implementing lean principles with the six sigma advantage: how a battery company realized...

10
JOURNAL OF ORGANIZATIONAL EXCELLENCE / Summer 2003 © 2003 Wiley Periodicals, Inc. Published online in Wiley InterScience (www.interscience.wiley.com) DOI: 10.1002/npr.10078 IMPLEMENTING LEAN PRINCIPLES WITH THE SIX SIGMA ADVANTAGE: HOW A BATTERY COMPANY REALIZED SIGNIFICANT IMPROVEMENTS PROCESS IMPROVEMENT Lean Manufacturing can produce startlingly good results—but implementing them can be costly in time and other resources, whose investment does not always pay off. When Lean principles are integrated with Six Sigma practices, however, their success rate grows—and, most importantly, improvements become embedded in daily work life on a continuing basis. One battery company instituted this blend of methods, and dramatically reduced its cost of capital while streamlining its manufacturing process—as well as improving its customer satisfaction levels. © 2003 Wiley Periodicals, Inc. Udit Sharma Udit Sharma is a principal consultant with IBM Business Consulting Services in Fairfax, Virginia, and helps Fortune 500 companies imple- ment Lean and Six Sigma principles to improve their business operations. He has more than ten years of operations strategy and engineering management experience in the steel industry. He can be reached at 610-993-5320 or at [email protected]. * * * 43 O ver the last 50 years, a number of companies have embraced Lean Manufacturing as a process improvement methodology, yet only a few have achieved the ambitious goals that they set forth. Taichi Ohno, known as the founder of Lean Manufacturing, first experimented with Just-In- Time (JIT) production concepts in the 1940s. He had been tasked with designing a solution for an auto company that was cash poor and had limited mar- ket share and a poor brand image—Toyota Motor Company. It did not take Ohno long to design a conceptual utopia, but it took him and his equally competent colleagues decades to perfect the system. Today, Toyota’s production system is the most suc- cessful JIT production system in existence. Other companies have undertaken efforts sim- ilar to Toyota’s but without similar results. Thus cu- rious minds might inquire, “Why do some compa- nies benefit from Lean while others do not?” Aca- demics answer, “They apply the Lean principles the right way.” But just what is the right way to be- come Lean? As this article will show, companies are learning how Six Sigma methods and concepts can be used to effectively implement Lean principles in a service or manufacturing environment. LEAN MANUFACTURING The fundamental objective of Lean Manufactur- ing is to free up capital from non-value-added ac- tivities or waste and invest it back into the busi- ness. Lean Manufacturing professionals thus try to transform the non-value-added activities of a business (or non-valued-added work steps in a

Upload: udit-sharma

Post on 15-Jun-2016

231 views

Category:

Documents


2 download

TRANSCRIPT

Page 1: Implementing Lean principles with the Six Sigma advantage: How a battery company realized significant improvements

JOURNAL OF ORGANIZATIONAL EXCELLENCE / Summer 2003

© 2003 Wiley Periodicals, Inc. Published online in Wiley InterScience (www.interscience.wiley.com) DOI: 10.1002/npr.10078

IMPLEMENTING LEAN PRINCIPLESWITH THE SIX SIGMA ADVANTAGE: HOW A BATTERY COMPANY REALIZEDSIGNIFICANT IMPROVEMENTS

PROCESS IMPROVEMENT

Lean Manufacturing can produce startlingly good results—but implementing themcan be costly in time and other resources, whose investment does not always payoff. When Lean principles are integrated with Six Sigma practices, however, theirsuccess rate grows—and, most importantly, improvements become embedded indaily work life on a continuing basis. One battery company instituted this blendof methods, and dramatically reduced its cost of capital while streamlining itsmanufacturing process—as well as improving its customer satisfaction levels.© 2003 Wiley Periodicals, Inc.

