Six Sigma Case Study v.2

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Six Sigma Case Studyv.2

• Dr. Ron Tibben-Lembke
• SCM 494

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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

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Mission Statement

• Put the right information in the right place.
• Management created a list of objectives and
  projects that will support those objectives

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President
Director of Paper Shuffling Dept
Business Objectives Increase of orders
Business Indicators orders per Month (c chart)
Area Objectives Increase orders in PSD
Area Indicators No. orders in PSD / mo. (c chart)
Potential 6 Sigma projects New customer promotions
project
1. avg. services used per customer, per
quarter 2. St dev. of serv. used (x-bar and s)
Increase Services used by each customer in PSD
1. avg. services used per PSD cust, per Q 2.
St dev. Of serv. used (x-bar and s)
Existing customer promotions project
Increase of POI services used by each customer
Minimize production costs
Prod costs per month (I-MR chart)
Minimize production costs in PSD
Production Costs in PSD/mo (I-MR chart)
MSD quality project
Eliminate employee complaints
employee complaints per month (c chart)
Eliminate PSD employee complaints
PSD employee Complaints/mo (c chart)
Employee Morale project
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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

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Production costs Normally distributed
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Prioritizing Six Sigma Projects
Potential Six Sigma Projects
Existing Customer Promotions
New Customer Promotions
MSD Quality
Employee Morale
Business objective
Weight
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
Increase orders Increase POI services used
by each customer Minimize production costs Elimi
nate employee complaints Weighted average of
potential
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Starting MSD Project

• Champion and process owner make initial charter.
• What is the name of the process? MSD purchasing
• What is the aim? Purchase MSDs that improve
  productivity and morale of PSD
• What is economic rationale?
• Why do it at all?
• Un-durable clips (lt4 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 gt5 broken
  MSDs)

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Additional charter questions

• Why do it now? High production costs, complaints
• What business objectives are supported by
  project? Min. costs, reduce complaints
• Consequences of not doing lower profits, more
  employee complaints
• What projects have higher priority? None.
• What is the problem statement?
• Low-quality MSDs create additional production
  costs and employee frustration
• 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)

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More charter questions

• What is scope?
• Boundaries? When purchasing receives purchase
  orders, ends when MSD put in inventory
• What is out of bounds? How employees use MSDs
• What resources? 30,000, including salaries
• Who can approve expenditures? Process owner
• Can they go over 30,000? No.
• What are obstacles? Budget, 21 weeks
• What time commitment expected? Friday 8-9am
  meetings, progress reports
• What about regular duties? OT may be required,
  not in budget

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Gantt Chart for Project
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MSD Project Benefits

• Benefits
• Soft benefits eliminating complaints from PSD
  and increasing employee morale
• Hard benefits (financial) minimizing labor costs

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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

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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

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Team Members

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

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SIPOC
Start
Purchasing receives order fromPaper Shuffling
Department

• -Suppliers
• Inputs
• Process
• Outputs
• Customers

Purchasing agentcalls vendor
No
Does vendorhave MSDin stock?
Yes
Place order withvendor
Receive order fromvendor
Store productreceived intoinventory (newboxes
go on bottomback of shelf)
PSD removesproducts from inventory
PSD uses Product
Stop
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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 gt 4 bends w/o
  breaking
• The number of different MSD colors 1 color of
  MSDs
• The number of broken MSDs in a box. lt 5 broken
  in box

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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?

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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 gt bends, then MSD conforms, else defective

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Operationally Define CTQ2 - Functionality

• Take top-front box
• Count the number of broken clips
• If number of broken is lt 5, box is conforming
• If number is gt 5, box is defective
• Use same boxes for both operational definitions

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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

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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

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

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• Durability dot plot shows how many boxes had
  a particular durability level
• Graph doesnt look like Normal distribution
• Maybe Poisson distribution

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

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• C-chart for Functionality under control

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Dot-plot for Functionality

• Dot-plot for Functionality looks Normally
  distributed

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DetailedProcess Map
X1 Vendor (Ibix or Office Optimum) X2 Size
(Small or Large) X3 Ridges (With or Without) X4
Cycle time from order to receipt for MSDs X5
Discrepancy in count from order placed and order
received
X6 Cycle time to place product in inventory

• Xs also could be defined in measure phase

X7 Inventory shelf time (in days)
X8 Type of usage (Large stack of paper or Small
stack of paper)
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Operational Definitions for each X

• X1 Vendor Ibix Office Optimum
• X2 Size Small Large
• X3 Ridges With 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)

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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

