Académique Documents
Professionnel Documents
Culture Documents
June 2014
Addis Ababa
ACKNOWLEDGEMENT
First, I would like to express my deepest gratitude for my advisor Dr Taffesse Gebresenbet
for his help and guidance throughout this work. I also would like to thank Ato Eshetie
Birhan who helped me during the preparation of the thesis proposal and Ato Ephrem Gidey
who gave me his comments and suggestions on the work I have done.
Next, I want to thank the general manager of Ethiopian Paper and Pulp Share Company
Engineer Melaku Teshome for allowing me to work in the company and being supportive of
the study. I also would like to thank production planning department workers specially Ato
Dawit Kassa, Ato Wondwosen Gizachew and Ato Kassahun Mamo for their support and
voluntariness to give me the data I needed and all the other employees of EPPSC since all of
Finally I would like to express my thank and love for my family and friends who has always
iii
ABSTRACT
Reducing manufacturing wastes and variability plays a very important role for the
improvement of yield and financial conditions of any company. Lean Six Sigma (LSS) is one
such strategy commonly used to improve process efficiency and quality. This thesis presents
a process improvement study conducted in Ethiopian Paper and Pulp Share Companys
(EPPSC) packaging plant based on a customized LSS methodology. Specifically, the Define,
Measure, Analyze, Improve and Control (DMAIC) methodology to streamline process and
enhance quality for companys packaging plant. In particular, the study aims to identify the
extent of the seven LSS wastes and determine which of those wastes plays a significant role
in the Companys profitability and competitiveness. Data for the study was collected by
Collected data was analyzed and presented inform of percentages. Findings have indicated
that material reject rate (MRR), down time and inventory were identified as the three main
wastes of the company. Based on the findings, various improvement opportunities are
forwarded for implementation to reduce the level of the identified wastes. Implementing the
opportunities could benefit the company by achieving a potential reduction of 55% in the
level of DPMO, improving raw material inventory consumption to 65%, reduced the level of
WIP to 7.1ton/month and reduce the cost of WIP by 73%. This study benefits the company
and other industries in their effort towards improved productivity and efficiency.
Table of Contents
Acknowledgement.iii
Abstract..iv
List of Figures...viii
List of Tablesviii
List of Acronyms.x
CHAPTER ONE: THE STUDY AND ITS APPROACHES1
1.1. INTRODUCTION...1
1.2. PROBLEM STATEMENT.3
1.3. OBJECTIVES OF THE STUDY..4
1.4. RESEARCH METHODOLOGY5
1.5. BENEFITS AND BENEFICIARIES.6
1.6. SCOPE OF THE STUDY...7
1.7. SIGNIFICANCE OF THE STUDY......8
CHAPTER TWO: LITERATURE REVIEW.......9
2.1. THE HISTORY OF TOYOTA PRODUCTION SYSTEM9
2.2 OVERVIEW OF LEAN MANUFACTURING....10
2.2.1. VALUE CREATION...10
2.2.2. KINDS OF WASTES..11
2.2.3. OPTIMIZING WIP INVENTORY LEVEL...14
2.3. SIX SIGMA....17
2.3.1. SIX SIGMA AS A METRIC..18
2.3.2. SIX SIGMA AS A METHODOLOGY.19
2.3.3. SIX SIGMA AS A MANAGEMENT PHILOSOPY ..19
2.4. INTORDUCTION TO LEAN SIX SIGMA...20
2.5. DMAIC METHODOLOGY........21
2.6. FACTORS FOR LSS MANUFACTURING IMPLEMENTATION...23
2.6.1. INVOLVEMENT OF EMPLOYEES IN THE IMPLEMENTATION....23
2.6.2. SENIOR MANAGEMENT COMMITMENT.24
2.6.3. EDUCATION DURING IMPLEMENTATION....24
2.6.4. COMMUNICATION AND INFORMATION25
2.6.5. PROJECT MANAGEMENT..25
CHAPTER THREE: DATA COLLECTION AND PRESENTATION....27
3.1. BRIEF DESCRIPTION OF THE COMPANY (EPPSC).......27
3.2. PRELIMINARY STUDY.29
v
3.2.1. OVERVIEW OF CORRUGATED BOARD MANUFACTURING PROCESS...30
3.2.2. PRODUCT DESCRIPTION..32
3.2.3. EPPSCS CARTON BOX CUSTOMERS.......35
3.2.4. ARRANGEMENTS OF THE FUNCTIONAL UNITS OF EPPSC ....36
3.2.5. THE CURRENT STATE OF RM WAREHOUSE.....37
3.5.6. THE MODEL OF THE MANUFACTURING SYSTEM..38
3.3. DATA TYPE SELECTION...39
3.4. DATA PRESENTATION AND ANALYSIS...40
3.5. LEAN WASTES IN EPPSC .48
3.5.1. DEFECT (MATERIAL REJECT RATE)..48
3.5.2. DOWNTIME...49
3.5.3. INVENTORY....49
3.5.4. OVERPRODUCTION.50
3.5.5. OVER PROCESSING..51
3.5.6. MOTION....51
3.5.7. MATERIAL TRANSPORTATION...51
CHAPTER FOUR: DMAIC MODEL FOR LSS IMPLEMENTATION IN EPPSC54
4.1. INTRODUCTION.54
4.2. DEFINE PHASE.55
4.2.1. SIPOC DIAGRAM...55
4.2.2. DETAILED PROBLEM UNDERSTANDING.58
4.2.3. PROJECT CHARTER...61
4.3.MEASURE PHASE..61
4.3.1. DEFECTS PER MILLION OPPORTUNITIES (DPMO) AND SIGMA LEVEL...62
4.3.2. PARETO DIAGRAM FOR THE PROCESS LOSS (MRR)..64
4.3.3. PARETO DIAGRAM FOR DOWNTIME..65
4.4. ANALYSIS PHASE.69
4.4.1. ISHIKAWA ANALYSIS FOR MRR....69
4.4.2. CAUSES OF HIGH RATE OF DOWNTIME72
4.4.3. COST ANALYSIS OF THE WASTES..74
4.4.4. 5WHY TOOL FOR ROOT CAUSE ANALYSIS OF WASTES..79
4.5. IMPROVE PHASE.81
4.5.1. IMPROVING MATERIAL REJECT RATE..82
4.5.1.1. 5S Implementation ............................................................................................................83
4.5.1.2. Cost of 5S Implementation .............................................................................................91
4.5.1.3. Training on Waste Reduction .......................................................................................91
vi
4.5.1.4. Sigma Level After Improvement ...................................................................................93
4.5.2. IMPROVING DOWNTIME.94
4.5.2.1. Raw Material Substitute / Benchmarking .................................................................96
4.5.2.2. Increasing The Product Mix ..........................................................................................97
4.5.2.3. Outsourcing ........................................................................................................................98
4.5.2.4. Company Downsizing .....................................................................................................99
4.5.3. INVENTORY LEVEL IMPROVEMENT....99
4.5.3.1. Improving RM Inventory ................................................................................................99
4.5.3.2. Two Machines-One Buffer Line................................................................................ 100
4.6. CONTROL PHASE..103
4.7. OUTCOMES OF THE STUDY.104
CHAPTER FIVE: CONCLUSIONS AND RECOMMENDATIONS .....106
5.1. CONCLUSIONS.106
5.2. RECOMMENDATIONS..107
5.3. FUTURE WORK AREAS..108
REFERENCES...109
APPENDICES...114
vii
List of Figures
Figure 16: Ishikawa diagram for the causes of before load rejects
Figure 18: Existing (L) and proposed (R) state of the warehouse
List of Tables
viii
Table 8: Reject At Each Machines For Shift B (Night Shifts)
Table 9: Downtime Summary For Corrugating And Converting Machines
Table 10:Raw Material Inventory In Store
Table 11:Monthly WIP Inventory Level From July2011-June 2012
Table 12:Annual Cost Data
Table 13:2004ECs Production And Utilization Data
Table 14:Educational Status Employees
Table 15:Process Metrics For The Main Wastes
Table 16: Sample Project Charter For LSS Implementation
Table 17:The Current Performance Of EPPSCs Corrugating Plant
Table 18: Sigma Calculation
Table 19: Categories Of Downtime Causes
Table 20: Summary Of Operational And Others Causes Of DT
Table 21:Beginning And Ending WIP Inventory Level
Table 22: Cost Of The Main Wastes
Table 23: 5why Tool for Root Cause Analysis
Table 24: Set Up Of Activity Time
Table 25: Cost Benefit Analysis For 5S Implementation
Table 26:Parameters Value For Calculating WIP Level
Table 27:The Results Of The Study
List of Acronyms
ix
LSS: Lean Six Sigma
M/Cs: Machines
MRR/RR: Material Reject Rate
RM: Raw Material
SF: Single Facer
UP: Unlimited Packaging
W: Width
WIP: Work In Process
x
CHAPTER ONE
1.1. INTRODUCTION
In the modern world of manufacturing, to improve the performance of the process and
ensure on time delivery, there are numerous approaches available. There is no doubt that
manufacturing industries are always embracing changes and improvements in their key
activities or processes to cope with the challenges. One way to stay competitive in the
The role of continuous improvement within organizations has changed and matured
throughout history. From the first improvements made through the invention of machines
that sped up production to using empirical or statistical methods and scientific methods to
methods. [1, 19] Certain industries including healthcare and pharmaceuticals focus the
products and services. For others, continuous improvement is viewed as a mechanism for
initiatives ultimately change the culture of an organization like Toyota. The culture change
focuses on the motivation and desire of the organizations members to continually improve
business processes and policies. This fundamental change in operating and managing
improvement. Lean Six Sigma has been receiving a lot of attentions in many industries these
days. [1]
Lean Six Sigma (LSS) is a combination of two continuous improvement methodologies: Lean
manufacturing and Six Sigma. Lean and Six Sigma focus typically on improving the
methodologies and principles to effect the improvement, both have complementary effects.
Lean offers a unique method that helps identify possible improvement areas on a
production line. On the other hand, Six Sigma offers a unique approach that is widely used
in industries in order to improve the process and thereby reduce the number of defects.
DMAIC which is an acronym for Define, Measure, Analysis, Improve and control is a lean
six sigma model which helps to improve business process to reduce defects and wastes.[1]
This thesis addresses the implementation of Lean Six Sigma production system to the
continuous production/process sector with the focus on Ethiopian Paper and Pulp Share
Company (EPPSC) specifically the packaging plant. EPPSC is half a century old Company
that produces two products in two separate manufacturing plants. However, despite being
in market for decades, through time the company lost most of its customers for newly
emerging companies and the companys profit declined continuously even to the level that
is almost close to not making profit at all. EPPSC can be characterized by low profit, high
level of wastes like material loss and down time, lack of detailed expertise and not working
Hence, much of the research has focused on identifying the extent of wastes and developing
DMAIC model for LSS application in the case company because it offers the greatest
2
1.2. PROBLEM STATEMENT
In Ethiopia, regardless of the stern global competition in modern business, most industries
are still very inefficient and are competing under suboptimal conditions. Similarly, EPPSC is
one of those companies that suffer from many challenges/problems. High concentration of
waste, high production cost, low profit, high rate of downtime due to frequent lack of order,
machine failures and maintenance are some of the companys problems. There is also a
For instance, the packaging plant which the study focuses on, has lost more than 3.5 million
birr a year due to the materials rejected or lost. Up to 5 million birr become locked up in
inventory because only 40% of the RM inventory is consumed at the end of each month and
about 85% of the product cost in manufacturing carton box is cost of raw material (paper
rolls). Companys record shows that the plant has been down for an average of 60% of its
time mainly because of lack of order. There is a very high loss of customers. They lost most
of their customers instead of having more than 300 Companies at present they only have a
few customers. In fact, six month data shows that 65% of the products manufactured are
Companies that adopt Lean Six Sigma like GE were able to increase their profit by 1 billion
change the culture and existing mindsets and behaviors and the management is committed,
it is possible to launch the concept of LSS to Ethiopian industries. Hence, the objective of this
research is to study the possible implementation of Lean Six Sigma in EPPSC in order to
increase their income in a measurable amount and at the same time to make them customer
3
Particularly, the research questions raised includes (for packaging plant):
What are the main wastes of the company that have significant impact on
How much is the current rate of defects or material rejects of the company?
How the implementation of Lean Six Sigma (LSS) helps to avoid the main wastes of
the company and reduce the manufacturing variability to 3.4 parts per million
opportunities (PPM)?
How DMAIC model will be used for application or implementation of Lean Six
Sigma?
In short, this research seeks to identify which key issues must be addressed to successfully
variability (defects).
General Objective
The general objective is to identify and reduce or eliminate all kind of wastes and defects by
using Lean Six Sigma in EPPSC in order to increase the companys profitability and make
Specific objectives
To study the existing system and determine the level of wastes like the extent of
material reject rates, idle times, levels of inventory, ways of processing and
4
To improve the sigma level of the company by reducing DPMO (defects per million
To determine which Lean Six Sigma model to implement for waste elimination
The study intends to investigate the extent of manufacturing wastes in EPPSC in order to
improve customer satisfaction and companys profitability. For this study, the research
methodology requires gathering relevant primary and secondary data. Primary research
conducted using interviews and visits. The interviews used to provide qualitative insights
into the data collected. Secondary data collected from recent literatures, specified
documents and company records in order to analyze the material and arrive at a complete
understanding of lean six sigma waste level in EPPSC. The methodologies employed to
achieve the objectives are:
A. Literature Survey: - Different related reading materials like books, journals, previous
research works on similar topic, and the Internet sources are referred to have
(especially with the General Manager and production planning department head)
and interviews. The extent of material rejects data is collected from the companys
Broke analysis record which shows how much material used to manufacture the
products and how much of this material input goes to waste. Similarly inventory and
downtime data is gathered from companys material consumption and time study
5
understanding of the manufacturing process thus during visit, the presence of
regarding material reject rate, downtime, WIP inventory, cost, and production
taken to determine the monthly consumption of raw material and one month data of
materials rejected at each stage starting from loading the materials to corrugators
materials loss at each stage. All collected data are for year 2004EC because it is more
D. Analysis: Upon collecting the qualitative data derived from interviews, observations
and companys records and databases, different analysis performed like percentage
determine Sigma level of the company, Ishikawa analysis, inventory cost analysis, etc
to provide statistical insight into the data collected and draw conclusion.
