copq & roi presentation 572 [10-18-16]

1EDU 501 12122013 © 2013 The National Graduate School of Quality Management

EDU QSM 572(O)Cohort 116

Master Business Cost ProjectTeam Independence

10/10/16

Louis Poggenburg

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2 EDU 501 12122013 © 2013 The National Graduate School of Quality Management

Independence Corrugated Loading Damage Project

Team Members: Louis Poggenburg Manager, Quality Assurance Independence Corrugated Oak Creek, WI

Kistler D. Fletcher Sr. Senior Advisor, Logistics Automation Project Manager/T3P DynCorp International, LLC Kabul, Afghanistan

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D M A I C

Yvonne Rutherford Risk Program Analyst, Quality Management Veterans Affairs Dublin, GA


Champion and Guiding Coalition

Champion

Chad Gillenwater The Plant Manager has complete responsibility for the overall leadership, commitment, implementation, and adherence to Independence Corrugated Production & Quality System.

Day-to-Day ChampionsJoe SextonProduction Superintendent; responsible for the day to day control of manufacturing processes, equipment, maintenance and adherence to the Quality System.

Jacob BrandtAccounts Receivable; gathers and collects data, maintains financial spreadsheets

John LuznickyProduction Coordinator and Safe Trainer; assists with quality as needed

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D M A I CDefine Stage


Problem Statement The Independence Corrugated Plant in Oak Creek, Wisconsin, shipped

damaged product to its customers resulting in 57 requests for credits totaling $11,420 between January 2015 and March 2016. External nonconformance return costs due to rework and remanufacturing resulted in an annual cost of poor quality of $89,320 during this time period.

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D M A I C


Current “As-is” Process

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Fishbone Diagram

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D M A I CAnalyze Stage

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Shift 3

Shift 2

Shift 1

0

5

10

15

20

25

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Customer Credit Requests by Shift Jan-July 2016

Dam

age

Occ

urre

nces

D M A I C


Strategic Priority and Project Goals

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To decrease product damage that occurs prior to loading in a shipping trailer, resulting in a 50% decrease in monthly customer credit requests based on receiving damaged product.

To decrease product damage opportunities at each of the three “points of contact” within the process flow; facility location drop point, equipment contact points, and grid location of unit damage.

Establish a monitoring system that reviews loading damage on a weekly basis.

D M A I C


Cost Analysis/ COPQ

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D M A I C

Tasks Average hours per Task Hourly Rate

Cost of Element

Material Costs

External Failure $

Internal Failure $

Total Failure Cost

1. Customer Service receives complaint 0.20 $25.00 $5.00 N/A $5.00 N/A $5.00

2. Forwards info to QA and Production 0.10 $50.00 $5.00 N/A $5.00 N/A $5.00

3. Production Superintendant investigates problem

0.50 $50.00 $25.00 N/A $25.00 N/A $25.00

4. Cost of part N/A N/A N/A $776.27 $776.27 N/A $776.275. Production / QA investigates the problem 4.00 $50.00 $200.00 N/A N/A N/A $200.00

6. Response and requested credit is provided to customer

0.75 $50.00 $37.50 776.00 $813.77 N/A $776.27

Total - - - - - - $1,011/ea

Avg. Monthly Avg. Labor Avg. Material Avg. Total Total Damage $ Total Failure

Annual annualized Failures = 52 # QVRs $ per QVR $ per QVR $ per QVR per year per year

4.4 $49.55 $776.27 $825.82 $42,943 $52,586.04

(50% reduction ) = $26,293.02


Pareto

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Table 5.3 Pareto of Failure Costs

Problem Description

Failure Type Annual Failure $ No. of Annual Occurrences

1. Crushed product on 2nd & 3rd Tiers (50%) IF $13,147 26

2. Fork Damage (35%) IF $9,203 18

3. Side swipe (15%) IF $3,944 8

D M A I C


Prevention Plan Costs

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Table 5.4

Root Cause Description

Corrective Action RationaleAnnual Hours

Needed $/hr. Rate Total $

1. Lack of SOP Write SOP Standardize the process 2.0 $50 $100

2. Lack of Training (3rd) Train & qualify 3rd shift

Standardize the process 10.0 $50 $500

3. Communication PlanImplement Visual

Management / Metrics

Raise Departmental Awareness 12.0 $50 $600

Total Total $1,200


Recommendations - Prevention Internal Damage Audits - Internal damage data was not being collected; routine but random

audits were implemented during the measure phase and logged per shift by supervisors for tracking and trending. Identifying internal damage before loading onto trailer will minimize customer credit requests. The scrutiny has already improved damage occurrences. This practice will continue.

