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6/11/90-06110-5

TOTAL QUALITY MANAGEMENT. Art Schneiderman. Analog Devices. ANALOG DEVICES "at a glance". QUALITY IMPROVEMENT PROCESS. GOALS. culture. scorecard. IS. PROBLEM. METRICS. projects. SOLVING. Nolan-Norton, July 19, 1990 . 6/11/90-06110-5. Analog Devices at a Glance.

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6/11/90-06110-5

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  1. TOTAL QUALITY MANAGEMENT Art Schneiderman Analog Devices ANALOG DEVICES "at a glance" QUALITY IMPROVEMENT PROCESS GOALS culture scorecard IS PROBLEM METRICS projects SOLVING Nolan-Norton, July 19, 1990 ©1987-2000 Arthur M. Schneiderman All Rights Reserved. 6/11/90-06110-5

  2. Analog Devices at a Glance • Headquartered in Norwood Massachusetts • Publicly Held (NYSE Symbol ADI) • $453 Million in Sales (FY1989) • 48% of Sales Outside United States • 5200 Employees Worldwide ©1987-2000 Arthur M. Schneiderman All Rights Reserved. c. 2/13/90-PREZ_1

  3. ANALOG DEVICES AT A GLANCE (cont) Products: ICs, assembled products, subsystems Applications: precision measurement & control Markets: data acquisition 40% industrial/instrumentation 30% military/avionics 13% computer 17% other Integrated supplier design manufacturing (8 locations) direct sales (100 locations) ©1987-2000 Arthur M. Schneiderman All Rights Reserved. c. 1990-PREZ-1a

  4. ADI CORPORATE QIP COUNCIL Jerry Fishman MEMBERS: Executive VP Kozo Imai VP, Japanese Operations Larry LaFranchi Operations Controller Bill Manning Division GM Doug Newman VP, Sales and Marketing Art Schneiderman, Chairman VP, Quality/Productivity Improvement Ray Stata Chairman of the Board and President Goodloe Suttler Division GM Suzanne Thomson Director, Training & Development Tom Urwin VP, European Operations CHARTER: QIP Organization QIP Goals Deployment priorities Training Juran metrics Monitoring Incenting/Rewarding ©1987-2000 Arthur M. Schneiderman All Rights Reserved. 4/8/90-QIP-15a

  5. 1989 Top Customers Worldwide ©1987-2000 Arthur M. Schneiderman All Rights Reserved. c. 1990-PREZ-11

  6. CUSTOMER PREFERENCE RATINGS D/A and A/D CONVERTERS Analog Devices Burr-Brown National Motorola PMI Linear Technology Maxim Intersil TI Signetics Harris TRW Analogic Crystal Teledune Philbrick 1 2 3 4 5 least most Preference Source: EDN, 1/90 ©1987-2000 Arthur M. Schneiderman All Rights Reserved. 6/11/90-06110-4

  7. TOP 10 MIXED SIGNAL IC SUPPLIERS Sales $M 300 RMS=1.4 250 200 150 100 50 0 ADI National Philips Hitachi Sanyo NEC TI Toshiba Matsushita Motorola Source: VLSI Research ©1987-2000 Arthur M. Schneiderman All Rights Reserved. 2/16/90-02140-1

  8. PROJECTED WORLDWIDE GROWTH RATES 1987-1992 25 20% 20 15 13% average annual growth rate, %/year 11% 10 5 0 Electronic Equipment Semiconductor Sales ADI's Growth Goal ©1987-2000 Arthur M. Schneiderman All Rights Reserved. c. 2/13/90-PREZ-10

  9. QUALITY IMPROVEMENT PROCESS GOALS culture scorecard IS PROBLEM METRICS projects SOLVING ©1987-2000 Arthur M. Schneiderman All Rights Reserved. 3/11/90-03110-1rev 4/8/90

  10. GOALS ADI's CONSTITUENCIES culture scorecard IS PROBLEM METRICS SOLVING projects CUSTOMERS partnership growth ADI's BUSINESS OBJECTIVES STOCK- capital EMPLOYEES return HOLDERS ©1987-2000 Arthur M. Schneiderman All Rights Reserved. c. 1/17/89-?/3/12/90-03120-2rev 4/8/90