E. Model Development: the implementation model of lean six sigma which is DMAIC
The first and the main beneficiary of the thesis is EPPSC because first they are under
suboptimal conditions since they have high rate of downtimes, material reject rate and non
value adding activities. Second, the concept of LSS helps to address and eliminate
manufacturing and quality related problems of the company and these are the core areas
6
Lean Six Sigma helps to eliminate all kinds of wastes that the company is having and reduce
the rate of defects/reworks to 3.4 PPM opportunities. This means it leads the company to
have improved flexibility, response time, inventory turnover, product quality and
productivity. It also means that the customer satisfaction will be improved and profit will be
maximized. Thus, these are some of the benefits that will be gained if the company properly
implements LSS. The customers, suppliers, other government and private manufacturing
companies can also be one of the beneficiaries by becoming familiar with the concept of
The scope of the study include Identifying the major wastes of the company, investigating
and identifying the root cause of the problems, Defining the voice of customers, measuring
rate of defects and reworks. It also includes determining inventory levels and waiting time
and finally, implementation detail will be prepared which will minimize or eliminates the
wastes and defects and improves the system by integrating various lean manufacturing and
The scope of the research is limited to consider only EPPSC as a case study, which means if
others want to use the document they have to make it compatible with their condition. It is
also limited in considering only the main wastes that will have a great impact in
profitability of the company. moreover, the company focuses on developing a DMAIC model
for lean six sigma implementation in the case company however it did not go through the
actual implementation because whether to use this document is up to the organization not
7
1.7. SIGNIFICANCE OF THE STUDY
The study is devoted to investigate the solutions to the manufacturing and quality related
problems in EPPSC and proposing the appropriate model of Lean Six Sigma for
implementation. Therefore, the primary merits of the study goes to the company itself and
hopefully, they will get important concepts on continuous improvement and will motivate
them to work for it. Since there are few and shallow studies in the area, it will give a
eliminating manufacturing wastes and quality defects can also get good ideas from this
thesis. Finally, the study will contribute a lot in providing a step-by-step, unambiguous
roadmap of improvement that leads to predictable results. This roadmap provides the self-
confidence, punch, and power necessary for action and is the principal subject of this
research.
8
CHAPTER TWO
LITERATURE REVIEW
After World War II, Japanese manufacturers were faced with the dilemma of vast shortages
of material, financial, and human resources. The problems that Japanese manufacturers
were faced with differed from those of their western counterparts. These conditions resulted
in the birth of the "Lean" manufacturing concept. Toyota Motor company (TMC), led by its
president Toyoda recognized that American automakers of that era were out-producing
their Japanese counterparts; in the mid- 1940's American companies were out performing
their Japanese counter parts by a factor of ten. In order to make a move toward
improvement early Japanese leaders such as Toyoda Kiichiro, Shigeo Shingo, and Taiichi
Ohno devised a new, disciplined, process-oriented system, which is known today as the
"Toyota production system", or "Lean manufacturing." Taiichi Ohno, who was given the task
to be the primary force behind this system [1]. Ohno drew upon some ideas from the west
and particularly from Henry Ford's book "Today and Tomorrow". Ford's moving assembly
line of continuously flowing material formed the basis for the Toyota production system.
After some experimentation, the Toyota production system was developed and refined
between 1945 and 1970, and is still growing today all over the world. The basic underlying
idea of this system is to minimize the consumption of resources that add no value to a
product. [1, 9]
9
2.2 OVERVIEW OF LEAN MANUFACTURING
Lean Production System is the world famous production system developed and practiced by
Toyota Company for a long time. The basic ideas behind the lean manufacturing system are
The Japanese philosophy of doing business is totally different than the philosophy that has
been long prevalent in the US. The traditional belief in the west had been that the only way
to make profit is to add it to the manufacturing cost in order to come up with a desired
Even though the lean concept was introduced by Toyota in the 1950s as a part of the Toyota
Production System (TPS), it did not become famous until Womack and Joness best-seller
book The Machine That Changed the World: The Story of Lean Production was published in
1990 (Andersson et al., 2006). The lean concept can be defined as a dynamic process of
change, driven by a set of principles and best practices aimed at continuous improvement
adding activities with a focus on flowing the product at the pull of the customer in pursuit
of perfection (NIST, 2000). Over time, the lean concept evolved and extended its meaning
from lean production to a whole enterprise model, and finally even to an extended lean
enterprise model (Ricondo and Viles, 2005). There are five fundamental steps involved in
applying the lean concept. These steps are: value identification, value stream analysis, flow,
pull, and perfection (Nave, 2002; Ricondo and Viles, 2005; Tracy and Knight, 2008). [34,
39]
One of the principles of Lean as documented by Maskell and Baggaley (2003) which were
derived from Womack and Jones (1996) is value. Value can only be defined by the ultimate
customer, and it is only meaningful when expressed in terms of a specific product that
10
meets the customers needs at a specific time. Value is created by the producer and from the
customers point of view. Everything that does not add value to the product is waste and is
something that the customer is not willing to pay for. Identification and elimination of
waste makes it easier to focus on value adding activities and become more cost efficient. So
in Lean, if it is not adding value it is waste and elimination of this waste is the basic
principle of lean manufacturing. For industrial companies, this could involve any of the
The literatures offers either seven (Womack and Jones, 1996; Shingo, 1997; Maclnnes,
2002; George, 2002; Ohno, 1998) or eight forms of waste (McAdam, 2003).
The eight wastes are uncovered through the determination of what the customer values.
The list of the wastes that has been modified and expanded by various practitioners of lean
manufacturing includes:
2. Defects In addition to physical defects that directly add to the costs of goods sold,
3. Inventory means having unnecessarily high levels of raw materials, WIP and
finished products. Extra inventory leads to higher inventory financing costs, higher
4. Transportation - includes any movement of materials that does not add any value to
11
5. Waiting is idle time for workers or machines due to bottlenecks or inefficient
production flow on the factory floor. Waiting results in a significant cost so far as it
Waste sources are all related to each other and getting rid of one source of waste can lead to
either elimination or reduction in others. Perhaps the most significant waste is inventory.
When inventory is reduced, hidden problems can appear and actions can be taken. There
are many ways to reduce the amount of inventory, one of which is reducing production lot
sizes. Reducing lot sizes however, should be followed by a set up time reduction so as to
make the cost per unit constant as the famous economic order quantity formula states
(karlsson and Ahlstrom, 1996). At Toyota, Shingo developed the concept of single minute
exchange of dies (SMED) to reduce set up times (Shingo, 1997); for instance, setup times in
large punch presses could be reduced from hours to less than ten minutes. This has a big
effort on reducing lot sizes. Another way to reduce inventory is by trying to minimize
machine downtime [53]. This can be done by preventive maintenance. It is clear that when
inventory is reduced other sources of waste are reduced too. For example, space that was
used to keep inventory can be utilized for other things such as increase facility capacity.
12
Also, reduction in setup times as a means to reduce inventory simultaneously saves time,
Transportation time is another source of waste. Moving parts from one end of the facility to
another end does not add value to the product. Thus, it is important to decrease
transportation times within the manufacturing process. One way to do this is to utilize a
cellular manufacturing layout to ensure a continuous flow of the product. This also helps
eliminate one other sources of waste, which is energy. When machines and people are
grouped into cells, unproductive operations can be minimized because a group of people
can be fully dedicated to that cell and this avoids excess human utilization. Another source
of waste is defects and scrap materials. Total productive maintenance is one way to
eliminate defects and scrap. Manufacturing parts that are fault free from the beginning has
illustrated in Table 1. The seven wastes identified by Taiichi Ohno in the Toyota Production
System are categorized by the sources of waste People; Quantity and Quality. The model
also details what waste reduction approach can be used for source of waste, the most
13
Table 1: Conceptual model of lean manufacturing
Throughput time is the time that a part spends in the system. The shorter the throughput
time is, the faster the system can respond to customer orders, and the sooner that tardiness
can be reduced. Throughput time consists of waiting times in buffers and processing times
on machines. Thus, Lots of effort in manufacturing system research has gone towards
minimizing buffer capacities or eliminating buffers. As the buffer size decreases, the impact
of uncertainties, such as machine failures increases and leads to higher risks (average loss).
Hence, finding the right buffer size for a manufacturing system is critical.
Decomposition methods have been developed for the performance evaluation of some large
systems for which exact analytic methods do not exist and numerical methods are
infeasible. These techniques approximate the original large system with a set of smaller
systems that satisfy a set of carefully chosen relationships. Networks with finite buffers are
the major focus of attention. Early work focused on tandem systems with unreliable
machines and finite buffers (Gershwin 1987; Dallery, David, and Xie 1988); more recent
II. The machines have identical cycle time T. The time axis is slotted with the slot
14
III. Each buffer is characterized by its capacity, Ni, i = 1,... , M - 1, where Ni is a positive
integer.
IV. Machine mi is starved during a time slot if buffer Bi-1 is empty at the beginning of
this slot; mi is blocked during a time slot if at the beginning of this time slot buffer Bi
is full and machine mi+1 is either down or blocked. Machine ml is never starved, and
V. Machine ml, being neither blocked nor starved, produces a part during a time slot
with probability Pi=1-ki and fails to do so with probability ki, i=1,.., M, where 0
< e << 1 and ki 0 is independent of e. The ki's are called the loss parameters.
reliable serial production lines. An asymptotic technique for their performance analysis and
design has been developed. In many practical situations, however, serial production lines
include a quality control system that identifies and discards some or all of the defective
parts produced by the machines. To account for this possibility, introduce the following
M where the bi 0 are independent of e. The bi's are referred to as the quality loss
VII. A defective part can be identified as such and discarded from the system by the
quality control devices, Qi, placed between each two machines, mi and mi+l, and after
the last machine. Each quality control device identifies a defective part with
probability 0 < Di < 1, i=1,.., M. The Di's are referred to as the measurement
15
different assumptions could be made with regard to the positions of the quality
VIII. Quality control devices are placed immediately after each machine and the
defectives identified are removed from the system before being placed into the
VIII'. Quality control devices are placed immediately after each buffer. A discarded part
is instantaneously replaced with another part from the buffer, if available. This is
Manufacturing systems defined by (i-viii or viii') are called asymptotically reliable serial
production lines with a quality control system. The performance of such lines can be
a. The line production rate, PR, i.e., the average, steady state number of parts produced,
b. The line production rate of non-defective parts, PRnd, i.e., the average, steady state
c. The line consumption rate, CR, i.e., the average, steady state number of parts utilized,
d. The line work-in-process, WIP, i.e., the average, steady state number of parts in the
system.
lines with a quality control system can be formulated as follows: Given the parameters ki, bi,
Di, i =1,...,M and Ni, i =1,...,M- 1, find PR, PRnd, CR and WIP as functions of these parameters.
[13,33]
16
a. The production rate is:
1 + 1
PR = 1 [1 +1 + 2 , 1 + 2 ] + ( 2 ) ,
2
Where,
1
Q (, N1) = , 0 , N1 Z+ , ( 2 ) =K1 b1*D1
1 1
2
Where: =
1 + 1
This two machine-one buffer analytical formula is used in this study to calculate the
The Six Sigma approach was initially developed in Motorola and greatly refined during its
application in GE. The enormous savings reported by GE fuelled interest in Six Sigma in late
1990s (Krishna et al., 2008). Six Sigma refers to the capability of a process to deliver units
within the set quality limits (Klefsjo et al., 2006). For a company to be classified as a Six
Sigma company, it should not have more than 3.4 defects per million opportunities in any
achieving Six Sigma, it tries to systematically eliminate the defects in a process to be able to
get as close to perfection as possible. As such, over time, Six Sigma has evolved into a
business process change (BPC) initiative, which combines statistical control tools and total
17
quality management with an emphasis on customer satisfaction (Arnheiter and Maleyeff,
2005; Rajamanoharan and Collier, 2006). [19, 20, 51] Since Six Sigma has evolved over the
Six Sigma approach satisfies all the three levels at the same time.
Sigma is the Greek letter . It is a statistical symbol and metric of process variation
which used to measures something called standard deviation. In its business use, it indicates
defects in the outputs of a process, and helps to understand how far the process deviates
from perfection. The probability density function is shown below where is the mean and
In Six Sigma approach, Sigma is used as a scale for levels of process capability or quality.
According to that, Six Sigma equates to 3.4 Defects Per Million Opportunities (DPMO).
Therefore, as a metrics, Six Sigma focuses on reducing defects. If we achieve 68% of aims,
then we are at the 1 Sigma level. If we achieve 99.9997% of aims, then we are at the 6
level, which equates to 3.4 DPMO. From this point of view, Sigma level shows how well the
product is performing. It seems this level can never be achieved. However, the Sigma level is
not the purpose, the real purpose is to improve quality continually. The higher Sigma level
18
The calculation of Sigma level is based on the number of defects per million opportunities
Where D means the number of defects, N means number of units produced, and O is the
number of opportunities per unit. A part of DPMO to sigma conversion table is given in
Six Sigma approach is not just counting defects in a process or product, but it is a
methodology to improve processes. The Six Sigma methodology focuses on: [2]
When we look at Six Sigma as a methodology, there are many models available for process
improvement like DMADV, DMAIC, Breakthrough strategy, Eckes method, Six Sigma
Roadmap, IDOV, and DMEDI [39]. The most widely used models are DMAIC and DMADV.
