Service Processes Operations Management Dr. Ron Tibben-Lembke.
Six Sigma Case Study v.2 Dr. Ron Tibben-Lembke SCM 494.
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Transcript of Six Sigma Case Study v.2 Dr. Ron Tibben-Lembke SCM 494.
Six Sigma Case Studyv.2
Dr. Ron Tibben-Lembke
SCM 494
Six Sigma Case Study - POI
Paper Organizers International Filing, organizing, and paper shuffling services Uses MSD (metallic securing devices) Increasing complaints from the Paper Shuffling
Department (PSD) about MSDs breaking and failing to keep papers together
Customers’ papers can get mixed together Purchasing wants to eliminate MSD complaints
Mission Statement
“Put the right information in the right place.” Management created a list of objectives and
projects that will support those objectives
President Director of Paper Shuffling Dept
BusinessObjectivesIncrease # of orders
Minimizeproductioncosts
Eliminateemployeecomplaints
BusinessIndicators# orders perMonth (c chart)
Increase # of POI services used by eachcustomer
1. avg. # services used per customer, per quarter2. St dev. of# serv. used(x-bar and s)
Prod costs per month(I-MR chart)
# employeecomplaints permonth (c chart)
AreaObjectivesIncrease # orders in PSD
Increase #Services used by eachcustomer inPSD
Minimize production costs in PSD
Eliminate PSDemployee complaints
AreaIndicatorsNo. orders in PSD / mo.(c chart)
Potential 6Sigma projectsNew customerpromotions project
1. avg. # services used per PSD cust, per Q2. St dev. Of# serv. used(x-bar and s)
EmployeeMorale project
# PSD employeeComplaints/mo(c chart)
MSD qualityproject
ProductionCosts in PSD/mo(I-MR chart)
Existingcustomerpromotionsproject
Current Costs
Management considers costs production costs in PSD to be too high Avg. Production costs of $1.1m per month Standard deviation is $116k. R-bar / d2 = $116,672 Average is “too high” but process is under control
0Subgroup 10 20 30 40 50 60 70
800000
900000
1000000
1100000
1200000
1300000
1400000
Indi
vidu
al V
alue
Mean=1096880
UCL=1393879
LCL=799881
0
100000
200000
300000
400000
Mov
ing
Ran
ge
R=111672
UCL=364863
LCL=0
I and MR Chart for Production C
Production costs Normally distributed
12900001250000121000011700001130000109000010500001010000970000930000890000
10
5
0
Production Costs in PSD
Fre
quen
c y
Histogram of Production Costs in PSD
Prioritizing Six Sigma Projects Potential Six Sigma Projects
Business objective
Increase # orders
Increase # POI servicesused by each customer
Minimize productioncosts
Eliminate employeecomplaints
Weighted average of potential
WeightNew Customer
Promotions
ExistingCustomer
PromotionsMSDQuality
EmployeeMorale
0.35 3 3 0 0
0.10 1 3 0 0
0.40 0 0 9 3
0.15 0 0 9 9
1.15 1.35 4.95 2.55
Starting MSD Project
Champion and process owner make initial charter.
1. What is the name of the process? MSD purchasing
2. What is the aim? Purchase MSDs that improve productivity and morale of PSD
3. What is economic rationale?
a. Why do it at all? Un-durable clips (<4 bends): lost papers, frustrated
employees lead to higher processing costs, inefficient labor costs (60% cannot withstand test)
Functionality (broken in box): sorting costs, frustrated employees (60% of boxes have >5 broken MSDs)
Additional charter questionsb. Why do it now? High production costs, complaintsc. What business objectives are supported by project? Min.
costs, reduce complaintsd. Consequences of not doing: lower profits, more employee
complaintse. What projects have higher priority? None.
4. What is the problem statement? Low-quality MSDs create additional production costs and
employee frustration5. What is goal or desired state?
