Mass to Lean to Six Sigma Improvement Path to Unlocking Improvements to Your of Production Leanmetrics Ann Arbor, Mi The Total Cost

Customer Value Added Definition and Example Def: Value Added is anything done to a product or service that entices purchase by a typical customer. It can include activities that improve quality, cost or delivery. Examples of Value Added would be: using rust resistant paint, in-process reduction in handling/transporting resulting in lower cost to customer or beating the competition in comparable-product delivery time. Trying to measure “ Value Added ” or answering the question, “ How do we measure: quality improvements, the reduction in product cost or impact of faster delivery?” are difficult tasks.

Correlation Between VSM and Improvements to Cost, Quality or Delivery Since there are no cost inputs to the VSM no direct relationship can be formed between map and product cost. Additionally, internal/external quality data have no input into the mapping process. Tracking the lead time from the start of the production flow to the end is the most important aspect of the mapping process because it can impact the customer satisfaction level. 6 How the workforce can impact the lead time (and what time elements are important-- conform to lean objectives ) are not discernable .

Customer From Value Stream Mapping ? ? ? ? Benefit ?

To get us on the Cost Tracking Path let’s pose the question... “ Have YOU ever tried to corral your spending habits by establishing a monthly household budget?” 8

The 2 key elements to constructing a household budget are: * gross income * expenses over the income period 9

Increasing Gross Income… Of course, increasing your gross income can be helpful in balancing your monthly budget. Keeping your expenses in check; therefore, is the key to achieving positive financial success! Too many times, though, a rise in gross income alters the mindset of the recipients (personal or business) and they increase their spending habits in proportion (or in excess) to the rise in income. 10

Some of the items we might focus on to reduce our personal spending include: *heating/cooling costs *telephone *reading materials *transportation costs *entertainment *sporting events *trash pick-up *laundry *food & water *computer expenses *restaurant meals *personal luxuries *cable *medical expenses *taxes *clothing *late fees *interest rates *travel *vacation destinations 11

The Following Slides Will Present a Similar Approach to Attaining Financial Success in Your Business…

If you consider the sales of the product you are making times the quantity produced over a pre-determined time frame as “your gross income”... … and the expenses you incur to build your products over the same time frame as your opportunity to lower your Total Cost , you are ready to take the first step towards leaning your way to improved profitability... 13

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Process Cell Efficiency, Lead Time and Cost at This Station The actual cycle time of the process is compared to the sell rate (Takt time) resulting in a percentage of the operator(s) cost per unit of production (input into data base). The “lead time” of built units to get to this point of the process is logged and the labor mentioned above is combined with the labor to deliver each part to the assembly point (resulting in optimal cost per unit @ every process station). 17

Line-side Material Flow Levels and Takt Time (Sell Rate) Visual Indication of Control Part Meeting Stock Level Takt Time (seconds) = Sell Rate of Product Visual Indication of Meeting Line-side Stock Level Visual Indication of Meeting Line-side Stock Level Visual Indication of Meeting Line-side Stock Level Visual Indication of Meeting Line-side Stock Level 18

Keeping low levels of stock at line side: improves quality, provides better access to parts (improved ergonomics) and reduces cycle time (thus getting operation closer to takt time). Importance of Line-side Material Flow Levels and Takt Time (Sell Rate) speeds the Order to Revenue money stream . . . More importantly it 19

Cost of Work-In-Process and Visual Lean Indication (Sample) Note: There is a W.I.P. bank after each process station. Quantity & Cost Of Units Between Process Steps Visual Lean Level of WIP TYPICAL W.I.P. INVENTORY INV. INVENTORY ADDRESS SURGE UNITS+TRANSITS COST OF SURGE+TRANSITS POOR FAIR GOOD INVENTORY LEAD TIME

Building the Cost Flow Map Using Process and Inventory Cells Visual Depiction of Your Main Process Flow . . . . . . Sub-Assembly Feeding Main Line . . . . . . . Second Sub-Assembly to Main Line . . . . . . Main Line Sub # 1 Sub # 2 Note: Completed data base will automatically show your entire manufacturing flow in this v i s u a l format…… 22

Process and Inventory Cost Tracking Map Sample CopyofProcess_Inventory_and_SMF_Cost_Flow_Map(213).pdf 23 Note: Click mouse to advance to next slide

Some of the Advantages of Having a Completed Cost Flow Map: It’s a relevant communication tool that can be used by management and the workforce to make decisions impacting total cost. Process cell efficiency when combined with WIP levels prior to and after the cell can be indications of a restriction to production flow. Material logistics impact: travel distance for each part, # of parts per container and return dunnage distances are evaluated from a minimal cost per unit standpoint. It gives a visual depiction of each process station’s conformance to plant objectives for line-side material levels. It shows work-in-process levels and their measurement on a leanness scale. (Including actual surge and units in-transit) 24 The mapping process can be cascaded to 2 nd & 3 rd tier suppliers.

The Completed Cost Flow Map Allows You to the Minimal Material and Labor Cost for Each Unit of Production… 26 Taking the cost per unit (mentioned above) times your production volume over a given time frame can now be subtracted from your total expenditures incurred during that time period. What’s left is a myriad of opportunities to lower your total cost of production. Engage/empower your workforce in addressing each opportunity and reward their efforts with a portion of the improvements obtained. SEE

Getting Started… 28 Mass to Lean to Six Sigma via “hands-on” simulations…Car Wash Assembly Process. See it, feel it, hear it by actually experiencing the transformation. Learning points from simulations: Note: Click Mouse to advance to next slide