The DMAIC model is used when a process or product is in existence but is not meeting the
customer requirements. And the DMADV model is used when a process or product is not in
Through experience, Motorola has found that using Six Sigma as a metric and as a
Motorola ensures that Six Sigma metrics and methodology are adopted to improve
opportunities, which are directly linked to the business strategy. Now Six Sigma is also
applied as a management system for executing the business strategy. Six Sigma approach
19
provides a top-down solution to help the organization. It put the improvement efforts
according to the strategy. It prepares the teams to work on the highly important projects. It
LSS can be defined as the combination of the best features of lean and Six Sigma in the
of improvement in customer satisfaction, cost, quality, process speed, and invested capital
(Arnheiter and Maleyeff, 2005; Berryman, 2002). Believing in the synergetic effect of
converging lean and Six Sigma, several leading organizations including Xerox Corporation,
GE, Johnson and Johnson and Dell have successfully implemented the LSS approach in their
In order to become a successful LSS organisation, an organisation should bring together the
following lean and Six Sigma principles (Arnheiter and Maleyeff, 2005):
The top management must implement a decision-making process that bases every
The organization must constantly evaluate all of its incentive systems to ensure that
The organization must utilize data-driven methodologies to ensure that all the
changes are made based on scientific studies rather than making ad hoc decisions
20
The organization must implement a companywide and highly structured education
George (2002) defines Lean Six Sigma (LSS) as a methodology that helps companies achieve
better cost, quality, speed, customer satisfaction and rates of improvement. LSS projects will
often implement a Define, Measure, Analyse, Improve, and Control (DMAIC) procedural
framework for existing processes to achieve customer satisfaction with regards to quality,
delivery and cost. Process of DMAIC was developed in order eliminate waste in
manufacturing and service process (Andersson et al., 2006; Pande et al., 2000). After
starting a LSS project, it may evolve to use more Six Sigma or Lean tools or a mix of both as
suitable to the nature of the project where all tools are LSS tools (Hendricks and Kelbaugh,
Define is the first phase in the DMAIC model. During this phase, the projects definition is
developed. The projects definition includes the overall scope, objectives, and goals of the
project. It also determines the project leader, team members, sponsor, stakeholders, and
schedule. During the Define phase, the process is also defined (Antony and Banuelas, 2002).
This is accomplished by utilizing various tools such as flow charts, process mapping, and
Define phase and selecting team members is a serious part of the phase. The team leader has
a critical role in any Lean Six Sigma project and it is the leaders job to keep the team
focused on the stated objective, scope and goal (De Koning and De Mast, 2005). The team
leader also sets the ground rules and ensures to resolve all the conflicts. Driven by daily
pains and the need for instant fixes, projects may commence with measure, analyse and
improve pooled together in one giant step. But by skipping Define phase, practitioners miss
an opportunity for making valuable process discoveries. Like morning leads the day,
21
similarly a well-defined, well-scoped Lean Six Sigma project is more prone to be completed
Usually, a significant amount of head scratching is done before practitioners can unveil the
right xs and have a clear understanding of their impacts on the Y (Yang, 2004). This is why
the Define stage in the DMAIC model of Lean Six Sigma is so important. This phase consists
of qualitative tools, such as project charters, problem statements, process maps and critical-
to (CT) trees. Because team members are human and miscommunication can happen, so it is
important to answer all of the questions regarding current situation and constraints and
record the answers in a go-to document. This can serve as a source of backup information
when anyone asks Why are we doing or what we are doing? This also helps to build
consensus about the current state, desired future state and any other goals (Patel et al.,
2002). D also acts as a refresher to the team members about the process and sometimes this
review causes team members to look at the process with a fresh pair of eyes (Snee and
In the second phase of DMAIC model that is Measure the baseline performance is studied
using LSS metrics and VSM of current chain. Also, brainstorming is performed to identify
the list of the potential inputs. The Measure phase is typically characterized by the
collection of data, in an effort to gain an overall greater understanding of the problem. This
data is then investigated in the Analyze phase to determine cause and effect relationships
and prioritize the sources of product failure or wastes. The Analyze phase verifies the
critical few negatively affecting the outputs such as product quality and flow. In the
process or by using optimization techniques. And finally, in the Control phase, the
sustaining a high level of product quality. This means, in this last phase the inputs and/or
22
outputs of the improved processes will be monitored on a day-to-day basis to ensure that
the anticipated gains are maintained. These five phases of DMAIC model is summarized as:
Define: the problem, the voice of the customer, and the project goals, specifically
Measure: key aspects of the current process and collect relevant data
Control: the future state of a process to ensure that any deviations from target are
Changes in the organization are often met by suspiciousness and resistance from employees.
People are afraid of the unknown and might think things are already just fine and do not
understand the need of changing. The resistance towards new ideas is to high extent
dependent on the culture in the organization, which can repel attempts to implement lean
appropriate and cost effective implementation plan. Several factors must be considered to
successfully implement LSS manufacturing and some of the most important are discussed
On every organization where changes are desired, one needs to deal with people. The
motive for a change must be understood and accepted by the individual, in order to achieve
Human beings are very habitual and tend to do things the way they have been trained to do
or just as they have always done. The problem is that there are some employees who, even
after sufficient training in LSS principles, are not able to perform at the expected level. The
23
They dont agree that changes are necessary (everything is fine the way it is)
They are going to retire in a few years and do not want to do more than necessary
They have been through many improvement projects that have failed (believe
They do not want to reallocate their time from production work to improvement
work
The approach that seems to be necessary is that a pre specified period is set for the
employees to attain the necessary performance. If it does not occur during this period, they
expected and there is no room for employees who can or do not want to perform. It is
important to find those employees that really are interested in participating in a change and
involve them in the implementation process. Those real enthusiasts can inspire their
The focus of senior management commitment is critical, and it is important to win the
heart and mind of a major sponsor from the top team. The entire management team must
support the implementation and it is important to achieve unity before the project is
communicated to the organization. Top management should set the direction for the project
and establish the vision and mission. Case studies show that senior management
LSS manufacturing involves principles that might not be familiar to many of the employees.
24
organization before and during the implementation. Top management must be taught
enough to be convinced that LSS production is worth their attention and create unity.
Workers in the affected area need booth theoretical education and practical training, since
they must understand both why and how to use LSS. Others that may have to be educated
are union managers, process engineers and middle management. [5, 15, 35]
Many organizations do not have enough knowledgeable people with sufficient experience
to initially teach the in-house courses effectively so it is better to include consultants for this
purpose. However, it is important that the consultants just act as a support and not
accomplish the entire implementation with little involvement from the resident staff. Too
much involvement of consultants often leads to failure, because they do not have enough
knowledge about the internal processes. Another risk is that the sense of ownership for the
avoid confusion and create motivation. The focus should be on the results and benefits
rather than the use of particular tools. Different levels of information are needed during
different phases in the implementation. General information to large groups should be held
before the operational changes take place and more specific information to smaller groups
When starting a project it is only important to have clear and good project goals but also to
have part goals. Part project goals are goals that different departments or people want to
achieve during the project. These goals will help the project on its way, especially if it is big
and comprehensive project. Apart from the project goals, the projects plan is important.
The plan is the core of the project management. All projects have to have a plan with all
25
part goals, milestones and activities pointed out. When the implementation starts, it is
important to have a detailed plan. During the project, this plan will have to be updated and
changed as factors changes and new solutions might come up. The important thing is to
have a plan with fixed dates when part goals should be reached. when project plan is
created it will not be evaluated for its logical elegancy but for its part in the success of the
26
CHAPTER THREE
The status of the existing system should be thoroughly analyzed in order to implement LSS
in EPPSC. Thus, in this chapter the existing system is studied, the data collection methods
used, the presentation of the data and some of the discussions for the data presented along
the way and finally the extents of the seven wastes of LSS are defined for the company in
focus based on the collected data and observation of the manufacturing process. A brief
description of the industrial unit where the study has been carried out is also given.
EPPSC, located at Wonji which is12km from Adama city was established in August 29, 1955
Ec. the share holders of this companys were ministry of finance, Ethiopian Development
Bank, Ethiopian Investment Bank and Panser and Witmor Company with a beginning
capital of 50,000 birr. When it started production in 1962 the total expenses were 22
million birr and at the same time its capital was pumped to 10 million birr. During its
establishment, the company produces paper product of 25 ton daily and 8,500 ton
annually. Ethiopian government 70% and IFC 30% are the current shareholders of the
company.
EPPSCs production unit consists of two plants, which are the paper plant that has been
box manufacturing plant. The mill produces about 10,000 tons of printing and wrapping
paper with different grades, and is dependent on imported pulp. The company also
produces corrugated boxes mainly of 3 and 5 ply with an annual capacity of 11470 ton.
Paper can be made from a wide variety of materials such as cotton, wheat straw, sugar cane
waste, flax, bamboo, wood, linen rags, and hemp. Regardless of the source, fiber is what is
27
needed for paper production. In EPPSC fiber comes mainly from two sources: from the pulp
imported and recycled paper products. The raw material that the company uses for paper
production includes softwood pulp (short fiber), hardwood pulp (long fiber), and
unbleached Kraft pulp. EPPSC brought these raw materials from the worlds leading
suppliers found in Saudi Arabia, Sweden, Canada and Indonesia. The company also recycles
papers, which they collect it from different institutions like universities, government and
private industries, etc. On the other hand, the corrugated box production requires paper
rolls that resist tearing, splitting and bursting and different chemicals.
Currently, the factory creates job opportunity for 572 employees out of whom 451 are
permanent and 121 are contract. In addition to that, EPPSC has organized more than 158
The study focuses on EPPSCs packaging plant. This plant added a new Corrugators machine
with a capacity of 17,500 ton/annum and a box printer in 2001 GC. The new Corrugators
(Box making machine) was supplied and installed in 2001 by Yantai Star Packaging Co. Ltd
(China). The machine has a trim width of 1600 mm and a design speed of 120 m/min;
however, the normal operating speed achieved by the company is only 45-50 m/minute.
Above this speed it has been found that the fluting is crushed in the process, or skipping
occurs. At speeds of 60-80 m/min, there also were reports of a drying limitation. The
process has a total steam demand of 2,500 kg/h and a power demand of 180 kW. A Flexo-
printer-slotter from Ming Wei Paper ware Machinery Co., Ltd. (Taiwan) used to print,
score, fold, and glue to produce the finished corrugated boxes. [50]
The raw materials required for carton box manufacturing are Kraft liners, test liners and
fluting medium paper rolls and chemicals like ink, starch and glue. The rolls requirement of
the carton box plant (80-90%) is meet by the paper mill of EPPSC even if sometimes the
28
company imports paper rolls from abroad like white liners. The chemicals are purchased
Even though the corrugated box product is good in quality and used to have many
customers, the problem here is their product cost is high when it is compared to the cost of
the product that their competitors provide due to their high cost of material, labor, etc,
which leads them to losing most of their customers. Therefore, the annual production
volume dropped from year to year and now the number of units produced per year is much
less than what the company is expected to produce. EPPSC only has a 15% market share in
As explained above, EPPSC (EPPSC) is a combination of two companies, which are big
enough by themselves; which are paper Mill Company and corrugated box-manufacturing
company that produces paper rolls and carton boxes respectively. This thesis chose the
corrugated box-manufacturing plant because the extent of various wastes in carton box
manufacturing plant is more than that of paper manufacturing plant, which is shown in
table 2. The EPPSCs box corrugating plant works in two shifts for 16hrs/day and 22days
/month and sometimes the workers expected to work overtime. In addition, since it is
possible to extend the good outcomes of LSS implementation to the other plant or
29
3.2.1. Overview of Corrugated Board Manufacturing Process
Corrugated packaging industry holds major portion of the packaging industry with its
varied use in engineering, food, textile, glass and many other sectors.
The process of making corrugated box starts with a Corrugators in the corrugating line.
Three large rolls of paper are necessary. One forms the corrugated (fluting) medium, and
the other two form the liner boards on either side of the medium. The top board is normally
called the single-face linerboard (test liner) and the bottom layer often called a double-face
To make the board, the corrugated medium which will become the wavy middle layer in the
soften the natural ingredients in the paperboard and making it easier to form into flutes by
pressing it in between meshed rolls which fit together like huge gears. As the web (long
sheet of paper unwinding from the roll) emerges from the forming operation, it is held close
to the corrugating roll while corrugum starch is placed on the tips of the flute. The starch is
applied to the tips of the flutes, which are then pressed against the linerboard, also been
pre-heated. The adhesive sets up quickly following which the single-faced material is
moved up onto a bridge where the glue finishes the setting operation.
In the next section of the machine, known as the double-backer or double-facer, a second
layer of liner board is added. This layer is also pre-heated and adhesive is applied to the
outside of the flute just as before. Again, the glue set up is rapid. However, in order to cure
the adhesive, more heat is used. This is followed by an unheated section which allows the
30
Figure 1: single wall (3ply) corrugated board
At the end of corrugators, a slitter-scorer trims, slits and cuts the completed corrugated
structure into flat sheets called box blanks just the right size for making the boxes that have
For double-wall or triple-wall board, the double backing process is repeated, normally in
Finally, the box blanks are fed through the converting machine (printer-folder-gluer) in
order to convert them into finished containers. Thus, as each blank passes through the
rollers of the converting machine, it is printed, folded, glued and formed a carton box. From
the converting, the finished boxes are automatically stacked and sent to a banding machine
to be wrapped for shipping. Even if the banding machine exists in EPPSC, operators do the
31
Figure 2: process flow diagram
The EPPSCs Box products include mainly three and five ply carton boxes with different
designs. They are used for packing in different industrial sectors like horticulture, food and
beverages, soap and detergent, pharmaceuticals, bottle and glass, Pint, chemicals and
cosmetics and for apparel and textiles. EPPSC provide the following corrugated box
products with required print, which are applicable for variety business activities.
Normal box - a standard type of box which is used for packing different types of
products like Pasta and biscuits paints, garment, detergent, horticultures and many
others.
32
Partition box - most of the time three layer corrugated box with a number of
Flower box A special type of corrugated box with colorful print used for packing
Self locked box - these groups of boxes are designed to be locked by themselves
Corrugated board - A flat board in three and five layers with different flat
dimensions. It used for packing logistics and bulky materials like furniture.
Pannal and angle types of boxes - Panel and angle are special types of boards, which
creased as per the customers specification. Most of the time applicable to safe
Even if the company is capable of producing the above listed types of products, most of the
products the company currently manufactures are normal boxes and some partition boxes
mostly because the company lost most of its customers to other packaging plants in the
market. The boxes manufactured with brown and white colors and with different ply types
33
mainly with 3ply and 5ply. Table 3 summarizes product types manufactured in 2004EC
The Pareto analysis (figure 4) performed using the above data reveals that from the six type
of products mentioned, normal box with three ply products are the most frequent products
manufactured at the company, these product contributed to more than 88% from the total
products manufactured.