100-fold increase in durability 0.6% from 60% 10-fold every 2 years, so 100 over 4 year project 100-fold would take from 600,000 DPMO to 6,000 DPMO,
set goal as 4 sigma (p. 739)
More charter questions6. What is scope?
a. Boundaries? When purchasing receives purchase orders, ends when MSD put in inventory
b. What is out of bounds? How employees use MSDs
c. What resources? $30,000, including salaries
d. Who can approve expenditures? Process owner
e. Can they go over $30,000? No.
f. What are obstacles? Budget, 21 weeks
g. What time commitment expected? Friday 8-9am meetings, progress reports
h. What about regular duties? OT may be required, not in budget
Gantt Chart for Project
Steps Resp. Week
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
Define BA X X X X X X
Mesure BA X X
Analyze BA X X X
Improve BA X X X X X X
Control BA X X X X
MSD Project Benefits
7. Benefits:a. Soft benefits: eliminating complaints from PSD
and increasing employee morale
b. Hard benefits (financial): minimizing labor costs
Labor savings – Clipping expenses 100 employees, 40 hrs/wk, spend 10% of time
clipping = 400 hrs / wk clipping $25 / hr * 400 hrs * 50 wks = $500,000 annual
clipping expenses 60% clips defective = $300,000? Currently? 0.62% defective = $3,100? Improved system? Annually, 20,000 hrs clipping = 10 employees
60% = 12,000 wasted clipping hours currently 0.62% = 124 wasted hours under improved system Need 6 fewer employees
This does not including time lost from clips failing later, on work in process
Material Cost Savings
300,000 projects per year, 10 clips each =3,000,000 clips needed each year.
0.60 defect means 1/(1-0.6) = 2.5 clips used for each one needed = 7,500,000 used
0.0062 means 1/(1-0.0062) = 1.00625 =3,018,000 clips used
Savings of 4,482,000 clips = $44,820 per year
Team Members
Champion Process Owner Team Leader – Black Belt Team member 1 Team member 2 Finance representative IT representative
SIPOCStart
Purchasing receives order from
Paper Shuffling Department
Purchasing agentcalls vendor
Does vendorhave MSDin stock?
Place order withvendor
Receive order fromvendor
Store productreceived into
inventory (newboxes go on bottom
back of shelf)
PSD removesproducts from
inventory
PSD uses Product
Stop
No
Yes
-Suppliers-Inputs-Process-Outputs-Customers
Voice of the Customer
What emotions come to mind when you think about MSDs? What needs and wants come to mind when you think about MSDs? What complaints or problems would you like to mention about
MSDs? 3 themes:
Variation in durability Variation in color Variation in functionality (# broken MSDs in each box)
CTQ-Critical to Quality factors Tech Specs Ability to withstand bending >= 4 bends w/o breaking The number of different MSD colors = 1 color of MSDs The number of broken MSDs in a box. <= 5 broken in box
Project Objectives
1. Decrease (direction) the percentage that cannot withstand four or more bends without breaking (measure) bought by the purchasing department (process) to 0.62 percent (goal) by Jan. 1, 2005 (deadline). Go for 4 sigma!
2. Decrease (direction) the percentage of boxes of MSDs with more than five broken clips (measure) bought by the purchasing deparment (process) to 0.62 percent (goal) by Jan. 1, 2005 (deadline) Go for 4 sigma!
3. What happened to colors?
Measure phase-I Operationally Define CTQs Operational definition for CTQ1: Durability
Take top-front box Close eyes, randomly pull one out Count number of bends until breaking Do not count bend being made when it breaks If >= bends, then MSD conforms, else defective