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Sample Day Hour X1 X2 X3 X7 Durability
Function 1 Mon 1 1 0 0 7 2 5 2 Mon 2 0 1 0 7
2 9 3 Mon 3 0 0 1 7 10 7 4 Mon 4 0 1 0 7 1 4 5 Mon
5 0 0 0 7 7 3 6 Mon 6 0 1 1 7 2 5 7 Mon 7 0 1 1 7
1 9 8 Mon 8 0 0 0 7 7 5 9 Tue 1 0 1 0 8 2 8 10 Tu
e 2 0 1 0 8 1 7 11 Tue 3 0 1 0 8 1 13 12 Tue 4 1 1
1 8 9 5 13 Tue 5 1 1 0 8 9 9 14 Tue 6 1 1 1 8 10
11 15 Tue 7 1 1 1 8 10 11 16 Tue 8 0 0 1 8 8 9 17
Wed 1 1 1 1 9 8 11 18 Wed 2 1 0 0 9 1 11 19 Wed 3
1 1 1 9 10 11 20 Wed 4 0 0 0 9 7 11 21 Wed 5 1 1 1
9 9 9 22 Wed 6 0 0 1 9 9 5 23 Wed 7 1 0 1 9 2 11
24 Wed 8 1 0 0 9 1 10 25 Thu 1 1 0 1 10 1 14 26 Th
u 2 0 1 1 10 1 10 27 Thu 3 1 1 1 10 8 13 28 Thu 4
0 0 1 10 10 12 29 Thu 5 0 0 0 10 7 14 30 Thu 6 0 1
1 10 3 13
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Sample Day Hour X1 X2 X3 X7
Durability Function 31 Thu 7 0 0 0 10 9 13 3
2 Thu 8 1 1 1 10 8 11 33 Fri 1 0 1 0 1 2 0 34 Fri
2 0 1 0 1 2 1 35 Fri 3 0 1 0 1 1 6 36 Fri 4 0 1 0
1 3 3 37 Fri 5 0 1 0 1 2 2 38 Fri 6 1 1 0 1 10 6 3
9 Fri 7 0 0 1 1 10 0 40 Fri 8 0 1 0 1 2 0 41 Mon 1
0 1 1 4 3 4 42 Mon 2 0 1 0 4 3 7 43 Mon 3 0 1 1 4
3 3 44 Mon 4 0 0 0 4 10 2 45 Mon 5 1 1 0 4 8 5 46
Mon 6 0 1 1 4 3 4 47 Mon 7 1 0 0 4 1 4 48 Mon 8 0
0 1 4 10 5 49 Tue 1 1 1 1 5 11 6 50 Tue 2 1 0 1 5
3 4 51 Tue 3 1 1 0 5 10 6 52 Tue 4 1 0 1 5 3 5 53
Tue 5 1 0 0 5 2 4 54 Tue 6 0 0 0 5 9 5 55 Tue 7 0
0 1 5 9 5 56 Tue 8 0 1 0 5 3 7 57 Wed 1 0 0 1 6 9
5 58 Wed 2 1 1 0 6 9 7 59 Wed 3 0 0 0 6 9 5 60 We
d 4 1 0 0 6 2 6
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Sample Day Hour X1 X2 X3 X7
Durability Function 61 Wed 5 1 0 1 6 2 5 62 We
d 6 1 1 1 6 10 5 63 Wed 7 0 1 0 6 1 7 64 Wed 8 0 1
0 6 2 5 65 Thu 1 0 0 1 7 10 7 66 Thu 2 1 1 0 7 9
5 67 Thu 3 1 0 0 7 1 7 68 Thu 4 0 1 0 7 2 5 69 Thu
5 1 0 1 7 1 6 70 Thu 6 0 1 0 7 1 5 71 Thu 7 1 0 0
7 1 8 72 Thu 8 1 1 1 7 10 5 73 Fri 1 0 1 1 8 3 7
74 Fri 2 1 1 1 8 9 7 75 Fri 3 1 0 0 8 1 13 76 Fri
4 0 1 1 8 2 8 77 Fri 5 0 1 1 8 3 9 78 Fri 6 1 1 1
8 8 10 79 Fri 7 1 0 1 8 3 11 80 Fri 8 0 0 1 8 10 1
1   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
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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

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Vendor (X1) and Durability
Maybe Ibix is more durable?
Ibix
Off Opt.
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Size (X2) and Durability
Maybe small is more durable?
Large
Small
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Ridges (X3) and Durability
Maybe ridges are more durable?
Ridges
No ridges
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Shelf Life (X7) and Durability
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Vendor (X1) and Functionality
Maybe Ibix is more functional?
Ibix
Off Opt.
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Size (X2) and Functionality
Maybe large is more functional?
Large
Small
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Ridges (X3) and Functionality
Maybe ridges are more functional?
Ridges
No ridges
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Shelf Life (X7) and Functionality
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Conclusions

• Durability no large effects from any Xs.
• Vendor (X11 Ibix) improves functionality
• Size (X21 large) improves functionality
• Ridges (X31) seem to improve functionality
• Shelf Life (X7) lower values have better
  functionality
• Best plan is to buy Ibix large MSDs with ridges

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Office Ibix small Lg
No with Shelf Opt. Ridges Ridges Life
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Conculsions 2

• Best to buy
• Ibix
• Small
• With Ridges
• Shelf life doesnt matter?

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X1Off Opt
X1Ibix
Small Large
No ridges Ridges
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Conclusion?

• Ridges dont seem to affect durability
• Buy small Office Optimum, or Large Ibix!

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Functionality Main Effects
Age seems to be biggest factor, ridges, Vendor
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Functionality Interaction Plot
X2small
X2large
No ridges Ridges
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Improve Phase

• Conduct experiment to determine ideal parameter
  values

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