Udit Sharma

Udit Sharma is a principal consultant with IBM Business Consulting Services in Fairfax, Virginia, and helps Fortune 500 companies imple-ment Lean and Six Sigma principles to improve their business operations. He has more than ten years of operations strategy and engineeringmanagement experience in the steel industry. He can be reached at 610-993-5320 or at [email protected].

* * *

43

Over the last 50 years, a number of companieshave embraced Lean Manufacturing as a

process improvement methodology, yet only a fewhave achieved the ambitious goals that they setforth. Taichi Ohno, known as the founder of LeanManufacturing, first experimented with Just-In-Time (JIT) production concepts in the 1940s. He hadbeen tasked with designing a solution for an autocompany that was cash poor and had limited mar-ket share and a poor brand image—Toyota MotorCompany. It did not take Ohno long to design aconceptual utopia, but it took him and his equallycompetent colleagues decades to perfect the system.Today, Toyota’s production system is the most suc-cessful JIT production system in existence.

Other companies have undertaken efforts sim-ilar to Toyota’s but without similar results. Thus cu-

rious minds might inquire, “Why do some compa-nies benefit from Lean while others do not?” Aca-demics answer, “They apply the Lean principlesthe right way.” But just what is the right way to be-come Lean? As this article will show, companies arelearning how Six Sigma methods and concepts canbe used to effectively implement Lean principles ina service or manufacturing environment.

LEAN MANUFACTURING

The fundamental objective of Lean Manufactur-ing is to free up capital from non-value-added ac-tivities or waste and invest it back into the busi-ness. Lean Manufacturing professionals thus tryto transform the non-value-added activities of abusiness (or non-valued-added work steps in a

Page 2: Implementing Lean principles with the Six Sigma advantage: How a battery company realized significant improvements

JOURNAL OF ORGANIZATIONAL EXCELLENCE / Summer 2003

44 Udit Sharma

process) into value-added activities and processes,the goal being to achieve a “one piece” flow. Ex-amples of non-value-added activities and waste—referred to as Muda by the Japanese—includepoor inventory management (of raw material,work in progress (WIP), and finished goods), re-dundant tasks, rework, time and resources spentsearching for parts and tools, changeover/set-uptimes for different operations, and “nonconform-ing” (defective) products.

Eliminating waste not only frees up cash forother purposes but also makes processes more ro-bust and strengthens a company’s competitiveposture. Lean enterprises do not sustain their com-petitive advantage just by keeping their costsdown; they are also agile and adaptable to customerdemand. They focus on establishing shorter cycletimes and ensuring a predictable level of productand service quality, both of which serve to in-crease short-term customer satisfaction and securelong-term customer loyalty.

JUMPING ON THE LEAN BANDWAGON

There is no single way for a company to imple-ment Lean. Some companies train all of their em-ployees in Lean principles and then follow aphased approach to implementing it throughoutan enterprise. Other companies bring in Leanexperts to achieve “quick wins” and then use thecash flow from those projects to train employeesfor advanced phases of implementation. Stillother companies replace their middle manage-ment ranks in an effort to accelerate culturechange in the organization.

Each of these implementation approaches hasadvantages and disadvantages from the imple-menter’s point of view. Moreover, the time framesto transform a conventional organization to Leanvaries tremendously across industries, and evenacross firms in the same industry. Even the met-rics used to gauge a firm’s progress toward be-coming Lean can vary widely, as can the pro-jected payback calculations determined throughsensitivity analysis. For all these reasons, top ex-ecutives often find it hard to justify Lean imple-mentation to shareholders. As a result, most com-panies take the proverbial “leap of faith” andspend millions of dollars on Lean implementationin hopes of becoming more profitable and com-

petitive businesses. But rather than replicatingToyota’s success, only a small percentage of thesecompanies have realized substantial return on in-vestment (ROI) from their Lean endeavors.