34
3.2.3. EPPSCs carton box customers
The Company used to have many customers but now they have only few. Zenith G/Eshet,
National Tobacco, Kality Food, Nazareth Soap, Upper Awash, etc are the some of the main
customers with big volume of product orders. Table 4 and figure 5 shows shares of
35
3.2.4. Arrangements of The Functional Units of EPPSC
and has two production lines which are, the one that starts from the Corrugators to the NC
cutter, and the other line is printer-gluer line. The first manufacturing line contains the
machines corrugators, heater-cooler, slitter and NC cutter and the second line contains
Figure 6 shows the layout of the manufacturing departments, the raw material and finished
goods warehouses, steam houses and the relationships between them. The line from the
steam room to the first manufacturing line is steam transferring line. Trying to move the
first manufacturing line in order to reduce material transportation will automatically affect
the steam line and eventually results new steam line installation.
36
3.2.5. The Current state of RM warehouse
The raw material warehouse contains the three main materials for manufacturing of
corrugated board, which are test liners, Kraft liners and fluting medium with different
GSM, length, color, locally manufactured and the imported paper rolls. The grammage of
the paper rolls are usually between 170-175 g/m2 for Kraft liners, 145-160g/m2 for test
liners and 127-140g/m2 for fluting mediums. The length ranges from 90-160cm based on
standards and the colors are usually brown and white (most of the imported rolls) but based
on past data only few type of paper rolls frequently manufactured like more than 95% of
After the paper rolls are manufactured in paper plant, they transported to the raw material
warehouse with their product ID tagged on the them and placed randomly here and there.
The warehouse is cluttered and it is unbelievable that the organization produces parts and
throws them in so-called warehouse which is full of dust that is eventually deteriorating
or fading the products. Beside working in dusty environment is not only harmful for the
products but also for the employees who work in stock even from health perspective. The
other thing that damages the rolls is the material handling equipment, i.e. the forklifts
clamp tears the papers. Figure 7 shows the state of the warehouse and figure 8 shows
37
Figure 7: Raw material warehouse Figure 8: Damaged paper roll
The figure shows that the materials are placed on the dusty floor, which is very intolerable
and in appropriate because the rolls need to be placed in a very clean area in order to avoid
the deterioration of the products especially since the material cost is very high. Moreover,
appropriate placement and management of the materials have a big role in being
This problem clearly shows that the companys management work is very poor since the
state of the warehouse results high amount of financial loss and the problem can be solved
simply by using the appropriate material handling equipment and placing the materials in
A production line is a manufacturing system where machines are connected in series and
separated by buffers. The inclusion of buffers increases the average production rate of the
line by limiting the propagation of disruptions, but at the cost of additional capital
investment, floor space of the line and inventory. The profit of a production line is the
38
revenue associated with the production rate minus the buffer space cost and average
The first station represents the first manufacturing line which is the corrugating and
includes corrugators, heater and cooler and NC cutter machine. The second station, which
is the converting line includes the printer, folder and gluer machine. even if each line
contains three or more machines, all are placed consecutively and work continuously thus
The first line corrugates the liners and transforms them into a rectangular boards. The
converting line prints the customers brands and folds the board in to carton box. This
boards are the WIP inventories. The manufacturing process is subjected to both line
In order to attain the objectives of the research, some means of collecting data must be
developed. Here, the methodology used must incorporate the advantages of most data
interviews of personnel both directly and indirectly related to the process, document
39
review and direct observation of the actual working environment and the condition of the
shop floor. Table 5 shows how to collect data related to Lean Six Sigmas defect and wastes.
Data has been collected from EPPSCs corrugating department records regarding LSS wastes
such as material reject rate, causes of downtime and the hours lost, the level of raw material
and WIP inventory. On the other hand, direct observation of the actual working
environment and the condition of the shop floor reveals the level of the other wastes such as
transportation and motion is small. The aim of data analysis is to communicate the results of
the information gained through data collection. These data should be analyzed in a way that
one can convey the raw data and its analysis and draw conclusion from it. Therefore, the
data is analyzed using a standard statistical means and graphs are included wherever
40
A. Material reject rate
Waste from defects in EPPSC is measured in terms of materials rejected in the process.
Rejects happen starting from before loading the material to the corrugators until it passes
through each machines or stages of the manufacturing process, i.e. from corrugators to
printer-gluer.
Table 6 shows collected data on monthly material rejection rate in the process of
manufacturing carton box. The material rejected is the paper that is before and after it is
loaded to corrugators. During manufacturing different chemicals used, thus this loss also
Hence, the Company reported annual process loss of 11.3% in a year 2004 EC which is
about 270.3ton. The high percentage of material loss in the production of carton box
reveals the existence of large amount of loss in terms of material, machine time, labor,
energy and other resources. The rejected materials cannot be re-processed in corrugating
41
The company works for two shifts and the reject rates vary in each shift. The following one-
month reject data shows the level of rejects in each shift and the percentage of material loss
in each stage of the manufacturing process. Some of the days of the month are not included
in the list because the company has been down in those days. Thus, there was no production
in those days. Table 7 and 8 shows rejects for day and night shifts respectively.
42
25/06/04 57 25 43 - 50 67 44 4
26/06/04 - - - - - - - -
27/06/04 6 10 20 - 25 35 10 -
28/06/04 - - - - - - - -
29/06/04 - 10 13 - 7 9 6
30/06/04 25 27 30 - 30 35 20 -
31/06/04 27 17 30 - 35 50 29 -
Total 213 258 378 325 436 201 32
Total reject 1843
%age 11.56 13.99 20.51 17.63 23.66 10.91 1.74
Table 8: Reject at each machines for shift B (night shifts)
The bold figures show that more than one product type has been produced in that day. The
above data shows that rejects before load increases at night shifts and other rejects decrease
in night shifts. The amount of material used and the number of units produced during the
night shift is less than that of produced during the day shift. The level of rejects at each
25
percentage (%)
20
15
10
0
reject reject reject blank
DF reject SF reject SF reject print
before before before reject(NC
(KL) (TL) (FM) reject
load(KL) load(TL) load(FM) cutter)
shift A 6.25 13.96 17.73 0 18.75 26.54 12.41 4.37
shift B 11.56 13.99 20.51 0 17.63 23.66 10.91 1.74
43
B. Downtime Analysis
Annual data of downtimes of the company for the year 2004EC which lists each and every
cause for the plant being down is collected and shown in appendix A.
Table 9 and figure 11 summarized the list of downtimes in to operational, technical and
Down Time
3000
2500
2000
Hours
1500
1000
500
0
Total
Power techinic Total
Producti Operati Electric Instrum Mechan
Others interupt hal down
on hrs on al ent ichal
ion down time
time
Corrugator 1844.9 199.6 176.9 70.3 209.2 2143.9 45.09 456.5 2845
Converting 1720.4 794.3 87.5 73 337.3 1030.7 47.3 497.8 2370
Therefore, from the above table and figure of downtime the company has been down for an
44
C. Inventory Analysis
demands. Inventories typically include raw materials, work in process (WIP) and finished
goods. In an operation, the raw materials inventories scheduled for use in making a product
and waiting to enter the productive process, work in process inventories in the intermediate
stage and finished goods inventories already completely transformed by the production
EPPSC has two raw material stores; one for the paper rolls and the other for the chemicals
that the manufacturing process needs. The paper roll warehouse contains the Kraft liner,
Test liner and Fluting medium usually with frequent grammage but various lengths.
The paper roll warehouse holds up to 500-600 tons of materials in each month. In order to
show the monthly consumption of materials stored in warehouse, one month data
regarding materials available and materials consumed is taken. Month June is randomly
selected from the months that customer order becomes high. Table 10 shows the beginning
45
Thus, the material consumed is only 40% of the raw material (269.38ton) available in stock,
which indicates that only about 2/5th of the raw material inventory is utilized every month.
The WIP inventories are the box blanks between corrugating and converting stations.
The + sign indicates the increase in WIP inventory at the end of the month and the sign
indicates the decrease in WIP Inventory and based on the above data in average 30.5ton of
D. Product Cost
Product costs include all the costs that are involved in acquiring or making the product. In
EPPSC, finance department records cost of manufacturing the good (carton box) in the
category of materials cost, labor cost, energy, manufacturing overhead and prorated
overhead.
46
Material cost is cost of all raw materials used to manufacture the finished product, which
are Kraft liner, test liner, fluting medium, chemicals and stichers. Labor cost includes wages
as well as employee benefits, payroll taxes paid by the company for the workers and costs
for training customers. Overhead costs are all other costs associated with running the
manufacturing plant.
The material cost is the sum of cost of the raw materials used to manufacture the boxes (the
paper rolls and chemicals) and also the cost of the broke which is cost of the materials that
become defective. Therefore, from the total material cost 2,779,548.3br (from the
47
Design production capacity (ton) 11470.3 2124.3
Possible production capacity ()ton 7649.9 2124.3
Actual capacity compared with design capacity, % 18.5%
Actual capacity compared with possible production capacity, % 27.8%
Actual capacity compared with planned production capacity, % 66.3%
Table 13: 2004ECs production and utilization data
F. Human resource
According to 2004 data, the Company has 451 permanent and 121 contract employees
which makes the total 572 for both EPPSC plants. Table 14 shows the level of education of
workers.
The table shows that less than 5% of the employees have above diploma educational level
status and only 20% of them have diploma and above diploma.
Based on the seven lean wastes are defined for EPPSC as follows, which determines their
cause, level of the wastes and how LSS helps in avoiding them and it also justifies why some
Defect or material rejects (loss) in EPPSC is measured as process loss and it is one of the
main wastes. Material rejects happen due to various reasons like when the dust in the
warehouse damaged the paper, forklift tears the paper during transportation, heavy starch
application and touching the surface of the liners, boards being soft, over heated or cracked,
48
light glue application, Glue line has white appearance/incomplete starch gelatinization,
Shallow glue bond, Flutes not glued, etc. It also happens due to side trimming allowance and
due to printer-gluer problem like misalignment of prints, missing some prints, heavy ink
application, glue touching the surface, etc are the main reasons for EPPSCs corrugating
plant process loss happening. This material reject rate reaches up to 11.3% per year that is
about 270 ton and it costs the company high amount of money.
3.5.2. Downtime
The downtimes recorded as the times that the plant fails to produce parts (corrugated
boxes) due to technical, operational and others different kind of reasons. The technical
causes of downtimes are breakage of blade, printer ink pump problem, problem on die
cutter, steam line problem, problem on starch agitator, etc and the operational downtimes
are the times for glue and ink preparation, cleaning, machine set up times etc. There are
also other reasons like lack of order, power interruption, steam shifting to paper machine,
lack of the appropriate type of raw material etc that are neither technical nor operational.
and based on those records, the workstations (machines) both corrugating (corrugators-NC
cutters) and converting (printer-gluer) are down for more than half of their time which is
3.5.3. Inventory
The raw materials for corrugated box manufacturing are paper rolls of KL, TL and FM and
different chemicals like inks, starch and glue. The paper rolls are the main raw materials for
box production and their material cost is high which reaches up to 60-80% of the product
cost and about 85% in EPPSC. The company holds 15day safety stock of the materials. Even
if the company has to function for 16hrs/day, 22days/month and 264days per year, the
company produces parts in only 40% of the total time, which is 106days/year (264*0.4).
2384.953 tons of the paper rolls are consumed per year that means in average 22.5tons of
49
materials consumed per day. So the 15day safety stock amount is 337.5ton but the average
monthly production rate is 177ton which makes the safety stock level high. But not only the
safety stock level is high but also the amount of the RM in store is high since it reaches upto
600ton in each month which makes the inventory cost high since the Material cost is very
high beside the raw materials manufactured in house. Even if shortage of materials is the
main downtime cause and it makes the shortages cost very high, those shortages happen
when the customers requirement of the paper roll grades are different from what the
company is frequently using to produce the products. Therefore, this high level of raw
material inventory has to be reduced or optimized to reduce the capital that the material
locks up which should have been invested in other sectors of the company.
On the other hand, the WIP inventories are the box blanks between corrugating and
converting machines and its level reaches on average 30.5ton per month. In carton box
manufacturing the material always locks up high level of cost therefore, it needs
optimization. WIP inventory level seems a little high even if both starvation and blocking of
3.5.4. Overproduction
Overproduction is not that common in the company, since all carton boxes made to
customer order. A bigger problem is that the customers will not take their orders in time
(the due date) as a result the carton boxes which are ready for dispatch moved to the
finished goods warehouse. According to the companys workers, the reasons for not taking
the products on time is, most of the customers do not have enough storage area for the
carton boxes so they expect the manufacturers to store for them until they need it.
Therefore, even if there is no issue of over production in the company but in some way the
parts in the finished goods inventory could be considered as overproduction because the
carton boxes are produced before they actually can be delivered. But the problem here is if
50
they did not provide this service (storing parts) to their customers they lose them thus
providing storage service is one way of keeping their customer. Thus, overproduction (FG
Activities in processes can either add value to the customer, be necessary for the function of
the process or non-value adding. Incorrectly designed processes are a source of waste. In
EPPSC, the process that transforms the raw material into carton box is simple, clear, easy
and necessary. Even if the rework after the rejection can be considered as excessive
processing and it exists, usually the reworks of the rejected materials is made in paper mill
plant. Sometimes rejected box boards can be used for partition box production in
corrugating plant but the annual rate of this rework is very minimum which is about
0.08%. Therefore, the amount of the inappropriate processing in EPPSC is very low that is
3.5.6. Motion
There is no also that much of unnecessary motion since the only job of the workers is to
load, unload and inspect the products from the machines they are assigned too. Therefore
one of the lean wastes called motion is not studied since it is not that much of a waste for
the company.
The unnecessary transportation of material is not a common cause of waste in the company
since it is of process type of company. In this case, the material does follow a specific line
flow due to which material moves from one machine to another in a sequential manner and
does not travel long distances. The only two material transportations that exist in this plant
are, when RM (paper rolls) transported from RM stock to the corrugators machine and the
other is when blank board (box blanks) transported from NC cutter to printer machine.
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the feasible way of reducing the transportation waste is to optimize the distance that the
material travels by proposing new layout by rearranging the machines but as for EPPSC,
new steam house and steam lines for heater-cooler section of the manufacturing process.
