1. Copyright 2011 John Wiley & Sons, Inc. Chapter 10 Lean Systems and Six-Sigma Quality 10-1

2. Lecture Outline 10-2 What is Lean? Lean Production Respect for People Total Quality Management (TQM) Statistical Quality Control (SQC) Six-Sigma Quality Lean Six-Sigma Supply Chain Copyright 2011 John Wiley & Sons, Inc.

3. What is Lean? 10-3 Copyright 2011 John Wiley & Sons, Inc. Lean is a management approach for creating value for the end customer through the most efficient utilization resources possible Standard in many industries Often results in: –large cost reductions –improved quality –increased customer service

4. Lean Six Sigma Combines the approaches of Lean and Six Sigma Six Sigma –methodology to identify and eliminate causes of quality problems 10-4 Copyright 2011 John Wiley & Sons, Inc.

5. Tenets of Lean There are six tenets of the Lean Philosophy: 1.Elimination of Waste –eliminate all non-value adding activities 2.A Broad View –decisions made for the success of the entire supply chain –all supply chain members responsible for adding value 3.Simplicity –the simpler the solution the better 10-5 Copyright 2011 John Wiley & Sons, Inc.

6. Tenets of Lean Continued 4.Continuous Improvement –emphasis on quality and continuous improvement –called kaizen 5.Visibility –visible problems are identified and solved 6.Flexibility –easily switch from one product type to another, using flexible workers that perform many different tasks 10-6 Copyright 2011 John Wiley & Sons, Inc.

7. Elements of Lean Lean is composed of three elements that work in unison: Lean Production Total Quality Management (TQM) Respect for People 10-7 Copyright 2011 John Wiley & Sons, Inc.

8. Elements of Lean 10-8 Copyright 2011 John Wiley & Sons, Inc.

9. Lean Production Coordinated system for producing the exact products desired, delivered in right quantities to where needed Just-in-Time The Pull System Visual Signals Small Lot Production Uniform Plant Loading 10-9 Copyright 2011 John Wiley & Sons, Inc.

10. The Pull System Traditional approach –supply chains work as “push” systems –inventory carried to cover up problems Pull approach –each stage in supply chain requests quantities needed from the previous stage –no excess inventory generated –reduced inventory exposes problems 10-10 Copyright 2011 John Wiley & Sons, Inc.

11. Visual Signals Communication between workstations Kanban –“signal” or “card” in Japanese –contains information passed between stations –authorizes production 10-11 Copyright 2011 John Wiley & Sons, Inc.

12. Visual Signals 10-12 Copyright 2011 John Wiley & Sons, Inc.

13. Small Lot Production The amount of products produced at any one time is small –reduces inventory and excess processing –increases flexibility –shortens manufacturing lead time –responds to customer demands more quickly –setup time must be low 10-13 Copyright 2011 John Wiley & Sons, Inc.

14. Uniform Plant Loading Problem –demand changes are magnified throughout the supply chain –contributes to inefficiency and waste Uniform Plant Loading –production schedule is frozen for the month –also called “leveling” –helps suppliers better plan own production 10-14 Copyright 2011 John Wiley & Sons, Inc.

15. Respect for People Respect for all people must exist for an organization to be its best –flatter hierarchy than traditional organizations –ordinary workers given great responsibility –supply chain members work together in cross functional teams Look at Role of: –workers, management, and suppliers 10-15 Copyright 2011 John Wiley & Sons, Inc.

16. Role of Workers Workers have the ability to perform many different tasks and are actively engaged in pursuing company goals Worker Duties –improve production process –monitor quality –correct quality problems Work in Teams –quality circles 10-16 Copyright 2011 John Wiley & Sons, Inc.

17. Role of Management Create the cultural change in the organization needed for Lean to succeed –provide atmosphere of cooperation –Empower workers to take action based on their ideas –develop incentive system for lean behaviors 10-17 Copyright 2011 John Wiley & Sons, Inc.

18. Role of Suppliers Lean builds long-term supplier relationships –companies partner with suppliers –improve process quality –information sharing –goal to have single-source suppliers 10-18 Copyright 2011 John Wiley & Sons, Inc.

19. Total Quality Management (TQM) TQM is an integrated organizational effort designed to improve quality at every level Look at: Quality Gurus Voice of the Customer Costs of Quality Quality Tools ISO 9000 10-19 Copyright 2011 John Wiley & Sons, Inc.