Operationally Define CTQ2 - Functionality Take top-front box Count the number of broken clips If number of broken is <= 5, box is
conforming If number is > 5, box is defective Use same boxes for both operational
definitions
Measure Phase-II Gage repeatability and reproducibility 10 top-front boxes tested by 2 inspectors,
each box twice Gage (or gauge) run chart shows no
difference between the measurements from the two different inspectors
Box Inspector Count Functionality
1 1 1 10
1 1 2 10
1 2 1 10
1 2 2 10
2 1 1 9
2 1 2 9
2 2 1 9
2 2 2 9
3 1 1 5
3 1 2 5
3 2 1 5
3 2 2 5
4 1 1 4
4 1 2 4
4 2 1 4
4 2 2 4
5 1 1 5
5 1 2 5
5 2 1 5
5 2 2 5
Box Inspector Count Functionality
6 1 1 9
6 1 2 9
6 2 1 9
6 2 2 9
7 1 1 6
7 1 2 6
7 2 1 6
7 2 2 6
8 1 1 6
8 1 2 6
8 2 1 6
8 2 2 6
9 1 1 9
9 1 2 9
9 2 1 9
9 2 2 9
10 1 1 11
10 1 2 11
10 2 1 11
10 2 2 11
Misc:Tolerance:Reported by:Date of study:Gage name:
11
10
9
8
7
6
5
4
5 4 3 2 1Box
Fuc
tiona
lity
1
2
11
10
9
8
7
6
5
4
10 9 8 7 6Box
Fuc
tiona
lity
Runchart of Fuctionality by Box, Inspector
CTQ Baselines Hourly inspections for both
CTQs Durability is # bends for one
MSD before breaking Functionality is # of broken
clips Yield is percentage of
batches passing the standard
6/16 passed each Very similar to claim of 60%
unacceptable
HourDura-
bility
Function
-ality
Shift 1-Hr1 5 12
Shift 1-Hr2 7 4
Shift 1-Hr3 3 8
Shift 1-Hr4 2 6
Shift 1-Hr5 9 1
Shift 1-Hr6 2 5
Shift 1-Hr7 1 11
Shift 1-Hr8 1 9
Shift 2-Hr1 12 6
Shift 2-Hr2 9 6
Shift 2-Hr3 3 9
Shift 2-Hr4 1 5
Shift 2-Hr5 1 4
Shift 2-Hr6 1 5
Shift 2-Hr7 1 9
Shift 2-Hr8 4 10
Yield 0.375 0.375
15105Subgroup 0
15
10
5
0
-5
Ind
ivid
ual
Val
ue
Mean=3.875
UCL=12.21
LCL=-4.458
10
5
0
Mov
ing
Ran
ge
1
R=3.133
UCL=10.24
LCL=0
I and MR Chart for Durability
I-MR charts show durability not stable over time. Different vendors, but deal with that soon
0
1
2
3
4
5
6
7
1 2 3 4 5 6 7 8 9 10 11 12
Durability
num
ber of boxes b
ox
Durability “dot plot” – shows how many boxes had a particular durability level
Graph doesn’t look like Normal distribution Maybe Poisson distribution
C-chart not in control, shift 2 tester bent more slowly, caused it to last longer
C-chart for Functionality under control
Dot-plot for Functionality
Dot-plot for Functionality looks Normally distributed
DetailedProcess Map
Start
Purchasing receives order from
Paper Shuffling Department
Purchasing agentcalls vendor
Does vendorhave MSDin stock?
Place order withvendor
Receive order fromvendor
MSDs placed into inventory (new boxes
go on the bottom back of shelf)
PSD removesbox from inventory
PSD uses MSDs
Stop
No
Yes
X1 – Vendor (Ibix or Office Optimum)X2 – Size (Small or Large)X3 – Ridges (With or Without)X4 = Cycle time from order to receipt for MSDsX5 = Discrepancy in count from order placed and order received
X6 = Cycle time to place product in inventory
X7 = Inventory shelf time (in days)
X8 = Type of usage (Large stack of paper or Small stack of paper)
X’s also could be defined in measure phase
Operational Definitions for each X X1 – Vendor Ibix Office Optimum X2 – Size Small Large X3 – RidgesWith Without X8 – Usage Large stack Small stack X4 – Cycle time, ordering to receipt (days) X5 – Discrepancy: # ordered vs. received X6 – Cycle time to place in inventory (days) X7 – inventory shelf life (in days)Perform gage study on each, to make sure we can
measure consistently (repeatability and reproducibility)
Baseline Data
Every hour for 2 weeks – 80 samples Collect info about:
X1 vendor X2 size X3 ridges Y1 Durability Y2 Functionality
Other factors studied separately
Sample Day Hour X1 X2 X3 X7 Durability Function1 Mon 1 1 0 0 7 2 52 Mon 2 0 1 0 7 2 93 Mon 3 0 0 1 7 10 74 Mon 4 0 1 0 7 1 45 Mon 5 0 0 0 7 7 36 Mon 6 0 1 1 7 2 57 Mon 7 0 1 1 7 1 98 Mon 8 0 0 0 7 7 59 Tue 1 0 1 0 8 2 810 Tue 2 0 1 0 8 1 711 Tue 3 0 1 0 8 1 1312 Tue 4 1 1 1 8 9 513 Tue 5 1 1 0 8 9 914 Tue 6 1 1 1 8 10 1115 Tue 7 1 1 1 8 10 1116 Tue 8 0 0 1 8 8 917 Wed 1 1 1 1 9 8 1118 Wed 2 1 0 0 9 1 1119 Wed 3 1 1 1 9 10 1120 Wed 4 0 0 0 9 7 1121 Wed 5 1 1 1 9 9 922 Wed 6 0 0 1 9 9 523 Wed 7 1 0 1 9 2 1124 Wed 8 1 0 0 9 1 1025 Thu 1 1 0 1 10 1 1426 Thu 2 0 1 1 10 1 1027 Thu 3 1 1 1 10 8 1328 Thu 4 0 0 1 10 10 1229 Thu 5 0 0 0 10 7 1430 Thu 6 0 1 1 10 3 13
Sample Day Hour X1 X2 X3 X7 Durability Function31 Thu 7 0 0 0 10 9 1332 Thu 8 1 1 1 10 8 1133 Fri 1 0 1 0 1 2 034 Fri 2 0 1 0 1 2 135 Fri 3 0 1 0 1 1 636 Fri 4 0 1 0 1 3 337 Fri 5 0 1 0 1 2 238 Fri 6 1 1 0 1 10 639 Fri 7 0 0 1 1 10 040 Fri 8 0 1 0 1 2 041 Mon 1 0 1 1 4 3 442 Mon 2 0 1 0 4 3 743 Mon 3 0 1 1 4 3 344 Mon 4 0 0 0 4 10 245 Mon 5 1 1 0 4 8 546 Mon 6 0 1 1 4 3 447 Mon 7 1 0 0 4 1 448 Mon 8 0 0 1 4 10 549 Tue 1 1 1 1 5 11 650 Tue 2 1 0 1 5 3 451 Tue 3 1 1 0 5 10 652 Tue 4 1 0 1 5 3 553 Tue 5 1 0 0 5 2 454 Tue 6 0 0 0 5 9 555 Tue 7 0 0 1 5 9 556 Tue 8 0 1 0 5 3 757 Wed 1 0 0 1 6 9 558 Wed 2 1 1 0 6 9 759 Wed 3 0 0 0 6 9 560 Wed 4 1 0 0 6 2 6
Sample Day Hour X1 X2 X3 X7 Durability Function61 Wed 5 1 0 1 6 2 562 Wed 6 1 1 1 6 10 563 Wed 7 0 1 0 6 1 764 Wed 8 0 1 0 6 2 565 Thu 1 0 0 1 7 10 766 Thu 2 1 1 0 7 9 567 Thu 3 1 0 0 7 1 768 Thu 4 0 1 0 7 2 569 Thu 5 1 0 1 7 1 670 Thu 6 0 1 0 7 1 571 Thu 7 1 0 0 7 1 872 Thu 8 1 1 1 7 10 573 Fri 1 0 1 1 8 3 774 Fri 2 1 1 1 8 9 775 Fri 3 1 0 0 8 1 1376 Fri 4 0 1 1 8 2 877 Fri 5 0 1 1 8 3 978 Fri 6 1 1 1 8 8 1079 Fri 7 1 0 1 8 3 1180 Fri 8 0 0 1 8 10 11 Legend:X1 = Vendor (0 = Office Optimum and 1 = Ibix)X2 = Size (0 = Small and 1 = Large)X3 = Ridges (0 = Without and 1 = With)X7 = Inventory shelf time, in days
Baseline results
Durability 0.4625 Functionality 0.425 X1: Office Optimum 56.25% X2: Small 42.50% X3: Without ridges 50% X7: Shelf life average 6.5 days X7: Shelf life st. dev 2.5 days
Vendor (X1) and Durability
Maybe Ibix is more durable?
Ibix
Off Opt.
Size (X2) and Durability
Maybe small is more durable?
Large
Small
Ridges (X3) and Durability
Ridges
No ridges
Maybe ridges are more durable?
Shelf Life (X7) and Durability
Vendor (X1) and Functionality
Maybe Ibix is more functional?
Ibix
Off Opt.
Size (X2) and Functionality
Maybe large is more functional?
Large
Small
Ridges (X3) and Functionality
Ridges
No ridges
Maybe ridges are more functional?
Shelf Life (X7) and Functionality
Conclusions
Durability – no large effects from any X’s. Vendor (X1=1 = Ibix) improves functionality Size (X2=1= large) improves functionality Ridges (X3=1) seem to improve functionality Shelf Life (X7) – lower values have better
functionality Best plan is to buy Ibix large MSDs with
ridges
Office Ibix small Lg No with ShelfOpt. Ridges Ridges Life
Conculsions – 2
Best to buy Ibix Small With Ridges Shelf life doesn’t matter?
X1=Off Opt
X1=Ibix
Small Large
No ridges Ridges
Conclusion?
Ridges don’t seem to affect durability Buy small Office Optimum, or Large Ibix!
Functionality Main Effects
Age seems to be biggest factor, ridges, Vendor
Functionality Interaction Plot
No ridges Ridges
X2=small
X2=large
Improve Phase
Conduct experiment to determine ideal parameter values