However building the steam house and the steam line is very difficult because the company
does not have expansion area and the layout of the plant does not have space for new steam
line beside the fact that trying to build a new one is very costly. But it is possible the reduce
distance that the blank boxes travels by simple bringing the second manufacturing line a
little close to the first line. Usually reducing the distance that the materials travels have a
great impact in reducing cycle time and increasing production rate but for EPPSC, reducing
cycle time means increasing another downtime since the company already has too much
Therefore, each lean waste defined for the case company (EPPSC) and then identified which
wastes are the main one by thoroughly looking on the recorded data, observing the
manufacturing department and the warehouses specially the paper roll and interviewing
the operators especially with production planning department of corrugating plant and
shop floor workers. Hence, the study summarizes after investigating all kinds of wastes
existed through inspection and interviewing workers the author concluded that the main
wastes, which needs further study are defects or the process loss, downtimes and
inventories (RM and WIP) based on their level, their impact on the companys profitability
and customer satisfaction. Thus, these three wastes are defined and summarized in the table
15. The rejects measured as the amount of materials lost in the process of producing of
corrugated box, downtimes as the numbers of hours the company has not been
remained in stock.
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Process metrics Description Data to measure
Rejects Measure the material reject From daily, monthly and
rate in the process of yearly reject data
producing the parts
Downtimes Measure the number of From the Company record
hours the Company has been
down
Inventories Measure the number of units From the Company record
remained in stock
Table 15: Process metrics for the main wastes
This project uses a Lean Six Sigma approach to reduce waste and variation in the process of
carton box manufacturing. Lean Six Sigma manufacturing helps the company to
continuously simplify and organize the working environment or the process so that the
Company can reduce waste, and keep its people, equipment, and workspace responsive to
what's needed right now. Moreover, it helps to meet the changing demands of the
customers quickly and effectively, and adapt to a rapidly changing business environment
and it also improves the companys profitability. Lean Six Sigma has been used worldwide
The project used DMAIC model, which stands for Define, Measure, Analysis, Improve and
Control phases as a base since it is a backbone of Lean Six Sigma implementation. DMAIC
cycle used as a guideline to define the problem, measure the data and current situation,
analyze the causes, improve the process, and control the final benefits. Most of the projects
done on implementation of lean six sigma also used DMAIC model to study a process and
come up with the improved one. Moreover, the model plays an important role in making
LSS initiatives a success for business since it is a phased approach and also very easy to
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CHAPTER FOUR
4.1. INTRODUCTION
The waste identification and measurement analysis done in chapter three revealed the three
main wastes of EPPSC, which are material loss, downtime and inventory. Theses wastes have
a major & direct influence in the companys profitability, competitiveness and existence in
the market.
For instance, the total amount of materials that got rejected cost the company hundreds of
thousands of dollars a year and it contributes to 7% of the product cost. This makes cost of a
product higher that leads to loss of a number of customers since other companies provide
the product in lower price. Moreover, the total cost of the materials rejected is higher than
Similarly, the company being down for more than half of its time results a loss of possible
revenue since it is producing way less than its manufacturing capacity. Workers wait for
hours with nothing to do and this contributes to huge increases in manufacturing costs.
Employees are underutilized since capabilities of employees are not fully revealed and
engaged to create maximal profit and benefit for the company employing them. The
employees idle time is accounted as costs of direct labor for employees so their work is
compensated as usual but the organization is not obtaining the proper labor outcomes,
therefore the idle time incurs loses to the organization. The same can be said for the idleness
of machines.
The high level of inventory also plays the same role since it contributes to more than 80% of
the product cost. Its consumption is low so that it locks up capital that could have been
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invested in different process improvement projects. In addition, the state of the RM
Thus, the high level of these wastes calls for immediate improvement and Lean Six Sigma is
proven effective for driving waste out of manufacturing process and save money. Lean Six
Sigma improves manufacturing process by using its effective model DMAIC that stands for
Define, Measure, Analysis, Improve and Control. Therefore, this chapter presents the
complete step by step analysis carried which is defining the problem and process,
measuring the current status, identifying the problems root cause, suggesting
improvement methods and developing control mechanisms and identifying the things that
In this phase, the process and its metrics defined with the help of tools like SIPOC diagram
and process map. The problem is also defined in detail and project charter is prepared.
SIPOC stands for Suppliers, Inputs, Process, Outputs and Customers is a process map viewed
from a great distance. This diagram helps by making the process viewed by all team
members (employees) in the same way and everyone understands the process where to
focus in terms of the project. Figure 12 shows the whole process for packaging plant
however the study focuses on the raw material (paper rolls) warehouse and in the
manufacturing department.
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SUPPLIERS INPUTS PROCESS OUTPUTS CUSTOMERS
RM warehouse
56
In addition, a high-level process map that is shown in Figure 13 shows the main production
Effective use of resources and materials can be controlled with the use of KPIs (Key
and indicate the yield of processes so objectives can be achieved. The seven wastes of Lean
Six Sigma can be seen as KPI because the level of these wastes show how efficiently the
company is working.
EPPSC have four very important KPIs that measure productivity, efficiency and costs. The
performance measures are identified as production volume (ton), machine hours used
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(uptime), labor hours used and MRR. For example even though the company has a design
capacity of producing more than 7500 ton per year by working for two shifts and plans to
produce 3201 ton, they only manufactured 2124ton in 2004 EC which is clearly below
This study focuses on the MRR (material Reject Rate) KPI since it is one of the lean wastes
and also on downtime and inventory. These wastes are discussed in detail below.
Companies today are forced to save money and resources if they want to compete in
globalized markets. For EPPSC, packaging plant this is very important when competing with
different manufacturers of packaging products that can provide the products in much more
capacity, with lower price and good quality. The Company used to manufacture the
packaging products for more than 300 different companies/customers but now they lost
many of those customers for newly emerged packaging companies like MIDROCs UP,
Burayu PPI and other small-scale carton box manufacturers in the past couples of years.
Any production process can be inherent to either Process loss or product loss. The process
loss, which usually happens in process industries like EPPSC, is associated with raw
materials being lost while going through the production process and it happens due to
various reasons like because of the nature of the material itself, nature of the process or
In EPPSC, the process loss that is the materials reject or loss happen at each stages of the
manufacturing process starting from before loading the paper rolls to the Corrugators until
the end product comes out from printer folder machine. The rejects happen due to various
reasons like flute wave length variation, overheating, trimming, missing prints, smearing
inks, etc and it also includes damaged parts of the paper rolls that got removed before
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loading it to the Corrugators. This material rejection rate reaches up to 11.3% (271682kg)
per year and that is too much for the company whose annual production rate is only
2124ton.
The rejected materials cannot be reworked in corrugating plant except for some rejected
box blanks, which can be used to manufacture partition boxes. However, that does not
mean that the rejected materials are a total waste because even if they cannot be reworked
in corrugating plant they can used as a raw material in paper mill plant. Therefore, those
rejected materials can be sold for paper manufacturing company (EPPSCs paper Mill) for
re-processing. Thus, this high level of MRR is one of the main non-value adding activities of
the Company.
The other major waste of the company that is downtime is recorded for each station
(machines) which are corrugating and converting. According to 2004EC data, the
Corrugating machine has been down for 2845hrs and converting machine for 2370hrs
that means in average the production line has been down for about 60% of its time. Even if
the company works for two shifts (16hrs/day), the average time that the company able to
produces parts does not exceed 6.5hrs/day, which clearly indicates that the company is in
trouble. The sum of production hours and downtime hours exceed the annual available
The other waste which needs consideration is inventory but as explained in section 3.6 FG
inventory is not included in this study. Thus, the study considers RM and WIP inventory as
a waste because the level of RM inventory is high because only few amount of it is
consumed in each month. In addition since both line starvation and blockage exists, the
optimal level of WIP inventory needs to be determined for EPPSCs two station-one buffer
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system. The wastes of EPPSCs corrugating plant that the thesis focused on are summarized
The amount of materials that got rejected in each machines because they did not
meet the quality requirements is about 270 ton per year. This means 11.3% of the
materials go to waste which costs the company a high amount of money and also the
customer also pays for this non-value adding activity which ultimately drives them
away.
The corrugating machine has been down due to various reasons for 60.66% of the
total hours and the converting machine for 57.94% which shows that the plant is
Only 40% of the RM inventory is consumed per month and the average WIP
Thus, the goal here is to use Lean Six Sigma methodology in order to improve and control
the above waste levels, this means eliminating waste and variation in the process of making
o To reduce process loss to 3.4 PPM, so that the materials and carton boxes will not be
o To reduce downtime so that the company will able to manufacture more and
o To optimize RM and WIP inventory level, so that the locked up capitals can be
o To increase the profit at least by 50% by eliminating the wastes identified yet.
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4.2.3. Project charter
After the problems are defined properly, team members, objectives, goals and how long the
project will take will be defined using project charter. Table 16 shows the template of
project charter.
The second phase of DMAIC in Lean Six Sigma implementation is Measurement. Thus, this
phase is about collecting data regarding the extent of wastes. Since the collected data is
presented in chapter three, this phase summarizes the problems identified in terms of their
values with the help of diagrams like Pareto and measures the sigma level of the process.
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Table 17 summarizes the level of lean waste in EPPSCs packaging plant based on the
collected data.
Lean Wastes
Process loss Downtime Inventory
MRR Hours lost/year Corresponding Raw material WIP inventory
production loss
11.3% of process An average of 3398ton of Only 40% of the An average of
loss exists which 59.3% of products didnt RM (paper rolls) 30.5 ton of WIP
is about 270.3 available time produced that in the inventory exists
ton/yr has been lost should have warehouse are at the end of
been produced consumed per each month.
in those lost time month
In process improvement techniques, defects per million opportunities (DPMO) are measures
Six Sigma as a metric equates to 3.4 defects per million opportunities (DPMO). Many
companies use this metric to lead their defect reduction effort. Many improvement experts
contend that most companies today work at a sigma level between three and four. For
example if the company is operating at a three sigma level, it is producing 66,800 defects
per million opportunities; a 4 sigma level is 6,210 DPMO. Reducing defects will obviously
lead to higher customer satisfaction, lower cost of quality, increased capacity and most
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The sigma metric is often used as a management tool to evaluate and compare performance
between dissimilar processes, and DPMO can be used in many situations to relate impact
DPMO = *106
/
Where:
Total defect is the total number of units lost (units fails to meet customer expectations)
Opportunities/unit is events where the critical characteristics of the sampled entity could
either meet or fail customer expectations or simply it is the total quantity of chances for a
defect. In many manufacturing situations, there may be multiple opportunities per entity.
As explained before, rejects in EPPSC can occur at different levels starting from before
loading the rolls to the corrugators until it passes through printer-gluer. Thus, from rejects
at each stage data the product has a total opportunity of eight to be defective. These are
three before loading the material to Corrugators and five after the material is loaded and
passes through each machine. The three opportunities of before load are for Kraft liner, Test
liner and Fluting medium paper rolls and the five after load opportunities are for single
facer (TL), single facer (FM), double facer (KL), NC cutter and printer. The reject
opportunities are summarized in table 18. Daily rejects are calculated by adding the rejects
To measure the overall manufacturing process more closely, production data of one year
has been taken and defects per million opportunities (DPMO) calculated (as shown below),
which comes out to be 15907.11DPMO and further sigma value is generated as 3.65.
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Production results for year2004
Total quantity produced 2124301Kg
SN Reject opportunities Reject value(Kg) Percentage (%)
1 Before loading(KL) 25677.5 9.498505
2 Before loading(TL) 37798 13.98207
3 Before loading(FM) 52522.16 19.42876
4 Double facer 0 0
5 Single facer(TL) 48841.12 18.06709
6 Single facer (FM) 66976.98 24.77582
7 Blank reject (NC cutter) 31064.39 11.4912
8 Printer reject 7451.862 2.756559
Total quantity rejected 270332 100
No. of opportunities 8
DPMO 15907.11
Sigma level of process 3.65
Table 18: Sigma calculation
DPMO = =
/
DPMO= 15907.11
The companys sigma level shows the existence of high rate of material loss and for carton
box manufacturing companies the sigma level has to be high enough because the material
In EPPSC, the quantity of the materials rejected has a huge effect in increasing the cost of
the product in addition to the fact that Millions of Birr become lost. A Pareto diagram with
the major categories of the process loss (MRR) created to check in which problems we can
focus on. Figure 14 shows the vital few reject opportunities in contrast to the useful many.
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Figure 14: Material reject rate Pareto chart
Hence, from the chart, FM and TL before load rejects and FM and TL single facer rejects are
76.3% of the total material lost. It helps by identifying which parts need immediate
improvement since it identifies the vital few cause of the problems in having high MRR.
Since the grammage of Kraft liner is relatively high, it relatively does not get easily
damaged.
Moreover, from reject opportunities data, it is known that before load rejects covers 42.9%
and after load reject covers 57.1%. The 57.1% after load reject is the sum the rejects happen
in the first manufacturing line (corrugating line) which is 54.3% and the reject happen in
powerful tool that enables a better understanding of the underlying issues that affect plant
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availability and rate loss. DTA enables identification and quantification of lost production
capacity by accurately collecting data and measuring actual overall output against
which show the causes, duration, and timing of downtime and rate losses. It helps the
improvement programs that can reduce the level of downtime and increase production
Downtime costs EPPSC millions of dollars (birr) each year in lost production, downgrade,
and loss of customers. That is why it is important to know what is causing the downtime
and how to use this information to correct the problem and improve the system.
DT causes can be grouped together to create a hierarchy of faults with major classifications
such as mechanical, electrical, raw materials, procedural, personnel, and availability being
expanded into more detailed causes but In EPPSC, downtime are measured manually by
operators and the causes of the idle times categorized in to three; which are:
A. Technical lost time: are idle times of the machineries due to hardware failures
B. Operational lost time: are the times that the operators spent to adjust the
machines or to prepare the materials like ink, glue, etc for the manufacturing
process
C. Others: This category includes all causes of downtime that are neither technical
nor operational. For example idle time when steam shifted to paper machine,
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The annual summarized total downtime for the whole line of manufacturing is shown in
From the above table it is clear that the plant is down in average for 59.3% of its time and
reasons categorized in others is about 62 % is the main cause for having such a high rate
of DT and with operational causes of DT, they cover more than 80%. EPPSC implements
frequent and scheduled preventive maintenance and that is the main reason for relatively
reduced technical downtimes. The following Pareto chart identifies which type of
operational and others categories of downtime causes are the main one.
As major causes of downtime are uncovered and underlying reasons addressed, the focus on
particular downtime causes will change with some categories being expanded, with less
significant causes being grouped together. The following table and Pareto chart summarizes
the causes.
