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2012 IMPLEMENTING LEAN SIX SIGMA IN MANUFACTURING

CHAMATH DAYARATNE KINGSTON UNIVERSITY 10/1/2012


IMPLEMENTATION OF LEAN SIX SIGMA IN MANUFACTURING

MSc Engineering Project & Systems Management

OCT 2012 Faculty of Engineering Kingston University

CHAMATH DAYARATNE K1157956

Supervised by: Dr MALIK SAFA

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SUMMARY

Lean six sigma is an extremely powerful tool a manufacturing company can use to enhance their success. Lean manufacturing and six sigma has tools that facilitate many companies to make advancement in the manufacturing world beating their competitors. The three main industrial/manufacturing paradigms discussed has helped companies to learn vital concepts to improve the production making it more effective. The increase of efficiency and the low cost in production has also enabled these companies to and then to increase the profit margins. Quality is a very important area in a manufacturing. High quality production outcomes facilitate the viability of the company. The report identifies the importunacy of quality. A company’s earning potential would be a maximum if the customers are satisfied about the production orders given that the number of defectives and the specifications would be within the order criteria. It is essential to eliminate rapid change to repair problems and to adapt changes that would help the companies to achieve consistent growth giving them the privilege to obtain profits in the future. Understanding the six sigma concept completely from top to bottom is a ground rule to the success of it. After understanding it extensively, obligations to implement it are needed. To put these in to place the fundamentals o Lean Six Sigma needs to be illustrated appropriated to make the full use of it. Without focusing on all eight key drivers or fundamentals on six sigma illustrated below a company will not accomplish total growth and obtain potential profits that would help them succeed and over take their competitors. Practicing effective techniques over and over to establish perfection can result in the near prefect production.Lean six sigma has several schemes or approaches. Out of these schemes the earlier discussed DMAIC approach is the best and the most suitable when it comes to a manufacturing situation. This approach would help the company to structure the outline of the overall project. This research base project of implementation of lean six sigma in manufacturing gives detailed information about the tool and the methods to follow when adapting it to a manufacturing environment. The three individual case studies done for Acme industries, Scania and Dell it is clear that Lean and six sigma approaches are also very flexible and can be utilised in different environment and scenarios to eliminate the problems and process improvements. 3


LIST OF FIGURES

Figure 3.1: Production line with conveyer and belts and storage racks similar to the first mass production at Ford. Figure 3.2: Superior production flow that adds value at Toyota and proven results Figure 3.3: Number of requirements in total quality management techniques Figure 3.4: Changes and focuses on lean manufacturing and direct outcomes Figure 3.5: Implementing Six Sigma into manufacturing and its direct Figure 3.6: Sigma Level of a company categorized deepening on the defects due to errors in manufacturing Figure 5.1: Pillars of six sigma and working as a team for a common success. Figure 6.1: Key factors and difference in qualitative and quantitative research methodologies Figure 6.2: Five Stage DMAIC cycle for continues improvement. Figure 7.1: Acme Industries Manufacturing Plant Facility in USA Figure 7.2: Six Sigma DMAIC model that has a diverse use. Figure 8.1: Scania Variety reduction method and modular system Figure 8.2: Scania Variety reduction method and modular system pyramid Figure 8.3: Results at Scania due to lean manufacturing and six sigma implementation Figure 9.1: Lean supply chain at Dell that adds value at each tier within the supply chain

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TABLE OF CONTENTS 1.0

Page No

SUMMARY

3

LIST OF FIGURES

4

2.0

INTRODUCTION

6

3.0

LITERATURE REVIEW 3.1 Evolution of manufacturing methods 3.2 Quality Management 3.3 Lean Manufacturing 3.4 Six Sigma

8 12 14 17 18

4.0

BASICS OF LEAN SIX SIGMA

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5.0

TEN COMMANDMENTS OF LEAN SIX SIGMA

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6.0

METHODOLOGY: DMAIC- 5 Stage Lean Six Sigma Methodology 6.1.1 Define Stage 6.1.2 Measure 6.1.3 Analyze 6.1.4 Improve stage 6.1.5 Control Stage

30 32 33 34 34 35

7.0

CASE STUDY 1: Acme industries Inc 7.1 Background Acme Industries Inc 7.2 Identification of the problem 7.3 In-depth Analysis of the problem 7.4 Development of Lean Six Sigma philosophy 7.5 Using Six Sigma for Pricing 7.6 Installation Six Sigma within the Organization: 7.7: Five Step Six Sigma Cycle 7.8 Results and Benefits:

36 37 37 38 38 39 40 40 41

8.0

CASE STUDY 2: Scania Production System 8.1 Company background – Scania 8.2 Need for a beneficial Production process 8.3 The Unique Production system 8.4 Production Flow 8.5 Working Strategy 8.6 Results

42 42 43 44 44 45 46

9.0 9.1

LEAN SUPPLY CHAIN Dell Lean Supply Chain Model

48 49

10.0

DISCUSSION AND RECOMMENDATIONS 10.1 Case Study Analysis 10.2 Total Quality 10.3 Change Management 10.4 Risk Management 10.5 Future of Manufacturing

51 51 51 52 53 53

11 CONCLUSIONS

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12 REFERENCE

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2.0

Introduction

Lean six sigma which consists of both lean manufacturing and six sigma is an extremely influential theory in manufacturing engineering. These theories are used as engineering tools in production at industry based manufacturing companies in order to increase the productivity and cost effectiveness. Lean manufacturing and six sigma methods has helped companies to progress in the manufacturing world, standing out from their competitors. However in recent time lean six sigma method in particular which consists of useful techniques has been a popular development as it tackles lapses in production and helps the company to increase the quality of the produces along with stream line production and detailed attention to time.

Kaizan lean six sigma tool is one of the most popular tools that is currently tested and used in manufacturing environment. Kaizen which means ‘change to better things’ is a process that helps to the reduce production time in each sector of production. Kaizen process improvement tool can be divided in to two key sectors which are process Kaizen and Flow Kaizen. Process Kaizen mainly focuses on sub processes where the Flow Kaizen or system Kaizen deals with reduction in cost and increase in quality in the overall process. When utilized in a production shop flow environment, Kaizen six sigma tools identifies activities that associated with high levels of wastage can be visibly identified. Different techniques are then used to eliminate the identified activities individually. Also human interaction is vital in these techniques as Kaizen has a bigger collation with staff operations. Companies can use their man power, knowledge and experience in staff members alongside creative problem solving nature of the management team when developing solutions. Due to the utilization of all levels of expertise the company can benefit by a high accurate solution. The continues process improvement nature of Kaizen is also one of the main reason for success when used in a manufacturing environment.[Khalil,2006]

There are numerous others tools and techniques available that a manufacturing company can select to have positive outcomes in production and its processes. The popular TAKT Time technique used in time scheduling, Value stream mapping that can be used to improve the 6


flow of production and automation of production technique of Jidoka are some of the other tools that has become popular over the recent times. Apart from these latest Lean six sigma tools the existing methodologies and traditional data analysis methods such as Pareto charts, histograms and run charts are also out there for companies to take advantages from. All these tools and techniques can be used separately all simultaneously to exploit the manufacturing industry to excel in cost effectiveness and speedy stream line production that has quality world class produce. [Khalil,2006]

The post credit crunch era has made many manufacturing companies follow different strategies in production in order to counter the loss of demand. Many companies are focusing on improving their profitability by decreasing their unit cost of production rather than increasing the sales price. This strategy has helped many manufacturing companies to compete with their competitors in a advance level. The Popular six sigma techniques address the need for as change in strategy as the direct benefits suits today’s manufacturing world. Naturally six sigma methods spotlights on collecting useful information and data , analyzing these gatherings exclusively to derive methods to tackle bottlenecks and address problems of quality using its statistical feature. On the other hand lean manufacturing principally pays attention to decrease wastage in production and to use raw material effectively to produce products at a lower cost to obtain the best profit for it. Therefore synchronizing the two mythologies collectively would help any industry based manufacturing company to achieve results that would benefit them to establish a production process that would shift them to a superior category when compared to their competitors.