  11. GOALS culture scorecard ADI QIP GOALS IS PROBLEM METRICS SOLVING projects BUSINESS MARKET LEADERSHIP (RMS) OBJECTIVES: REVENUE GROWTH PROFITABILITY DRIVERS: BE RATED #1 BY OUR CUSTOMERS IN TOTAL VALUE DELIVERED EXTERNAL LEVERS: PRODUCTS DEFECT LEVELS ON-TIME DELIVERY LEADTIME PRICE RESPONSIVENESS INTERNAL LEVERS: TIME TO MARKET PROCESS PPM MANUFACTURING CYCLE TIME YIELD ©1987-2000 Arthur M. Schneiderman All Rights Reserved. c. 1/17/89-AMS-5rev. 4/8/90-04080-2

  12. Counter Action III Process Quality Improvement (Dip Soldering Process) % Counter Action I 0.4% 0.4 0.3 Counter Action II 0.2 Failure Rate ppm Revision of Manufacturing Engineering Standards Dip Solder was made to one worker job 40 0.1 40ppm 30 Basic Working Guide Manual 3ppm PC Board Design Instructions Omit Hand Rework Process 20 10 Masking Method Improvement 0 0 10 1 4 7 10 1 4 7 10 1 4 7 10 month 11 1 4 7 10 1 4 7 10 FY 82 80 81 79 78 Source: Kenzo Sasaoka, President Yokagowa-Hewlett-Packard 7/84 ©1987-2000 Arthur M. Schneiderman All Rights Reserved.

  13. YOKOGOWA HEWLETT PACKARD Dip Soldering Defects 10,000 1 1,000 50 % improvement each: .1 3.6 months Failure Rate % PPM 100 .01 10 .001 .0001 1 0 12 24 36 48 60 months ©1987-2000 Arthur M. Schneiderman All Rights Reserved. 12/12/85-ZD4

  14. PROPOSED HALF-LIFE MODEL VALUES MONTHS PROJECT TYPE EXAMPLES MODEL HALF-LIFE EXPECTED RANGE uni-functional operator errors 3 0 to 6 WIP cross-functional new product cycle time 9 6 to 12 outgoing PPM multi-entity vendor quality 18 12 to 24 warranty costs ©1987-2000 Arthur M. Schneiderman All Rights Reserved. 3/19/87-imp-9rev. c. 1989-hflf-2

  15. TARGET HALF-LIVES months 14 18 22 hi Organizational Complexity 7 9 11 med 1 3 5 low low med hi Technical Complexity ©1987-2000 Arthur M. Schneiderman All Rights Reserved. 6/11/90-06110-1rev. 5/28/91

  16. R S PLAN E S 36 S HALFLIFE E U DO ACT 27 9 C MPI L O 18 T CHECK R S P GOALS THE DEMING CYCLE culture scorecard IS PROBLEM METRICS SOLVING projects ©1987-2000 Arthur M. Schneiderman All Rights Reserved. 3/12/90-03120-3rev 5/27/91

  17. ADI RESPONSE TO HALF-LIFE CONCEPT Critics Supporters Doesn't reflect where we need to be Embodies the concept of KAIZEN Hard to understand Easy to understand Hard to use Makes sense manual vs. computerized Data not negotiation based realistic assumes instant startup Accepted by line organization assumes constant rate of learning Works focuses on results not process focuses on results not process "...the rate at which individuals and organizations learn may become the only sustainable competitive advantage..." Ray Stata ©1987-2000 Arthur M. Schneiderman All Rights Reserved. 2/18/90-02180-2

  18. SAMPLE IMPROVEMENT CURVE linear scale defect level 3 2.5 2 1.5 1 0.5 0 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 months ©1987-2000 Arthur M. Schneiderman All Rights Reserved. 2/19/90-02190-1arev 5/28/91

  19. SAMPLE IMPROVEMENT CURVE logarithmic scale defect level 3 2 1 0.5 0.3 0.2 0.1 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 months ©1987-2000 Arthur M. Schneiderman All Rights Reserved. 2/19/90-02190-1rev 5/28/91

  20. ADI QIP GOALS IC OPERATIONS, ESTABLISHED PRODUCTS METRIC 1987 1992 HALF-LIFE EXTERNAL On time delivery 85% 9 >99.8% Outgoing defect levels 500 PPM 9 <10 PPM Lead time <3 wks 10 wks 9 INTERNAL Manufacturing Cycle Time 15 wks 9 4-5wks Process Defect Levels <10 PPM 5000 PPM 6 Yield 20% 9 >50% 36 mths 6 mths Time to Market 24 WHILE AGGRESSIVELY PURSUING CORPORATE-WIDE COST MANAGEMENT ©1987-2000 Arthur M. Schneiderman All Rights Reserved. c. 7/12/87-QIP-16/QS-16Brev. 7/25/87

