INSE621- Winter 2016 (Week3) Total Quality Methodologies in Engineering Project Organization, Selection, and Definition The whole employee involvement process springs from asking all your workers the simple question, What do you think?. Donald Peterson, Former Chairman of Ford Motor Co. How do you eat an elephant? One bite at a time. Unknown If you don t drive your business, you will be driven out of business. B. C. Forbes Dr. Nizar Bouguila Concordia University 1
Summary: Last Lecture n What DPMO is n Six Sigma problem solving methodology: DMAIC n Design for Six Sigma (DFSS) problem solving methodology: DMADV n How to describe Six Sigma and DFSS in a short and clear statement Have you ever been lost? What is the first thing you need to do before proceeding? If you answered find out where you are, then you realize the importance of knowing your current status in order to get to your desired destination. Six Sigma is about knowing where you are and where you are going. 2
In this lecture you will Learn how to define a project Learn Critical to Quality (CTQ) Learn Pareto analysis 3
First Step in DMAIC: Define Selecting the problem to address Clearly define the improvement opportunity Building commitment among all the stakeholders. Understanding the process and customer requirement from a high-level perspective Before the Define step creation of an effective structure to carry out the effort 4
Organizing for Six Sigma Project a temporary work structure that starts up, produces some output or outcome, and then shuts down. Project management all activities associated with planning, scheduling and controlling projects. 5
Project life cycle Project initiation Project planning Project assurance Project control Project closure Don t forget customer involvement in all stages!! 6
We are living, once and for all, in the Age of the Customer. Did you hear what we said? There has never been a better time to be a customer or a tougher time to be a supplier. Customers have higher expectations and more choices than ever. Which means that you have to listen more closely than ever. Forget building a learning organization. You first have to build a listening organization a company whose people have their ears to the ground. Rekha Balu, Senior Writer Fast Company May 2000 7
Project Initiation Clearly define the goals, directions, priorities, limitations, and constraints of the project When and how they can be accomplished Identify a project champion, project manager, and other team members 8
Project Planning Project definition: Define the project, its objectives, and deliverables. Determine the activities that must be completed and the sequence required to perform them. Resource planning: Determine the resources needed for each activity: personnel, time, money, equipment, materials, etc. Project scheduling: time scheduled for each activity. Project tracking and control plan: track the progress, anticipate the problems and develop alternative plans. 9
Project Assurance Customer relationship management while the project is in process Interface: customer, project champion, team members Estimate how successful the deliverable will perform 10
Project Control Systematically review the time, resource, cost, and performance measures invested in the project A typical control system Project plan: schedule, cost, performance goals or requirements Continuous monitoring system: measures the current results or status Reporting system: identifies deviation from the project plan. Timely action: correct variations. 11
Project Closure Ensure that The project has been signed off by those who must do so All bills have been paid Team members have been thanked and properly recommended for future positions Lessons learned are examined and documented Project success and best practices are communicated and disseminated 12
People Skills Technical skills Not what things people need to know. What things do they need, to know how to do. Soft skills Shared vision: can unify a team and provide motivation (discussion) Behavioral skills require both knowledge and practice 13
Skills for Team Leaders Conflict management and resolution Team management Leadership skills Decision making Communication Negotiation Cross-cultural training 14
Skills for Team Members Communication: for gathering data and information from others and sharing their findings among the team Meetings Shared decision making 15
Team Dynamics Team life cycle Forming Storming: challenge the way that the team will function. Norming: team members agree on roles and ground rules. Performing: productive phase, the team members cooperate to solve problems and complete the goals of their assigned work. Adjourning: move on to other project. 16
Ingredients for Successful Teams (1 of 2 ) Clarity in team goals Improvement plan Clearly defined roles Clear communication Beneficial team behaviors 17
Ingredients for Successful Teams (2 of 2) Well-defined decision procedures: use the data Balanced participation: everyone should participate. Established ground rules: outline acceptable and unacceptable behaviors. Awareness of group process Use of scientific approach 18
Problems and Opportunities for Six Sigma Projects High costs Excessive defects Customer complaints Low customer satisfaction 19
