that helped define
both positive and
negative impacts
on various
activities.
Searching for a Cause and Formulating
Solution
s
The improvement project kicked off in August 2007 with an
11-member group called the Moving Forward team. See the
sidebar, Meet the Project Team, for a complete list of team
members. These individuals were carefully selected from a
“talent bank” of employees who completed training in lean, Six
Sigma, or other process improvement strategies.
Identifying Root Causes
After gathering data on LPP, including completing the pains-
taking task of checking the weight of every bolt, the team

6. identified CTQ factors. Arranging the CTQs on a process map
enabled the team to better estimate the incidence of each, as
well as understand distinctive features of the factors in every
stage. Identifying all factors was necessary, but proved difficult
because some were not readily apparent. “We had to walk
through every process step to identify the factors and relate
them
with the LPP,” explains Fernando Lima Lopes, Six Sigma Black
Belt coach on this project.
Next, the team selected the most critical factors and conducted
a more thorough analysis with a prioritization matrix, where
scores were assigned according to the influence of each factor
in the response variable. The four factors listed below were cor-
related in an attempt to observe a cause-effect relationship and
thus determine the root cause of the problem:
• The supplier—some vendors offer competitive advantages
that affect the final price of bolts.
• Annual purchase volume that showed a negative correlation
with LPP.
• The technical specifications of each bolt that may affect the

7. price.
• The commodity strategy for conducting the quotation process
to select bolt suppliers.
Team members then used design of experiments to help deter-
mine the relationship between the response variable, LPP, and
the
scored factors. The four selected factors were carefully
analyzed
and verified during each process phase. Eventually, a quotation
was simulated for a bolt in each category. The simulation
included
purchasing volumes in three levels and with four separate
suppli-
ers. Quotes were requested from suppliers and the team drafted
a
model, including LPPs from the suppliers’ returned quotes.
As a result of the simulations, the team observed that higher
LPPs
resulted from low volume purchases from a particular supplier,
referred to here as Supplier A. Data confirmed that Supplier A
offered a competitive advantage only for very high volumes of
bolts

8. and that 91 percent of the bolts purchased came from this
supplier.
In addition, team members discovered that the company’s
commod-
ity strategy did not include recommendations on annual
purchasing
volumes, but did advocate giving Supplier A the opportunity to
bid
on any new business. Thus, the team identified incorrect
supplier
selection as the root cause. “We could see that good planning
led us
to identify the true root cause of the problem and to choose
correc-
tive actions to neutralize this cause,” recalls Lopes.
Developing a