There is, however, a quality improvementmethodology that when integrated with Lean Man-ufacturing principles and precepts can help gen-erate business results that are at once concrete,consistent, measurable, and sustainable. Thismethodology not only provides a framework forimplementing Lean approaches but also enablesbusiness leaders to quantify the risk of failuresfrom Lean Manufacturing initiatives and to real-ize measurable ROI from such efforts in a pre-dictable time frame. The methodology is SixSigma, and it has been successfully deployed bya wide variety of companies—GE, Caterpillar,Dow Chemical, LG Chemicals, DuPont, JPMor-gan, AIG, GMAC Mortgage, and others—to drivechange in their organizations.

INTRODUCTION TO SIX SIGMAMETHODOLOGY

The Six Sigma methodology was developed byMikel Harry in the late 1980s to provide a con-sistent data-driven approach to solving difficultbusiness problems. Harry used mathematical andstatistical tools to model problems in manufac-turing settings, determine the root causes of thoseproblems, develop and implement solutions tothem, and put statistical controls in place to pre-vent the problems from arising again.

The Six Sigma methodology was developed byMikel Harry in the late 1980s to provide aconsistent data-driven approach to solving

difficult business problems.

Harry posited that every problem could becharacterized as a process with “inputs” and “out-puts.” Addressing process problems, analyzingtheir root causes, and troubleshooting solutions tothem could be divided into the following five dis-crete steps or phases: define, measure, analyze, im-prove, and control—the so-called “DMAIC” ap-proach to process improvement. Let’s examineeach of these five phases in more detail.

Page 3: Implementing Lean principles with the Six Sigma advantage: How a battery company realized significant improvements

Implementing Lean Principles with the Six Sigma Advantage: How a Battery Company Realized Significant Improvements

JOURNAL OF ORGANIZATIONAL EXCELLENCE / Summer 2003

45

Control. The last phase of Six Sigma method-ology focuses on the development of procedures tomaintain the gains realized in the Improve phase. Op-portunities to replicate the gains are also identified.

BECOMING LEAN THE SIX SIGMA WAY

Because Six Sigma relies on probability, statisticalmeasurement techniques, and systematic data gath-ering, it is a powerful decision-making and analyti-cal tool. What’s more, when used strategically withina company, Six Sigma principles have the ability tocreate a strong climate of organizational alignmentto drive implementation of Lean initiatives on an en-terprisewide basis, which can rapidly accelerate thepace of quality or process improvements. This occursbecause the methodology puts strong emphasis on

• Senior leadership involvement• Development of specific deployment plans

to drive improvement initiatives forward• Periodic project reviews and project track-

ing to monitor performance levels as im-provement initiatives proceed

• Training• Communications• Strong technical support of improvement

efforts—specifically the use of Six SigmaMaster Black Belts and Black Belts—tospearhead improvement projects tied tostrategic business goals

Just how can Six Sigma’s power be harnessed todrive successful Lean implementations? Six Sigmamethods and work approaches need to be embeddedin an organization’s culture and in the way people dotheir everyday jobs. This process begins as a com-pany’s top leaders develop a strategic plan to aligncustomer and marketplace needs with key businessprocesses, the result of which is the creation of a“business process framework” configured to meet theexisting and emerging needs of customers. SpecificSix Sigma projects are designed to satisfy key crit-ical customer requirements (CCRs) or critical-to-quality characteristics (CTQs) that have been de-rived from intensive research of customer ormarketplace needs. The full leveraging of Six Sigmabenefits is then realized with the completion of theseprojects. This process is outlined in Exhibit 1, whichillustrates how the development of key strategic

Define. In this initial phase of Six Sigma,company leaders (with input from others)

• Define the problem “opportunity” withina process

• Benchmark performance• Delineate business goals and project goals• Form project teams to address the problem• Develop project timelines

Measure. In the second phase, project teamsmap a specific business process and determine allthe variables that impact that process (the inputs) aswell as the process outputs. Headed by project lead-ers called “Black Belts,” project teams examine allthe variables affecting a process in order to identifythose that are most critical to its operation. They an-alyze the adequacy of existing measurement systemsto accurately account for these variables and will,if necessary, design new measurement systems totrack and monitor process performance. Outputs ofthe process are also studied. The findings are thenused to determine such characteristics as process ca-pability, stability, reproducibility, and repeatability.

