Six Sigma Case Studyv.2

Dr. Ron Tibben-Lembke

SCM 494

Six Sigma Case Study - POI

Paper Organizers International Filing, organizing, and paper shuffling services Uses MSD (metallic securing devices) Increasing complaints from the Paper Shuffling

Department (PSD) about MSDs breaking and failing to keep papers together

Customers’ papers can get mixed together Purchasing wants to eliminate MSD complaints

Mission Statement

“Put the right information in the right place.” Management created a list of objectives and

projects that will support those objectives

President Director of Paper Shuffling Dept

BusinessObjectivesIncrease # of orders

Minimizeproductioncosts

Eliminateemployeecomplaints

BusinessIndicators# orders perMonth (c chart)

Increase # of POI services used by eachcustomer

1. avg. # services used per customer, per quarter2. St dev. of# serv. used(x-bar and s)

Prod costs per month(I-MR chart)

# employeecomplaints permonth (c chart)

AreaObjectivesIncrease # orders in PSD

Increase #Services used by eachcustomer inPSD

Minimize production costs in PSD

Eliminate PSDemployee complaints

AreaIndicatorsNo. orders in PSD / mo.(c chart)

Potential 6Sigma projectsNew customerpromotions project

1. avg. # services used per PSD cust, per Q2. St dev. Of# serv. used(x-bar and s)

EmployeeMorale project

# PSD employeeComplaints/mo(c chart)

MSD qualityproject

ProductionCosts in PSD/mo(I-MR chart)

Existingcustomerpromotionsproject

Current Costs

Management considers costs production costs in PSD to be too high Avg. Production costs of $1.1m per month Standard deviation is $116k. R-bar / d2 = $116,672 Average is “too high” but process is under control

0Subgroup 10 20 30 40 50 60 70

800000

900000

1000000

1100000

1200000

1300000

1400000

Indi

vidu

al V

alue

Mean=1096880

UCL=1393879

LCL=799881

0

100000

200000

300000

400000

Mov

ing

Ran

ge

R=111672

UCL=364863

LCL=0

I and MR Chart for Production C

Production costs Normally distributed

12900001250000121000011700001130000109000010500001010000970000930000890000

10

5

0

Production Costs in PSD

Fre

quen

c y

Histogram of Production Costs in PSD

Prioritizing Six Sigma Projects Potential Six Sigma Projects

Business objective

Increase # orders

Increase # POI servicesused by each customer

Minimize productioncosts

Eliminate employeecomplaints

Weighted average of potential

WeightNew Customer

Promotions

ExistingCustomer

PromotionsMSDQuality

EmployeeMorale

0.35 3 3 0 0

0.10 1 3 0 0

0.40 0 0 9 3

0.15 0 0 9 9

1.15 1.35 4.95 2.55

Starting MSD Project

Champion and process owner make initial charter.

1. What is the name of the process? MSD purchasing

2. What is the aim? Purchase MSDs that improve productivity and morale of PSD

3. What is economic rationale?

a. Why do it at all? Un-durable clips (<4 bends): lost papers, frustrated

employees lead to higher processing costs, inefficient labor costs (60% cannot withstand test)

Functionality (broken in box): sorting costs, frustrated employees (60% of boxes have >5 broken MSDs)

Additional charter questionsb. Why do it now? High production costs, complaintsc. What business objectives are supported by project? Min.

costs, reduce complaintsd. Consequences of not doing: lower profits, more employee

complaintse. What projects have higher priority? None.

4. What is the problem statement? Low-quality MSDs create additional production costs and

employee frustration5. What is goal or desired state?

100-fold increase in durability 0.6% from 60% 10-fold every 2 years, so 100 over 4 year project 100-fold would take from 600,000 DPMO to 6,000 DPMO,

set goal as 4 sigma (p. 739)

More charter questions6. What is scope?

a. Boundaries? When purchasing receives purchase orders, ends when MSD put in inventory

b. What is out of bounds? How employees use MSDs

c. What resources? $30,000, including salaries

d. Who can approve expenditures? Process owner

e. Can they go over $30,000? No.

