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1. Operational
Excellence
Six Sigma
Six Sigma: DMAIC; Y=f(x)
Is it a Goal, a Measure, a Process,
a Tool or an expletive deleted?
By Lee Olson
 D efine Presentation to INFORMS
M easure
A nalyze
I mprove
C ontrol

2.  D efine
M easure
Objectives A
I
nalyze
mprove
C ontrol
 Understand the Basics of the Six Sigma Program
 Understand How Six Sigma Relates to Lean, TOC, TQM
(Theory Of Constraints; Total Quality Management)
 Ability to Define a Strategy and Roadmap for Success
Operational Excellence Training

3.  D efine
M easure
Define A
I
nalyze
mprove
C ontrol
 Is it a Goal, a Measure, a Process, a Tool or an expletive
deleted?
 Yes
Operational Excellence Training

4.  D efine
M easure
Define A
I
nalyze
mprove
C ontrol
Six Sigma
 Is a management methodology
• Customer focused
• Data driven decisions
• Breakthrough performance gains
• Validated bottom line results
Operational Excellence Training

5.  D efine
M easure
Customer Focused A
I
nalyze
mprove
C ontrol
ON TIME DELIVERY (sample)
The percentage of sales order line items that ship complete on or before the original customer promise date, for
all line items shipped in the month.
Our Performance Compared to Competitors
On-Time Delivery
Pareto of Drivers
100%
90%
100%
80% 75%
% Impact
70%
60% 50%
• Complete
50%
25%
40%
30% 0%
Credit Hold
Engineering
xyz Cell
Deliveries
Unrealistic
on part abc
Always
Orders on
Supplier
Low Yield
Promise
Late
Change
20%
Importance to Customers
Orders
Late
Date
Target
10%
• Quality • OTD
0%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Reason
Top 5 Action Items
Original Due Current
High
Driver Action Description Status Status Description Ow ner Date Due Date
Late Supplier Deliveries Monthly reporting to suppliers on delivery & On Report Cards Implemented. Adam 5/21 5/21
quality metrics. track
Late Supplier Deliveries Arrange face to face meetings with top On Meetings Complete with top 10 Beth 6/15 6/15
offenders. track Suppliers.
Late Supplier Deliveries Review and approve supplier's corrective action Caution Corrective Action Plan in Place for 2 Carlos 7/15 9/15
plan. major Suppliers
xyz Cell Always Late Kaizen Event to focus on improving throughput On Event held 5/1. 25% throughput Doreen 5/21 5/21
by 40% and improve labor efficiency by 35% track improvement in May. Labor Efficiency
Increase of 30%
Unrealistic Promise Date Focus on custom products to provide realistic Problem Continued lack of progress. Re- Earnest 6/15 8/15
ATP based on inventory and leadtime of structured and focused team.
components. Developing detailed plan.
• Training
Moderate-
• Price
• Shared Goals • Complaints to-’Low’
We’re Better They’re Better
Operational Excellence Training

6.  D efine
Data Driven Decisions M
A
I
easure
nalyze
mprove
C ontrol
Y= f (X)
To get results, should we focus our behavior on the Y or X ?
• Y • X1 . . . XN
• Dependent • Independent
• Output • Input-Process
• Effect • Cause
• Symptom • Problem
• Monitor • Control
• Response • Factor
Why should we test or inspect Y, if we know this relationship?
Operational Excellence Training

7.  D efine
M easure
Breakthrough performance gains A
I
C
nalyze
mprove
ontrol
(Distribution Shifted ± 1.5)
 PPM
2 308,537
3 66,807
4 6,210
5 233
6 3.4
Process Defects per Million
Capability Opportunities
Sigma is a statistical unit of measure which reflects process capability.
The sigma scale of measure is perfectly correlated to such
characteristics as defects-per-unit, parts-per million defective, and
the probability of a failure/error.
Operational Excellence Training

8. Pr
Impact on Bottom Line
ic
e
In
cr
ea
Vo M se
lu at
m er
ia
e lC
In
c. os
w ts
ith
Le
ve
ra
M g e
an
uf
ac
tu
r in
g
Vo
lu
m
e SG
In
Operational Excellence Training
c. &A
No
Le
ve
ra
g e
Ta
Factors
xe
s
La
G W bo
en or r
ki
er
al n g
-5 Ca
% p
Pr ita
ic l
e
Assuming a 10% change in the factor
Re
d
Validated bottom line results
uc
tio
n
I
A
C
M
 D efine
ontrol
nalyze
easure
mprove

