SEMESTER PROJECT

ISE 250: Organizational Improvement Capabilities and Skills

Instructor: Dr. Baruch I. Saeed
Team Members: Ramachandran Janakiraman Emma Lara Richard Olaso Ronnaporn Pasakdee Young Shea

Agenda

Six Sigma Storyboard

Define Measure Analyze Improve Control

Conclusion

Six Sigma Storyboard

Define

Goals: To define the projects purpose and scope To obtain background information:

Process Customers

Understand the voice of the customer (VOC)

D for Define
Tools Applied Process Flow Diagram
Process Flow Diagram
Overall Process (High-Level) Initiating Arrival of Goods to be Stored Goods

Charter
Problem Statement Customer(s)? Business Case . . . .

Critical-to-Quality

WMS

Receiving 7.44 sec./pc.

Storing 3.50 sec./pc.

Initiating Order or Request for Shipping

Goods Stored

WMS

End of Receiving and Storing Picking 18.00 sec./pc.

Shipping 11.40 sec./pc.

Goods Ordered Shipped

End of Picking and Shipping

Charter

Problem Statement

SuperMicro warehouse not meeting customer needs No visibility of flow through warehouse, and packages arriving late to customer Customers opting to go with competitors if not solved

Business Case

SuperMicro exports microprocessors throughout the country. Menlo Worldwide has been contacted to analyze the companys dilemma, and to determine if RFID implementation will solve existing problems.

Deliverables

Obtain an efficient and effective proposal, while meeting customers needs

Success?

Better visibility On-time delivery

Scope

Evaluate current warehousing process Provide proposal/recommendations within 4 months (February-May)

D for Define
Tools Applied Process Flow Diagram
Process Flow Diagram
Overall Process (High-Level) Initiating Arrival of Goods to be Stored Goods

Critical-to-Quality

WMS

Receiving 7.44 sec./pc.

Storing 3.50 sec./pc.

Initiating Order or Request for Shipping

Goods Stored

WMS

End of Receiving and Storing Picking 18.00 sec./pc.

Shipping 11.40 sec./pc.

Goods Ordered Shipped

End of Picking and Shipping

Process Flow Diagram

Receiving and Storage (A & B)

Updated PFD (with Time Study)

Initiating Arrival of Goods to be Stored

Goods

WMS

Goods are Processed by Receiver 1.40 sec./pc.

Perform Inspection (Count and Damages) 4.50 sec./pc.

Notify Supplier and Make Necessary Arrangements

Return Order to Supplier

Enter Order Received into the System and Print Order Location 1.44 sec./pc.

Modify Received Order

Move Order to the Storage Area 2.76 sec./pc.

Complete the Received Order into the System 0.84 sec./pc.

Goods Stored

End of Receiving and Storing

Process Flow Diagram

Picking and Shipping (C & D) Initiating Order or Request for Shipping

Updated PFD (with Time Study)

WMS

Generate Pick-List 1.20 sec./pc.

Check if Order is Available

D Notify Customer that Order is Not Available

Pick Order 3.60 sec./pc.

Customer Modify Order

Resend Order

Move Order to Quality Control Area 1.20 sec./pc.

Puller Makes Adjustments of Wrong Picked or Damaged Items 2.00 sec./pc.

Cancel Order

Perform Inspections (Count and Damages) 10% ~ 10.00 sec./pc.

Move Order to Packing Area 1.25 sec./pc.

Process Shipping Label and Notify Customer of Processed Order 7.20 sec./pc.

Order Verification 1.20 sec./pc.

Ship Order 1.80 sec./pc.

Goods Ordered Shipped

End of Picking and Shipping

Process Flow Diagram

Overall Process (High-Level)

Updated PFD (with Time Study)

Initiating Arrival of Goods to be Stored

Goods

WMS

Receiving 7.44 sec./pc.

Storing 3.50 sec./pc.

Initiating Order or Request for Shipping

Goods Stored

WMS

End of Receiving and Storing Picking 18.00 sec./pc.

Shipping 11.40 sec./pc.

Goods Ordered Shipped

End of Picking and Shipping

D for Define
Tools Applied

Critical-to-Quality

Critical-to-Quality
Need Drives CTQs
Reduce order process time Streamline process

Optimal picking sequence Efficient material handling Good inventory tracking system Sufficient staffing Time on hold is minimal Optimal responsiveness Optimal Inventory level Consistently meeting customer demand Shorter promised lead times Efficient transportation Fast delivery, short transit time High service level Low % transportation delay Low loss or damage claims Fast dock-to-stock time High accuracy in picking orders (fill-rates) Easy to identify location for customer orders High Productive output Fast inventory turnover; FIFO Low Stock-out %