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3.0

LITERATURE REVIEW

3.1

Evolution of manufacturing methods

The 20th century has been an era that manufacturing world has seen various new additions and inventions that companies have utilize to improve production. The ever growing consumer demand, industrial revolution and the world war has been very influential factors for these outcomes. There have been a few significant paradigms that were identified, developed and practiced successfully in the last century. Best practices had evolved from era to era, understanding the history of evolution and Identifying current trends of change in manufacturing is vital to understand the needs that will follow in the future. The main focus of all industrial/manufacturing paradigms is to improve the production making it more effective and then to increase the profit margins by keeping the cost of production to a minimum.

In the 20th century was also a period that the manufacturing industry was hugely taken care from vehicle manufacturing. A manufacturing paradigm that used best practices was introduced in to manufacturing. This manufacturing technique is also called the Talyorism and it was one of the first efforts to collaborate industrial engineering with management. Talyorism was first developed by Frederick Taylor in the 1930’s and was extremely popular up until the mid-1930. Although manufacturing methods used in industries at present are very different to the techniques used in this period of time, some significant features of Taylorism is still in use even in successful production process with high levels of complexity. Some of these are standardization of best practice, using analysis and synthesis, work ethics, transferring knowledge between shop flows workers are some of them. Scientific management techniques were first introduced to manufacturing during this period to enhance results. The newly introduced techniques helped manufacturing companies in the 1930s to use their labor force very productively and also help them to establish economic efficiency. The fundamental ideology in these techniques in terms of labor utilization was to simplify tasks these simplified tasks were straight forward and recurring activities

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The next most significant era in manufacturing industry begins in the 1970’s. production systems that could mass produce that would meet the economic demand was developed during this period .Fordism that is based on the original Taylorism was introduced by the Henry Ford, where he developed a concept which involves new refined state of the art massproduction systems which uses assembly lines, racks, belts and conveyors that helped the complex production process to be much more simplified. Fordism focused on minimizing the cost of manufacturing rather than focusing on maximizing profits for the first time. Henry Ford’s ideology was put to question at first how ever the technique has proved to be an exceptional discovery to establishing positive results. It also had a division of conception and implementation in the process of production. The other significant different in this new manufacturing method was that the production staff was paid a higher salary for their contribution. The moral of worker were also boasted due to this change hence increased the productivity of the work force all together. [ Markus , 2008]

Figure 3.1: Production line with conveyer and belts and storage racks similar to the first mass production at Ford.

Fordism’s increase in productivity and efficiency in work pattern enables mass production which then influenced in a huge opening in the manufacturing market in vehicle production in particular. The System Henry Ford introduced was governed by three key factors in order it to be successful. Firstly the demand for products needed to be high at all times. 9


Secondly, to sustain the layout force accordingly and finally to use the mass-production system to be capable to produce a range of products that is currently on demand. The final main paradigm of manufacturing evolution is regarded to be the Toyota production system based paradigm that is called the Toyataism. This was developed and implemented during the post world war II period where the growth of production reaches an important mind stone. Toyota system is centralized with two very important factors. Firstly, the improvements in the management of tasks and the control mechanism of the industrial company. The modern Justin-time practice that is highly successful was first used in production using this period. The key factor of success of the Toyota production system is its superiority of production flow. Stream flow production flow means that adding value during each sector of production. The system also helped the company to reduce cost and increase productivity maintains flexibility in production. Due to these special qualities of the Toyota production system it is more successful than the previous paradigm such as Taylorism and Fordism as Uncertainty in market and the rise and fall of in production demand can now be easily withstand with this new Toyota production system. [ Markus , 2008]

Figure 3.2: Superior production flow that adds value at Toyota and proven results[Toyota case study] 10


The Three main paradigms discussed above have been very popular due to its unique features. However manufacturing companies in today’s world is using elements from these paradigms depending on the nature of their production. Evolution of productions has moved on since then. New elements are added to production in recent years that is more suitable for today’s manufacturing environment. A combination of new techniques and the proven traditional methods is the trend forward from the out look and detail analysis of the production trend. The Following chapters of this research based project will explain these new techniques in further as the project follows on.

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3.2

Quality Management

Quality is a very important area in a manufacturing. High quality production outcomes facilitate the viability of the company. If quality is not at a utmost level company would function but the earning potential would be a minimum as customers would not be satisfy about the production orders as the number of defectives and the specifications would not be within the order criteria. High quality at the right price would guarantee customer satisfaction and it would also lead to future business opportunities with them. It would also be an excellent reputation a company should have in terms of attracting new customers in the future.

Total quality management deals with every single aspect of quality. Quality can be defines as having very good features. Cheaper in quality or in short degree of excellence is a negative image a company can have that would impact them directly or indirectly. Total quality management deals with these issues eliminating root causes of quality related issues. It is a variation reduction method used, simply by making defective to a minimum. By reducing the variation quality of the outputs are increased. It also has a direct link to customer satisfaction of the product that would lead a company forward. There are number of requirements in total quality management techniques. These are shown in the figure 4.1.

Due to the requirements of total quality techniques problems in production and quality can now be solved with every level in the organization and the role of the managers in the organization has changed dramatically due to this. Traditionally the management had to ensure the quality is beyond exceptional how ever involving all stake holders, suppliers and workers the standards in new quality concept has moved companies forward. [Airforce,2005 & PJ Caine,2006]

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Organizational support from the top management

Focusing on customer satisfaction and to satisfy their needs

Using the man power effectively

Improving the company’s performance continuously

All stake holders and suppliers are needed to be considered as partners

Measuring the standards , analyzing and improving it in the future Figure 3.3: Number of requirements in total quality management techniques

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3.3 Lean Manufacturing

Lean manufacturing is a practice that a manufacturing company can use to manage their resources to its full potential by eliminating wastage in production. The fundamentals of Lean manufacturing evolve from the Toyota production process that was discussed in the earlier part of the project. Lean manufacturing also increases the efficiency by optimizing the flow by identifying and removing bottlenecks from the production flow. When implement correctly Lean manufacturing can stream flow production and add value during every part within the production process/system and finally delivering products with added value to the customer at the correct price. The Efficiency and the outcomes of a lean manufacturing method are measured by the production cycle and the flow of inventory. By removing bottlenecks from the production process, time taken to manufacture an item in a production line would reduce dramatically. This would help the company to obtain lower production cost and have direct financial benefits from it. Inventory flow would be smoother and visible making the company obtain the maximum out of the raw material that is purchased from their suppliers.

