Improving Your Bottom Line
Making Kentucky manufacturers more
competitive
Why Manufacturing?
13% of the nation’s total Gross Domestic Product (GDP)Nearly 14.3 million employeesAverage annual wage of $45,916Conducts two-thirds of all private sector R&DEvery $1 in manufactured goods generates an additional $1.43 worth of economic activity
Competitiveness Challenges
Rapidly advancing technologyCustomer demands – faster, better, cheaperOffshore competition from low wage countries– China’s average wages are:
25% of Mexico’s10% of Hong Kong & Taiwan’s3% of U.S.’
How Will Firms Compete?
It’s all about... Innovation
…Productivity…Speed
2 Key Tools for Competitiveness
Lean Manufacturing / Lean Office
Six Sigma
KMAC
Mission: Increase the competitiveness of Kentucky manufacturersPrivate, not-for-profit corporationStatewide operationsIndustry-driven Board of DirectorsKentucky affiliate of the national Manufacturing Extension Partnership (MEP) program
Productivity Improvement
Lean Manufacturing / Lean for the OfficeFacilities Planning & LayoutProcess ImprovementProblem Solving TrainingEmployee DevelopmentTeam Building & Team Leader Development
Quality Improvement
Quality SystemsISO and QS/TS StandardsSix SigmaStatistical Process ControlPoka-Yoke / Error Proofing
Product Improvement
New Product Development– Accelerate to Market for Small & Medium Enterprises
(ATOM-SME)
Value Engineering / Design for Manufacturability
Business Improvement
Strategic PlanningMeeting FacilitationPerformance MeasurementFinancial Planning
Benefits
Expertise– Staff of seasoned manufacturing professionals
Results– Proven track record will all types of industry– A national leader among MEP Centers for delivering
quantifiable, bottom-line impacts to clients
Value– Clients realize significant returns on their investments in
KMAC services
FY06 Client-Reported Results
Increased Sales: $21 Million
Retained Sales: $12 MillionAnnual Cost Savings: $4.8 Million
New Investment: $27 Million
Lean Manufacturing Lean Office
What is Lean?
A systematic approach to identifying and eliminating
waste (non-value added activities) through
continuous improvement by flowing the product at
the pull of the customer.
Defining Value-Added Activities
VALUE ADDED:Increases the market form or function of the product or service
NON-VALUE ADDED:Does not add market form or function or is not necessary
ESSENTIAL NON-VALUE ADDED:Cannot be eliminated completely
Lean = Eliminating the Wastes
Value Added
Typically 95% of all lead time is non-value added
• Overproduction• Waiting• Transportation• Non-Value Added
Processing• Excess Inventory• Defects• Excess Motion• Underutilized People
Non-Value Added
Lean Tools
Quick Changeover
Standardized Work Batch Reduction Teams
Quality at Source
5S System Visual Plant Layout
POUS
Cellular/FlowPull/Kanban TPM
ValueStreamMapping
Continuous Improvement
Value Stream Mapping
Visually document current material & information flow
– Identify non value-added activities– Quantify non value-added lead time
Create an ideal future state– Eliminate wastes & simplify processes
Results in development of a Lean Implementation Action Plan
– Prioritized improvement projects– Determines Lean Tools to be applied
5S System
Designed to improve workplace organization and standardization
Visual Workplace
Simple signals providing an immediate understanding of a situation or condition
– Kanban cards– Color-coded dies, tools, pallets
Plant LayoutRaw Stock QC Rec Ship
Shear Screw Machine
QCStamp
AssemblyBrake MillLathe
Weld FinishGrind Parts Stock
Drill
Standardized Work
Tasks organized in the best known sequence Most effective combination of:
– People– Materials– Methods– Machines
Batch Reduction
The best batch size is:
ONE PIECE FLOW
Make One . . . Move One!