f. What are obstacles? Budget, 21 weeks

g. What time commitment expected? Friday 8-9am meetings, progress reports

h. What about regular duties? OT may be required, not in budget

Gantt Chart for Project

Steps Resp. Week

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Define BA X X X X X X

Mesure BA X X

Analyze BA X X X

Improve BA X X X X X X

Control BA X X X X

MSD Project Benefits

7. Benefits:a. Soft benefits: eliminating complaints from PSD

and increasing employee morale

b. Hard benefits (financial): minimizing labor costs

Labor savings – Clipping expenses 100 employees, 40 hrs/wk, spend 10% of time

clipping = 400 hrs / wk clipping $25 / hr * 400 hrs * 50 wks = $500,000 annual

clipping expenses 60% clips defective = $300,000? Currently? 0.62% defective = $3,100? Improved system? Annually, 20,000 hrs clipping = 10 employees

60% = 12,000 wasted clipping hours currently 0.62% = 124 wasted hours under improved system Need 6 fewer employees

This does not including time lost from clips failing later, on work in process

Material Cost Savings

300,000 projects per year, 10 clips each =3,000,000 clips needed each year.

0.60 defect means 1/(1-0.6) = 2.5 clips used for each one needed = 7,500,000 used

0.0062 means 1/(1-0.0062) = 1.00625 =3,018,000 clips used

Savings of 4,482,000 clips = $44,820 per year

Team Members

Champion Process Owner Team Leader – Black Belt Team member 1 Team member 2 Finance representative IT representative

SIPOCStart

Purchasing receives order from

Paper Shuffling Department

Purchasing agentcalls vendor

Does vendorhave MSDin stock?

Place order withvendor

Receive order fromvendor

Store productreceived into

inventory (newboxes go on bottom

back of shelf)

PSD removesproducts from

inventory

PSD uses Product

Stop

No

Yes

-Suppliers-Inputs-Process-Outputs-Customers

Voice of the Customer

What emotions come to mind when you think about MSDs? What needs and wants come to mind when you think about MSDs? What complaints or problems would you like to mention about

MSDs? 3 themes:

Variation in durability Variation in color Variation in functionality (# broken MSDs in each box)

CTQ-Critical to Quality factors Tech Specs Ability to withstand bending >= 4 bends w/o breaking The number of different MSD colors = 1 color of MSDs The number of broken MSDs in a box. <= 5 broken in box

Project Objectives

1. Decrease (direction) the percentage that cannot withstand four or more bends without breaking (measure) bought by the purchasing department (process) to 0.62 percent (goal) by Jan. 1, 2005 (deadline). Go for 4 sigma!

2. Decrease (direction) the percentage of boxes of MSDs with more than five broken clips (measure) bought by the purchasing deparment (process) to 0.62 percent (goal) by Jan. 1, 2005 (deadline) Go for 4 sigma!

3. What happened to colors?

Measure phase-I Operationally Define CTQs Operational definition for CTQ1: Durability

Take top-front box Close eyes, randomly pull one out Count number of bends until breaking Do not count bend being made when it breaks If >= bends, then MSD conforms, else defective

Operationally Define CTQ2 - Functionality Take top-front box Count the number of broken clips If number of broken is <= 5, box is

conforming If number is > 5, box is defective Use same boxes for both operational

definitions

Measure Phase-II Gage repeatability and reproducibility 10 top-front boxes tested by 2 inspectors,

each box twice Gage (or gauge) run chart shows no

difference between the measurements from the two different inspectors

Box Inspector Count Functionality

1 1 1 10

1 1 2 10

1 2 1 10

1 2 2 10

2 1 1 9

2 1 2 9

2 2 1 9

2 2 2 9

3 1 1 5

3 1 2 5

3 2 1 5

3 2 2 5

4 1 1 4

4 1 2 4

4 2 1 4

4 2 2 4

5 1 1 5

5 1 2 5

5 2 1 5

5 2 2 5

Box Inspector Count Functionality

6 1 1 9

6 1 2 9

6 2 1 9

6 2 2 9

7 1 1 6

7 1 2 6

7 2 1 6

7 2 2 6

8 1 1 6

8 1 2 6

8 2 1 6

8 2 2 6

9 1 1 9

9 1 2 9

9 2 1 9

9 2 2 9

10 1 1 11

10 1 2 11

10 2 1 11

10 2 2 11

Misc:Tolerance:Reported by:Date of study:Gage name:

11

10

9

8

7

6

5

4

5 4 3 2 1Box

Fuc

tiona

lity

1

2

11

10

9

8

7

6

5

4

10 9 8 7 6Box

Fuc

tiona

lity

Runchart of Fuctionality by Box, Inspector

CTQ Baselines Hourly inspections for both

CTQs Durability is # bends for one

MSD before breaking Functionality is # of broken

clips Yield is percentage of

batches passing the standard

6/16 passed each Very similar to claim of 60%

unacceptable

HourDura-

bility

Function

-ality

Shift 1-Hr1 5 12

Shift 1-Hr2 7 4

Shift 1-Hr3 3 8

Shift 1-Hr4 2 6

Shift 1-Hr5 9 1

Shift 1-Hr6 2 5

Shift 1-Hr7 1 11

Shift 1-Hr8 1 9

Shift 2-Hr1 12 6

Shift 2-Hr2 9 6

Shift 2-Hr3 3 9

Shift 2-Hr4 1 5

Shift 2-Hr5 1 4

Shift 2-Hr6 1 5

Shift 2-Hr7 1 9

Shift 2-Hr8 4 10

Yield 0.375 0.375

15105Subgroup 0

15

10

5

0

-5

Ind

ivid

ual

Val

ue

Mean=3.875

UCL=12.21

LCL=-4.458

10

5

0

Mov

ing

Ran

ge

1

R=3.133

UCL=10.24

LCL=0

I and MR Chart for Durability

I-MR charts show durability not stable over time. Different vendors, but deal with that soon

0

1

2

3

4

5

6

7

1 2 3 4 5 6 7 8 9 10 11 12

Durability

num

ber of boxes b

ox

Durability “dot plot” – shows how many boxes had a particular durability level

Graph doesn’t look like Normal distribution Maybe Poisson distribution

C-chart not in control, shift 2 tester bent more slowly, caused it to last longer

C-chart for Functionality under control

Dot-plot for Functionality

Dot-plot for Functionality looks Normally distributed

DetailedProcess Map

Start

Purchasing receives order from

Paper Shuffling Department

Purchasing agentcalls vendor

Does vendorhave MSDin stock?

Place order withvendor

Receive order fromvendor

MSDs placed into inventory (new boxes

go on the bottom back of shelf)

PSD removesbox from inventory

PSD uses MSDs

Stop

No

Yes

X1 – Vendor (Ibix or Office Optimum)X2 – Size (Small or Large)X3 – Ridges (With or Without)X4 = Cycle time from order to receipt for MSDsX5 = Discrepancy in count from order placed and order received

X6 = Cycle time to place product in inventory

X7 = Inventory shelf time (in days)

X8 = Type of usage (Large stack of paper or Small stack of paper)

X’s also could be defined in measure phase

Operational Definitions for each X X1 – Vendor Ibix Office Optimum X2 – Size Small Large X3 – RidgesWith Without X8 – Usage Large stack Small stack X4 – Cycle time, ordering to receipt (days) X5 – Discrepancy: # ordered vs. received X6 – Cycle time to place in inventory (days) X7 – inventory shelf life (in days)Perform gage study on each, to make sure we can

measure consistently (repeatability and reproducibility)

Baseline Data

Every hour for 2 weeks – 80 samples Collect info about:

X1 vendor X2 size X3 ridges Y1 Durability Y2 Functionality

Other factors studied separately

Sample Day Hour X1 X2 X3 X7 Durability Function1 Mon 1 1 0 0 7 2 52 Mon 2 0 1 0 7 2 93 Mon 3 0 0 1 7 10 74 Mon 4 0 1 0 7 1 45 Mon 5 0 0 0 7 7 36 Mon 6 0 1 1 7 2 57 Mon 7 0 1 1 7 1 98 Mon 8 0 0 0 7 7 59 Tue 1 0 1 0 8 2 810 Tue 2 0 1 0 8 1 711 Tue 3 0 1 0 8 1 1312 Tue 4 1 1 1 8 9 513 Tue 5 1 1 0 8 9 914 Tue 6 1 1 1 8 10 1115 Tue 7 1 1 1 8 10 1116 Tue 8 0 0 1 8 8 917 Wed 1 1 1 1 9 8 1118 Wed 2 1 0 0 9 1 1119 Wed 3 1 1 1 9 10 1120 Wed 4 0 0 0 9 7 1121 Wed 5 1 1 1 9 9 922 Wed 6 0 0 1 9 9 523 Wed 7 1 0 1 9 2 1124 Wed 8 1 0 0 9 1 1025 Thu 1 1 0 1 10 1 1426 Thu 2 0 1 1 10 1 1027 Thu 3 1 1 1 10 8 1328 Thu 4 0 0 1 10 10 1229 Thu 5 0 0 0 10 7 1430 Thu 6 0 1 1 10 3 13