Reduce warehouse cycle time

On-Time Delivery

Quick respond to urgent orders

.indicate deficiency

Six Sigma Storyboard

Measure

Goals: Collect the baseline data Create a Pareto chart to analyze the current process Create a Balance Scorecard for what to improve and how to measure Do benchmarking against competitors and industry standards

M for Measure
Tools Applied

Pareto Chart

Balance Scorecard
50% 45% 40% 35%

Benchmarking
Benchmarking with Industry Average
44.5% 45%

% of Times

30% 25% 20% 15% 10% 5% 0% Receiving Storing Tasks

Client Current Process Industry Standard

28.0% 25% 18.5% 20%

9.0% 10%

Picking

Shipping

- Time Study - Pareto Chart ( High Level and Detailed Process )

20 18 16 14
sec / piece

12 10 8 6 4 2
Shipping Picking Receiving Storing

Breakdown of Picking Process

Pick the order

15% 15% 25% 45% Adjustment for wrong picking Generate Pick-List Move to the Q/C

M for Measure
Tools Applied

Balance Scorecard
50% 45% 40% 35%

Benchmarking
Benchmarking with Industry Average
44.5% 45%

% of Times

30% 25% 20% 15% 10% 5% 0% Receiving Storing Tasks

Client Current Process Industry Standard

28.0% 25% 18.5% 20%

9.0% 10%

Picking

Shipping

Benchmarking

Benchmarking: Processing Time VS Industry Standards

50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 44.5% 45%
Time(mins)

Benchmarking VS Competitor (RFID)

400 350 300 250 200 150 100

337

% of Times

28.0% 18.5% 20% 9.0% 10%

25%

150 62 28 30 22
Move to storing

147 60 26 10 7 10 18 34 10 4
Move to packing Pack parts

50 0

5 8
Move to shipping Total Time

Receiving

Storing Tasks
Client Current Process

Picking

Shipping

Receive order

Pick parts

Move to Q/C Check inspection Tasks

Industry Standard

Current Process (mins) Competitor with RFID (mins)

VS Industry Standards

VS Competitor

Balance Score Card

Financial Warehouse Productivity Net Received Orders Per Hour Net Stocked Orders per Hour Net Pulled Orders Per Hour Net Shipped Orders Per Hour Expense per Received and Shipped Orders National Revenue Growth International Revenue Growth 33

IBP Service Quality Index Rejected Orders Shortage Orders

20

4 2 2 2 2

6
3 3 6 6 6 3 Concern

Shipped Damaged Orders Received Damaged Orders Committed Services Visibility (2) Received Orders Confirmed Shipped Orders Confirmed Claims (4) Origin Damage Issued Destination Damaged Issued

1.5 0.5

2 2 2

Customer

People 27 Employees Paid Over 9 hours Turnover

20 5 1 Safety Index(14) Injury Frequency/ Expense Accident Frequency/ Expense 7 7

Customer Retention

20

Volume Growth

Six Sigma Storyboard

Analyze

Goals: Explore potential causes Identify and focus on root problems Interpret root problems Help formulate feasible solutions

A for Analyze
Tools Applied

Cause-and-Effect Diagram

Cause-and-Effect Diagram
Methods Need training to use Too much QC Time Poor inventory management Manual QC High Cost Employee resistance Poor Shiping Manual Picking Poor reports on items Poor picking process location Not methods Poor Receiving followed Lack employee motivation Not scanning Technologies Available Employees Lack of technology Lack of process management training Machine/Equipment Insufficient equipments Not enough packaging lines Over utilized Under utilized Inefficient scheduling insufficient budgets Lack of maintenance lack of preventative plans

Misuse transport equipment Lack of flexibility

Inefficient carry aids Lack of experience Poor Handling Machine malfunction of orders Too expensive Overheat on packing Old devices

Not supervised Not enough staff Not Followed Too expensive Excess time to check received boxes Poor manual process

Unbalance load of lines Overload units

Unorganized written procedures Time consuming Lack of documentation Inaccurate reporting Human errors on manual input Unclear instructions Lack of standard procedure Different Proprietary software Inconsistent data format

lack of interdepartmental meeting Inadequate supervision Error on picking Inefficient procedure Inadequate inter-department communication Lack of technology Ineffective IT usage Uneasy to use Excessive idle time Inefficient methods Methods not followed

Long Warehouse Processing Time & No Visibility of Goods

improper stacking variation on sizes Mishandle in storing Hard to pick on high shelves similar items store too close

Inefficient organization of storing Lack of visible labels and signs

lack of standard protocol Excessive paper trails

Material Handling

lack of systematic training

Communication

Cause-and-Effect Diagram
People
Safety procedures not reinforced
Worker injury Safety procedures not followed Low motivation for job Low Pay Safety procedures not made important Poor management

Instructions are not effective Training classes not effective

De-motivated by work Low pay Teaching methods are poor Low teaching experience Class content not updated