20. Quality Gurus 10-20 Copyright 2011 John Wiley & Sons, Inc.

21. Voice of the Customer Quality is defined as meeting or exceeding customer expectations Determine customer wants: –focus groups –market surveys –customer interviews 10-21 Copyright 2011 John Wiley & Sons, Inc.

22. Costs of Quality 10-22 Copyright 2011 John Wiley & Sons, Inc.

23. Quality Tools Lean requires workers to identify and correct quality problems Seven Tools of Quality Control: –Cause and Effect Diagrams –Flowcharts –Checklists –Control Charts –Scatter Diagrams –Pareto Analysis –Histograms 10-23 Copyright 2011 John Wiley & Sons, Inc.

24. Cause and Effect Diagrams Identify causes of a quality problem –sometimes called “fishbone diagrams” 10-24 Copyright 2011 John Wiley & Sons, Inc.

25. Flowchart Diagrams the sequence of steps in an operation or process 10-25 Copyright 2011 John Wiley & Sons, Inc.

26. Checklist Lists common defects and number of occurrences of the defects 10-26 Copyright 2011 John Wiley & Sons, Inc.

27. Control Chart Determines whether a process is operating within expectations 10-27 Copyright 2011 John Wiley & Sons, Inc.

28. Scatter Diagram Graph that visually shows how two variables are related to one another 10-28 Copyright 2011 John Wiley & Sons, Inc.

29. Pareto Analysis Based on the premise that a small number of causes create the majority of problems –identifies problems based on degree of importance 10-29 Copyright 2011 John Wiley & Sons, Inc.

30. Histogram Chart that shows the frequency distribution of observed values of a variable 10-30 Copyright 2011 John Wiley & Sons, Inc.

31. ISO 9000 “Family” of standards for quality management –increased international trade developed a need –published by International Organization for Standards (ISO) in 1987 –concerns measuring and documenting the quality process –ISO provides a certification process ISO 14000 –standards for environmental management 10-31 Copyright 2011 John Wiley & Sons, Inc.

32. Statistical Quality Control (SQC) SQC is the use of statistical tools to measure product and process quality Three categories: Descriptive Statistics –describe quality characteristics Statistical Process Control (SPC) –a random sample of output is used to determine if characteristics are acceptable Acceptance Sampling –sample determines if whole batch is acceptable 10-32 Copyright 2011 John Wiley & Sons, Inc.

33. Sources of Variation All processes have variation Assignable Variation –caused by factors that can be clearly identified and managed Common Variation –inherent in the process –also called random variation 10-33 Copyright 2011 John Wiley & Sons, Inc.

34. Process Capability Process Capability evaluates the variation of the process relative to product specifications Product Specifications –ranges of acceptable quality characteristics –also called tolerances Process Variation –all processes have natural variation –defects are produced when variation exceeds product specifications 10-34 Copyright 2011 John Wiley & Sons, Inc.

35. Process Variation Equal to Specification Range 10-35 Copyright 2011 John Wiley & Sons, Inc.

36. Process Variation Exceeds Specification Range 10-36 Copyright 2011 John Wiley & Sons, Inc.

37. Process Variation Narrower than Specification Range 10-37 Copyright 2011 John Wiley & Sons, Inc.

38. Process Capability Index where: USL = upper specification limit LSL = lower specification limit C p Values: –C p = 1: process is minimally capable –C p ≤ 1: process is not capable of producing products within specification –C p ≥ 1: process exceeds minimum capability 10-38 Copyright 2011 John Wiley & Sons, Inc.

39. C p Example Given a process with three separate machines that are used to fill jars with pasta sauce. –specification range is between 30 and 34 ounces –process mean, μ, is 31 ounces 10-39 Copyright 2011 John Wiley & Sons, Inc. Machineσ A0.6 B0.7 C1.2 Calculate the C p for each machine to determine capabilities

40. C p Example Continued A: B: C: 10-40 Copyright 2011 John Wiley & Sons, Inc. Machine A has a C p > 1, however the process mean is not centered

41. C pk Example C pk addresses the lack of centering of the process over the specification range Machine A: C pk = min (1.66, 0.55) = 0.55 10-41 Copyright 2011 John Wiley & Sons, Inc.