9.  D efine
M easure
Define A
I
nalyze
mprove
C ontrol
Methodology
 Define
 Measure
 Analyze
 Improve
 Control
Operational Excellence Training

10.  D efine
Roadmap M
A
easure
nalyze
Example I
C
mprove
ontrol
Next Project Define
Customers, Value, Problem Statement Validate
Scope, Timeline, Team Project $
Celebrate Primary/Secondary & OpEx Metrics
Project $ Current Value Stream Map
Measure
Voice Of Customer (QFD)
Control Assess specification / Demand
Document process (WIs, Std Work) Measurement Capability (Gage R&R)
Mistake proof, TT sheet, CI List Correct the measurement system
Analyze change in metrics Process map, Spaghetti, Time obs.
Value Stream Review Measure OVs & IVs / Queues
Prepare final report
Validate
Project $
Validate
Project $
Improve Analyze (and fix the obvious)
Optimize KPOVs & test the KPIVs Root Cause (Pareto, C&E, brainstorm)
Redesign process, set pacemaker Find all KPOVs & KPIVs
Validate
5S, Cell design, MRS FMEA, DOE, critical Xs, VA/NVA
Project $
Visual controls Graphical Analysis, ANOVA
Value Stream Plan Future Value Stream Map
Operational Excellence Training

11. Plan Execute
Operational Excellence Methodology •
•
Strategic Link to Business Plan defined in Project Selection Process
Defined Business Impact with Op Ex Champion support
Identify • Structured Brainstorming at all organizational levels
Problem • Cause and Effect Diagrams identifying critical factors
• Primary and Secondary Metrics defined and charted
• Multi-Level Pareto Charts to confirm project focus
• Develop a focused Problem Statement and Objective
• Develop a Process Map and/or FMEA
Practical • Develop a Current State Map
Problem • Identify the response variable(s) and how to measure them
• Analyze measurement system capability
• Assess the specification (Is one in place? Is it the right one?)
• Characterize the response, look at the raw data
• Abnormal? Other Clues? Mean or Variance problem?
Problem • Time Observation • Spaghetti Diagram • Takt Time
• Future State Maps • Percent Loading
Definition
• Standard Work Combination
• Use Graphical Analysis, Multi-Vari, ANOVA and basic
statistical tools to identify the likely families of variability
• Identify the likely X’s
• 5S • Set Up Time Reduction (SMED)
• Material Replenishment Systems
Problem
• Level Loading / Line Leveling
Solution • Cell Design • Visual Controls
• Use Design of Experiments to find the critical few X’s
• Move the distribution; Shrink the spread; Confirm the results
• Mistake Proof the process (Poka-Yoke)
• Tolerance the process Problem Solving
 What do you want to know?
Problem • Measure the final capability  How do you want to see what it is that you need
• Place appropriate process controls on to know?
Control
the critical X’s  What type of tool will generate what it is that you
need to see?
• Document the effort and results  What type of data is required of the selected tool?
Execute Plan • Standard Work • TPM  Where can you get the required type of data?
Based in part on Six Sigma Methodology developed by GE Medical Systems and Six Sigma Academy, Inc. Crane Co. Op. Ex. Methodology Originated by MBBs; D. Braasch, J. Davis, R. Duggins, J. O’Callaghan, R. Underwood, I. Wilson

12.  D efine
Define M
A
easure
nalyze
Key Items I
C
mprove
ontrol
 Customers, Value, Problem Statement
 Scope, Timeline, Team
 Primary/Secondary & OpEx Metrics
 Current Value Stream Map
 Voice Of Customer (QFD)
(Quality Function Deployment)
Operational Excellence Training

13.  D efine
Project Selection M
A
easure
nalyze
Impact I
C
mprove
ontrol
 Business Impact
• Revenue Growth
• Cost Reduction
• Capital Reduction
• Key Business Objectives
• On Time Delivery
• Lead Time
• Quality
• Customer Satisfaction
 Impact on Operational Excellence Metrics
Operational Excellence Training

14.  D efine
Evaluate and Rank Suggestions M
A
easure
nalyze
Effort and Risk I
C
mprove
ontrol
 Effort required
• People Resources
• Capital Resources
• Duration of Project
 Probability of success
• Technical Risk
• Data available
• Knowledge of process
• Management Risk
• Aligned with objectives
• Support by value stream manager
 Impact vs. Risk vs. Effort
• Assess ROI (Return On Investment)
• Assign priorities to projects
Operational Excellence Training