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L Print problem and adjustment operationally 67.8
M Manpower shifted for output packing 60.9
N Single facer clearance adjustment 40.0
O Single facer problem and operational adjustment 28.4
P Cleaning dirt from stereo 27.51
Q Lack of pallet 26.33
R Company meeting/cleaning 24.67
S Board being curled 23.29
T Work space being crowded 20.8
U Cleaning for Company's yearly celebration 19.5
V Folder belt operational problem 19.0
Others 213.9
Table 20: Summary of operational and others causes of DT
The chart shows that shortage of raw material, lack of order, steam shifting to paper
machine, lack of blank inputs from corrugating machine, stereo damage and adjustment,
waiting for print sample from customer and lack of inks (i.e. black and yellow) are 80%
contributors of the idle times and production loss (3393.6ton). Thus, the DTA helps to
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achieve the objectives of identifying the main non-productive times and helps to prepare
the improvement plan that reduces the downtimes and making the company run to its rated
throughput.
In this phase, the root causes of the wastes are analyzed so that the process can be improved
or redesigned.
1. Exploring: Investigate data and the process with an open mind to see what can be
2. Create hypothesis about the causes: Use new knowledge to identify the causes that
3. Verify or eliminated the causes: Use data or a more detailed analysis of the process
Thus, in this phase the collected data analyzed using different tools like fish bone diagram,
When there is a problem, it is important to explore all of the things that could cause it
before starting to think about the solutions. That way it is possible to solve the problem
completely first time round rather than just addressing part of it and having the problem
run on and on. The Ishikawa diagram gives a useful way of doing this. The MRR analysis
identifies the main reasons for the materials loss and show them using fish-bone diagram.
In identifying the root causes of having a high rate of MRR or process loss, the causes
categorized in to two. Causes of Before load rejects and after load rejects since 43% of the
rejects happen before loading the material to Corrugators machine and the rest 57%
material rejects happens when the material passes through each machines. In both before
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and after load causes of rejects, the FM and TL paper rolls are the main one to be damaged
and that is mainly because their grammage is less than that of Kraft liners.
Figure 16 and 17 shows the causes of before load and after load material loss using
Ishikawa diagram.
Figure 16: Ishikawa diagram for the causes of before load rejects
Thus, from the cause and effect analysis two causes are identified as the main root causes
The warehouse being dirty and unorganized specially since the paper rolls easily
The forklift tears the paper rolls during handling the rolls and transporting them to
Cause and effect diagram for causes of after load rejects is shown in Figure 17.
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Figure 17: Ishikawa diagram for causes of after load rejects
Thus, from the cause and effect analysis, the operators are identified as the main root causes
for having a high level of after load rejects. That is the operators (mainly Shop floor
The operators applying inks and chemicals incorrectly happen to be the two main
From the 57% of the after load rejects, the 11% of them that happened in NC cutter are
unavoidable because they are the 14cm allowance given for side trimming (each side).
However, it is possible to avoid the allowances that exceed 14cm that happens when there
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4.4.2. Causes of High Rate Of Downtime
Based on the Pareto chart from figure 12, the main causes for having a very high rate of idle
time is because of lack of order and lack of the appropriate type of material in store, i.e.
when either the right type of the grammage of the rolls or the length is not available in the
warehouse.
The following points identified as the causes for losing customers that leads to lack of order
and poor MRP, which happens to be the main causes for the high level of idle time.
cope up and dominate the market. However, when the government owns the
company there are certain rules that they are expected to follow and even if it is for
the benefit of the company, they cannot break it. The board of directors has the
takes too much time to present different matters and get approval from the board.
High cost of material: more than 80% of the paper rolls are produced in house
(paper mill). Even if different grades of paper rolls exist, the company only
manufactures certain grades of the materials frequently. For example, the company
doesnt use below 170g/m2 for Kraft liner,127g/m2 for fluting medium and
140g/m2 for test liners whether the ordered product has to be manufactured using
this grade or not. On the other hand the competitor companies use Kraft liner with
produce the box products. Which means their cost of product is less than that of
EPPSCs because basically the grammage of the material is proportional with the
amount of fiber used per square meter that means high grammage means high cost.
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Usually, those lower grade (not the quality) rolls are imported from foreign
suppliers since EPPSC is the only paper mill company in Ethiopia and they dont
manufacture those grades of the paper rolls. The reason why they do not import is
that the material locks up high amount of capital if they do not get customer for it.
High labor cost: based on data from human resource, they have 572 workers
(2004EC) and only 5% of them have first degree and more. If we assume only 20%
of this employees work in corrugating plant that is about 115 employees. The
company does not need this much employees especially to produces 2124 ton/year
and since the company is down for almost 60% of the time so is the employees. The
author realized that most of the time the employees are idle and if the general
manager is out for business and does not come to office neither some of the
This high unnecessary labor cost affect how the business operates because it can
improvement, etc. But most importantly, this cost makes the product cost high and
Payment terms: are the conditions under which a seller will complete a sale.
Typically, these terms specify the period allowed to a buyer to pay off the amount
due, and may demand cash in advance, cash on delivery, a deferred payment period
of 30 days or other similar provisions. EPPSC payment terms are 50% in advance
50% on delivery (set by the government) but the competitors terms of payment is
cash on delivery which clearly drawn them many customers because people usually
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Quality of the raw materials: the critical quality parameters of paper rolls are
sizing, porosity and wax pick test. EPPSCs papers are good in some of those qualities
such as in its strength (specially bursting and tearing) and imported materials in the
others. Even if the existing customers of EPPSC chose those qualities, the competitors
companies customers wants the other quality parameters. Therefore, they have to
Note: when grammage is quality parameter, lower grammage does not mean that lower
quality. It is the consistence throughout the roll what makes it quality parameter.
Delivery date: sometimes there are customers who wants their product to be
manufactured immediately and the company will not able to do that when they
already have orders which enters production or there might not be the exact raw
material.
In general, the company has inflexible system and the product cost is high which makes the
company lose their customers day by day until their existence become in danger. The
reason why they are surviving the market is that because their profit margin is very low in
fact there were quality products times there were not getting profit at all.
Hence, the company needs to win over the lost customers and gain a new one by providing
Cost of the wastes is the cost the company incurred due to having lean wastes. These can
include cost due to defects/rejects, lost revenues, lost production time, cost incurred for
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1. Cost of the rejected materials
Cost of rejected materials is cost of wasted raw material, labor and overhead that is invested
during the manufacturing process. The amount of the materials that got rejected is
270.3ton which costs the company about 14031br/ton which results a financial loss of
more than 3.7 million birr. However, the materials rejected by the process which is called
broke is not a total waste, i.e. it can be re-processed in paper manufacturing plant in fact
it is raw material for paper Mill. Hence, the paper mill Company buys the broke at a cost
of 3.75birr/kg from box plant that is a total of 1,013,745br (270332*3.75) and this sell
Since the company adds this cost to the cost of the product, reducing it not only have impact
on getting financial savings for the company but also reduces the cost of the product by
more than 7% which helps to keep and get customers and increases customer satisfaction
by avoiding non value adding costs. Moreover, the cost of the materials rejected is more
2. Cost of downtime
The cost of the other main waste of the company that is downtime is measured interms of
the amounts of revenue lost. The Company is idle for 60% its time and has a capacity of
producing 1.6-1.8 times more from what the Company is producing now and this clearly
shows that the level of lost revenue is very high. So reducing this high level of downtime not
only have impact on increasing revenue and profit but also it helps the company to get
3. Cost of RM inventory
Raw material inventories provide a stable source of input required for production but when
the inventory level is not optimized, it locks up money that should have been invested in
different sectors or assets become tied up in investments that are not producing any return
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in fact it incurs a borrowing cost. They also incur costs for the care of the stored material
The cost of carrying RM inventory is the sum of three inventory costs, which are holding
A. Holding cost
This is the cost of holding a raw material for some given unit of time specifically for a year.
holding the rolls in stock leads the company to a number of costs like utility, salary,
insurance, depreciation, and other costs. The annual holding costs of the materials in the
i. Utility cost: is the cost for electricity, water, etc. It is assumed that only 1% of
electricity cost goes to this department because most of the annual electricity cost is
ii. Labor cost: is the cost incurred for store workers, guards, inventory management
department employees, etc. so from the annual labor cost incurred in corrugating
iii. Depreciation cost: is cost of the material rejected before load because it has been
absorbing dust while it was in store. Around 32% materials rejected due to this.
At the end of the year, the amount of materials in store was 397.09tons that makes unit
B. Ordering cost
Ordering cost is the cost incurred starting from setting an order to the time of receiving that
order. This costs include transportation , clearance, telecom and mailing, etc but for EPPSC
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since the papers manufactured in house those costs are not that much significant so the
C. Shortage cost
It is a cost of not making a sale and loss of customer good will. Currently the company
makes a profit of 5.8%, which is 1032.4br/ton. Since there are other companies that provide
packaging products in fair price and good quality, shifting of customers happen in high
range if they do not get the product they want. Cost of customer good will loss that is
make sales which makes customer good will loss 309.7br/ton (0.3*1032.4br/ton). Therefore,
Hence, total RM inventory cost becomes the sum of the above three costs which is
4124.42br/ton. This cost does not include the cost of the material or purchasing cost for RM
in the warehouse (397.09ton) at the end of the year, which is about 5,907, 377.13br.
WIP inventory consists of all inventory items that have begun but not completed the
transition from raw material to finished goods. Since WIP inventory items are not complete
units, accountants need special calculation to determine the total cost of ending WIP
inventory.
The cost of WIP inventory can be calculated first by adding the number of inventory units
that have been completed during the period in question with equivalent number of
inventory units on which work has begun but has not been completed (i.e. WIP * the
percentage of their completion) to find total number of the equivalent units. Then the total
production cost divided by the total number of equivalent units produced to determine cost
per unit. Finally, multiply the cost per unit by the equivalent units sitting in WIP inventory
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at the end of the period to calculate the value of ending WIP inventory. The following
Assumptions:
I. The beginning WIP inventory is assumed to be zero because the total units of
products produced and the total costs includes the beginning inventories and
II. The companys inventory flow assumption is FIFO (first in first out)
Thus, the data regarding WIP inventory for year 2004 (EC) is summarized in table 21.
Moreover, 85% of the materials (the liners and corrugum starch) are used in Corrugators
machine and so did the other conversion costs such as fuel and electricity so this makes the
Where:
Equivalent units = 2124ton completed units + 28.441 WIP unit 85% complete
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37843485 .06
Cost per unit: = =
2148 .17
The following waste-cost matrix summarizes and shows that how much money could be
saved if reject rate reduced and the company optimizes the level of RM and WIP inventory.
Moreover, reducing downtime even by 20% will have a great impact in the companys
revenue and it will be a remarkable achievement and success for the company if they able
to reduce the level of wastes. Table 22 summarizes cost of the main wastes.
5 why analysis is a technique that helps to determine the root cause. This tool is used when
asking the major cause, five times the question why to find the underlying cause of the
problem. This tool helps to identify the root cause and create an action plan for
improvement. It is possible to obtain the roots cause of the problem without asking 5 times
why, so it is important for the team to be able to know when to stop asking this question.
Table 23 shows the 5Why tool used to identify the root causes of the major wastes.
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4.5. IMPROVE PHASE
The main objective of the improve phase is to improve the process by eliminating wastes.
Different methods of LSS are used to help the Company develop solutions for improving
Once the Analyze phase of the project is finished, the best improvement ideas for the root
causes that affect the process discussed in this phase. In the improvement phase, it is
attack the root cause of the problem and achieve the goal proposed in the project
charter
The selected solutions should be tested to guarantee their effectiveness before they
Solutions should not be expensive or go over the departments budget, the cost
There are many Lean Six Sigma improvement methods that can help in reducing the
capacity, reducing maintenance cost and increasing productivity. However it is the most
difficult tool of Lean Six Sigma to implement and also very costly more specifically during
initial stage of its implementation. Similarly, VSM is another LSS tool that examines the
physical system, process and interconnections. It gives visual perspective to materials and
information flows. However, even if it can be easily implemented and not costly at all, the
map does not begin to capture all specific actions and ignores the human element. For
example 5S can clean up the plant, improve safety and further raise productivity and
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Thus, even though there might be many lean six sigma improvement methods that can help
in reducing the manufacturing wastes, the remedies are selected based on the following
criteria.
o Ease of implementation
Hence, the following methods proposed as improvement methods for MRR and downtime
based on the expected benefits they will bring in terms of both process improvements and
financial savings.
the old machine are suggested for eliminating/reducing the level of material reject rate.
improve the level of downtime and some of them chosen for implementation.
In addition, in order to improve the level of WIP inventory level two machine- one buffer
analytical method is used and new set of Quantity to hold and re-order level (Q,R) proposed
as improvement methods to reduce the high level of rejects because one they properly
address the root causes of the problems of rejects, simple for implementation and they are
cost effective. However, the training not only helps in reducing rejects but also helps in
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4.5.1.1. 5S Implementation
From cause and effect analysis, the root causes for before load rejects are identified as the
status of the warehouse, which is unclean and unorganized, and the material handling
equipment.
Thus, 5S is chosen as improvement method to reduce this high level of before load rejects
fundamental, systematic approach for productivity, quality and safety improvement in all
types of organizations.
The 5S are derived from 5 Japanese words that translate to sort (seiri), set in order (seiton),
shine (seiso), standardize (seiketsu) and sustain (shitsuke) which are discussed below.
The work of improving EPPSCs paper roll warehouse follows the following 5S
implementation steps, which helps to decrease cost of material loss, create healthy and safe
environment for workers and to provide quick accessibility of materials. As with most lean
concepts the steps are simple and easy to follow, however sustaining these ideals will be the
challenge.