Six Sigma Problem Types 1. Conformance problems: users are not happy with system outputs. 2. Unstructured performance problems: poor sales for example 3. Efficiency problems: cost and productivity issues 4. Product design problems: design new products that better satisfy user needs 5. Process design problems: design new processes or revising existing processes. 20
Key Factors in Six Sigma Project Selection Impacts on customers and organizational effectiveness Probability of success Impact on employees Fit to strategy and competitive advantage Financial return, as measured by costs associated with quality and process performance, and impacts on revenues and market share 21
The Cost of Quality (COQ) COQ the cost of avoiding poor quality, or incurred as a result of poor quality Translates defects, errors, etc. into the language of management $$$ Provides a basis for identifying improvement opportunities and success of improvement programs 22
Quality Cost Classification Prevention Appraisal Internal failure External failure 23
Prevention Costs Quality planning costs: salaries, new equipments, studies. Process control costs: costs spent on analyzing production processes and implementing process control plans Information system costs: develop data requirement and measurement Training and general management costs: internal and external training, staff expenses 24
Appraisal Costs To ensure conformance through measurement and analysis of data: Test and inspection costs Instrument maintenance costs Process measurement and control costs 25
Internal failure costs Result of unsatisfactory quality found before the delivery of a product: rework cost Cost of correction actions Downgrading cost: selling a product at a lower prize because it does not met specification Process failure: unplanned equipment repair 26
External failure costs Poor quality products reaches the customer: Costs due to customer complaints and returns Product recall costs: cost of repair or replacement Product liability costs: legal actions 27
Pareto Analysis n Pareto analysis technique to identify the vital few from the trivial many (because a high proportion of quality issues resulted from only a few causes) n Pareto chart A bar chart that plots frequencies of occurrences of problem types in decreasing order 28
Pareto Analysis Separating vital few from the trivial many The process of ranking opportunities to determine which of many potential opportunities should be pursued first Should be used at various stages in a quality improvement program to determine which step to take next Especially useful in defining and selecting a project Example: On what type of defect should we concentrate our efforts? On what type of complaint should we concentrate our efforts? 29
Pareto Chart Helps a team focus on causes that have the greatest impact Displays the relative importance of problems in a simple visual format Helps prevent shifting the problem where the solution removes some causes but worsens others 30
Pareto Analysis Procedure 1. Determine the classifications (categories) for the Pareto chart 2. Select a time interval for analysis 3. Determine the total occurrences for each category (categorize categories with small occurrences as other ) 4. Compute the percentage for each category 5. Rank-order the categories from the largest total occurrences to the smallest 6. Draw Pareto chart 7. For the category with the highest rank, repeat 1-6 31
Process Definition (1/2) Poor performance is often a symptom of a design or operations flaw in a process. One approach to identify good Six Sigma projects is to find work processes having poor performance and analyze them. 32
Process Definition (2/2) Define the process: its start, end, and what it does using a high-level process map (ex. SIPOC diagram) Describe the process: key tasks and sequence, people, equipment, methods, materials Describe the players: customers, suppliers, process operators Define customer expectations: what the customer wants, when, and where Determine what data are available or need be collected Describe the perceived problems: failure to meet customer expectations, excessive variation 33
Models for Project Selection Categorization into different levels based on impacts on results: Level1: projects directly affect an organization s profit margin. Level2: projects results in redeployment of resources inside an organization to increase operating efficiency or productivity Level3: projects affects operations by avoiding expenditures or increasing the chances of obtaining higher future revenues. Scoring models Project selection matrix (W. M. Kelly: "Three steps To Project Selection", Six Sigma Forum Magazine, November 2002). 34
Project Definition (1/3) Formal mission statement (charter) that defines the project, its objectives, and deliverables. The charter represents a contract between the project team and the sponsors. Six Sigma project charter should clearly define the problem to be addressed, the (internal, external) customers requirements on which the project focuses, existing measures, the project benefits, a project timeline, the resources and the data needed to carry out the project. 35
Project Definition (2/3) Project charter is a document that provides purpose and goals for the Six Sigma project to the team A simple project charter example from the previous week Reduce (goal) the variability in the cycle time (measure) to produce an error-free accounting report (process) from the current level of 66,811 DPMO (current status) to 3.4 DPMO (target) by January 10, 2006 (deadline) 36
