Lean Six Sigma Logistics Boot Camp

Track 1 Session 2

Thomas J. Goldsby
Title: Professor of Logistics, The Ohio State University Organization: Ohio State University

Email: Goldsby.2@osu.edu
Web: http://www.fisher.osu.edu/~goldsby_2/ Phone: 614-247-4261
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Abstract
Skip this session if you have no operational waste, perfect quality, minimum costs and delighted customers. If not, you will find this session invaluable in formulating a powerful continuous improvement program for your supply chain operation. Included is a roadmap for successful implementation of Lean Six Sigma Logistics from the speaker's book by the same name.

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Agenda
Gain an understanding of Lean principles and

how they relate to the management of logistics;

Review the basics of Six Sigma methodology

and the application of its primary tools for variation reduction and process improvement; and
Provide a starting point for the Lean Journey

and employment of Six Sigma in this journey.

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Dilbert On Lean Six Sigma

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The Law Of Entropy And You

Law of Entropy (2nd Law of Thermodynamics): In an isolated system, the degree of disorder can only increase, or a system left unto itself will grow in complexity. If you are in supply chain management today, then complexity is a cancer you have to fight. Process management is the weapon.
Tom Blackstock Coca-Cola North America

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What is a process?

In what processes is logistics involved?

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How do Lean and Six Sigma Help?

DISCIPLINE
THE COMPANY AND ITS RESOURCES CUSTOMERS AND MARKET OPPORTUNITIES
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What Does It Mean To Be Lean?

Being Lean means developing a value stream

to eliminate all wastes, including:

- Overproduction - Inventories - Waiting

- Overprocessing
- Unnecessary motion - Unnecessary transport - Product defects
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Key Aspects of Lean Implementation

Value stream mapping Continuous Improvement Kaizen Process orientation Teamwork Jidoka quality Five-S organization Standardized work Heijunka High frequency Small lot size JIT Kanbans
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Total Cost Analysis

Discipline

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Seeing the Rocks

Complaints

Waiting

Poor Communication

Uncertainty

Long Lead Times

Rework

Reward Systems

Poor Processes

Obsolescence

Supplier Quality

Service Quality

Poor Measurement

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Reinforcing Learning
Learning Organization Problem-Solving Organization Makes Problems Visible

Engage Everybody Everyday

Lowers the Water Level

Natural Teamwork Created Organizational Learning Occurs
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Visual Management
Visual Workplace = Self Explaining and Self Improving
Seeing as a Group 1. Production Status 2. Inventory Levels 3. Resource Availability
Knowing as a Group 1. Service Agreements 2. Goals and Schedules 3. Management Rules Acting as a Group 1. Consensus on Rules 2. Jidoka 3. Involvement

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What Is The 5S Philosophy?

Red Tag Initiative = If in doubt, throw it out Achieved Through use of Visual Controls

Japanese Term English Translation Definition Clearly separate necessary items from unnecessary; abandon the unnecessary. Seiri Sorting Neatly arrange and identify things for ease of use. Seiton Set in Order Always maintain tidiness and cleanliness. Regularly scheduled clean-ups. Seiso Shine Constantly maintain the 3S' mentioned above. Sediketsu Standardizing Shitsuke

Sustaining

Create vehicles to enforce the above rules.

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5S - Exercise 15
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258

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1 3

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5S Exercise - SORT 15 18

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5S Exercise - SET

2
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67 8
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10 11
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5S Exercise - Shine

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Separating Value-Add From The Rest

A value-adding activity is one that creates a benefit for

which the customer is prepared to pay

- An activity adds value if
the customer cares about it,
it physically changes the item, and/or creates time and place utility

A non-value-adding activity is an activity whose

elimination would lead to no reduction of the product or services attributes as seen by the customer (e.g., performance, function, quality, perceived value)
- Some non-value-adding activities are necessary; others not
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The Critical Waste Of Time

Throughput = Efficiency Value-Adding Time Pipeline Time

A typical measure of throughput efficiency is < 10% Many will be as low as 2% - 5%

What does this mean?