  21. FY1990 CORPORATE SCORECARD FY 90 Q1 90 End FY89 Q2 90 Q3 90 Q4 90 ACTUAL BHMK ACTUAL BHMK ACTUAL BHMK ACTUAL BHMK ACTUAL BHMK ACTUAL FINANCIAL SALES SALES GROWTH YTY CONTRIBUTION MARGIN ROA (CM) QIP ON TIME DELIVERY (To FCD) % CRDs NOT MATCHED EXCESS LEADTIME LABOR TURNOVER MANUFACTURING METRICS: IC PRODUCTS OUTGOING PPM PROCESS PPM CYCLE TIME YIELD MANUFACTURING METRICS: ASSEMBLED PRODUCTS OUTGOING PPM PLUG-IN YIELD CYCLE TIME % COST OF SCRAP/REWORK ACTUAL FY87 PLAN FY87 PLAN ACTUAL ACTUAL ACTUAL FY87 PLAN FY87 PLAN ACTUAL ACTUAL FY87 PLAN NEW PRODUCTS BOOKINGS POST-85 PROD 1Q90 2Q90 4Q90 3Q90 FY89 FY90 FORECAST 3rd YR BOOKINGS of new product releases ©1987-2000 Arthur M. Schneiderman All Rights Reserved. c. 1989-Scorecard

  22. 1 1990 Scorecard 2 ? ADI Qtr 2 1990 Retrace Utilities 1989 Scorecard Commentary Return ©1987-2000 Arthur M. Schneiderman All Rights Reserved. 1Q90-Scorecard-1

  23. 1 1990 Scorecard 2 ? ADI Qtr 2 1990 Retrace Utilities 1989 Scorecard Commentary Return ©1987-2000 Arthur M. Schneiderman All Rights Reserved. 1Q90-Scorecard-2

  24. GOALS culture scorecard PERFORMANCE MEASUREMENT IS PROBLEM METRICS SOLVING projects If you don't measure it, it will not improve. does not mean measurement improvement ©1987-2000 Arthur M. Schneiderman All Rights Reserved. 5/22/90-05220-4

  25. GOALS GOAL: culture scorecard IS IMPROVE CUSTOMER SERVICE PROBLEM METRICS SOLVING projects CUSTOMER SERVICE METRICS ON TIME % late % on time % early RESPONSIBILITY factory credit warehouse customer LATENESS/EARLINESS shipped late, how late? shipped early, how early? still late, how late? months to ship late backlog LEAD TIME customer requested lead time % CRD's matched excess lead time RESPONSIVENESS time to schedule an order ©1987-2000 Arthur M. Schneiderman All Rights Reserved. 4/8/90-04080-3rev 5/13/90

  26. On Time Customer Service Improvement Quarterly Data (1Q87 – 4Q89) ADI DSP ADS MED MDL ADBV CLD IPD 100 10 1 0.1 54.9 16.5 6.9 18.0 13.2 8.4 10.8 13.8 Half Life In Months ©1987-2000 Arthur M. Schneiderman All Rights Reserved. 4Q89-% Late

  27. Percent Of Lines Shipped Late (Jun 89 through May 90) ADBV ADS CLD DSP IPD MDL MED ADI 100 10 + + + + + + 1 0.1 NS NS NS NS N/A 7 NS NS Half Life (In months) ©1987-2000 Arthur M. Schneiderman All Rights Reserved. % Late May 90

  28. RELATIONSHIP BETWEEN LEADTIME AND ON-TIME DELIVERY AD XXX 0.1 1 0.95 0.08 0.8 0.06 0.6 0.04 0.4 0.02 0.2 0 0 0 50 100 113 150 lead time Market requirements: OTD > 95% leadtime < 100 Our requirements: OTD < 50% or leadtime > 113 LOSS OF MARKET SHARE ©1987-2000 Arthur M. Schneiderman All Rights Reserved. 5/16/90-05160-1a

  29. IMPROVING ON THE OTD/LEADTIME TRADEOFF 1. increase inventory 2. build to good forecasts 3. reduce manufacturing cycle time ©1987-2000 Arthur M. Schneiderman All Rights Reserved. 5/16/90-05160-2