Identifying value in terms of eliminating items that does not add any significant value and adding on things that would add value to customer order is essential. Furthermore it is important to view things when in comes to adding value in a customer’s point of view rather than the traditional company’s point of view. By doing so it would give the manufacturing company better results in the long term. Since the customer is centric, complains form order requirement would be extremely low. Giving better customer service would also help the company to develop a brand that is superior retaining current customer and attract new customers due to their superiority. Therefore indentifying value and implementing productive changes is a key step in the overall process of improving products. Similarly, indentifying opportunities to eliminate waste in production is also a key factor. It should be synchronized with the identifying value procedure for optimum results. The identifying waste can be implemented during any time of production life cycle. That is during designing and any stage of production. There are many forms of waste in a manufacturing process. Over Production and Over Processing in manufacturing can be very damaging as customer would not require it hence no money can be made by doing so. Work in process that does not relate to the requirement of customers is another source of waste. This can be put to a minimum by utilizing proper productive shop flow plan in production sites. This would also reduce 14


Inventory and time. Reducing Defects in production which directly links to quality issues is also significant. This would waste raw material as well as man power. Therefore Raw material and man power can be saved If defects are at a minimum. Most companies also have transportation wastages. Transportation should only used when it is fully needed using transport services unnecessary can causes companies major financial losses. Therefore adapting a plan when moving stock final products are even data and information is vital to get transportation cost low. [Airforce,2005 & PJ Caine,2006]

Eliminate Waste Smooth Production Flow

Low Production Cycle Time Smooth Inventory Flow

Production cost Happy Customer On-Time orders Figure 3.4: Changes and focuses on lean manufacturing and direct outcomes

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Stream-Flow Production is the governing action to produce manufacturing goods smoothly with out interruptions or lapses. Finding the best practice stream flow production would enable companies to reduce production time and add further value to their products. There also should be proper planning when it comes to producing orders. Customer requirements and the neediness for final produce should be taken into consideration. All these factors should be used in a continues basis .Learning from previous situations would help companies to obtain a near perfect production process that can use minimum man power and raw materials wastage to produce manufacturing items at a much quicker time.

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3.4 Six Sigma

It is a mythology that is done by improving (re-tuning) processes .This methods will decrease negative impacts and increase profit. A constant examination of a company’s manufacturing process updating it effectively to reorganize the structure is the key principle of it. By doing so a company can reduce its defective products continually to establish reduce variation in products to give quality process output. The mythology indirectly increases the customer satisfaction as well as the moral of the manufacturing process workers to boast the profit and efficiency of the work force. It appropriate use of the method can lead to near perfection on production. Most Successful six sigma methods used in multinational companies such as Boeing and Motorola has help them to achieve defects to four per million products manufactured. The reduction in wastage has helped these companies to save millions of pounds increasing the profits dramatically. The focus of any manufacturing company is to make sure the specimens are as close as possible to the targets value of specification. However products within the lower specification limit and the upper specification limits are considered to be accurate in customer specification demand. The target is to ensure the products outside the above mention specification limits are at a minimum. [Airforce,2005 & PJ Caine,2006]

Most small scale manufacturing companies in the past was not implementing quality improvement as there was not visible incentive in terms of money. Six sigma implementation processes could cost the company a project setup cost initially. Financial gain due to the results from implementation and changes in strategy would help the organization to follow the guideline of the change in process to obtain future results in years to come. Once that is established Critical to quality factors are analyzed depending on the products manufactured and processes under taking in the organization. The factor that effects the customer satisfaction is also analyzed in this step to maximize results. An effective six sigma project guarantees the company to obtain defects results on few per million products produce. This ultimate goal can be reaches continuously improving quality results due to six sigma implementation.

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Initial evaluation before implanting a six sigma project can reveal the current quality state of the company’s produce. Most companies generally falls lower than four sigma level where the number of defects is higher in production. The aim is to improve standards by increasing the lower 4 sigma level to the ultimate goal of six sigma. Communication within the production team as well as management is vital in six sigma implantation. Commitment from the company worker is essential to success. Master Black Belt is the superior level of the six sigma project. They consult and train other members to black belt levels. The master black belt owners have a high level of competency .They trained Black Belt members they train and educated the green belt holders to make sure the company follows the structure effectively. The green belt holders then commit them self to make sure other workers operate appropriately in order to six sigma launch is successfully implemented and correct procedures and under taken. These levels in six sigma team help the process to improve as per the planned structure. The successful execution would gradually improve results and establish six sigma.[ M.I.T Distance Learning Course]

Figure 3.5: Implementing Six Sigma into manufacturing and its direct outcomes.

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Figure 3.6: Sigma Level of a company categorized deepening on the defects due to errors in manufacturing [google.com-images/six-sigma-graph]

Quality of the produced is determined by the yield of products that are within the degree of acceptance. For any products there is a target value when it comes to specifications. However it’s near impossible to always for produces good to be at this target all time. Hence companies set a zone where products would be accepted as products with acceptable specification. This is between the lines of lower specification limit where it is just off the target line and the upper specification limit which is just beyond the target value. Companies set these Lower specification lines and the upper specification line depending on a products and the accuracy that needs to be established. The figure 3.6 illustrates these lines in more detail. When a sigma level of the company is established prior to the improvement processes most companies fall between three sigma and four sigma levels where it has a yield percentage of 93.3% and 99.37% respectively. However if the company can increase their quality and enable almost all of their produce to fall within the specification limit better it is in terms of production lost and satisfied customers. Furthermore if the improvement project of lean six sigma is implemented right the company can establish a near perfect six sigma level which only causes 3.4 defects per one million products manufactured at the factory. From analyzing and comparing the shape and the area over the specification limit for a 1, 3 and 6 sigma company the results can be easily understood.

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4.0

Basics of Lean Six Sigma in a manufacturing environment

The increase in product demand and consumer requirements has made manufacturing companies lose their attention to detail when it comes to unit profit and company growth in sales revenue due to it. It is essential to eliminate rapid change to repair problems and to adapt changes that would help the companies to achieve consistent growth giving them the privilege to obtain profits in the future. Rapid changes to help short term financial problems would also work in a negative way so it is essential for the company to understand the long term objectives and adapt a longstanding effective method to achieve growth in the future. To achieve this objective the company should incorporate lean to their manufacturing. The Eight fundamentals of Lean Six Sigma would guide them through in achieving this final goal. These fundamentals are discussed in detail later on in this chapter.

The high technological systems and automations seem like the key essential to tackle the profit growth test. However in reality electronic planning, organizational programs and technology advanced systems used in the company did not influence a big impact. The Popular Planning and organization softwares such as the Material planning tool MRP and the Resource planning tool ERP had a huge publicity but results were not as good as expected. The reason is purely due to the fact that the outcomes from these computerized systems are not as good as the skill levels of the workers using the program and the data that in fed into these programs. The other sub factor of the problem is that management cannot adapt the same management approach as the approach needs to be changed depending on the condition, situation and the environment as these factors change in a day to day basis. The ever demanding workload often underlines the importunacy of finding unproductive systems. Therefore time needs to be set away to analyze manufacturing systems and to find root causes of laps in the system.

Understanding the six sigma concept completely from top to bottom is a ground rule to the success of it. After understanding it extensively, obligations to implement it are needed. To put these in to place the fundamentals o Lean Six Sigma needs to be illustrated appropriated to make the full use of it. Without focusing on all eight key drivers or 20


fundamentals on six sigma illustrated below a company will not accomplish total growth and obtain potential profits that would help them succeed and over take their competitors.These fundamentals are invented by William Gaw and is stated in his journal published with the title Eight basics of lean six sigma.[William Gaw , 2011]

Data reliability: Data reliability is the integrity of data and information over the whole cycle of use. The Data needs to be perfectly completed, the timeliness needs to be exact, the accuracy should be as high as possible and finally the validity needs to be appropriate too. The data with high level of reliability is known to be over ridden by data sousing, extracting, transforming and organizing rules. The use of Reliable data would help the company to have a stable system. The performance of the company would be increased and a constant system would be established. The integrity in information would help the company to use data for other different activity centralizing the whole data system to maximize its effectiveness and helping the company to maintain their work easily.