Because Six Sigma relies on probability,statistical measurement techniques, and

systematic data gathering, it is a powerfuldecision-making and analytical tool.

Analyze. In this phase, Six Sigma practition-ers use statistical tools to determine the relation-ships among different variables that constitute theinputs and outputs of a process. Data are stratifiedin this phase and analyzed to determine the rootcause(s) of process problems. Once determined, theroot cause(s) is validated through the use of toolssuch as controlled design of experiments (DOE).

Improve. The fourth phase of Six Sigma in-volves brainstorming solutions to eliminate theroot causes of the product, service, or quality de-fects validated in the Analyze phase. Solutionsare filtered through several criteria such as capa-bility, cost effectiveness, controllability, sustain-ability, safety, etc. A pilot improvement project isthen conducted to verify the proposed solution’sviability; if successful, the solution is then formallyimplemented on a broader scale.

Page 4: Implementing Lean principles with the Six Sigma advantage: How a battery company realized significant improvements

JOURNAL OF ORGANIZATIONAL EXCELLENCE / Summer 2003

46 Udit Sharma

initiatives leads to specific Strategic ImprovementGoals (SIGs) and, ultimately, actionable Six Sigmaprojects to help a company realize its strategic visionor accomplish its business mission.

In Exhibit 1, executives of a consumer elec-tronic parts firm have decided to embark on fourstrategic initiatives designed to help the firm re-alize its vision of becoming the #1 or #2 supplierof electronic parts in all of its business markets:

• Pursuit of Lean Enterprise (the imple-mentation of Lean Manufacturing meth-ods across a company)

• Development of product technology thatis superior to that of the firm’s competitors

• Launch of an aggressive e-Business initia-tive to drive better market penetration andbetter customer relationship management

• Six Sigma

Exhibit 1. Example of Six Sigma Linked to Lean Manufacturing

Page 5: Implementing Lean principles with the Six Sigma advantage: How a battery company realized significant improvements

Implementing Lean Principles with the Six Sigma Advantage: How a Battery Company Realized Significant Improvements

JOURNAL OF ORGANIZATIONAL EXCELLENCE / Summer 2003

47

• Feasibility. How long will it take to real-ize results from the project? How wide-spread will its impact be? What are the re-sources required to launch and sustain theproject? What is the likely timeline forproject completion?

• Business Alignment and Degree of Im-pact on SIGs. How closely aligned areproject goals to a specific SIG? A companythat adopts Lean principles will need toalign projects to SIGs by selecting thosethat directly address the key obstacles inbecoming a Lean enterprise. For exam-ple, selected projects might focus on— Decreasing changeover times by 90

percent— Decreasing safety stock levels by 90

percent while maintaining or increas-ing the on-time delivery rate

— Error-proofing processes to reduce aparticular defect by 90 percent

— Decreasing assembly cycle time by90 percent

— Increasing first time throughput by50 percent

— Increasing value-added component ofthe dock-to-dock time by 10 percent

• Impact on Customers.To what extent doesa specific project impact a specific cus-tomer? To what extent does it meet an ex-pressed or emerging need of a customer?To what extent does it deal with a cus-tomer complaint or issue that is a sourceof long-standing customer dissatisfaction?

• Timeline and Six Sigma Relevance. Is theproject more likely to generate short-term“quick wins” or medium- to long-term ben-efits? To what extent can the project be lever-aged or replicated across the organization tomultiply the savings or efficiencies througheach new generation of project undertaken?

• Return on Investment. Is the project likelyto generate tangible financial savings, in-direct savings, or deferred savings? Whatis the time frame associated with eachlevel of potential benefit?

