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Improving Your Bottom Line

Improving Your Bottom Line. Making Kentucky manufacturers more competitive. Why Manufacturing?. 13% of the nation’s total Gross Domestic Product (GDP) Nearly 14.3 million employees Average annual wage of $45,916 Conducts two-thirds of all private sector R&D

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Improving Your Bottom Line

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  1. Improving Your Bottom Line Making Kentucky manufacturers more competitive

  2. Why Manufacturing? • 13% of the nation’s total Gross Domestic Product (GDP) • Nearly 14.3 million employees • Average annual wage of $45,916 • Conducts two-thirds of all private sector R&D • Every $1 in manufactured goods generates an additional $1.43 worth of economic activity

  3. Competitiveness Challenges • Rapidly advancing technology • Customer demands – faster, better, cheaper • Offshore competition from low wage countries • China’s average wages are: • 25% of Mexico’s • 10% of Hong Kong & Taiwan’s • 3% of U.S.’

  4. How Will Firms Compete? It’s all about ... Innovation …Productivity …Speed

  5. 2 Key Tools for Competitiveness Lean Manufacturing / Lean Office Six Sigma

  6. KMAC • Mission: Increase the competitiveness of Kentucky manufacturers • Private, not-for-profit corporation • Statewide operations • Industry-driven Board of Directors • Kentucky affiliate of the national Manufacturing Extension Partnership (MEP) program

  7. Productivity Improvement • Lean Manufacturing / Lean for the Office • Facilities Planning & Layout • Process Improvement • Problem Solving Training • Employee Development • Team Building & Team Leader Development

  8. Quality Improvement • Quality Systems • ISO and QS/TS Standards • Six Sigma • Statistical Process Control • Poka-Yoke / Error Proofing

  9. Product Improvement • New Product Development • Accelerate to Market for Small & Medium Enterprises (ATOM-SME) • Value Engineering / Design for Manufacturability

  10. Business Improvement • Strategic Planning • Meeting Facilitation • Performance Measurement • Financial Planning

  11. Benefits • Expertise • Staff of seasoned manufacturing professionals • Results • Proven track record will all types of industry • A national leader among MEP Centers for delivering quantifiable, bottom-line impacts to clients • Value • Clients realize significant returns on their investments in KMAC services

  12. FY06 Client-Reported Results • Increased Sales: $21 Million • Retained Sales: $12 Million • Annual Cost Savings: $4.8 Million • New Investment: $27 Million

  13. Lean Manufacturing Lean Office

  14. What is Lean? A systematic approach to identifying and eliminating waste (non-value added activities) through continuous improvement by flowing the product at the pull of the customer.

  15. Defining Value-Added Activities • VALUE ADDED: • Increases the market form or function of the product or service • NON-VALUE ADDED: • Does not add market form or function or is not necessary • ESSENTIAL NON-VALUE ADDED: • Cannot be eliminated completely

  16. Lean = Eliminating the Wastes Value Added • Overproduction • Waiting • Transportation • Non-Value Added Processing • Excess Inventory • Defects • Excess Motion • Underutilized People Non-Value Added Typically 95% of all lead time is non-value added

  17. Lean Tools Pull/Kanban Cellular/Flow TPM Quality at Source POUS Quick Changeover Standardized Work Batch Reduction Teams 5S System Visual Plant Layout Value Stream Mapping Continuous Improvement

  18. Value Stream Mapping • Visually document current material & information flow • Identify non value-added activities • Quantify non value-added lead time • Create an ideal future state • Eliminate wastes & simplify processes • Results in development of a Lean Implementation Action Plan • Prioritized improvement projects • Determines Lean Tools to be applied

  19. 5S System • Designed to improve workplace organization and standardization

  20. Visual Workplace • Simple signals providing an immediate understanding of a situation or condition • Kanban cards • Color-coded dies, tools, pallets

  21. Plant Layout Ship QC Rec Raw Stock QC Screw Machine Shear Stamp Drill Lathe Assembly Brake Mill Weld Grind Finish Parts Stock

  22. Standardized Work • Tasks organized in the best known sequence • Most effective combination of: • People • Materials • Methods • Machines