  30. RELATIONSHIP BETWEEN LEADTIME AND ON-TIME DELIVERY AD XXX 0.1 1 0.95 0.08 0.8 0.06 0.6 0.04 0.4 0.02 0.2 0 0 0 50 100 113 150 lead time Market requirements: OTD > 95% leadtime < 100 Our requirements: OTD < 50% or leadtime > 113 LOSS OF MARKET SHARE ©1987-2000 Arthur M. Schneiderman All Rights Reserved. 5/16/90-05160-1a+b

  31. ADI Half-Lives by month 5/89 to 4/90 Hlf Life ©1987-2000 Arthur M. Schneiderman All Rights Reserved. c. 1990

  32. Percent Of CRDs Not Matched (Jun 89 through May 90) ADBV ADS CLD DSP IPD MDL MED ADI 100 10 NS 48 NS NS N/A NS NS 60+ Half Life (In months) W/I CRD % ©1987-2000 Arthur M. Schneiderman All Rights Reserved. Apr 90-CRDs not matched

  33. Weeks Of Excess LT - NonExcess Orders Excluded (Jun 89 - May 90) ADBV ADS CLD DSP IPD MDL MED ADI 100 10 + + + + + + + 1 NS 15 NS NS N/A 35 NS NS 61 57 15 25 38 20 29 49 Half Life (In months) W/I CRD % ©1987-2000 Arthur M. Schneiderman All Rights Reserved. Dec 89-Excess LT

  34. 48 CUSTOMERS IN VENDOR RATING DATABASE ABB AGFA Allen Bradley Allied Signal Ametek Apollo AT&T Brown Engineering Compugraphic Currie-Peak-Frazi Eaton Finnegan Ford General Electric GEC Gould Hewlett-Packard Honeywell Hughes Instron JET Electronics Kodak Loral Lucas M/A-COM Martin Marietta Marquette Electric Masscomp Microcircuits Semiconductor McDonald Douglas Parker Air & Space Penastar Perkin Elmer Raytheon Reliance Electric Rockwell Sanders Siemens Sikorsky Tektronix Teleco Teledyne Teradyne Texas Instruments Trillium United Technologies Waters Associates Westinghouse ©1987-2000 Arthur M. Schneiderman All Rights Reserved. c. 7/90-VRS Database

  35. ON TIME DELIVERY, CUSTOMER MEASURED 100.00 QIP STARTED % L A T E 10.00 HALF-LIFE = 10 MONTHS 1.00 Actual Data Trend (Ave: 21 C9ompanies per point) ©1987-2000 Arthur M. Schneiderman All Rights Reserved. Feb 90-CMD

  36. HEWLETT-PACKARD VENDOR RATINGS year ADI rank total suppliers category 1986 8 16 linear IC suppliers 1987 5 linear IC suppliers 8 1988 5 15 all IC suppliers * 1989 1 12 all IC suppliers * tied with one other supplier ©1987-2000 Arthur M. Schneiderman All Rights Reserved. 5/22/90-05220-1

  37. ADS QIP TEAM STRUCTURE ADS SAFETY COMMITTEE ON TIME DELIVERY DIRTY HARRYS PLANNING QIP TRANSIT WIP QIP PPM STEERING ALCATRAZ BENT LEADS DIPS ELIMINATORS COG PPM FINAL TEST ESD HERMEDICS SLASHERS TEST EQUIPMENT YIELD STEERING TEST TRIM VISUAL FAB STEERING BMW'S DIRT DEVILS ELIMINATORS ERRORBUSTERS ETCH JIT ON TIME DELIVERY PROMIS ECN WAFER SAVERS TTM STEERING DESIGN & LAYOUT DESIGNER TASK FORCE LAYOUT TASK FORCE FABCATS PROCESS DEVELOPMENT HANDOVER SPC GROUP 1 707 SPC GROUP 4 569 SPC GROUP 11 OP07/27 SPC GROUP 8 570/1/3 SPC GROUP 12 574 SPC SOLDER DIP SPC GROUP 14 521/534 WIRE BOND SPC SPC GROUP 3 711/712 SETUP TIME REDUCTION ©1987-2000 Arthur M. Schneiderman All Rights Reserved. 6/11/90-06110-2