Teams
More flexibleGreater productivity & use of resourcesCollaborative & cross-functionalMore creative & innovative
Quality at the Source
Quality builtOperators inspect
– Necessary equipment– Established standards– Process documentation
Point of Use Storage
Materials are stored where used
– Simplifies physical inventory tracking, storage, and handling
Quick Changeover
Changing over a process to produce a different product in the most efficient manner
Pull/Kanban
Push System– Production based on
forecasts or schedules
Pull/Kanban System– Production based on
actual demand using Kanbans to signal replenishment
Cellular Flow
Linking of manual and machine operations into the most efficient combination of resources
– Flexible layout– Simplify flows– Minimize materials handling– Make use of people
Total Productive Maintenance
Systematic approach to the elimination of equipment downtime as a waste factor
Designed to maximize the productivity of equipment for Its entire life
Going Lean
Training in Lean toolsUsing Lean tools in improvement events– Kaizen Events
Organizational / Cultural changes– Move toward team environment– Defined problem-solving approach– Performance metrics that support Lean
Improvements Achieved with Lean
Lead Time Reduction
0% 25% 50% 75% 100%
Productivity Increase
WIP Reduction
Quality Improvement
Space Utilization
Six Sigma
Definition of Six Sigma
Methodology for disciplined
quality improvement
History of Six Sigma
Originated at Motorola in the early 1980sProcess modified by othersImplemented by IBM & Allied SignalAdopted by General Electric in 1995
– Broadly deployed– By 1998, GE claimed $750 million in net benefits
Goal of Six Sigma
Optimize process capability by identifying and minimizing variationVirtual elimination of all defects
– No more than 3.4 defects per million opportunities (DPMO)– 99.9996% acceptable
Cost of Poor Quality
Scrap/Rework– Materials, labor costs, disposition
costs
Warranty Costs– Customer credits, return/restocking
costs, penalties
Lost Sales– Lost revenues, cost of gaining new
customers
Competitive Performance
World Class< 1% of sales6
1% - 15% of sales5
Average16% - 25% of sales4
26% - 40% of sales3
Non-competitive>40% of sales2
PerformanceCost of Poor QualitySigma Level
Benefits of Improved Quality
Bottom-line cost savingsGreater customer satisfactionIncrease in throughputReduction in waste and reworkImprovement in process capability
Six Sigma Core Philosophies
Values defect-prevention over defect-detectionEmphasizes reducing variation in processes
– Tackles root causes of poor performance
Is customer-focused by driving improvement in areas most important to your customers
Six Sigma Characteristics
Defined, problem-solving approachData-drivenProject-basedCommitment and support from the top level
Problem-Solving Approach
Uses a defined approach (DMAIC)– Define the project
– Measure the baseline process capability
– Analyze when, where and how often defects occur
– Improve process capability to reach a Six Sigma level
– Control the process to maintain the gain
Data-Driven
Based on data rather than perceptionUses statistical tools during the DMAIC processCalls for training in “statistical thinking” for many; advanced statistics and project management for some
Project-Based
Project selection is critical– Should advance organization’s strategic initiatives
– Have impact on a Critical to Quality (CTQ) characteristic
– Should have bottom-line financial impact
– Begin and end with performance measure
Top Level Leadership
Requires leadership, commitment and active support from top level managementLeaders should use Six Sigma to drive strategic improvement
– Six Sigma projects should support strategic goals
Six Sigma – The Players
The ChampionBlack BeltGreen BeltQuality Process Analyst
KMAC’s Approach to Six Sigma
Developed specifically for small- and mid-sized manufacturers
– Affordable
– Flexible
– Focuses on implementation of Six Sigma not just training
– Emphasizes bottom-line results
Two Part Approach
On-Site Deployment Planning & Mentoring– Helps the company gain the most benefit from
implementing Six Sigma
Online Six Sigma Training– Provides an affordable way to train Black Belts, Green
Belts, and Quality Process Analysts
Lean and Six Sigma
Two powerful tools to help a company improve:
– Quality
– Productivity
– Bottom-line results
Lean & Six Sigma Together
Use Lean to:– Reduce or eliminate non-value-
added activities
Use Six Sigma to:– Improve value-added activities– Solve complex problems
uncovered by Lean or those requiring advanced analysis
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