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Mapping the Value Stream

89 Days supply of inventory (45 at Regional DC) Service problems Pipeline Time = 93 days Value-Added Time = 4.2 days

1 day
Order Time = 10 days 12% Late 3% Short 4% Wrong 84% Perfect

1 day

I 30 days .75 hrs. (0.5-1.3) 30 days

I 5 days 1.5 hrs. (1.2-3.0) 5 days

I 4 days

I 5 days .75 hrs. (0.5-2.0) 4 days

2 days

I 45 days 1.2 hrs. (.8-4.0) 45 days

Processing Queue Time

.50 hrs. (0.4-1.5) 5 days

Setup Time
Uptime %

.25 hrs.
98%

2.0 hrs.
96%

1.75 hrs.
88%

0.75 hrs.
92%

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.20 hrs
96%
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Reported Benefits Of Leanness

Reduced cycle times Reduced inventory Reduced changeover time

Reduced rework
Improved service Reduced wastes

Doubling productivity Lead times reduced by 90% Inventory reduced by 75%

Near-zero defects
On-time delivery close to 100% Reduced accidents Improved morale
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What Is Six Sigma?

Data-driven approach to better understand, predict, and control processes through the reduction of variation. Voice of Business
Voice of Customer Project Management tools Statistical analysis Root Cause Analysis Belts DMAIC Methodology
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Project Selection tools

Process Capability assessment - DPMO and Sigma calculations

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The DMAIC Method

Define
What problem needs to be solved?

Measure
What is the capability of the process?

Analyze
When and where do defects occur?

Improve
How can process capability be improved?

Control
How can the gains be sustained?

Improvement validated Process owner takes over Periodic validations Solutions proposed & prioritized Solution piloted & implemented
Sources of variation identified Root causes determined Process mapped Data collected

Improvement goals set Value of projects determined Projects are organized

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Why Six Sigma?

Defects per Million Opportunities (DPMO) 841,300 691,500 500,000 308,500 158,700 66,800 22,700 6,200 1,300 230 30 3.4 Sigma Level 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0

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What Is Lean Six Sigma?

The elimination of wastes through disciplined efforts to understand and reduce variation, while increasing speed and flow in the supply chain.
Lean and Six Sigma as complements rather than competitors
- Lean provides the inspiration for process improvement

- Six Sigma provides the structured approach for delivering results

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Improving In Two Ways

Consistent, Not Accurate
X

Not Accurate or Consistent

X X X X X

Accurate and Consistent

XXXX XXXX XXX X

XXX XXX XXX XX

Center Process

Reduce Spread

(Lean Influence)
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(6 Influence)
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Once Improved, Sustain & Challenge

Standard Work 1) Each worker understands his task 2) All tools and equipment are at arms length 3) Standard work has been practiced to perfection 4) Continuous observation and analysis drives continuous improvement Types of Waste Eliminated Searching Finding Selecting Transporting Waiting
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Key Takeaways
Waste and variation are found in all processes,

and particularly so in logistics processes;

Lean and Six Sigma offer philosophies,

concepts, and tools that can help to improve processes, lower costs, and satisfy customers;
Lean and Six Sigma can be employed in

isolation or together; and

Lean Six Sigma is about DOING THE RIGHT

THINGS RIGHT.
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For More Information

Books:
Thomas J. Goldsby and Robert Martichenko (2005), Lean Six Sigma Logistics: Strategic Development to Operational Success, J. Ross Publishing, www.jrosspub.com Darren Dolcemascolo (2006), Improving the Extended Value Stream: Lean for the Entire Supply Chain, Productivity Press, www.productivitypress.com

Websites:
Lean Enterprise Institute at: www.lean.org Process Excellent Network: www.processexcellencenetwork.com

Groups:
LinkedIn groups: The Lean Supply Chain, Lean Logistics, Lean Six Sigma
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Questions?

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