Six Sigma, JIT and KANBAN

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POWPERPOINT SLIDES DISCUSSED DURING CLASS

Six Sigma

Six Sigma is a rigorous, focused and supposedly effective implementation of proven quality principles and techniques mainly inspired from the concepts of Juran’s quality control, TQM and Crosby’s zero-defects. The term Sigma is the Greek letter ‘σ’ used by statisticians to measure variability or precisely standard deviation in any process[1]. Accordingly, any process that has Six Sigma or 6 σ is expected to have 99.99966% of products manufactured free from any defects or expected to have 3.4 problems-per-million products manufactured. Six Sigma is a registered service mark and trademark of Motorola Inc and has developed certification programs. The certification programs are studied at different levels identified in terms of colour belts depicting hierarchy and career path that cuts across all business functions. The lowest belt is the white belt for individuals trained locally but without involving project participation, followed by yellow belt for basic training, followed by green belts who take up six sigma implementation, followed by black belts who train green belts and focus of project execution of six sigma followed by master black belts who act as in-house Six Sigma coaches to the organisation.

Based on the three concepts of quality control, TQM and zero-defects Six Sigma focuses on the following:

  • Help the organisation to make more money by improving customer value and efficiency
  • Quality provided as value-addition through productive endeavour. Deviation from the same could lead to wastes.
  • Improve quality by helping organisations to produce products and services better, faster, and cheaper. For example, in the Mumbai Dabbawalas case study, the monthly fee for carrying your tiffin is Rs 350 per month and delivery is done twice.
  • The error rates are generally low and the costs of quality are believed to also be low in Six-Sigma based companies

For application of Six Sigma philosophy a structured scientific method is considered which includes : i) Observing important characteristics of the marketplace of one’s business; ii) Developing a tentative explanation or hypothesis consistent with the observations; iii) Making predictions based on the hypothesis; iv) Testing your predictions by conducting experiments or making further careful observations, recording the observations and modifying predictions based on new facts. If variations exist, use statistical tools to help separate random deviations and; v)Repeating steps iii) and iv) until there are no discrepancies between the hypothesis and the results from experiments to observations. Based on the previously mentioned philosophy there are two project methodologies inspired especially from PDCA cycle and are referred to as DMAIC and DMADV, wherein DMAIC focuses on improving existing business process and DMADV aims at creating new product or process designs.

DMAIC (Define-Measure-Analyse-Improve-Control) methodology has 5 phases, which are as follows:

  • Define the problem and goals for improvements
  • Measure the existing system
  • Analyse the system to identify ways to eliminate gaps between current performance of the system of process and the desired goal
  • Improve the system
  • Control the system

DMADV project methodology, also known as (Design for Six Sigma) also features five phases which are as follows:

  • Define design goals that are consistent with customer demands and the enterprise strategy
  • Measure and identify characteristics critical to quality, product capabilities, production process capability and risks
  • Analyse to develop and design alternatives, create high-level design and evaluate design capability to select best design
  • Design details, optimize design, and plan for design verification
  • Verify the design, set up pilot runs, implement the production process and hand it over to the process owner(s)

Accordingly, Six Sigma requires utilisation of various problem-solving and lateral thinking tools such as the “Why” technique, Pareto analysis, Root-cause analysis, regression analysis, Tagchi methods, etc. The method however faces many criticisms, which are summarised below:

  • The method offers nothing new or different to existing quality theories like that of Juran’s quality trilogy
  • It is argued that there is overselling of Six Sigma by many consulting firms with relevant certifications that claim expertise in Six Sigma but having basic knowledge of tools and techniques involved
  • It is believed to be more corrective method than being a proactive and preventive procedure
  • It is believed to be rigid with more attention paid towards reducing variation and less attention paid towards eliminating the need to reduce variation thus reducing creativity and innovation
  • Evidence proving its success is limited though there are short-term improvements. It is believed that six sigma does not lead to long-term improvements within an organisation
  • No long-term improvements are also technically related to the assumption of Six Sigma that processes will be normally distributed in the long-run which in turn reduce defects to 3.4 defects per million products. Processes cannot be normally distributed in the long-run.

Just-In-Time (JIT)

JIT is an inventory strategy companies employ to increase efficiency and decrease waste by receiving goods only as they are needed in the production process, thereby reducing inventory costs. For example, a car manufacturer that operates with very low inventory levels, rely on the supply chain to deliver the parts to build the cars. The parts needed for manufacturing cars arrives just as they are needed and not before or after they are needed. Accordingly, the goals of JIT include:

  • Increasing the organisation’s ability to compete with rival firms and remain competitive in the long-run
  • Increasing the degree of efficiency within the production processes
  • Reducing the level of wasted materials, time and effort involved in the production process
  • Identifying and responding to the needs of the consumers
  • Aiming for the optimal quality/cost leadership
  • Eliminating unnecessary wastes that do not add value to the product
  • Aiming for the development of trusting relationships between the suppliers
  • Designing the plant for maximum efficiency and ease of manufacturing

Adopting work ethics that aim towards continuous improvements even though high standards have already being achieved.