15.  D efine
M easure
Evaluate and Rank Suggestions A
I
nalyze
mprove
C ontrol
Project Information Impact Effort Risk
Duration of Project
Capital Resources
People Resources
Management Risk
Capital Reduction
On Time Delivery
Revenue Growth
Cost Reduction
Technical Risk
Total Impact
Key Business
Total Effort
Satisfaction
Total Risk
Lead Time
Customer
Objective
Quality
Mfg
(M)
or
Admin
# (A) Project Description
Variable weightings 20% 15% 10% 15% 20% 5% 5% 10% 100% 50% 20% 30% 100% 40% 60% 100%
1 A Customer Billing Errors 0 2 0 4 4 2 2 5 2.4 2 1 3 2.1 1 4 2.8
Warranty
2 M 0 2 0 1 1 0 3 3 1.1 4 4 5 4.3 4 2 2.8
scrap warranty vs sales
3 A Vendor Delivery Performance 0 2 2 2 5 4 3 0 2.2 1 1 3 1.6 1 2 1.6
4 M On Time Shipping Performance 2 1 2 4 5 0 1 5 2.9 4 1 2 2.8 1 3 2.2
Hiring and Retention
5 A 20% - 24% Turnover 0 3 0 2 1 0 3 2 1.3 3 2 4 3.1 1 4 2.8
New Product Development Cycle Time
6 A 3 4 2 5 3 3 4 5 3.6 5 3 5 4.6 5 5 5.0
Manufacturing Maintenance
7 M 0 3 0 1 2 3 1 0 1.2 1 4 1 1.6 1 1 1.0
Tooling Maintenance
8 A Day Sales Outstanding (DSO) 0 0 4 2 0 0 0 0 0.7 1 0 2 1.1 1 1 1.0
9 M FTY of 65% on product 123 4 4 2 5 4 4 5 5 4.1 2 1 1 1.5 2 1 1.4
Example tool to rank projects
0106-01 Project Rating.xls
Operational Excellence Training

16. Example chart to rank projects 0106-01 Project Rating.xls

17.  D efine
M easure
Measure A
I
nalyze
mprove
C ontrol
 Establish measurement capability
• Validate the database (transactional)
• Gage R&R (Repeatability & Reproducibility)
• Calibration is not enough
• Many (or most) measurement systems are not capable
• How good is the data you are using to make decisions?
 Fix the measurement system
• Enables calculation of process capability
• Enables calculation of alpha & beta risks
• This step is often skipped
Operational Excellence Training

18.  D efine
Analyze M
A
easure
nalyze
(and fix the obvious) I
C
mprove
ontrol
 Find all KPOVs & KPIVs
(Key Process Output Variables; Key Process Input Variables)
 FMEA, DOE, critical Xs, VA/NVA
(Failure Modes Effects Analysis; Design Of Experiment)
 Graphical Analysis, ANOVA
(Analysis Of Variance)
 Future Value Stream Map
Operational Excellence Training

19.  D efine
M easure
Improve A
I
nalyze
mprove
C ontrol
 Optimize KPOVs & test the KPIVs
(Key Process Output Variables; Key Process Input Variables)
 Redesign process, set pacemaker
 5S, Cell design, MRS
(Material Replenishment System)
 Visual controls
 Value Stream Plan
Operational Excellence Training

20.  D efine
M easure
Control A
I
nalyze
mprove
C ontrol
 Management of Change
• Owned by project champion and value stream manager
• Critical to long term success of project
• Physical and cultural changes
 Measurement controls
• On-going metrics
 Visual Controls
• Enable workers to self-manage the process
Operational Excellence Training

21.  D efine
Basic Implementation M
A
easure
nalyze
Roadmap I
C
mprove
ontrol
Identify Customer Requirements
Understand and Define
Entire Value Streams
Vision (Strategic Business Plan)
Deploy Key Business Objectives
- Measure and target (metrics)
- Align and involve all employees
- Develop and motivate
Continuous Improvement (DMAIC)
Define, Measure, Analyze, Improve
Identify root causes, prioritize, eliminate waste,
make things flow and pulled by customers
Control
-Sustain Improvement
-Drive Towards Perfection
Operational Excellence Training