Managed well, the QFD process can be a pow-erful tool to prioritize projects in the order that bestsuits the business as determined by the SIGs. Projects

In the next step, experts in the four strategicareas do a “current state” business assessment andbenchmarking analysis to determine where the com-pany is currently failing to meet customer require-ments (resulting in performance gaps). The com-pany’s leaders, using Six Sigma principles, establishstrategic improvement goals (SIGs)—the large Ys inthe Exhibit 1—that address the performance gaps re-lated to the strategic initiatives. As Exhibit 1 shows,the company has selected several SIGs to address thekey strategic initiatives of Lean Enterprise, Tech-nology Advantage, and e-Business. The fourth ini-tiative, Six Sigma, which is being implemented si-multaneously with the other initiatives, will serve asthe chief deployment vehicle for the other activities.

Through a process known as QualityFunctional Deployment (QFD), Six Sigma

Black Belts spearhead the filtering of all thecandidates to select and prioritize those projects

that will have a sizeable impact on the SIGs.

With regards to Lean Enterprise, project se-lection and alignment are aided by a generalawareness of Lean principles among the com-pany’s leaders, and by Lean resources such as ex-ternal consultants who are available to the com-pany. This gives a strong advantage to Leanimplementation efforts as productive time is spentup front to select only those projects that have di-rect impact on Lean SIGs, such as optimizingworking capital and reducing time-to-market fornew products. Gap analysis further aids the se-lection of effective Lean projects to quickly de-velop a Lean culture in the organization.

Once SIGs are established, a combination ofSix Sigma organizational champions, processowners, and subject matter experts identify po-tential projects that may be appropriate to im-plement the SIGs (small Ys in Exhibit 1).Through a process known as Quality FunctionalDeployment (QFD), Six Sigma Black Belts spear-head the filtering of all the candidates to selectand prioritize those projects that will have a size-able impact on the SIGs. Different companies usedifferent versions of QFD, but these typicallyinvolve evaluating several aspects of each po-tential project, most commonly:

Page 6: Implementing Lean principles with the Six Sigma advantage: How a battery company realized significant improvements

JOURNAL OF ORGANIZATIONAL EXCELLENCE / Summer 2003

48 Udit Sharma

are then implemented in parallel by Six Sigma teamsusing the DMAIC methodology described earlier.In a mature, heavy manufacturing environment, thetypical Six Sigma project will generate about$200,000 in cash and take from three to six monthsto complete. In the service sector, projects typicallygenerate $300,000 to $400,000 and finish in thesame time frame as manufacturing projects.

Once a company’s Six Sigma leaders haveselected/prioritized the projects to be implemented,the firm is then ready to move forward with projectlaunch and management. It is here that the fullpower of Six Sigma analysis and solution sets, com-bined with various Lean tools, can rapidly drivechanges in business processes to improve operationalor process efficiencies, cut costs, and reduce waste.

EMPLOYING SIX SIGMA AND LEANENTERPRISE PRINCIPLES: A CASE STUDY

What follows is a case study of a battery manufac-turing company—let’s call it Baxter Battery—thatused Six Sigma methodology in conjunction withLean solution sets to achieve a specific Lean ob-

jective: to reduce the amount of capital ($20 million)the company had tied up in its inventory of batteryparts, specifically in lead plates used to build bat-teries. Meeting this objective was critical if Baxterwas to more effectively manage business costs, re-duce its annual cost of capital, and improve profits.

Exhibit 2 provides a high-level view of BaxterBattery’s manufacturing process for lead acid bat-teries. The manufacturing process begins with the ar-rival of raw materials, mostly lead and packaging ma-terials for creating finished batteries, at the firm’smanufacturing facility. The lead is converted into leadoxide paste in the firm’s oxide plant in the manu-facturing facility and into grids that will form the in-ternal structure of batteries. The lead oxide paste andlead grids are sent to pasting machines, which loadthe empty grids with the paste. Plates containingthese elements move on to special ovens, where theyare baked for a period of time and then sent to theAssembly Department to be assembled with othercomponents to make dry lead batteries. Assembledbatteries are moved to the formation area, whereacid is poured into each battery and the batteries arecharged for a few days, depending on their size.