Warehouse ethics not reinforced

Ethical responsibilities not followed Low motivation for job Low Pay Ethical responsibilities not made important Poor management Low worker attendance Low pay Hiring of low skilled workers Worker favoritism Competitive work environment Lack of teamwork Health benefits are poor Lack of 401K program Classes not effective Low WMS skills

Resistance to change
Content is dull

De-motivated by work

De-motivates workers
No homework and exams Classes not effective Students do not pay attention

Poorly trained workers

Errors are seldom reported

Low motivation for job

Lack of retention programs Lack of reward system

Procedures are seldom updated

Too many warehouse errors

Short budget Not expertise people available Poor lay Out Limited Space Inefficient use of space Not enough air circulation Too Hot Extreme Temperature Too Cold Too many doors open A/C not available Wrong use of voltage Low visibility Not enough lights Work Environment

Not enough Not enough resources Time and people outdated plan Not enough Time study Insufficient data lack of floor configuration Not enough supervision sampling Inefficient procedure Not enough employees Wrong analysis tools used Insufficient Information Tracking Insufficient time and supervision No clear data analysis Data misinterpretation Insufficient resources Lack of knowledge Inefficient use of space Not follow-up on problems Inefficient organization management lack of grouping products lack of expert evaluation Improper storage arrangement Limited Space of warehouse Unable to expand

Long Warehouse Processing Time & No Visibility of Goods

Measure

Cause-and-Effect Diagram: Analysis and Findings

Communication

Lack of interdepartmental communication

Material Handling

Inefficient handling procedure

Machine Equipment Improper transport aid

Poor picking method

Methods

Long warehouse processing time

Work Environment

Improper storage configuration

Measure

Inconsistent time study

People

Lack of training

Six Sigma Storyboard

Improve

Goals: Plan, develop, and implement solutions Prioritize the projects Develop project plans Actual implementation plan

I for Improve
Tools Applied

Prioritization
Project NPV End of life Cost Duration Change Complex Score Categorize orders and Establish Standard Time $500 per day observed $10,240 3 yrs 4 Weeks Time is allocated per order Medium 5

PDCA

Service Level
$2,000 per method modified $8,250 3 yrs 4 Weeks Efficient Operation Procedure Small 5

Revise and Modify Process Methods (use expertise) Receiving Storing Picking Shipping Training Communication Methods Tools Analysis

$6,400

1 yr

(15 Employees) $60 per person $250 per person $580 per person

1 hour 4 hours 8 hours

Efficient Communication Efficient operational procedures Efficient Data Analysis

Small

Reward and Motivation Program

$500 per month $6,000 1 yr

Monthly

Employee Motivation

Small

Productivity Level

Prioritization
Project NPV End of life Cost Duration Change Complex Score

Categorize orders and Establish Standard Time

$500 per day observed $10,240 3 yrs

4 Weeks

Time is allocated per order

Medium

Revise and Modify Process Methods (use expertise) Receiving Storing Picking Shipping Training Communication Methods Tools Analysis

$2,000 per method modified $8,250 3 yrs

4 Weeks

Efficient Operation Procedure

Small

$6,400

1 yr

(15 Employees) $60 per person $250 per person $580 per person

1 hour 4 hours 8 hours

Efficient Communication Efficient operational procedures Efficient Data Analysis

Small

Reward and Motivation Program

$500 per month $6,000 1 yr

Monthly

Employee Motivation

Small

Prioritization
Project NPV End of life Cost Duration Change Complex Score

Buy new Equipment Forklifts

$17,500

10 yrs

2 Forklift ($14,000) 3 Dollies ($600) 3 Hand Forklift ($3,400) $80,000 $40,000 $15,000

Years life

Reduce Idle Time

Small

Re-Arrange Layout Install an efficient A/C Install appropriate lighting system RFID Readers Tags Antenna Hardware and Software

$80,00 $48,000 $17,000

5 years 30 yrs 30 yrs

3 Weeks 2 Weeks 2 Weeks

Efficient Use of space Better Environment Better Environment Provide Visibility at all times

Large Large Medium

3 2 2

$133,000

10 years

$3,500 per reader $.40 per tag (varies) $20,000 (hardware & software)

3 months

Large

I for Improve
Tools Applied

PDCA

Service Level

Productivity Level

PDCA: Service Level

PDCA: Service Level (Gantt Chart)

PDCA: Productivity Level

PDCA: Productivity Level (Gantt Chart)

Six Sigma Storyboard

Control

Goals: Document new process methods and standard data per department Present results to management for an approval Training program Monitor performance Evaluate current methods and standard times every five years