Warehouse floor is the important surface that affects the speed, efficiency and the safety
and movement of the stocks operators and the material handling equipments. But as for
EPPSCs it is beyond improving speed and efficiency because the floor is full of sands or
dusts which fades almost all of the products which results loss of very high amount of
money due to this materials damage. So surfacing the floor have a great monetary value for
the company by removing those rejects that happen before loading the rolls to the
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Corrugators machines. The author also thinks painting the room will be nice for its
Thus, surfacing the floor and/or renewing the warehouse is the first step in implementing
5S in EPPSCs raw material store, which is before starting sorting out the materials and it
has major role in reducing the 43% of before load rejects and in creating healthy working
2. Sorting
The sorting activity is to get rid of unnecessary things and leave only what is truly necessary
at the workplace. In this stage, damaged and undamaged rolls will be identified and
separated. However, when the roll is said damaged that doesnt mean that the whole paper
roll become a waste rather it means part of the paper is damaged after all a single Kraft
The procedure for sorting is first to identify and separate damaged and undamaged paper
rolls and then place a red tag on the damaged ones with a reasons why. The current
reasons are that the rolls have been absorbing dusts for as long as they were in store and the
roll clamp of the forklift tears them. The next step is making unused article list for
damaged paper rolls, tear or rip out the damaged parts and place a product ID on
remaining part of the material. The product ID that is tagged on the roll is on A5 sized paper
(currently) and it will be better if it written on A4 sized paper to provide a clear view of the
products type but it is unnecessary to write any kind of identification on cover of the roll.
Finally, dispose the removed part of the material. The other thing that needs to be removed
and replaced with a new one with the right standards is the forklifts roll clamp so that it
can handle the materials properly and not tear (damage) them.
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As for undamaged materials, make a list of them on shop stock list sheet which includes
mentioning their frequency of use since it helps in setting them in order and their amount
in order to know whether the materials available are surplus or necessary quantity. After
However, before directly going through sorting activity some preparations needs to be done.
These are:
Since the 5S implementation is proposed to improve the state of the paper rolls warehouse
because it is leading to a very high amount of material loss, it becomes the target workplace.
Currently, the companys material loss in this warehouse is 115.9ton. Thus, the target value
is to reduce the 42.9% before load reject (i.e. the warehouse reject) to 2.9%, which reduces
All the sort activity should be done while the warehouse is being renewed or floor surfaced
Before starting sorting activity red tags and documents should be prepared. A red tag is a
tag that will be affixed on a machine, a facility or a part that is considered unnecessary at
the workplace. It should be prepared based on the Red Tagging Criteria Sheet. Some of the
other documents that needs to be prepared are shop stock list sheet, unused article list sheet,
activity plan sheet, etc. sample red tag and some sample documents are included in
Appendix C, D, E and F.
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Deciding where to put unnecessary things
Since the material that can be disposed are raw material for the paper milling plant,
disposed materials will be sent to where raw materials for paper manufacturing plant are
being placed.
A briefing session on procedure and purpose of red tagging, how to use various
documentations, etc should be prepared for employees before actually going through the
sorting activity.
3. Set in order
This stage is about deciding where and how things should be put away and what rules
should be obeyed to insure that it is maintained. The guidelines for deciding where things
belong is keeping the product close if it used very often and designating location and label.
Which means it is very important to place each type of the paper rolls in their designated
location that is all Kraft liners, test liners and fluting mediums should be placed in specified
and their own area based on their frequency of use; no mixing up with each other and no
placing materials here and there. In addition making products ID very clear for everyone to
see and understand is also very important because it helps employees mostly forklift
the area required for the materials that will be stored in the warehouse can be calculated
based on the diameter of the rolls (d2/4) and the maximum level allowed to put one roll on
The current layout of the warehouse looks like U-shaped but it is not exactly U-shaped
because materials placement does not exactly follow the shape due their placement of here
and there. L-shaped layout is proposed because it will be more organized, more economical
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in terms space and provide clear path for forklifts. Figure 18 shows the existing and
Figure 18: existing (L) and proposed (R) state of the warehouse
4. Shine/Cleanliness
Cleanliness is the abstract state of being clean and free from dirt and the process of
achieving and maintaining that state. Thus, after the warehouse is renewed, damaged parts
disposed, the room is physically organized and dirt is eliminated, the store is clean and they
have to work hard to keep it that way. In order to do that frequent inspection should be
done on the cleanness of the warehouse and everything is placed on its specified location. In
order to do that team efforts is required thus awareness needs to be created on how
Moreover, in order to eliminate dirt and keep the room always clean, necessary tools for
cleaning needs to be prepared based on the number of workers. In addition, cleaning tools
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should be available for employees who are assigned to cleaning tasks and cleaning should
be done on daily, weekly, monthly, etc basis. Table 24 shows set up of activity time.
5. Standardize/visual workplace
Standardizing is setting up rules for sort, set in order and shine and the standards should be
simple and easy to follow. In this stage, systems and procedures needs to be created to
monitor the above phases. The following simple and easy procedures are set for the workers
Thus, the standard for sort is to place a red tag on paper rolls whenever it is damaged with a
reason why on it. Then the damaged rolls should be taken to temporary red tag holding area
and then remove the damaged part. Finally, measure the waste, specify the time to clear it
The next standard is for setting in order. The following activities should be done in order to
Making sure the first line is full before moving to the next
o Making sure the room is clean every time and frequently inspecting it
o Showing the task, person responsible, items needed, etc very clearly
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o keeping cleaning supplies in specified place and replenish them when they are
finished
The managers of 5S must set the tone and lead by example. As leaders, managers need to be
committed, have time to develop other leaders, provide guidance and support 5S changes.
The author suggests the following general points to the company in order to keep the work
o Based on the companys stock data it is possible to know that which types of KL, TL
and FM are used the most so when every time material comes to the warehouse and
o The operators need to know the proper way of handling rolls using forklifts.
o Name individuals who have ownership of the stocks task and will take
o Identify and document the sources of dirt or waste and how to keep them from
6. Sustain
The warehouse management team have to do what is required on a regular basis rather
than take stock every few weeks and implement the first four phases all over again. In order
needed. In short, 5S activities should become part of everyday life which means establishing
routines and procedures for maintaining and improving the first four Ss.
Thus, the things that needs to be done in order to keep what is being done in the above
phases are:
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a. Patrol: is the most effective way to maintain and stabilize the effects of 5S activity.
comprehensively.
checklist, checking the progress based on the overall plan and identifying
o Camera patrol: visibly highlighting the problems and progress of the activity
using photographs
b. Use of slogan and poster of 5S activity: it helps by encouraging all the participants
o We polish our minds as well as our factories etc and posters can be added
too.
In conclusion, the author strongly believes that properly implementing 5S to paper roll
warehouse will minimize the before load materials loss by up to 93-98%. Because as
explained in the analysis phase the two main causes of before load material loss is the state
of the warehouse (i.e. being full of dusts) and forklift tearing the papers and 5S is a perfect
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4.5.1.2. Cost of 5S Implementation
An evaluation of conducting full 5S process and providing quality training would also cost
the company money. Financially, it would cost the company several hours spread across
several weeks that would go into planning, training staff, and preparing to conduct a 5S in
addition to renewing the raw material warehouse. However, it will kick off the overall
implementation of lean manufacturing into the company culture. Cost benefit analysis is
Employee training and development is very important as companies are increasingly relying
on the knowledge, skills and abilities of their human capital to drive firm performance and
enhances employee competencies. Organizations provide training for different reasons such
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EPPSC usually provides training for its employees but the problem is it is only provided for
the workers in management position like for workers in production planning, etc. for the
company whose 95% of their employees educational level is diploma and below grade 12
level, the training should have been provided for those workers. Developing the skills of the
workforce is one way that organizations can enhance their competitiveness in the market.
From the reject data, we know that about 43% of the rejects happen before load, 54.3% in
corrugating machine and 2.7% in converting machine. From those 54% of the rejects
happened in corrugating machine the 11% are happened in NC cutter which are mostly
due to trimming allowances (the standard is 14cm each side). However, the other rejects
happened on the other machines like on heater cooler (for example over heating), on
corrugators like glue touching the surface of the liners, flute wavelength variations, etc are
operator related because those things happened when the operators did not set the
machines properly or did not apply inks and glues properly. The operators are also the
main reason for the 2.7% reject in converting machine since it happens when the stereo is
From downtime data in the measure phase, almost 20% of the downtime causes are
operators related. Most of the time that the operators waste is unnecessary; for example one
of the main operational downtime reasons which is glue and ink preparation which is 96.7
hrs/year shows that too much time has been lost since preparing those materials does not
Because the employees are one of the reasons in having high rate of MRR and downtime, it
is clear that they need training. Even if they do their job well based ob their many years of
experience, the problem with them is not understanding wastes like MRR, downtime, etc
have a great impact on the company profitability, reducing product cost, etc. Therefore, the
company needs to provide training for the workers specially for shop floor employees on
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reducing errors, on reducing the time they take to prepare materials, their role in increasing
the companys revenue, profit and customer satisfaction. In general, they need training on
waste reduction or Lean Six Sigma. Finally, the Company need to analyze the effectiveness
performance like measuring how much employees performance improved in reducing the
As identified in the analysis phase the main causes of before load rejects are dusts
deteriorating the material and the forklift (clamp) tearing the papers. Thus, by
implementing 5S is these problems will be removed since it cleans up the room and replaces
the forklift. A clean room does not provide a room for material deteriorations and a new
forklift roll clamp with advanced electronics controls and optimizes roll clamp operations.
It uses optimized and lowest possible clamping force for all situations or paper grades.
Checking the efficient clamping force for each contact pad on digital display reduces
damages out of roundness. Paper rolls are weaker and most sensitive for damages when
clamping on or near to the roll edges. In this case, the driver will easily adjust the height of
the clamp to fit rolls to be handled. The advantage is a secure grip on all rolls together with
reduced risk to damage edges on paper rolls. In short, a new forklift provides efficient and
reliable performance. Therefore, implementing 5S avoids these two main causes of material
loss as a result the level of before load reject is expected to reduce to 2.9% from the current
level of 42.9%. This means 5S implementation improves the level of before load rejects by
93%.
Similarly, the operators are the main cause for after load rejects because they improperly
adjust machines and incorrectly apply inks and chemicals. Even if the employees do their
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job from experience, they do not exactly know the material losses are costing the company
money. Thus, providing training for employees on waste elimination in general or more
specifically on reducing the material losses will help the employees to acquire new skills
and build self esteem. This will help the company to reduce after load rejects and save
money. Since there is no record of how much these rejects are due to operators, it is
assumed that providing training for employees will reduce the 57.1% of after load rejects to
42.1%. This means providing training improves the level of after load reject by 26.3%.
Hence, after the implementation of 5S and providing training for the workers especially for
shop floor on proper adjustment of machines and the advantages of reducing material
rejection and its monetary value, reject rate is expected to reduce by 55%. This improves the
defects per million opportunities and reduces it by more than a half (DPMO= 7158.202),
which in turn improves the sigma level to approximately four (3.95). The company has to
work continuously for improvement so that the reject level will be reduced and the Six
The main waste of the company is downtime since the time the company fails to produce
exceeds the time that the company produces parts and when the time is converted in to the
production loss, it is 1.6-1.8 times greater than what the company is currently producing
which leads to high level of lost revenue. Beside the companys design production capacity
(in 3 shifts) is more than 11,000 tons per year but currently the company is producing only
2124tons (by working in 2shifts) which is only 18% of the companys design capacity, 26%
from what the company is capable of producing in two shifts and 66% from what the
company has planned to produce. Moreover, 80% of the causes for downtime are not
related to machines or machine parts failing which is the case for most companies; that
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means those causes are operator related and other various reasons like lack of order,
Reducing this downtime rate is quite a challenge because trying to improve one cause leads
to another cause for increasing downtime or has its own problem. For example, trying to
avoid boiler (steam shifting to paper machine) and stereo related problems by replacing
those things might increase the rate of downtime because when new boiler is installed and
stereo is changed they have their own impact in reducing cycle time. But even if reducing
cycle time is a good thing since the company able to produce more and product delivery
due date will be reduced, if the company is not producing parts on those improved times,
It is also the same in trying to reduce shortage of materials because the plant is factory-to-
order kind of company, which means they cannot produce parts unless the customer places
an order. Holding high level of inventory specially the paper rolls leads to very high
inventory cost since as explained above 60-80% (up to 85% for EPPSC) of the cost in
producing carton box is material cost. Hence, the first thing the company needs to do in
order to decrease downtime is to get more customers by providing the product with great
Currently, despite the fact that EPPSC has more than 20 years experience and being the first
company ever for providing packaging products (carton) in Ethiopia, the company lost most
of its customers to newly emerged competitor companies. For example, from being the only
carton box supplier for flower companies, they only have one customer from flower
companies now. They not only lost flower companies but also most of their customers and
one of the reasons the existing customers work with them is they specifically need EPPSCs
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paper rolls grade like the Kraft liners grade to be 175g/m2 which most of the competitor
The companys annual production volume is way less than what the company is expected
to produce and one of the main reasons for having such a high rate of downtime is lack of
The reasons for losing their customers and not gaining a new one are various and it starts
from the government being the largest shareholder of the company. The causes are
Therefore, the company needs to win over the lost customers and gain a new one by
providing quality products with minimum cost and at the right time. The following methods
As explained, the main raw materials for corrugated box manufacturing are the three types
of paper rolls with different length and grammage. EPPSCs corrugating box plant uses the
frequent grammages of paper rolls whether it is that type of material needs to be used or
not. Since the cost of the material increases as the grammage of the roll increases, it is not
appropriate to use the same kind of material to produce different types of boxes.
For example: the cost of 140GSM (competitors companies paper roll grade) Kraft liner is
very different from 170GSM (EPPSCs roll grade) Kraft paper roll. Even if the competitor
companies import these products from abroad and this makes them subjected to additional
costs like custom related costs, transportation costs, etc relatively, their cost of material is
less than that of EPPSCs. Therefore the company needs to benchmark what other companies
in this industry are doing like substituting the grades of the materials they are using to
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produce the parts either by importing the material from abroad or starting to manufacture
The other problem related to the materials grade is the length. As explained, there is a 14cm
(each side) allowance for trimming during the manufacturing process. But, sometimes the
trimming allowance exceeds 14cm (15-17cm) when the standard length of the material is
out of stock which also increases the cost of the material. Since the material cost is about
85% of the manufacturing cost, reducing this cost plays a huge role in reducing the product
cost and this can be started by using the right material to produce the boxes hold the right
material in store. For example, there is a 150GSM Kraft liner in store, which they do not use
it that often.
A product mix is the variety of products a company sells. Product mix also known as
product assortment refers to the total number of product lines that a company offers to its
customers. The four dimensions to a companys product mix include width, length ,depth
and consistency.
Currently, the company produces six/seven different types of boxes based on customer
order, which makes the product mix width of two, length of seven and depth equals with
customers dimension requirement and with high level of the products consistency.