Project Definition (3/3) Two important parts of a project definition are: High-level process map (SIPOC) Customer requirements identifications and validation. 37
SIPOC Diagrams SIPOC - Suppliers, Inputs, Process, Outputs, and Customers Suppliers Inputs Process Outputs Customers Provides a broad view of a process and who is the process owner, how inputs are acquired, who the process serves, and how it adds value 38
Example: SIPOC Process Map Metal Fabricators Stamped Parts Body Fabrication Painting Finished Automobiles Dealers Component Suppliers Parts & Sub-assemblies Assembly S I P O C 39
Example of Business Processes Process Flow Unit Input-Output transformation Order fulfillment Orders Receipt of order - delivery of product Production Products Receipt of materials - completion of the finished product Shipping Products Shipment of the product delivery to the customer Customer service Customers Arrival of customer departure of customer New product development Projects Recognition of a need launching a product Cash cycle Cash Expenditure of funds collection of revenues 40
Voice of the Customer (VOC) Customer requirements expressed in the customer s own terms Methods for gathering: Comment cards and formal surveys Focus groups Direct customer contact Complaint analysis Internet monitoring 41
Performance-Importance Analysis, Identifying Key CTQ s from VOC Performance Low High Low Importance Who cares? Overkill High Vulnerable Strengths 42
Kano Model of Customer Needs (CTQs) Dissatisfiers: expected requirements, Basic quality Satisfiers: expressed requirements, Requirements that customers say they want Exciters/delighters: unexpected features 43
Creating a Customer Focus From a Customer s standpoint, neither quality, cost nor schedule always comes first. When customers evaluate the products and services they receive, they make trade-offs between all three key factors in order to maximize value. The challenge that suppliers face is to provide their customers with the maximum value, which often is a balancing act between quality, cost and schedule. The First Among Equals, Quality Digest, June 1999 44
Project Review Define (1 of 2) The team has reached agreement on and has clearly defined the problem or opportunity to address The project charter is developed and agreed upon The team understands the strategic and financial impact of the project The team agrees that the project can be completed successfully A project plan and timeline have been developed to guide the entire Six Sigma project The right mix of people are on the team 45
Project Review Define (2 of 2) Key stakeholders outside of the team have been identified All team members have consistent expectations Team members have received any necessary just-intime training Appropriate resources financial and human have been committed to conduct the project The voice of the customer and CTQs are fully understood and documented The team has developed a high-level process map. Key performance measures have been identified for measuring success of the project 46
Break-Even Analysis Common tool for analyzing the relationship between sales volume and profitability Break-Even: Sales volume where net income = 0 There are two types of costs that are important in breakeven analysis: variable and fixed Total variable costs = quantity(q) * cost per unit(v) Fixed costs(fc) are constant, regardless of output, over some time period (e.g. salary, rents, utility) Total costs = fixed + variable = FC + VQ Break-even (Q * ) PQ (VQ + FC) = 0 Q* = FC/(P-V) 47
Cost Example ABC firm has the following cost structure Price: $1000/unit Variable cost: $600/unit Fixed cost (per quarter): $350,000 What is the break-even quantity? 350,000/400 = 875 The company sells 1000 units in the quarter. What is the quarterly profit if? 1000,000 600,000 350,000 = 50,000 48
Income Statement and Break-Even Diagram 49
Benefits of Six Sigma: Cost Saving Assume the ABC firm has been suffering from 10% defect which can not be reworked (For simplicity) assume the Six Sigma project can completely eliminate the defect How would you calculate the cost saving? When the defect rate is 10%, in order to produce 1000, the company needs to produce 1000/0.9 = 1111 units. Because the cost is reflected in the variable cost already, the unit cost of producing a unit is 600000/1111 = $540.054 (and not 600000/1000=600.000) The total variable cost of producing 1000 units is thus $540,054 The total profits becomes $109,946 (the profit is increased by 109.964-50,000=$59,946) 50
Income Statement and Break-Even Diagram (after Six Sigma) 51
Cost of Six Sigma Example Assume the Six Sigma project for ABC company costs $150,000 and the benefit from improvement lasts 10 quarters $15,000 can be spread over 10 quarters The fixed cost becomes $365,000 52
Income Statement and Break-Even Diagram (After counting Six Sigma Project as an Asset) 53
Six Sigma Project as an Investment not a Cost Return on Investment: ROI = Return / Investment ROI of the Six Sigma Project in the previous example 100(Operating advantage Amortization) / Investment= 100(44,946-150,000/10)/150,000 20%/quarter Operating advantage=94,946-50,000 54
After this lecture you should Be able to define a project Be able to explain CTQ and Kano s quality model Be able to perform Pareto analysis Be able to calculate ROI of Six Sigma projects 55