  38. TYPICAL QIP PROJECTS NAME MEMBERS PROJECT METRIC BMW'S YIELD 8 FAB LINE OPERATORS REDUCE THE QUANTITY 2 FAB TECHNICIANS OF BROKEN/MISSING 2 FAB ENGINEERS WAFERS PER MILLION 3 FAB SUPERVISORS MOVES YIELD ERRORBUSTERS 6 FAB LINE OPERATORS REDUCE MISPROCESSING 3 FAB TECHNICIANS IN PHOTO 1 FAB ENGINEER 1 FAB MANAGER DIRT DEVILS YIELD 2 FAB LINE OPERATORS REDUCE PARTICLE 2 YIELD ENHANCEMENT COUNT IN FAB 1 FAB SUPERVISOR 1 Q.C. INSPECTOR 1 FAB TECHNICIAN 1 EQUIPMENT REPAIR PLANNING QIP ON TIME DELIVERY 2 BUSINESS PLANNING INCREASE CUSTOMER 2 MANUF. SUPERVISORS SERVICE WHILE 5 P.C. PLANNING REDUCING CYCLE TIME 1 FINANCE AND MINIMIZING 1 PURCHASING INVENTORIES 1 CUSTOMER SERVICE ALCATRAZ PPM 5 TEST OPERATORS ELIMINATE FACTORY 2 BRAND OPERATORS ESCAPES 1 Q.A. ENGINEER 1 BRAND SUPERVISIOR FABCATS TIME TO MARKET 1 C.A.S. OPERATOR MINIMIZE TAT ON NEW 1 MASK FAB MANAGER PRODUCT DEVELOPMENT 1 Q.C. MANAGER LOTS 1 FAB MANAGER 1 P.C. PLANNING 2 P/L COORDINATORS 1 FAB COORDINATOR ©1987-2000 Arthur M. Schneiderman All Rights Reserved. 6/11/90-06110-3

  39. GOALS PROBLEM SOLVING culture scorecard IS PROBLEM METRICS SOLVING projects Participants: Cross Functional Problem Solving Teams (QIP Teams) Task Forces QC Circles Individuals Systematic Approach: Deming Cycle (PDCA) Tools: 7 QC Tools (fishbone, histogram, ...) 7 Management Tools (KJ Method, affinity diagram,...) Design of Experiments (Taguchi, etc.) SQC (control charts) SPC (Cp, Cpk) Quality Cost (failure, prevention, appraisal) QFD Hoshin Kanri SMED TPM EI JIT/Kanban (cycle time, WIP reduction) ©1987-2000 Arthur M. Schneiderman All Rights Reserved. 4/8/90-04080-1

  40. GOALS PROBLEM SOLVING culture scorecard IS PROBLEM METRICS SOLVING projects The Deming Cycle (PDCA) 1 PERCEPTION OF PROBLEM PLAN WHAT EVALUATION OF 2 CURRENT SITUATION WHY 3 ANALYSIS OF CAUSES WHO WHEN PLANNING OF 4 COUNTER-MEASURES WHERE HOW IMPLEMENTATION OF DO 5 COUNTER-MEASURES CHECK 6 EVALUATION OF RESULTS 7 STANDARDIZATION ACTION 8 SUMMARY & FUTURE PLANS ©1987-2000 Arthur M. Schneiderman All Rights Reserved. 5/22/90-05220-3

  41. CENTRAL PRINCIPLES OBSERVED IN TQM IMPLEMENTATION Primacy of the Customer customer first customer satisfaction market-in Use of the PDCA cycle for continuous improvement Strong CEO and top management leadership policy deployment Education and training for all Respect for all people teamwork participative management ©1987-2000 Arthur M. Schneiderman All Rights Reserved. 4/24/90-04240-2

  42. GOALS culture scorecard THE QIP CULTURE IS PROBLEM METRICS SOLVING projects We each have a dual function daily job SDCA cycle process improvement PDCA cycle customer satisfaction We are committed to improving We are dedicated to (kaizen) continuous improvement functional and cross-functional We are part of a parallel organization: We are a continuously learning organization ©1987-2000 Arthur M. Schneiderman All Rights Reserved. 4/8/90-04080-4rev 7/9/90

  43. REQUIREMENTS FOR QUALITY IMPROVEMENT Systematic Top Management Sense of Urgency Method Commitment proven results leadership profit opportunity kaizen changed objectives competition data driven hands-on management fuel for change cross-functional visibility support Company Wide Organization/ Pilot Projects Involvement Systems overcome skepticism weakest link training build credibility internal customers guiding get ball rolling policy deployment : vendors/customers develop champions monitoring rewarding : ©1987-2000 Arthur M. Schneiderman All Rights Reserved. 12/16/85-ADI-2

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