Since the company is down for about 60% of its time, there is a high level of labor hours
unused, machine hours unused and materials unused. Therefore increasing the product mix
helps in using those unused resources specially unused materials and human resources.
Therefore, the company has to add new products to the mix like paper bags and/or cement
bags, which will have a very big demand since all of the countrys cement companies
import the bags from abroad except Muger Cement Factory. This mix helps the Company in
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using their labor properly and the materials in store which will increase the motivation of
the workers and also helps in reducing the inventory level. The only thing the Company
needs is to add paper making machine to the plant and importing some materials like anti-
oil paper.
The other product that needs to be added to the mix is producing colored boxes especially
for textile and shoe Companies. Currently the Company does not have any customer from
shoe Companies and most of shoe and textile factories production volume is high which
means their demand for carton box is high too. For example peacock shoe factory produces
more than 500,000 pairs of shoe per year. adding this products to the mix helps in
4.5.2.3. Outsourcing
portions of work to outside suppliers rather than completing it internally or simply it is the
EPPSC needs to outsource portions of works not only to decrease cost but also to keep
customers. As explained one of the reasons for losing potential customers is when they do
not able to deliver products in the customers due date like to deliver it within two or three
days or within a week. The other is when they do not manufacture products with
customers raw material grade requirement and mainly that is because they do not
When this kind of customers come, it is possible to outsource portions of the work like
outsourcing the job of manufacturing the blank boards and doing the rest of the work in
the company like printing, folding and gluing. Thus, when customers come with different
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product requirements better to outsource some of the works rather than sending them away
because once the customers has gone to other companies they may not come back.
The corrugating line worked for 1844.9hrs/year and the converting line worked for
1720.4hrs/year, which means in average each line worked for 6.99hrs/day & 6.52hrs/day
respectively. This figure clearly shows that the average working hours per day is less than a
single shift hours (i.e. 8hours) and the amount of products that the company is currently
the Company is down for 60% its time it also means that the operators are also idle for 60%
of the time. Thus, the extra shift that the company is using is costing the company extra
Therefore, unless the company is planning to expand what the company is currently
providing and use the two-shift hours properly, they do not need to work double shift to
produce 2124 ton per year. The company is capable of producing up to 3800tons of carton
boxes in a single shift. Reducing the working shift reduces the labor cost by 30-50% which
Inventory improvement focuses on improving both the raw material and WIP inventory
Raw material inventories are the paper rolls and chemicals but since the 80% of the
material cost is related with the paper rolls its warehouse optimization takes the priority.
Even if it is possible to improve the RM inventory level using different methods like
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simulation and other inventory models, there is another simple method which is based on
The companys current safety stock is 330 ton but the current average material
consumption per month is 199ton and only 40% of the inventories are consumed each
month and the maximum monthly consumption for year 2004EC was 297.6 ton. Inventory
model with (Q, R) suggested based on the current average monthly consumption rate
(Q=199ton) and the re-order level based on the frequent lead time which is one week
(R=210ton) and it improves the consumption rate to 65%. Since the ordering cost is zero,
the lesser the quantity the company is holding the lesser the total inventory is going to be.
In order to optimize the level of the WIP inventory, analytical model that analyzes the
performance of two machine-one buffer system is used (see section 2.2.3). Thus, the optimal
Step 1: the probability that the company is operating and probability of producing defective
Thus,
a) probability that the corrugating station fails to produce parts calculated as:
Downtime 2845
Z1 = k1 = = , Z1 + P 1 = 1
Total AT 4689.9
100
Z1 = k1 = 0.61
b) The probability of making the material defective in corrugating station is calculated as:
Units of materials becomes defective ( single facers and NC cutter rejects) per
year = 146882.49 kg
Therefore :
146882 .49
b1 = =
2394633
b1 = 0.061
D1 = 0.85
ii. The units of buffer existed at the end of the year between the two station is equal to
28441kg
Thus,
a) The probability that the corrugating station fails to produce parts is calculated as:
Downtime 2370
Z2 = k2 = = , Z2 + P2 = 1
Total AT 4090.4
Z2 = k2 = 0.58
b) The probability of making the material defective in corrugating station is calculated as:
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Units of materials becomes defective ( single facers and NC cutter rejects) per
year = 7451.9kg
Therefore :
7451 .9
b2 = = 2394633
b2 = 0.003
The above parameters for the two stations i.e. corrugating and converting is summarized
Stations ki bi Di ( ) d1 1/ N1 N1 N1+1 Q
(1/, N1)
Corrugating 0.61 0.061 0.85 0.032 0.052 0.88 1.14 28.44 0.03 0.02 0.0035
Converting 0.58 0.003 0.9
Table 25: Parameters value for calculating WIP level
Therefore, the optimal level of WIP that the production process of EPPSC needs to have is
WIP= 7.6ton
Since The unit cost of WIP is 17616.62*0.85= 14974.13 br from the WIP cost calculation,
the cost of the WIP inventory for the improved system is:
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Thus, if the company reduces the level of WIP inventory to the optimal level which is 7.6
ton, the company will save money by 73% which was locked up in the WIP inventory so
that the money could be invested in other aspects like for promotion since lack of order is
The last phase of the DMAIC methodology is control. Once the suggested improvements
methods are implemented, it is time to set controls so everything achieved in the other
phases will not be lost through time. After the project is finished and a process improved
(i.e. after IMPROVE phase), if no monitoring is given the process goes back to where it was.
Thus, in this stage yields needs to be continuously measured, operations should be adjusted
results should be shared throughout the organization. Different statistical tools like
histograms, Pareto charts, etc should be used in order to show the before and after level of
wastes. The things that needs to be done in order sustain the changes made in the improve
Since control phase is all about identifying variations in the process and keep an eye on the
process or track of the system, the following points outlined for EPPSC to focus in this phase
o Whatever improvements has achieved, they need to make sure its continuity
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o Expanding the improvements achieved throughout the organization. For example,
o Having visual factory, i.e. displaying schedule boards, production boards, tool
boards and many other devices in the production floor or warehouse floor. The idea
plant.
momentum of change within the company. The marketing and publicizing of each
success increases the speed with future gains and helps in building a good image
improvement thus this research on application of LSS is conducted in order to improve the
process of EPPSC. As a result, the model called DMAIC is used to study the existing system of
The results expected from this research implementation are that Lean Six Sigma will reduce
the level of those wastes and increase customer satisfaction with better final products. After
use of Lean Six Sigma techniques, the process will have standards, whereby the bottlenecks
section 4.5, vary in implementation complexity and in value. As the concept of LSS
continues to grow and the team works for continuous improvement and did not expect
changes over night, the Company will become more productive and more efficient. This
research will help in understanding the current operations and sigma level of the process
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plus ways to reduce DPMO and other LSS wastes. The expected results of the study are
Reiterating what was said previously, the LSS wastes identified as main problems in EPPSC,
which are MRR, downtime and inventory offer the largest room for improvement. Table 27
shows what the future state of the company could look like if certain opportunities for
product with the lowest possible cost. The implementation of Lean Six Sigma grants
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CHAPTER FIVE
5.1. CONCLUSIONS
variability and avoid non-value adding activities so that their customers will be satisfied
and their profitability and competitiveness will increase. LSS is not only a perfect
methodology for EPPSC but also for Ethiopian companies as a whole because it is a
continuous improvement method and it helps to avoid quality and manufacturing related
The study executed the DMAIC cycle to achieve its objective, going through the Define,
Measure, Analysis, Improve, and Control phases to improve the process by reducing
manufacturing wastes. The research findings indicate that from the seven types of
manufacturing wastes, downtime, MRR and inventory become the most significant one in
terms of their level and cost. Thus, different improvement opportunities are forwarded for
implementation to reduce the level of the identified wastes. Implementing the opportunities
could benefit the company by achieving a potential reduction in the level of DPMO,
reducing the level of WIP, improving raw material inventory consumption, reducing the
In conclusion, the study shows that how rewarding implementation of LSS could be by
showing how those wastes are affecting the company and the outcomes of its
implementation. The study benefits the company and other industries in their effort towards
improved productivity and efficiency. The study able to answer all of the research questions
raised.
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5.2. RECOMMENDATIONS
The companys existence in the market relies on its ability to produce and deliver quality
products and keeping and getting customers. In order to achieve the benefits of customer
satisfaction and cost reduction EPPSC should implement Lean Six Sigma production system.
The procedures necessary to implement LSS production system are simple yet powerful in
eliminating wastes. The author recommends that the following should be avoided to
The data that the company record seems a little bit over rated. Besides, one
departments report about something differs from the other departments report in
2.5-5%. For example, broke (rejected material) report shows a 2.5% difference in
shift and SIV (stock) report. LSS requires properly measuring and recording data.
problems are relatively less but they also have to pay to attention to others kind of
problems too specially when they have a great impact in companys profitability
like operator related problems. For example, one of the reasons for their high
products cost is their labor cost, operators are also one of the three reasons for
downtime but the company does not seem to care unless the problems are technical.
losses and this in turn will save more than one million Ethiopian birr thus it is highly
The following points are outlined for further extension of this work.
From the 11 % rejects that happened in NC cutter, 6-9% is due to corrugated board
side trim. Material rejects which are related to extra trimming i.e. >14cm can be
There are some customers who demand the company to produce and deliver them a
products with in 2 or 3 days or within a week and the company wont able to
produce it due to various reasons like the company already having an order. The
such problems.
Currently, the company is down for 60% of its time. After measuring the outcomes
108
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APPENDICES
114
Technical Lost Time
Feeder machine problem 106.1 21.4 128.9
Problem on flaps knife/bolt defect 79.5 16.0 90.9
Slotter blade problem 77.7 15.7 94.4
Glue line and pump defect 50.21 10.1 57.4
Folder unit problem 42.6 8.6 49.5
Printer cylinder problem 25.0 5.0 28.6
Die cutter anvil defect 21.8 4.4 25.3
Print no 2 problem(anilox roll, rubber roll and
cylinder) 18.1 3.6 21.0
Print hose defect 18.0 3.6 20.6
Driver belt problem 17.50 3.5 20.0
Printer ink pump problem 9.83 2.0 11.9
Counter injector problem 7.7 1.5 8.9
Air stream line problem 6.0 1.2 7.0
Cylinder bolt being broken 5.5 1.1 6.7
Stacker belt problem 5.3 1.1 6.1
Kicker unit problem 3.83 0.8 4.4
Print no 1 problem 1.3 0.3 1.6
Total Technical Lost Time 495.9 100.0 577.7
Waiting for print sample from customer 273.12 317.5
Lack of blank inputs due to corrugators
machine being stopped. 231.80 281.7
Lack of black ink 177.42 215.6
Shortage of order 148.8 180.9
Shortage of yellow printing ink 142 164.5
Power interruption 47.27 57.4
Company meeting/cleaning 24.67 28.2
lack of pallet 13.83 15.8
Cleaning of work space 7.25 8.4
Glue line clogging with dirt 3.42 4.0
Waiting for ink from quality inspections 3.00 3.9
115
Print no 2 move out of rail 2.25 2.9
lack of glue 1.75 2.0
lack of water 1.33 1.5
Drying of ink because of power interruption 0.50 0.6
Others 1077.94 1285
Corrugating machine
Operational Lost Time
Place being crowded 49.00 24.6 56.0
Single facer clearance adjustment 40.0 20.0 52.9
Single facer problem and operational
adjustment 28.4 14.2 32.5
Man power shifted to packer 16.0 8.0 20.2
Adjustment of raw materials 14.5 7.3 18.3
Waiting for machine instruction for new
order 13.17 6.6 16.9
Felt being tear 10.2 5.1 11.6
Starch preparation 8.25 4.1 10.9
Board being curled 5.5 2.8 6.3
Removing dirt from double facer dryer 4.0 2.0 5.1
Slitter blade adjustment operationally 3.0 1.5 3.8
Adjusting starch viscosity 1.5 0.8 1.9
Glue/starch painting problem adjusted
operation 1.5 0.8 1.7
Starch roll operational problem 1.3 0.7 1.7
Removing dirt from starch pipe line 1.25 0.6 1.4
Vacuum pump problem and adjusted
operationally 1.0 0.5 1.1
C-flute roll problem and adjusted
operationally 0.5 0.3 0.6
Removing trim from fan pipe 0.5 0.3 0.6
Total Operational Lost Time 199.6 100.0 237.5
Thechnical Lost Time
116
Problem on slitter blade/pin defect 125.7 27.6 160.9
Boiler problem and maintained 88.3 19.4 116.7
Double facer`s felt shaft being broken 67.1 14.7 85.8
Problems on single facer 53.50 11.7 68.5
Problem on NC cutter 29.8 6.5 37.7
New Electric boiler test 23.8 5.2 27.2
Steam line defect 16.0 3.5 20.5
Electric tripped in double facer 14.6 3.2 18.7
Tearing of double facer's felt 9.2 2.0 11.7
Double facer felt's motor defect 6.7 1.5 8.4
Starch line defect 5.00 1.1 6.6
Stacker electric problem 2.7 0.6 3.4
Starch cleaner problem 2.5 0.5 3.2
Starch roll defect 2.5 0.5 3.3
Double facer`s starch roll problem 2.0 0.4 2.6
Starch tanker electric defect 2.0 0.4 2.6
Electric tripped in single facer 1.5 0.3 1.9
Starch motor defect 1.33 0.3 1.5
Vacuum problem 1.00 0.2 1.1
Fan belt problem 0.5 0.1 0.6
Fan motor defect 0.5 0.1 0.6
Total Technical Lost Time 456.2 100.0 542.8
Shortage of raw materials 837.2 957.1
Lack of order 632.5 723.1
Due to electric boiler problem, steam shifted
to Paper machine 574.7 759.4
Power interruption 43.9 50.2
Place being crowded 22.7 30.0
Cleaning for Company's yearly celebration 19.5 22.3
End month counting 18.0 23.0
Lack of pallet 12.5 14.3
shortage of water from Awash 11.3 14.5
117
Poor quality of raw material paper 8.5 10.7
New electric boiler test 7.7 8.8
Others 2188.4 2613.4
118
Appendix C: Sample Red Tag
119
Appendix D: Red Tagging Criteria Sheet
120
Appendix E: Sample unused article list
121
Appendix F: Shop Stock List Sheet
122
Appendix G: Sample Activity Plan
123