  23. Batch Reduction The best batch size is: ONE PIECE FLOW Make One . . . Move One!

  24. Teams • More flexible • Greater productivity & use of resources • Collaborative & cross-functional • More creative & innovative

  25. Quality at the Source • Quality built • Operators inspect • Necessary equipment • Established standards • Process documentation

  26. Point of Use Storage • Materials are stored where used • Simplifies physical inventory tracking, storage, and handling

  27. Quick Changeover • Changing over a process to produce a different product in the most efficient manner

  28. Pull/Kanban • Push System • Production based on forecasts or schedules • Pull/Kanban System • Production based on actual demand using Kanbans to signal replenishment

  29. Cellular Flow • Linking of manual and machine operations into the most efficient combination of resources • Flexible layout • Simplify flows • Minimize materials handling • Make use of people

  30. Total Productive Maintenance • Systematic approach to the elimination of equipment downtime as a waste factor • Designed to maximize the productivity of equipment for Its entire life

  31. Going Lean • Training in Lean tools • Using Lean tools in improvement events • Kaizen Events • Organizational / Cultural changes • Move toward team environment • Defined problem-solving approach • Performance metrics that support Lean

  32. Improvements Achieved with Lean 0% 25% 50% 75% 100% Lead Time Reduction Productivity Increase WIP Reduction Quality Improvement Space Utilization

  33. Six Sigma

  34. Definition of Six Sigma Methodology for disciplined quality improvement

  35. History of Six Sigma • Originated at Motorola in the early 1980s • Process modified by others • Implemented by IBM & Allied Signal • Adopted by General Electric in 1995 • Broadly deployed • By 1998, GE claimed $750 million in net benefits

  36. Goal of Six Sigma • Optimize process capability by identifying and minimizing variation • Virtual elimination of all defects • No more than 3.4 defects per million opportunities (DPMO) • 99.9996% acceptable

  37. Cost of Poor Quality • Scrap/Rework • Materials, labor costs, disposition costs • Warranty Costs • Customer credits, return/restocking costs, penalties • Lost Sales • Lost revenues, cost of gaining new customers

  38. Competitive Performance

  39. Benefits of Improved Quality • Bottom-line cost savings • Greater customer satisfaction • Increase in throughput • Reduction in waste and rework • Improvement in process capability

  40. Six Sigma Core Philosophies • Values defect-prevention over defect-detection • Emphasizes reducing variation in processes • Tackles root causes of poor performance • Is customer-focused by driving improvement in areas most important to your customers

  41. Six Sigma Characteristics • Defined, problem-solving approach • Data-driven • Project-based • Commitment and support from the top level

  42. Problem-Solving Approach • Uses a defined approach (DMAIC) • Define the project • Measure the baseline process capability • Analyze when, where and how often defects occur • Improve process capability to reach a Six Sigma level • Control the process to maintain the gain

  43. Data-Driven • Based on data rather than perception • Uses statistical tools during the DMAIC process • Calls for training in “statistical thinking” for many; advanced statistics and project management for some

  44. Project-Based • Project selection is critical • Should advance organization’s strategic initiatives • Have impact on a Critical to Quality (CTQ) characteristic • Should have bottom-line financial impact • Begin and end with performance measure

  45. Top Level Leadership • Requires leadership, commitment and active support from top level management • Leaders should use Six Sigma to drive strategic improvement • Six Sigma projects should support strategic goals

  46. Six Sigma – The Players • The Champion • Black Belt • Green Belt • Quality Process Analyst

  47. KMAC’s Approach to Six Sigma • Developed specifically for small- and mid-sized manufacturers • Affordable • Flexible • Focuses on implementation of Six Sigma not just training • Emphasizes bottom-line results

  48. Two Part Approach • On-Site Deployment Planning & Mentoring • Helps the company gain the most benefit from implementing Six Sigma • Online Six Sigma Training • Provides an affordable way to train Black Belts, Green Belts, and Quality Process Analysts

  49. Lean and Six Sigma • Two powerful tools to help a company improve: • Quality • Productivity • Bottom-line results

  50. Lean & Six Sigma Together • Use Lean to: • Reduce or eliminate non-value-added activities • Use Six Sigma to: • Improve value-added activities • Solve complex problems uncovered by Lean or those requiring advanced analysis

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