Chronological Production process: Adding control in manufacturing operation is very important. To establish customer consignments on time at an attractive profit limits would be a key outcome of a productive factory scheduling plan. Chronological process which is simple enough but effective needs to be established to succeed in lean six sigma (LSS). The chronological production process needs to be stream-flowed with appropriate raw material supplies and right inventory control. This would lead to high speed production that can handle any production demand which produce height quality produce with minimum cost. The Chronological production processes can also fix time delays due to lapses in different departments. Appropriate scheduling can make the complex orders simpler due to the correct use of planning and organization of the workload. Saving time in production means that goods can be supplied on time establishing good relationships with customers. Eliminating bottle necks in the process would also benefit workers making their tasks simpler and straight forward.

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Performance Management: Performance management is a tool that is used by a company to guarantee the objectives are met in a continues basis and a well organized mode. It can also measure the performance of the entire manufacturing company, different divisions of a manufacturing plant, pefr4omance of individual systems or even a shop floor worker. The results from these directly relate to the success of the company therefore increasing the productiveness continuously would help the company to move forward. There are several performance management softwares for companies to use to measure their current performance in manufacturing processes and outputs. Webfocus performance management software that was created by information builders is one such software that is very effective for a manufacturing company. There are several key tools in this software that is very beneficial. Customized dash boards, quality publishing tool, detailed analysis and instant alerts are some of these. Software like these enables to monitor areas such as production, distribution material management and sales. Because the precision of measurements done using softwares like the webfocus performance management software the company can indentify area and opportunities to improve easily. The Company can use these results to increase the growth in sales, minimize the costs and to restrict the projects to overrun. Using employee performance monitoring method is another way of making sure standards are met and contribution from the workers is high as possible. The results of a performance management for a worker such as the balance scorecard can help the company to identify the strengths and weaknesses of the shop floor worker in question and help the person to improve his skills and to maximize his input to the company. This would also help the employee to remain motivated at all times. Most often balance scorecard performance is also linked with bonus schemes’ giving the employer potential in making a bonus end of every quarter depending on their success at work and the contribution done. Balance scorecards can also help management to track workers and give them the right training and support in order to excel as the balance score card would identify areas of improvement of an individual.[Webforcus,2012]

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Point of Use (POU) Logistics POU logistics which is the transfer of raw material from the store to relevant production location needs to be organized and scheduled wisely to minimize logistic costs and time delays due to it. Inappropriate Raw material management and inventory generally leads to high cost for manufacturing companies. All actions that does not have a significant impact and hence doesn’t add value needs to be identified as quickly as possible. The logical and realistic POU logistics would spotlight on receiving the correct raw material to the appropriate work station and the fastest possible way with the lowest logistic cost. Most manufacturing companies have very high financial cost due to material handing and material storage. Less time used to handle material and less storage done in a manufacturing plant can reduce production cost heavily. The traditional method of stocking increase numbers in the stock warehouse is slowly but surely disappearing from manufacturing factories. This method can only be utilized if the supply chain is an efficient and reliable one. Dell computer manufacturer are one of the best practiced point of use logistic concept follower. Their efficient supply chain that has a minimum storage and delivery of material every two hours has made them very successful.

Cycle Time Management: Cycle time management is the most imperative dynamic to a project .a manufacturing process’s test cycle is calculated depending on the work done per hour on the lean manufacturing process/system. If kaizen project is implemented cycle time management should be given priority than any thing else. Reducing the time for a manufacturing cycle from a long to a more effective shorter one would increase the performance and add value to a manufacturing process. Once time cycle management is utilized constant improvements also needs to be implemented for all cycles continuously.A company that has a very positive cycle time management procedures identifying the impact and the importance of keeping the cycle time to a minimum. These companies intensify workers attentiveness to time spent on each task and sub cycles. The management hierarchy to junior shop floor workers is given intense information and knowledge about time cycle management and its impact. Each company member would be given knowledge about the customers, direct competitors, measuring success and the manufacturing procedure in detail to fully understand the structure of it.

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Linear Production: Making the production linear is another fundamental in the six sigma basics. Production linearity directly tally’s with the dependability and the uniformity of amount produce by the manufacturing process. It’s essential to produce quality outputs and a constant rate with the same specification limits as per order. The process needs to be highly accurate and identical each day to make sure the variation is a minimum from batch to batch. Many companies in the manufacturing world uses statistical process control methods to linear their production. These statistical methods such as Thaguchi methods increase the quality of production by analyzing and eliminating factors that has negative effect on quality and hence increases the batch variation in terms of specifications.

Resource Planning: Whether the manufacturing process is determined by make to order or make to stock planning the resources is very important. In mass production bases on forecast and demand is determined. Much software is currently in use to exploit this. The data is then used and analyzed using sophisticated tools in this resource planning software’s. This would help the inventory to be at a minimum and the orders to be on time all the time. Regardless of the engineering criteria a modern day company needs much more than general basic system to plan their resources well. Need of specific a system that understands requirement is very beneficial If the quality aspect has the greater priority ISO quality based systems needs to be implemented. Most automation industry based companies has systems that does resource planning linked with bar code labeling.

Customer Satisfaction: Customers are very important for any manufacturing company. If the company can fulfill the three key areas in an order which are price, quality and the service it’s a guarantee that a customer would be satisfied with the outcome of the business done with the company. Most business loses customer because of the poor customer service from a recent US survey conducted it was estimated that a 60% of customers are likely to leave goods / service provider or even a supplier if customer service is not up to their expectation. 24


Delivering excellent customer service can make sure customer recommends the company to others which would help the company expand in the future. On the other hand If a customer is not happy about the product or the service given by the company they are more likely to detract new customers or business partners with doing business with the company in question which have a direct negative impact on the business.

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5.0

Ten Commandments of Lean six sigma

Lean six sigma is also a mindset that needs to be embraced. Practice make perfect is the secret to many improvements. Furthermore for continues improvement projects of lean six sigma daily practice is vital for success. Mastering an error free production plan can be done with continues improvements. Practicing effective techniques over and over to establish perfection can result in the near prefect production. The Ten Commandments of lean six sigma chapter of the project discusses key factors known of a lean six sigma project. These factors would govern the likeliness of the success.

5.1: Pillars of six sigma and working as a team for a common success.

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The figure 5.1 shows the four main pillars of the lean sig sigma methodology which can be further broken down as increase in speed and quality to increase the customer satisfaction criteria and process improvements established by smooth production flow and eliminating defects from produce. It is also essential to work as a team in order to establish these improvements and data and facts used in the improvement strategy is also highly important.[ Gemba- Academy,2012]

Opening mind to change: The greatest approach to improve and tackle problems is not to spotlight on the outcomes but the behavior of the unit. Opening our mind to change and realizing change is needed in order to remove obstructions is the first step of any continues improvement projects.

Yes we can Attitude Thinking positively is also very important. If the team is determined enough to succeed the outcomes are achievable.

Focus on process improvements Most often when processes are broken down, blaming individuals for mistakes is common. The commandment focuses on improving the systems that consist of multi processes rather than blaming on different individuals when problems are occurred.

Identify less complex solutions A simple solution to problems needs to be used as much as possible to complex ones. More often than not problems can be eliminated by few simple adaptation than wasting both time and money on complicated solutions.

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If out of order fix it immediately When processes problems are identified stop and fix policy should be used. When a problem is identified fixing it then and there can help the company to abolish the problem immediately than to deal with a severe problem in the future.

Use creativity as much as possible Logical thinking and creativity can solve most problems specially the ones in a manufacturing process. Buying equipments or machines are more often looked upon than creative thinking than can fix problems within a process.

Use problems as an opportunity to excel Problems should always be looked at a way to excel rather than having negative attitude about it. When this attitude is implements more often than not problems are discovered rather than swept under the carpet.