Exhibit 2. Overview of Battery Manufacturing Process

Page 7: Implementing Lean principles with the Six Sigma advantage: How a battery company realized significant improvements

Implementing Lean Principles with the Six Sigma Advantage: How a Battery Company Realized Significant Improvements

JOURNAL OF ORGANIZATIONAL EXCELLENCE / Summer 2003

49

often had to be manufactured, while prolongedstorage of misplaced plates resulted in aging-related obsolescence, further adding to inventoryinaccuracies. Finally, the team discovered that theAssembly Department’s forecasts of its plate re-quirements were typically accurate less than 50percent of the time!

The team quickly addressed key measurementissues in both upstream and downstream processes.It also began to collect data on several importantprocess measures, including the number of as-sembly orders placed, plate production, actualplate consumption, and the First Time Yield rate(FTY) for the plates and the assembled batteries.FTY is the number of good units produced dividedby the number of total units going into the process,excluding rework. It is a key cost-of-quality met-ric used by Six Sigma companies.

As part of its research in the Measure phase,the Baxter/Six Sigma team identified several

measurement problems.

Analyze. The Six Sigma team then appliedappropriate qualitative and quantitative tools to thedata it collected in the Measure phase and iden-tified several root causes for the large amount ofcapital tied up in Baxter Battery’s pasted plate in-ventory stores. These included

• Inaccurate forecasts of plate order re-quirements from the Assembly Depart-ment, a result of various factors, includ-ing inconsistent scheduling, variablecustomer demands, and wide variability inthe First Time Yields (FTYs) of finishedquality products from the Assembly De-partment (which resulted in wildly unpre-dictable levels of required rework)

• Long changeover times for pasting ma-chines and high process times for plates tocure in the ovens

• Inadequate communication between BaxterBattery’s Pasting and Assembly Departments

These root cause issues explained more than 80 per-cent of the CTQ problems the company was hav-ing with its battery production process.

The triangles shown in Exhibit 2 representthe various stock locations for work in process(WIP) at Baxter Battery. By examining this “cur-rent state” process map, company executives de-termined that their largest WIP site was locatedwhere pasted battery plates were held in inventory.Given operating capital constraints, Baxter exec-utives decided that their key Lean Manufacturinggoal had to be to minimize the amount of capitaltied up in the pasted plate inventory stores with-out negatively affecting lead times for delivery ofplates to the downstream assembly process. Work-ing with a consulting team, Baxter executives em-ployed DMAIC Six Sigma described below to de-fine performance gaps and then develop a solutionto optimize the inventory management process.

Define. In this stage, a blended BaxterBattery/Six Sigma consulting team identified thecurrent state of the company’s battery manufac-turing process, determined performance gaps, andquantified the business need to undertake the in-ventory reduction project. The team determinedthat the company currently had some $20 millionin plate inventory stores in four different indus-trial plants—an unacceptably high amount of cap-ital cost that had to be reduced.

Measure. In this stage, Six Sigma team mem-bers determined the relevance and adequacy of ex-isting performance measures to accurately modelthe manufacturing process under investigation.They also developed the critical measure for suc-cess of the project: reduction of capital tied up inplate inventory by 90 percent. This measure, re-ferred to as a Project CTQ (critical-to-quality)characteristic in Six Sigma methodology, was es-sential to achieve if the project were to eventuallybe judged a success.

As part of its research in the Measure phase,the Baxter/Six Sigma team identified severalmeasurement problems. First, they found numer-ous record-keeping inconsistencies that made itdifficult to actually determine the number of plateunits held in inventory at the four different sites.Second, inconsistencies were found in theprocesses used to place orders for battery plates.The automated tracking system, which counted thenumber of plates produced at the pasting ma-chines, was only about 90 percent accurate due tosensor problems. Moreover, inventory in variousstock locations was often misplaced; new plates

Page 8: Implementing Lean principles with the Six Sigma advantage: How a battery company realized significant improvements