Develop SOP - Developing a written procedure for the loading process will standardize the process which is a practice of highly reliable organizations and a best practice.

Implement training with competency validation (3rd shift) - Drivers will have a standardized method of loading and moving product, providing training regarding methods, methodology, and best practices will give the drivers the skills and competency to load and move product with less damage. Ensuring the drivers understand the training will be assessed using competency skill validation.

Implement Verbal and Visual Communication Plan - Communicating cost and frequency of damage with expected goals between leadership and drivers will encourage personal investment and result driven behavior. Routine communication will include the drivers in the process improvement aspect encouraging buy-in.

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Recommendations – Failure Analysis Identify 1st Shift Best Practices - Examining the process and environment on 1st shift will help

guide improvement efforts on 2nd and 3rd shift. This results in focused improvement efforts for root causes. This information will assist in writing the SOP and training modules.

Consult w/ Rite Hite Corp for Best Practices - Independence will benefit from other company's lessons learned and research results regarding loading damage. Implementing best and proven practices will minimize damage frequency prior to shipment. This effort may impact the SOP and training aspects.

Research dunnage utilization for truck load - Using dunnage (waste) to cushion product during transport is a best practice used by other similar companies to avoid shipping damage. Minimizing shipping damage positively impacts customer satisfaction and credit requests. This research may take some time and will begin once all internal recommendations have been initiated.

Pursue benchmark venture w/ Ecologic bottles - Working with an innovative company and expanding the uses of the product will increase business opportunities for the company. This process may take months to establish a business contact and relationship. This is reflected in the timeline.

Add cameras facing inside of loading trailers - Using video footage to review loading practices and the end results of product loads can be used for lessons learned and investigating shipping damage. This step will likely cost the most and logistical research is needed therefore will occur once drivers are trained.

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14 EDU 501 12122013 © 2013 The National Graduate School of Quality Management 14

Future State ProcessD M A I C

Improve Stage


Implementation Strategy

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Prevention

Failure Analysis


Implementation Cost

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D M A I C

Prevention Plan Costs

Root Cause DescriptionCorrective Action Rationale

Annual Hours Needed $/hr. Rate Total $

1. Lack of SOP Write SOP Standardize the process 2.0 $50 $100

2. Lack of Training (3rd) Train & qualify 3rd shift

Standardize the process 10.0 $50 $500

3. Visual ManagementImplement Visual

Management / Metrics

Raise Departmental Awareness 12.0 $50 $600

Total Total $1,200

Failure Reduction AnalysisRoot Cause Description

Corrective Action Rationale Annual Hours Needed $/hr. Rate Total $

1st shift had 6% total damage reported Implement Visual Management / Metrics Improvements to be added to SOP 4.0 $50 $200

Independence has not conducted a benchmark study to date Consult w/ Rite Hite Corp for Best Practices

Utilize lessons learned to further reduce damage 4.0 $250/hr. $1,000

Missed opportunities to expand business opportunities in this direction

Pursue benchmark venture w/ Ecologic bottles Expanding market share TBD TBD TBD

No real time monitoring of trailer damage inside trailer Add cameras facing inside of loading trailers

to obtain additional information for root cause analysis 2.0 + 12.0 $35/hr; $3000 Equip. $3,490

Total Total $5,890


Return on Investment (ROI)

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ROI

Achievable failure reduction (50%) $26,293

Prevention dollars =

$1,200 =

21.91

Benefit / cost ROI = 21.9 : 1

D M A I C

ROI with Failure Reduction Analysis

Achievable failure reduction (50%) $26,293

Prevention dollars = $5,890 = 4.46

Benefit / cost ROI = 4.46 : 1


Payback Time

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Prevention investment $1,200

Achievable savings =

$26,293 =

0.05years

Payback = 18days

D M A I C

Payback with Failure Reduction Analysis

Prevention investment $5,890

Achievable savings =

$26,293 =

0.22 years

Payback = 80days


Control Plan

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Control Stage

Continue monthly Quality Variance Report monitoring and communicate frequency and cost with drivers monthly. Monitor trailer loading with cameras and utilize for training and staff meetings (lessons learned). Continue quality control audits for internal damage. Maintain annual refresher training to include annual competency skills testing on forklift and loading process.

D M A I C


References

Fujii, R. (2013, July 19). Liquids in Cardboard Containers? The Record, pp. 1, 2.

Wood, Douglas C. (2013). Principles of Quality Costs (4th ed.). Milwaukee, WI:

ASQ Quality Press. 138-142.

Lean Six Sigma & Minitab Handbook, Quentin Brook, 2010, OPEX Resources, pg. 241.

copq & roi presentation 572 [10-18-16]

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