Find root causes of a problem Conducting proper root case analysis can always find the origin of any problem. When a problem arises ‘why questioning concept’ needs to be used to break down the causes further and find the original causes that led to the problem. If the root cause is identified changes can be done in order not to have the same problem again in the future.

Use all levels of information and ideas Working as a team is important when solutions are discovered. Information and analysis from all levels needs to be considered before solutions are created. Most often when tackle problems only the senior management has the opportunity to input their ideas and junior worker are disregarded. Using Ideas and opinions from all levels can help the company to come up with a better solution.

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No perfect Process An improvement project has no final target. Any process can be improved over time. Therefore assuming the process is perfect can lead to disregarding opportunities to save cost and time in production.

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6.0

Methodology

Research methodologies are systematic processes of collecting, using analysis and interpreting data gathered to visualize the problem in concern more clearly. There are two main research methods that any project can follow. They are quantitative and qualitative research methodologies. Quantitative research associates with numerical data that is then subjected to mathematical equations and formulas to produce final out comes using statistics and mathematical procedures. On the other hand qualitative research is done by gathering information from discussions and interviews carried out between the researcher and the other parties involved in the given scenario. The case studies discussed in the earlier part of the project has a strong link to qualitative research before the successful lean six sigma philosophy was introduced to obtain positive results. Especially in the first two case studies where the problem that each company was addressed by a strategy that was created using information gathered by the employees and the management hierarchy during meeting and discussions they had within the company. When conducting a qualitative research methodology it is important to address the assumptions that were taken into consideration during the project.

It is also important to adapt an effective strategy and the design of the qualitative method can determine the success of it and the rating of the outcome that is achieved at the end. The questioned asked when developing a strategy is very important. The key sources of information gathered from a qualitative research are by face to interviews, telephone conversations conducted to obtain information from other nonmanufacturing plant based parties and group meetings and session carried out to seek problems are solutions within the company. However there are pros and cons when conducting interviews as such. The key advantages are for when problems cannot be identified directly, questions and fact finding mission can be very important to find the root of the problem. In addition to, also the timeline of the information can expand to a great amount and would be very beneficial to the project. This method would also give the research team a good control over what exact approach they need to conduct giving them greater control over it. However at times indirect information is also gathered during interviews and not adding any importance to the line of focus. It also depends on the individual’s openness to the problem. If someone’s commitment to the 30


company and the desire to succeed is in question false information would also be a by product of the interview. Especially when carrying out interviews with the Existence of immediate managers of an individual in the manufacturing company employers might be biased due to the presence of individuals as such.

Carrying out observations on the processes and routines in the shop floor is another way of gathering information and identifying laps to eliminate them to achieve a better result. This method would give the observer firsthand experience and uncertainties and processes in questions can be noted down with ease. However the expertise and the problem identifying skills of the observer need to be excellent to have a good out come from it. When carrying out observation sessions it’s vital to use it in an appropriate manner as work been carried out needs to be not disrupted when carrying out observations. Especially in the shop floor where manual work is done by employers more often workers can be uncomfortable and not attentive to their task then inspectors are present.

Figure 6.1: Key factors and difference in qualitative and quantitative research methodologies [relevant insight,2010]

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6.1

DMAIC: 5 Stage Lean Six Sigma Methodology

Lean six sigma has several schemes or approaches. Out of these schemes the earlier discussed DMAIC approach is the best and the most suitable when it comes to a manufacturing situation. This approach would help the company to structure the outline of the overall project. In everyday terms identifying what is important, how is it done? , what’s going wrong in the process? , what needs to be changed? How do we make sure performance is assured? ; are define, measure, analyse improve and control respectively. Each element of the DMAIC approach will be discussed in depth in a manufacturing scenario in the later on in this chapter. [Airforce,2005 & PJ Caine,2006]

STAGE 1: DEFINE STAGE 5: CONTROL

STAGE 2: MEASURE

STAGE 4: IMPROVE

STAGE 3: ANALYZE

Figure 6.2: Five Stage DMAIC cycle for continues improvement.

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6.1.1 Define Stage

During this stage inputs would be analysed in the manufacturing plant. This may include setting up a goal such as increasing a particular rate by 10%, prioritizing on sections inside the overall process is also important although there could be several improvements an opportunity scaling them according to its propriety needs to be done before focusing on the most important opportunity of them. Especially in a manufacturing company there can be various opportunities that would be discuses doing this define stage. When getting outputs from shop floor workers, depending on the department they work in there in pits and areas of focus could be very different. However since the end results should lead to increase of product quality and customer satisfaction, customers needs to be also given a huge importunacy when selecting the opportunities with the highest priority. This define stage would classify workers in to teams and units involved in this project, each level within these team also can be discussed giving individuals responsibilities within the project. Financial desires can also be discussed at this stage. If the company is under performing financially ways of improving profits needs to be identified. In any company the most common ways of establishing this is by either increasing the total revenue by expanding the market or the addition of new products and services to the company’s portfolio. However Lean manufacturing focuses of reducing cost which is the other option that a company can select to increase their operating profits. Define stage would enable the manufacturing company to go into detail of elements and identifying high cost activities and low productive processes and needs to be changed during the course of the project.

6.1.2 Measure

Measure stage is to determine what measurements need to be taken. Since six sigma goal is to improve the quality and to reduce the amounts of defects. Company’s current percentage of defects and variations needs to be calculated. Therefore batches and sample sizes would be set and different tests would be under taken. Information from these tests would be taken down and table, graphs and other mathematical notations would be stored form further use. These data would be relevant to evaluate the 33


present capability of the company. This would also give the company of the sigma measure and the company can be classed as a 3 sigma or 4 sigma company depending on the results obtained by the tests. The company could also use a measurement plan of action to help them accomplish this stage in a organise manner.

6.1.3 Analyse

During the analyse stage identification of causes are done using the data gathered from the previous stage. When causes are spotted analysis is done to find the root causes of it. By doing so the reasons why the process cannot be used to its full potential is found out. At this stage to do the analysis there are numerous tool that a company can use. Value stream mapping is a very common tool of use. This value stream mapping identifies the areas that add value to the process and areas that do not add any value to the process. Fish bone diagrams and analysis done from it is another type of analysis that a company can do to identifying causes. Fish bone diagrams is a very logical way of spotting potential causes to a process. This analysis also help the company to find direct links between problems and the reasons for it to arise giving a very clear visibility of the problems and potentially eliminating them totally in the future. apart from these two type of tools discussed there are significantly high number of tool that the company can use depending on the project they are carrying out. These tools may include scatter plot, taguchi method, quality control tools, FMEA and design of experiments.

6.1.4 Improve stage

Core of the improve stage is to engender solutions. It is to find the solution that would provide the maximum effectiveness in a least amount of time scale. The key to success at this stage is to create a pilot map and carry out accordingly. In most process improvement there is no single right answer. Careful decision from the management is vital when selecting which areas to tackle and which solution to pilot. When piloting solution the selected improvement team should all work together for best results. All factors should be taken into consideration and best method 34


needs to be brought forward to eventual success. To help the improvement team to be more advance in making selections various tools are present that companies have use in the past. Impact and decision matrix would be one of the most common tools that the manufacturing company can look into using. Process accelerators and cost benefit analysis are some of the other tools that are available. However the biggest negative factor is inertia that the workers might propose about the changers to their comfortable work routines. Change managing scheme must be carried out in a well organised way to counter these negative feelings in the company. Change management scheme can help the workers to achieve high level of morals by different activities and workshops that are carried out prior to the implementation of the lean six sigma solution.