Sample Day Hour X1 X2 X3 X7 Durability Function31 Thu 7 0 0 0 10 9 1332 Thu 8 1 1 1 10 8 1133 Fri 1 0 1 0 1 2 034 Fri 2 0 1 0 1 2 135 Fri 3 0 1 0 1 1 636 Fri 4 0 1 0 1 3 337 Fri 5 0 1 0 1 2 238 Fri 6 1 1 0 1 10 639 Fri 7 0 0 1 1 10 040 Fri 8 0 1 0 1 2 041 Mon 1 0 1 1 4 3 442 Mon 2 0 1 0 4 3 743 Mon 3 0 1 1 4 3 344 Mon 4 0 0 0 4 10 245 Mon 5 1 1 0 4 8 546 Mon 6 0 1 1 4 3 447 Mon 7 1 0 0 4 1 448 Mon 8 0 0 1 4 10 549 Tue 1 1 1 1 5 11 650 Tue 2 1 0 1 5 3 451 Tue 3 1 1 0 5 10 652 Tue 4 1 0 1 5 3 553 Tue 5 1 0 0 5 2 454 Tue 6 0 0 0 5 9 555 Tue 7 0 0 1 5 9 556 Tue 8 0 1 0 5 3 757 Wed 1 0 0 1 6 9 558 Wed 2 1 1 0 6 9 759 Wed 3 0 0 0 6 9 560 Wed 4 1 0 0 6 2 6

Sample Day Hour X1 X2 X3 X7 Durability Function61 Wed 5 1 0 1 6 2 562 Wed 6 1 1 1 6 10 563 Wed 7 0 1 0 6 1 764 Wed 8 0 1 0 6 2 565 Thu 1 0 0 1 7 10 766 Thu 2 1 1 0 7 9 567 Thu 3 1 0 0 7 1 768 Thu 4 0 1 0 7 2 569 Thu 5 1 0 1 7 1 670 Thu 6 0 1 0 7 1 571 Thu 7 1 0 0 7 1 872 Thu 8 1 1 1 7 10 573 Fri 1 0 1 1 8 3 774 Fri 2 1 1 1 8 9 775 Fri 3 1 0 0 8 1 1376 Fri 4 0 1 1 8 2 877 Fri 5 0 1 1 8 3 978 Fri 6 1 1 1 8 8 1079 Fri 7 1 0 1 8 3 1180 Fri 8 0 0 1 8 10 11 Legend:X1 = Vendor (0 = Office Optimum and 1 = Ibix)X2 = Size (0 = Small and 1 = Large)X3 = Ridges (0 = Without and 1 = With)X7 = Inventory shelf time, in days

Baseline results

Durability 0.4625 Functionality 0.425 X1: Office Optimum 56.25% X2: Small 42.50% X3: Without ridges 50% X7: Shelf life average 6.5 days X7: Shelf life st. dev 2.5 days

Vendor (X1) and Durability

Maybe Ibix is more durable?

Ibix

Off Opt.

Size (X2) and Durability

Maybe small is more durable?

Large

Small

Ridges (X3) and Durability

Ridges

No ridges

Maybe ridges are more durable?

Shelf Life (X7) and Durability

Vendor (X1) and Functionality

Maybe Ibix is more functional?

Ibix

Off Opt.

Size (X2) and Functionality

Maybe large is more functional?

Large

Small

Ridges (X3) and Functionality

Ridges

No ridges

Maybe ridges are more functional?

Shelf Life (X7) and Functionality

Conclusions

Durability – no large effects from any X’s. Vendor (X1=1 = Ibix) improves functionality Size (X2=1= large) improves functionality Ridges (X3=1) seem to improve functionality Shelf Life (X7) – lower values have better

functionality Best plan is to buy Ibix large MSDs with

ridges

Office Ibix small Lg No with ShelfOpt. Ridges Ridges Life

Conculsions – 2

Best to buy Ibix Small With Ridges Shelf life doesn’t matter?

X1=Off Opt

X1=Ibix

Small Large

No ridges Ridges

Conclusion?

Ridges don’t seem to affect durability Buy small Office Optimum, or Large Ibix!

Functionality Main Effects

Age seems to be biggest factor, ridges, Vendor

Functionality Interaction Plot

No ridges Ridges

X2=small

X2=large

Improve Phase

Conduct experiment to determine ideal parameter values