JIT manufacturing broadly consists of three main components – (A) People, (B) Plants and (C) Systems through which its implementation can be enabled in an organisation.

(A) People

JIT manufacturing requires involvement of the following people or the stakeholders of an organisation through support and agreement.

  • Shareholders and owners of the company who could finance the various changes and investment commitments necessary for JIT success
  • Labour who should be informed about the goals of JIT and organisations should accordingly maintain good relations to be able to reach the JIT goals
  • Management whose support will assist at bringing about continuous improvements within the organisation at different levels / hierarchies
  • Government who can support companies with JIT through tax and other financial incentives. In the context of India, the government can also support organisations by enabling structured supply chains across industries

(B) Plants

JIT implementation could require various changes within and organisation and can include the following:

  • Arranging the plant layout for the workers enabling maximum flexibility with the product than the process and would correspondingly require multi-function workers. To handle multiple functions the workers would also require relevant training and skills for performing required tasks
  • Producing products in accordance to the exact demand for the product in terms of quantity and time
  • Using Kanban that indicates name or serial number for product identification, the quantity, the required operation and the destination of where the part will travel to
  • Using self-inspection to ensure production input adds value to the product and is of high quality
  • Improving continuously that enables the organisation to reach its goals and standards leading to customer satisfaction.

(C) Systems

Systems within an organisation refer to the technology and processes used to link, plan coordinate the activities and materials used in production. There are two such systems known as material requirements planning (MRP I) and manufacturing resource planning (MRP II) wherein MRP I method is used to manage materials required to carry out a scheduled operation in a business and MRP II method is a computer-based programme, which provides information on financial resources available to carry out the plans

Advantages of JIT Manufacturing

  • Reduces setup time allows the business to reduce or eliminate inventory
  • Simplifies inventory flow and management
  • Employees with multiple skills are used efficiently
  • Production scheduling and work hour consistency is aligned with the demand for products
  • Emphasises on supplier relationships that further reduces inventories
  • Supplies come in regular intervals throughout the day
  • Minimises storage space
  • Smaller chance of inventory wastes

Disadvantages of JIT Manufacturing[2]

  • Not feasible during supply shocks and cannot cater to large demand and supply changes
  • Demands delivery of high quality parts or raw material in small lots
  • Not one-time efforts that can be implemented in the short-run. It requires continuous assessment
  • Requires the presence of other quality systems especially Kanban, TPM, centralised information systems etc. that take longer time to implement
  • Requires excessive training/retraining costs
  • May not be feasible for industries with undefined and unstructured supply chains

KANBAN

Kanban is one of the means through which JIT can be achieved. It literally means “signboard” or a “billboard” through which scheduling of a production process can be conducted[3]. It is a pull system in which work centres signal with a card that they wish to withdraw parts from feeding operations or suppliers. By producing only what is needed Kanban eliminates buffer inventories and communicates any increase in customer demand to trigger processes with steps just-in-time to meet the demand. Kanban facilitates acquiring products at a desired quantity and time thus eliminating wastes and improving efficiency. Kanban’s main role is to manage flow and control inventory in a JIT environment.

Example: A pathology department in a hospital struggled with managing inventories of supplies. Some supply storage points would run empty and some items were overstocked also sometimes at inconvenient locations. Pathology staff members decided to use Kanban system by first auditing the quantity used for each item and the calculating the daily and monthly usage rates. The team created laminated kanban cards that visually marked the re-order point for items. When it was time to restock items, pathology staff would place the appropriate card in a pocket. In some cases a two-bin approach was used for small items that could be kept in small bins. For items that ran the risk of expiration, the two-bin system ensured that stock could be properly rotated, so the oldest supply was always used before the new ones. The staff was provided suitable training for using and maintaining the kanban system in the pathology department. The inventories became more organised, there were less wastes and more efficient.

The above mentioned case study reflects the following steps to implement kanban[4]:

  • Conduct data collection
  • Calculate the kanban size (daily and monthly usage rates)
  • Design the kanban (based on number of items and the characteristics of the items like description, expiry date etc)
  • Train personnel
  • Implement kanban
  • Audit and maintain kanban
  • Improve kanban


[1] Six Sigma Handbook By Thomas Pyzdek, Paul A keller

[3] Kanban made simple by John M Gross, Kenneth R. Mclnnis

[4] Lean Hospitals: Improving Quality, Patient Safety and Employee Engagement