6.1.5 Control Stage

If any improvements need to be sustained for a long time control stage is used for it. Control systems are used to integrate processes alongside control plans of action. The five key factors that is needed to sustain is overlooked in this part. Firstly the budget, if cash flow is needed to implement these changes and have success by it cash input are given to make sure nothing falls behind. Also the sources of funds are established. To make sure project does not fall behind plan control plan are included in the control stage. This would enable the company to measure success and to make sure correct strategy is used to obtain positive results through the process in the future. The people associated with the company are also a crucial factor to sustain improvements. The correct training and skills needs to be given to employers in a regular basis. Furthermore workshops and induction sessions needs to be up to scratch when new employees are recruited to make sure they deliver accordingly to the company standards and regulations. If the process important depends on the technology company needs to use stage of the art technology to control process improvement. All these elements help to make sure the improvement is successful. If these elements are not given detail attention project can fall behind loosing the company both time and money.

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7.0

CASE STUDY 1: Acme industries Inc

7.1

Background Acme Industries Inc

Acme industries in a manufacturing company based in Chicago USA. The company was established in 1948 and today it is a market leader in complex precision machinery parts all over USA. The Company also boasts a huge scale manufacturing plant in Illinois USA. The 150,000 scale foot factory plant provides custom solutions for their clients. They also run with a beyond precision theme gives solutions and detailed manufacturing outputs that are very accurate in terms of specifications. Acme Industries also manufactures other manufacturing equipment to medium scale original equipment manufacturing companies in USA that use acme parts and components and resell it in their own brand name. The extra level of customer satisfaction with Acne industries is one of their major strengths. The company constantly introduces a procedure that helps them to achieve high levels of customer happiness about their products and its quality measurements. [Acme Website]

Figure 7.1: Acme Industries Manufacturing Plant Facility in USA [acmewebsite]

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The main services that the company deals with can be broken down as Supply chain management, High detailed Machining, engineering services and logistic support. Supply chain management at Acne involves leverage relationship with raw material supplying companies so that customer specifications are met to the highest standards as possible and at the precise time. State of the art equipment/ tool and computerized software controlled machinery designs and produces parts that are very hard to create from standard operation due to its complexity. As for most manufacturing parts quality which can be defined as parts with minimum deficiencies or as parts that satisfies the initial objective of the customer is important for increasing customer reputation of a company. Although quality is significantly important pricing of the parts and the profitability needs to give constant attention during the manufacturing procedure. Due to the extreme detail that Acme Industries that go to established accurate products pricing element is more often forgotten hence the produces needs to be sold at high unit cost to obtain a profitable income. The following case study summarizes the lean six sigma manufacturing mythology that Acme Industries used to improve cost and pricing aspects of the company.

7.2

Identification of the problem

The first two quarterly reports of Acme Industries in 2004 showed financial results that impacted the company in a negative manner. The trends in financial costs meant that Acme was losing money continuously. Plans are procedures need to be discussed as soon as possible to increase profits in the future in order to maintain their operations. The demand for products was also fallen dramatically as the post credit crunch has affected the product demand directly. Increasing unit price was the realistic option however risk of cut down in sales was an impact that the risk management team had to focus. A market research done end of the 2nd quarter in 2004 suggested that the negativity in trends. [Quality Digest,2012]

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7.3

In-depth Analysis of the problem

Raw material cost has risen in the last few years, especially Acme industries main raw material steel. The cost at which the company is buying steel was at $490 per Ton. This was a significant rise, as a result of international steel import fare that was implemented in the beginning of the year. The demand for steel from the Far East and the Indian subcontinent due to newly invented manufacturing plants meant companies in the western world had to pay extra money due to the rise in demand. In 2004 China alone had a Steel demand of 35 million Tons and the scale is set to increase rapidly in the years to come. The Map’s Steel mining plant in Sheffield, England established these facts quantifiably in their annual reports for 2004/5. The other factor of raw material price rise is that oil process has also increased in the recent times. Acme Industries need to save money in other factory manufacturing operation in order to sell the products to their buyers at a reasonable price in order to have negatives effects. The Market Search conducted also suggested that the flexibility in pricing is no longer applicable. In the past flexibility given to sellers when discussing potential business led to obtaining a high influx of customers. Apart from un-controllable raw material cost Acme also had internal factors within the company that had direct impacts to their operation. Operational cost was also up by 10% in 2004. This gave the management a fact finding mission to deal with in terms of finding the reasons behind this increase. The complex procedure that acme industries followed was in question as result. Therefore cost reduction in manufacturing process was needed to increase the profitability. Therefore Lean Six Sigma implications needed to be introduced as soon as possible for company existence. [Quality Digest,2012]

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7.4

Development of Lean Six Sigma philosophy

The company’s management hierarchy had meeting to address the change in action plans that needed for the company to move forward. Agile manufacturing which involves changes to manufacturing processes, changes in tool utilization , and Acme workers training to permit a strategy that would counter the change in market and adapt low operating cost for manufacturing operations. Company also utilized lean manufacturing principles in to their day to day operations to reduce costs at all times. These changes in lean operations highly targeted the wastage of the manufacturing system. The operation structure was completely changed and stream flow applications were introduced. Since the manufacturing company shop flow workers were already quite comfortable with the old system the companies followed there were conflict between the workers at first as some of the apposed the changes saying the changes will not have a significant impact and the new elements added and the elements taken out of operations had confusion on the shop floor environment. The company workers were given training and workshops were conducted to educate the workers of the company of all levels to inform the impact that the new system will have on the company’s future. [Quality Digest,2012]

7.5

Using Six Sigma for Pricing

The management Hierarchy also identified the impotency of using six sigma in pricing of products. Since there was no flexibly at present when sellers sold products to potential customer changes in pricing would improve the company’s financial profile gaining advantages when comparison to acme’s competitors. A six sigma pricing strategy was now introduced at Acme. The Six Sigma Manufacturing concept of Define objective, Measure, analyzes data and control often known as DMAC was used at Amec.

7.6

Installation Six Sigma within the Organization:

Once the need of six sigma utilization was identified the managers were given the responsibilities to achieve the goals with determination. Previous six sigma deployment projects were studied in detailed to find 39


out similarities, successful and useful projects were then further analyzed to gain valuable tips for the lean six sigma project at Acme industries. The finding and the inputs from all levels of managements, shop flow workers, market researches to sellers were gathered and six sigma design structures, plans and guideline and notes were created for all levels of workers to follow. Apart from cost reduction aspects the new lean six sigma philosophy also identified other areas the company can have a positive impact on. The Zero Defectives idea was discussed in the six sigma strategy as the products outcomes needed to be as good as the quality the company was known for. Therefore the new training material for workers to follow emphasized on activities that would reduce cost and increase quality at the same time.

7.7: Five Step Six Sigma Cycle

Stage 1: During the define stage the problems of the company was identified . Stage 2: key measurements are taken, financial reports were used at Acme.Market reaesrch tools were also used to capture data Stage 3 : during this stage the comaopny found the root caucses of the problem. Factors that cannot be controlled were elemintaed from the equation and the improvement prospects were spotted. Stage 4: during the meeting of management hierachy and workshops that was staged , solutions from all directions were duscussed to find ou the best solutuion for the problem identified in first stage Stage 5: the implentations are followeed with control to find out the best solution in terms of performce and stability

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Figure 7.2: Six Sigma DMAIC model that has a diverse use.