C for Control
Tools Applied

Control Plan

Order Matrix Classification

Items Qty <1200 <1400 <1600 <1800 Receiving 4 8 12 A B C Classification Type A1 B1 C1 A2 B2 C2 A3 B3 C3 A4 B4 C4
Storing 2 3 4 L M H Classification Type 1L 1M 1H 2L 2M 2H 3L 3M 3H 4L 4M 4H Picking 2 3 4 L M H Classification Type 1L 1M 1H 2L 2M 2H 3L 3M 3H 4L 4M 4H
Shipping 5 10 20 S M L Classification Type 1S 1M 1L 2S 2M 2L 3S 3M 3L

15 D D1 D2 D3 D4

1 2 3 4

Items Qty <1200 <1400 <1600 <1800

1 2 3 4

Receiving 4 8 12 A B C Minutes per order type 40 50 60 45 55 65 55 65 70 60 75 75

Storing 2 3 4 L M H Minutes per order type 8 10 15 10 12 17 12 14 19 14 16 21 Picking 2 3 4 L M H Minutes per order type 7 10 13 8 11 14 9 13 16 11 15 18

15 D 70 75 80 85

Level Qty <100 <200 <300 <400 1 2 3 4

1 LL 1LL 2LL 3LL 4LL

5 HH 1HH 2HH 3HH 4HH

<100 <200 <300 <400

Level Qty 1 2 3 4

1 LL 5 7 9 10

5 HH 20 22 24 26

Level Items <2 <5 <10 <20 1 2 3 4

1 LL 1LL 2LL 3LL 4LL

5 HH 1HH 2HH 3HH 4HH

<2 <5 <10 <20

Level Items 1 2 3 4

1 LL 5 6 8 10

5 HH 15 16 18 20

Qty Items <5 <10 <20 1 2 3

Qty Items <5 <10 <20 2 3 4

Shipping 5 10 20 S M L Minutes per order type 5 7 10 7 9 12 9 11 14

Orders Per Hour

Orders Per Hour

20 0 1 2 3 4

25

30

35

40

45

4/ 3/ 20 06 4/ 5/ 20 06 4/ 7/ 20 06

Receiving Control Chart

Picking Control Chart

Date Date Receiving Daily Results Upper Control Limit Mean Lower Control Limit Picking Daily Results Upper Control Limit Mean Lower Control Limit
Orders Per Hour

4/ 9/ 20 06 4/ 11 /2 00 6 4/ 13 /2 00 6 4/ 15 /2 00 6 4/ 17 /2 00 6 4/ 19 /2 00 6 4/ 21 /2 00 6 4/ 23 /2 00 6 4/ 25 /2 00 6 4/ 27 /2 00 6

4/ 3/ 20 06 4/ 5/ 20 06 4/ 7/ 20 06 4/ 9/ 20 06 4/ 11 /2 00 6 4/ 13 /2 00 6 4/ 15 /2 00 6 4/ 17 /2 00 6 4/ 19 /2 00 6 4/ 21 /2 00 6 4/ 23 /2 00 6 4/ 25 /2 00 6 4/ 27 /2 00 6

Orders Per Hour

12 10 8 6 4 2 0

Control Charts

30

35

40

45

50

Date

Storing Control Chart

Shipping Control Chart

Date Shipping Daily Results Upper Control Limit Mean Lower Control Limit

4/ 3/ 20 06 4/ 5/ 20 06 4/ 7/ 20 06 4/ 9/ 20 06 4/ 11 /2 00 6 4/ 13 /2 00 6 4/ 15 /2 00 6 4/ 17 /2 00 6 4/ 19 /2 00 6 4/ 21 /2 00 6 4/ 23 /2 00 6 4/ 25 /2 00 6 4/ 27 /2 00 6

4/ 3/ 20 06 4/ 5/ 20 06 4/ 7/ 20 06 4/ 9/ 20 06 4/ 11 /2 00 6 4/ 13 /2 00 6 4/ 15 /2 00 6 4/ 17 /2 00 6 4/ 19 /2 00 6 4/ 21 /2 00 6 4/ 23 /2 00 6 4/ 25 /2 00 6 4/ 27 /2 00 6

Storing Daily Results Upper Control Limit Mean Lower Control Limit

Project Gantt Chart

Conclusion

Entire warehouse process was analyzed Take care of small problems first:

Standardization of process times Classification of orders

Install and monitor proposed changes Start thinking of RFID implementation

The End

Questions

Balance Scorecard (2006)

Element Financial
Warehouse Productivity

Sub-element

Weight 33

How Measured

Target

Net Received Orders Per Hour Net Stocked Orders per Hour Net Pulled Orders Per Hour

6 3 3

% Eff % Eff % Eff % Eff

100% 100% 100% 100%

Net Shipped Orders Per Hour

Expense per Received and Shipped Orders National Revenue Growth International Revenue Growth

6 6 3

98% Matrix % Eff % Eff

100% 100% 100%