22. 3.0 Improve Customer Focus
3.1
3.2
2.0 Educate/Get Everyone Involved
2.1
2.2
1.0 Improve the Metrics
1.1
1.2
8
7
6
5
4
3
2
1
1
2
3
4
5
6
Your Manager's 1-Year
Breakthrough
Objectives
Train functional leaders as LGBs
Improve On Time Delivery to 98%
Establish tracking of OTD in every cell
Benefits
Conduct interviews with top 10 customers
Objectives
Train leadership team as Lean Green Belts (LGB)
Train workers in how our products are used by our major customers
Your Annual Breakthrough
Indicator's and Goals
Complete 1 Leadership LGB training course
100% Completion of LGB Projects
Operational Excellence Training
Leaders have ability to map a value stream
Metrics module in all appropriate training sequences
Training projects demonstrate flowdown of metics to
4 4 4
4 4
operational level
Develop culture of teams
4
Trainees participate in customer survey
4 4 4 4 4 4 4
4 4
Complete 3 functional LGB training courses
4 4 4 4 4 4 4
Type in
Key:
-->
Bring reps from top 10 customers in for plant tours
4
4
4
Implement lean concepts in top 3 volume lines
4
establish pareto of drivers for OTD
4 4
4 4
4 Impact
IT
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Operations
m
Quality
Engineering
 Owner
Hoshin
Maintenance
m  m m m
Resource
m
Marketing
m
m
m m m m m m 

Training
I
m
A
C
M
m Support
 D efine
ontrol
nalyze
easure
mprove

23. ON TIME DELIVERY (sample)
The percentage of sales order line items that ship complete on or before the original customer promise date, for
all line items shipped in the month.
On-Time Delivery
Pareto of Drivers
100%
90%
100%
80% 75%
% Impact
70%
60% 50%
50%
25%
40%
30% 0%
Credit Hold
Engineering
xyz Cell
Deliveries
Unrealistic
on part abc
Always
Orders on
Supplier
Low Yield
Promise
Late
Change
20%
Orders
Late
Date
Target
10%
0%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Reason
Top 5 Action Items
Original Due Current
Driver Action Description Status Status Description Ow ner Date Due Date
Late Supplier Deliveries Monthly reporting to suppliers on delivery & On Report Cards Implemented. Adam 5/21 5/21
quality metrics. track
Late Supplier Deliveries Arrange face to face meetings with top On Meetings Complete with top 10 Beth 6/15 6/15
offenders. track Suppliers.
Late Supplier Deliveries Review and approve supplier's corrective action Caution Corrective Action Plan in Place for 2 Carlos 7/15 9/15
plan. major Suppliers
xyz Cell Always Late Kaizen Event to focus on improving throughput On Event held 5/1. 25% throughput Doreen 5/21 5/21
by 40% and improve labor efficiency by 35% track improvement in May. Labor Efficiency
Increase of 30%
Unrealistic Promise Date Focus on custom products to provide realistic Problem Continued lack of progress. Re- Earnest 6/15 8/15
ATP based on inventory and leadtime of structured and focused team.
components. Developing detailed plan.

24.  D efine
M easure
Does it work?. A
I
nalyze
mprove
C ontrol
The top companies in Customer Satisfaction grow MVA at
nearly twice the rate of their poor-performing counterparts.
In Billions $
50
$42
Market Value Added
1999 40
73 companies
Ralston Purina 30 $23
Quaker Oats
Hilton Hotels 20
Coca-Cola
Unilever
etc.
10
0
Low High
Customer Satisfaction Index Score
Source: American Customer Satisfaction Index, U Michigan, HBR, 2001
Operational Excellence Training

25.  D efine
M easure
What about Lean, TOC, TQM A
I
nalyze
mprove
C ontrol
 Six Sigma
• Remove defects, minimize variance
 Lean
• Remove waste, shorten the flow
 TOC
• Remove and manage constraints
 TQM
• Continuous Improvement
Operational Excellence Training

26. Value Stream Map - Current State
6 WEEK Production 90/60/30 day
Forecast Control Forecasts Customer
Suppliers MRP Order Entry
Demand = 45 per day
Orders/day 2 shifts
= 36 Takt Time
Lead Time - 34 Days Queue = 18.2 Minutes
WEEKLY SCHEDULE = 1.5 Days
Competitive Lead Time
= 3 Days
1X
Daily
I
Coils Stamping S. Weld # 1 Assembly Test Shipping
5 days I I
342 I I I
81 122 90
202
CT=1sec CT=3 min CT= 15 min CT= 67 min CT= 4 min Lead Time
Co=1 hr. Co=10 min. Co=0 min. Co= 23 min Co=0 =23.6 days
Uptime=85% Uptime=70% Uptime=100% FTY = 67% Uptime=100%
2 shifts 2 shifts Touch Time
1 shift 1 shift 2 shifts
= 89 min
5 days 7.6 days 1.8 days 2.7 days 4.5 days 2 days
1 sec 3 min 15 min 67 min 4 min