7.8

Results and Benefits:

The first quarter following the complete introduction of lean six sigma at Acme yielded major financial results. The revenues established in this quarter increased by $500,000.Although there was cost in terms of putting lean six sigma into action it was definitely cost affected in the long term. The changes in the organization structure and workshops and team building exercises in the lean six sigma project also meant that the work force was much more motivated and stronger. The management were also trained by the six sigma black belt movement helping them to be have goal driven mentality at all times.The success in the project means that not only the manufacturing process and the pricing of the products can utilize lean manufacturing and six sigma techniques but the whole corporation can take important facts out of it and spread them wide around the whole organization. [Quality Digest,2012]

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8.0

CASE STUDY 2: Scania Production System

8.1

Company background – Scania

Scania is a heavy truck manufacturer popular all over Europe. The company was founded in Sweden in 1891.the company currently operates with revenue of 80 billion Swedish Koran’s with a work force of 40,000 staff over 10 different factory locations. Scania’s company strategy involves increase productivity for the company as well as customers all the way through the product life time. The company has three cure values which are Putting customers first, showing respect and high quality production. The profitability and customer satisfaction is increased by the companies remarkable least cost in operations in the manufacturing plants. Ways of reducing costs in the entire product cycle is monitored and new elements are added to produce heavy manufacturing products at very low cost keeping customers happy at all times. The moral of Respect for individual drives new ideas from the talented pool of employees helping the company to excel by providing Excellencies in production and high standards in quality. Customer feedback is taken in to remarkable consideration. Their requirements and needs are identified and improvements to quality of products are continuously done. The following case study explains how scania changed their manufacturing system by adapting variety reduction in manufacturing. Waste elimination and resource utilisation was key in this leaning of manufacturing process. Further research on scania’s six sigma implementation projects are also discussed to conclude positive results of lean manufacturing and six sigma in production processes.

8.2

Need for a beneficial Production process

Scania has increased its product type vastly in the past decade. Constant demand for heavy vehicles and customised ordered has made Scania to produce a variety of new parts and components in the recent times. However the production cost has also risen in the same period of time as creating new parts and components has cost Scania a huge sum of money for its design and organising all these new type of items produced. On 42


average every new item created costs the company a few thousands of Dollars per annum. The high item list on the inventory and the quality of the new parts created has been a major problem for Scania. The Newly designed complex items are advance , however the durability , cost effectiveness and quality is not as the same that Scania as a company is known to create and has build a strong brand name over the past few decades. The Lean Manufacturing technique other automotive production companies have established such as the Kanban system at Toyota and also the line production system at Ford has made other major automotive companies such as Scania to invent new methods to reduce cost in all corners and add value to its produce and also increase the customer satisfaction.

8.3

The Unique Production system

In 1995 to establish a more cost effective manufacturing system that would tailor to scania’s needs are a heavy vehicle producer, the senior Engineers and the management at Scania met with their counter parts at Toyota factories in the USA. Small scale pilot projects were put to plan during this important meeting in order to obtain a production system that is similar to Toyota’s but would suit Scania’s needs as a manufacturer. The Scania Production system commonly known as SPS has a direct link between standardisation and reduction in wastes also has similarities to Toyotas production process but it also has a unique Modular system that the company has mastered since adapting changes in 1995/Since Scania deals with customised production depending on the customer requirements. The increased number of new parts created was significantly reduce .Scania was cutting down on the items on their inventory list. Without creating new parts and components scania managed to use existing parts that has been proven excellent in terms of quality and durability was now used to produce customised orders. Although the products created didn’t have major new technology addition to their internal design the new modular system meant huge reduction in production operation was established and many vehicles were now produced at a much quicker rate than before. Due to its unique design all parts in scania production plant fits perfectly with one another due to its compatible connections and interfaces. [C.dayaratne-coding and classification] 43


Figure 8.1: Scania Variety reduction method and modular system[scania financial report]

8.4

Production Flow

Flow of production is another area scania was hoping to stream flow by adapting these new manufacturing strategies. Severe lapses in assembly line and also machining areas were identified before introducing the new strategy. The main disruption of productions which were suppliers to plants and internal manufacturing departments within each plant were targeted in order to obtain a stream flow production process. The production process was also more flexible giving the work force less pressure during tasks carried out. The change to the production processes was first conducted in a few sites to see if there were any positive results. Particularly Scania’s manufacturing plant in Zwolle; Netherland had reviews with their suppliers to re arrange contracts so that the raw material would reach just in time of production.

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Customer Production Flow

Variety Reduction Unique Scania Production System

Figure 8.2: Scania Variety reduction method and modular system pyramid 8.5

Working Strategy

Apart from the unique production system scania developed, Employee working strategy has also changed to ensure efficiency is boosted and improvements are made to better results. All Scania workers were given training courses in lean manufacturing and six sigma. The courses were conducted and Lego models of the production process were built to ensure the workers fully understood the working model in detail. The variety of tasks the workers can do has now increased due to the standardisation of parts and procedures done at Scania giving the workers a new challenge in the production plant. [scania financial report &Scania modular system]

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8.6

Results

After adapting these new lean manufacturing techniques Scania had positive results. Especially at Zwolle manufacturing plant in Netherlands production capacity of increased dramatically. The modular production system help the company to increase daily rate of production giving extra 100 units of produce per day using the same labour and other operational costs. The Scania Production process (SPS) helped the company to obtain quality and safety improvement. The stream flow production also meant that 90% of scania’s components such as chassis and body frames move straight out to the production assembly area rather than spending time on post assembly areas for adjustments or add-ons. Therefore it is clear that the combination of both the processes has improved costs, quality and the reliability of the units produced at scania. The financial report form Scania 2005 also shows the company has increased its sales revenue from 33,000 million Swedish Koran to almost 40,000 SEK for its trucks and buses. [Scania modular system]

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LEAN MANUFACTRING ELEMINATING NEW PARTS COSTS

SMOOTH PRODUCTION FLOW

METHODS USED AT SCANIA MAKING PARTS SPECIFICATIONS STANDARD

BETTER UNDERSTANDING OF PRODUCTION AND QUALITY

POSITIVE OUTCOMES AND DATA FROM FINANCIAL REPORTS

Figure 8.3: Results at Scania due to lean manufacturing and six sigma implementation [Scania Financial report]

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9.0

Lean Supply Chain

Supply chain is a critical part for a company to transform to a lean corporation. Results taken from ‘Deloitte and TouchÊ’ research study in 2003 has proved that less than 10% of companies are having an effective supply chain at present and these companies are also 75% has more profits than their counterparts. In the manufacturing world companies such as Dell, Ford and Toyota has a superior supply chain giving the excellent results by doing so.

In an ideal supply chain model customer needed to be delivered with value for their specifications and demands. Suppliers are also crucial in terms of adding value to manufacturing process that would yields a value added product for the final customer. Therefore it is essential to define suppliers as a partner of the manufacturing company. A good supply chain got to have several key elements to it in order for the company to benefit from it. Cooperation, quick to respond, agile, dedication to longstanding relationship with suppliers are some of these key elements.

Every supply chain has different levels. From raw material suppliers to first level suppliers and from customers to end users every single level within the supply chain needs to be monitored to obtain an efficient supply chain. A non lean supply chain would not have any visibility at all and timing of orders are not accurate hence the whole supply chain can be considered to be a utter mess. With no real information up stream or downstream a random point in non lean supply needs to act on responds when delivery is collected. [Airforce,2005 & PJ Caine,2006]

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9.1

Dell Lean Supply Chain Model

Dell has a global network of supply chain and facilities that are located all over the world in a strategic manner. There are manufacturing plants all over the globe that creates and assembles customer specified computers and other related units. Dell also has fulfilment hubs globally distributed that can delivery orders swiftly and also to provide additional services to customers without any time delays. The processes in every single manufacturing centre at dell are identical. Same company systems are used to manufacture items, same methods are used to measure outcomes giving Dell a consistent product all over the world regardless which plant it had manufactured at. Dell also operates at a build-to-order theme giving the customers more flexibility when requesting exactly what is needed. Due to the globally spread manufacturing plants providing the same high quality products the closest manufacturing plant of Dell begins the customer order once the confirmation is received. The centrally operated order management system uses it’s high technology tool to schedule orders according to it’s requirements. Very manufacturing centre is connected to the order management centre electronically using satellite technology providing latest order details high in accuracy. The satellite technology is also used to update on order progress to customer and other parties that needs information.

