PROJECT SELECTION PROCESS

While determining customer expectations and gaps consider performance of our competetors and worldclass benchmarks.

Financial Benefits

Problem-solving tools or Kaizens. Six Sigma green belt projects Just do it, Kaizens Low

High

Six Sigma black belt projects

Low

Projects of lower priority

High

Complexity and difficulty

GUIDELINES FOR SELECTING AND DEFINING SIX SIGMA PROJECTS Areas for problem solving productivity issues Large work in - progress Supplier Quality/Delivery problems High attrition rates Transaction errors Long lead time/ cycle time

ICEBERG OF THE COST OF POOR QUALITY

Visible
invisi ble

Customer returns, warranty, rejections, scrap Lost customers, in process rework, drawing errors, mistyped letters, inventories, wastes, long lead times, late delivery, number of setups, customer representatives, service network and infrastructure, follow-up to expedite, delayed shipments, excess movements, motion, pilferage, obsolescence.

APPLICATION CASE STUDY FOR SELECTION OF SIX SIGMA PROJECTS Let us consider a case to understand the process: Company XYZ produces machines that are used as a major component of industrial equipment. The companys annual sales turnover is US$250 million. It has a complex product line and makes customizations for customer segments and Original Equipment Manufactures (OEMs). One-third of its products are exported and the remaining used in the home country. The company enjoyed a leading position for many years but competition has started showing significant presence now.

THE VOICE OF THE CUSTOMER (VOC)

During customer interactions and surveys, the inputs that were received are listed here: Customers are generally happy about the product performance and service net work. They are concerned about lower availability of products when there is a failure. They have informed OEMs that they prefer XYZs machines as these are cheaper than competitors machines. OEMs are finding that the cost of machines as a component of total equipment cost is about 15 percent. OEMs find that it takes a long time to select machines and launch new models. Competitors are introducing new models constantly.

THE VOICE OF BUSINESS (VOB)

Company spends approximately 3.7% of the sales revenue on the warranty of products. Inventory turns of the company for the last financial year are 3.5. An average delivery performance is 84%. Primary reasons for the delivery misses are - shortage of parts at the time of assembly; - surprise during the assembly of machines as some of the specified parts required for customization do not fit; - parts that are shown as available in the information system are physically not available; Sixty four percent of the suppliers are third party certified to ISO 9000. The company has implemented ERP system two years back and is finding it tough to manage the processes using the system.

FORMULATING SIX SIGMA STRATEGIES FOR XYZ

Reliability of the products needs to be improved as the warranty cost is 3.7%. Thus, it is evident that the number of failures should be reduced. Downtime of the equipment is expensive as the cost of total equipment is much higher than the cost of our machine. Customers have expressed concern over availability and the time to restore should be reduced in case of failures. New products need to be introduced quickly before competitors do so. There is a major opportunity to reduce inventory. Frequent part shortages indicate that the supply chain and /or material management needs to be looked into. Mismatch of system and physical stocks indicates lack of data integrity and accuracy. Thus, there is an opportunity to improve the accuracy of information system. This can impact many performance measures such as inventory, delivery performance etc. Excess and obsolescence management may need improvement.

Having identified the strategic areas for improvement, the top management should facilitate and lead the project selection process. Each of the strategic improvement areas can result in more than one project . Some examples of improvement projects (short charters) could be as given below:

Improve delivery performance of one market segment from 84 to 95 percent Reduce the cycle time to launch new products from average 15 months to 7 months. Improve the mean time to failure (MTTF) of pumps from 3600 hours to 25000 hours. Improve the accuracy of engineering specifications from 92 to 99 percent. Improve inventory accuracy of stores from 90 to 97 percent. Improve the mean time to repair (MTTR) from 57 hours to 30 hours.