27. Customer Data
Demand = 45/day
On-Time Delivery
Takt Time = 18.2 min 90/60/30 day
6 WEEK Production
Forecast Control Forecasts Customer
Competitive LT = 3 days
Suppliers MRP Order Entry
Demand = 45 per day
Orders/day 2 shifts
= 36 Takt Time
Lead Time - 34 Days Queue = 18.2 Minutes
WEEKLY SCHEDULE = 1.5 Days
Competitive Lead Time
= 3 Days
1X
Daily
I
Coils Stamping S. Weld # 1 Assembly Test Shipping
5 days I I
342 I I I
81 122 90
202
CT=1sec CT=3 min CT= 15 min CT= 67 min CT= 4 min Lead Time
Co=1 hr. Co=10 min. Co=0 min. Co= 23 min Co=0 =23.6 days
Uptime=85% Uptime=70% Uptime=100% FTY = 67% Uptime=100%
2 shifts 2 shifts Touch Time
1 shift 1 shift 2 shifts
= 89 min
5 days 7.6 days 1.8 days 2.7 days 4.5 days 2 days
1 sec 3 min 15 min 67 min 4 min

28. Raw = 5 days Inventory
WIP = 12.1 days 90/60/30 day
6 WEEK Production
Control Forecasts Customer
FG = 6.5 days Forecast
Suppliers MRP Order Entry
Demand = 45 per day
Orders/day 2 shifts
= 36 Takt Time
Lead Time - 34 Days Queue = 18.2 Minutes
WEEKLY SCHEDULE = 1.5 Days
Competitive Lead Time
= 3 Days
1X
Daily
I
Coils Stamping S. Weld # 1 Assembly Test Shipping
5 days I I
342 I I I
81 122 90
202
CT=1sec CT=3 min CT= 15 min CT= 67 min CT= 4 min Lead Time
Co=1 hr. Co=10 min. Co=0 min. Co= 23 min Co=0 =23.6 days
Uptime=85% Uptime=70% Uptime=100% FTY = 67% Uptime=100%
2 shifts 2 shifts Touch Time
1 shift 1 shift 2 shifts
= 89 min
5 days 7.6 days 1.8 days 2.7 days 4.5 days 2 days
1 sec 3 min 15 min 67 min 4 min

29. Flow of Value
Lead Time = 23.6 days
Lead Time
Touch Time = 89 min 90/60/30 day
6 WEEK Production
Forecast Control Forecasts Customer
Suppliers MRP Order Entry
Demand = 45 per day
Orders/day 2 shifts
= 36 Takt Time
Lead Time - 34 Days Queue = 18.2 Minutes
WEEKLY SCHEDULE = 1.5 Days
Competitive Lead Time
= 3 Days
1X
Daily
I
Coils Stamping S. Weld # 1 Assembly Test Shipping
5 days I I
342 I I I
81 122 90
202
CT=1sec CT=3 min CT= 15 min CT= 67 min CT= 4 min Lead Time
Co=1 hr. Co=10 min. Co=0 min. Co= 23 min Co=0 =23.6 days
Uptime=85% Uptime=70% Uptime=100% FTY = 67% Uptime=100%
2 shifts 2 shifts Touch Time
1 shift 1 shift 2 shifts
= 89 min
5 days 7.6 days 1.8 days 2.7 days 4.5 days 2 days
1 sec 3 min 15 min 67 min 4 min

30. Constraints
Max Wip = 7.6 days
OTD, Lead Time
CT (67) > Takt Time (18) 90/60/30 day
6 WEEK Production
Forecast Control Forecasts Customer
Suppliers MRP Order Entry
Demand = 45 per day
Orders/day 2 shifts
= 36 Takt Time
Lead Time - 34 Days Queue = 18.2 Minutes
WEEKLY SCHEDULE = 1.5 Days
Competitive Lead Time
= 3 Days
1X
Daily
I
Coils Stamping S. Weld # 1 Assembly Test Shipping
5 days I I
342 I I I
81 122 90
202
CT=1sec CT=3 min CT= 15 min CT= 67 min CT= 4 min Lead Time
Co=1 hr. Co=10 min. Co=0 min. Co= 23 min Co=0 =23.6 days
Uptime=85% Uptime=70% Uptime=100% FTY = 67% Uptime=100%
2 shifts 2 shifts Touch Time
1 shift 1 shift 2 shifts
= 89 min
5 days 7.6 days 1.8 days 2.7 days 4.5 days 2 days
1 sec 3 min 15 min 67 min 4 min