42. Process Control Charts Graph that shows whether a sample of data falls within the common range of variation 1.sample process output 2.plot result on the control chart 3.use to determine if process is in control can monitor: –variables characteristics that can be measured –attributes characteristics that can be counted 10-42 Copyright 2011 John Wiley & Sons, Inc.

43. Process Control Charts 10-43 Copyright 2011 John Wiley & Sons, Inc.

44. Control Charts for Attributes A p-chart monitors the proportion of defective items in a sample centerline: average value of p across all samples, p UCL = p + z sp LCL = p – z sp where: z = standard normal variable p = sample proportion defective sp = = standard deviation of 10-44 Copyright 2011 John Wiley & Sons, Inc. avg. proportion defective

45. P-Chart Example Given the following five samples of data tracking incorrect procedures in a hospital 10-45 Copyright 2011 John Wiley & Sons, Inc. Sample # of Incorrect Procedures# Inspected Fraction Defective 10100.1 21100.1 32100.2 41100.2 51100.1 Total550

46. P-Chart Example Continued p = 5/10 = 0.10 UCL = p + z sp = 0.10 + 3(0.095) = 0.385 LCL = p + z sp = 0.10 - 3(0.095) = 0.185 10-46 Copyright 2011 John Wiley & Sons, Inc.

47. What is Six Sigma? Six Sigma is a quality management process that uses measurement to reduce process variation and eliminate defects –no more than 3.4 parts per million defective –sigma stands for # standard deviations of the process –originated at Motorola in 1970s –“zero defects” 10-47 Copyright 2011 John Wiley & Sons, Inc.

48. Six Sigma Methodology Two Aspects: Use of technical tools –statistical quality control –seven tools of quality People involvement –all employees responsible for rooting out quality problems –all employees trained to use technical tools 10-48 Copyright 2011 John Wiley & Sons, Inc.

49. Six Sigma Five-Step Plan Define: –define the quality problem of the process Measure: –measure the current performance of the process Analyze: –analyze to root out cause of quality problem Improve: –improve process by eliminating root causes Control: –control process to ensure continued improvement 10-49 Copyright 2011 John Wiley & Sons, Inc.

50. 10-50 Copyright 2011 John Wiley & Sons, Inc. Lean Six Sigma Supply Chain

51. Developing a Lean Six Sigma Supply Chain Steps: 1.Jointly Define Value 2.Conduct Supply Chain Capability Analysis 3.Develop Key Financial & Operational Metrics 4.Identify & Implement System Improvements –Value Stream Mapping (VSM) 10-51 Copyright 2011 John Wiley & Sons, Inc.

52. Impact on Supply Chain Activities Suppliers –lower costs due to efficient systems –shorter lead times –lower safety stock Operations –proper cycle time calculation ensures production according to customer demand –uniform work flow –pull production Logistics –optimization models to select routes –warehouse design changes reduce waste 10-52 Copyright 2011 John Wiley & Sons, Inc.

53. Review 1.Lean management approach concerns the most efficient use of resources possible. The most important tenet is eliminating waste. 2.Lean consists of 3 elements: Lean Production, Total Quality Management, Respect for people. 3.Lean relies on visual signals to pull products through the system. 4.Jidoka is the authority of every worker to stop the production process. 10-53 Copyright 2011 John Wiley & Sons, Inc.

54. Review Continued 5.The “seven tools of quality control” include cause- and-effect diagrams, flowcharts, checklists, control charts, scatter diagrams, Pareto analysis, and histograms. 6.ISO 9000 standards address quality management. ISO 14000 standards address environmental management. 7.SQC measures and identifies quality problems in both the product and process. 3 categories: descriptive statistics, SPC, acceptance sampling. 10-54 Copyright 2011 John Wiley & Sons, Inc.

55. Review Continued 8.All processes have variation. Assignable variation can be identified and managed. Common variation is inherent in the process. 9.Process capability evaluates the processes ability to meet product specifications. 10.Process control charts ensure that the process is “in a state of control.” 11.Six Sigma uses measurement to reduce process variation and eliminate defects. 10-55 Copyright 2011 John Wiley & Sons, Inc.

56. Copyright 2011 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in section 117 of the 1976 United States Copyright Act without express permission of the copyright owner is unlawful. Request for further information should be addressed to the Permission Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information herein. 10-56