Software installation is also done within the assembly arena giving customers to receive computers with more features and saving them extra time and money. Every part created and assembled on to the manufacturing plant has a unique tag number that can be identified visually and also using bar code reader giving visibility in production and making all products easy to connect with other parts within the production process in different assembly departments. Raw material needed to produce components is delivered every two hours. Dell has a unique contract with their suppliers to enables this unique supply of raw material making supply chain more efficient and also reduces costs in terms of extra storage. This raw material supply compromises dell’s build-to-order theme very well.

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Figure 9.1: Lean supply chain at Dell that adds value at each tier within the supply chain [Dell Supply chain case study]

All items in a customer order is begins manufacturing at the same time. However differences in processes variability. however to make sure the whole order is delivered at the same time each completed unit is staged in racking areas within the manufacturing plant .Once the final item is completed. The entire order is collected and organized to ensure prompt delivery. When the customer orders are high in variety emerge centres are used to combine orders from different manufacturing plants which specialize in their own components. Once the full order is combined at these emerge centres the order is ready to be received by the customer exactly on time they needed it. Although the supply chain has a few complexities the unique method at Dell provides all customized orders in an efficient way to ensure high expectations are satisfied for their global customers.

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10.0 Discussion and Recommendations

10.1 Case Study Analysis

From the three individual case studies done for Acme industries, Scania and Dell it is clear that Lean and six sigma approaches are also very flexible and can be utilised in different environment and scenarios to eliminate the problems and process improvements. From the Case study done for Acme industries it is also clear that the sig sigma concept can also be used outside manufacturing in areas like pricing to create a marketing and sales strategy. Although the case studies discussed above has positive results, there are many factors that would directly link to the success. The consciousness of the management hierarchy and their understanding with the improvement needed should be very strong. Just like the management needs to understand the concept and the need for the new project workers needs to understand it too. if the company is not able to obtain steady improvement results in the upward direction that company can decline and even fall beyond their initial position before lean six sigma was introduced. Therefore the successful projects of lean six sigma implementation as such would help small scale manufacturing companies to learn about the concept. Beneficial features can be studied in detail and utilised when introducing their own lean six sigma project for improvements

10.2 Total Quality

The total quality techniques and six sigma approaches can be applicable to the service industry as well as the manufacturing sector discussed in this project. It’s vital to understand that quality is a journey that associates with continues improvements and should not be mistaken as a destination. If the company constantly hits the consumer expectation for quality it would be a huge weapon when challenging other companies in the same industry. Quality starts from the bottom of the company and standards should be met at all levels. The whole company should be hitting standards when it comes to quality. No exceptions can be made during any tie or any situation. Quality results would not be visible 51


overnight. Therefore time is needed and patience is needed when anticipating results. Companies can also use different methods to follow their path to success in quality. European Foundation of Quality management EFQM excellent model is one method as such currently available for companies to monitor their quality improvements.

during this phase the company should have an effective way of communicating to make sure all levels within the company is up do date with results , achievements and practices. When employers are new and recent to the role quality standards about the company needs to be embraced to their working mind set. Similarly to other improvement areas quality should always be over looked by the management hierarchy at all times. When the employers are comfortable in the new working environments shortcuts to the process might be tempted to be implemented. Therefore management should always focus on informing the employers about the correct procedures and advocate it. For the company to reach its potential success in terms of quality internally areas as well as external areas should both be controlled appropriately. Quality issues with retards to suppliers as well as sellers should be identified and eliminated and controlled. This would also help suppliers to embrace the continues quality improvement mind set to deliver better products every time.

10.3 Change Management

Since implementation of six sigma could be a very strange concept for company workers specially the ones who under Takes Company’s manufacturing processes day in day out would find it very uncomfortable about the change at first. The procedures and tasks that they have been using for years can be changed overnight when the new sig sigma process improvement methodology is used in production. Therefore using a effective change management approach is very important to make sure the change is smooth and no problems are derived due to it. Change management can be defined as a systematic way to endure transition from one phase to another. Exactly what a company would experience when lean six sigma is implemented. The Lean Sigma project can also potentially eliminate processes that dues not add value for the company therefore jobs losses or a reduction in working hours would be a factor for 52


shop workers to worry about. during this stage the company could use this new effective change management strategy to manage employee emotions and anxiety about their job security

10.4 Risk Management

Although lean six sigma promises positive results proper risk management tools must be used to see the effectiveness and to identify an potential risks for the company. Especially when used in small scale company results would not be as straight forward as a large Scale Company. This would enable the customer not to have any loss due to making changes to their process and structure of their manufacturing company. Since every manufacturing has its unique business strategy it is important that the lean principles used in the lean transformation and business strategy matches each other. If it is not synchronised properly no result would be visible and the company would not move forwards as an organisation. When Just in time is used in manufacturing the company needs to make sure they are in partnership with the best suppliers who would can be counted on prompt delivery. Since the new lean manufacturing would mean less stock is in the warehouse manufacturers needs to be extremely reliable with their suppliers.

10.5 Future of Manufacturing

From the recent trends of manufacturing and customer demands it’s fair to say that the manufacturing world would be anticipating a new era and a manufacturing methods focusing on different aspect in the future. The global manufacturing world was be establishing an accelerated process and many manufacturing companies in Asia would be specializing this. Planning horizon in the future would fall rapidly too. Flexibility is vital in the future as change in market would be a great factor. The supply chains would also change to accommodate these changes. The companies are now focusing more on security of their suppliers over the cost of a unit that might be cheaper but at risk of prompt deliver in time and size of batches. Since the market would be flexible companies would also prefer flexible suppliers to counter to this change. For an example nations would 53


prefer their suppliers to be local in distance rather than suppliers from other continents. This can be proved by USA’s increase of raw material orders from Mexico and other South American nations and China’s association with other far eastern nations as their main resource suppliers.

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11 CONCLUSIONS

This report has been capable to present the variety of ways of increasing the effectiveness of a production process and quality aspect of produce. The research on the trends of manufacturing methods shows that the manufacturing methods are always evolving to make sure company embrace the most effective method to produce customer orders and demands efficiently. The positive results obtained by many companies can also conclude that lean sigma has a great impact on a company that needs continues improvement. It is also essential to use a proper strategy when implementing a continues improvement method like the lean six sigma.

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Gemba- Academy [Online]: Ten commandments of lean six sigma: Assessed on :Aug 2012-Available at http://www.youtube.com/watch?v=JxFWilrz4iQ Jean-Baptiste Fouquet, University of Lund,Sweden [Journal]-Design for Six Sigma and Lean Product Development- Differences, Similarities and Links -2008

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Scania Annual Report 2006[Online]- www.scania.com Scania modular system [Online] Accessed on 20/08/2012-available at:http://www.igel.com/uk/industries/manufacturing-industry/manufacturing-industryoverview/scania.html

Webforcus Software :www.webforcis.co.uk

information

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on

:

July

C.Dayaratne 2011-Coding and classification case study-Kingston University

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Engineering Journal  

This research base project of implementation of lean six sigma in manufacturing gives detailed information about the tool and the methods to...