JOURNAL OF ORGANIZATIONAL EXCELLENCE / Summer 2003

50 Udit Sharma

Improve. The Baxter/Six Sigma team nextmoved on to finding practical, cost effective solu-tions. Traditionally, the Improve phase is the longestin a Six Sigma project. Depending on the nature(and number) of solutions generated in this phase,a Six Sigma team may have to undertake numer-ous pilots of various solutions to select the bestone. On the other hand, solutions to specific prob-lems are sometimes readily available from otherareas of an organization or from other processesthat have been redesigned as part of previous im-provement projects. Here is where certain Leanideas and solutions—such as pull scheduling andSMED (Single Minute Exchange of Dies) tools—proved valuable to Baxter Battery in helping it ac-celerate the introduction of improvements intothe battery manufacturing process. (Exhibit 3

lists some Lean Manufacturing tools that compa-nies may want to consider using to address spe-cific quality or process performance issues suchas inventory management.)

The Six Sigma/Lean team researched variousLean tools and their applications to see how theymight prove useful to Baxter’s situation and de-vised the following solution set:

1. Replace “push” scheduling with “pull”scheduling to ensure that adequate quan-tities of plate inventory are in stock at alltimes, but not an oversupply. Traditionalpush scheduling, which entails movingitems to inventory, even if customer de-mand is not present, had produced an over-supply in the company’s plate inventory

POSSIBLE “ROOT CAUSE” PROBLEMS A FIRM MAY FACE LEAN SOLUTION

Lack of adequate production control Pull Schedulingexists between different production units. With this production control method, production requirements upstream are driven by

downstream customers. Thus, the factory produces only what customers require. It doesnot produce parts or products to hold in inventory.

Poor batch size control among different Kanban System with reusable containers of predefined capacity.production departments. This methodology controls the batch size of production lots by limiting the size of

containers that move parts among different operations.

Frequent machine breakdowns result Total Productive Maintenance (TPM)in high level of safety stock. Operational Equipment Effectiveness (OEE)

These maintenance techniques dramatically increase the mean time between equip-ment failures.

Long equipment changeover times result SMEDin big runs and high cycle inventory stock. SMED and FAST techniques are used to decrease long equipment changeover/set-up

times by more than 90 percent.

Several operator errors decrease the first QCPCtime throughput (FTT). Poka-yoke

These techniques use mistake-proofing devices or procedures to prevent defects duringorder taking or manufacturing steps. Used specifically to increase First Time Yield (FTY).

Average assembly time for a product is Standard work sheets and determination of takt timeseveral times higher than the actual process This technique uses the bottleneck theory of constraint to set up a takt time (the daily time required of assembly machines. production number required to meet orders in hand divided into the number of working

hours in the day) for every process. Takt time is then closely monitored.

Exhibit 3. Some Lean Manufacturing Techniques Used in Lean Six Sigma Deployments

Page 9: Implementing Lean principles with the Six Sigma advantage: How a battery company realized significant improvements

Implementing Lean Principles with the Six Sigma Advantage: How a Battery Company Realized Significant Improvements

JOURNAL OF ORGANIZATIONAL EXCELLENCE / Summer 2003

51

the battery manufacturing process. Combining theLean approaches with Six Sigma principles andtechniques in the Improve phase of Baxter Bat-tery’s improvement initiative made it possible todemonstrate an actual reduction in the amount ofcapital tied up in battery pasted plate inventories.Eventually, inventory requirements for various bat-tery parts dropped by as much as 95 percent oncea more accurate forecast of required parts was pos-sible with the new Lean production controls.

Control. During this phase the team workedto standardize procedure changes that were insti-tuted in the Improve phase. For example, con-trol charts were put in place to monitor and controlplate inventory levels, radically reducing inventoryrequirements to just $2 million. Control chartswere also instituted to help manage die changeovertimes for pasting machines. The company alsoadopted Six Sigma principles to help sustain useof Kanban, cycle time, and Andon alarm andintervention systems.

Customer satisfaction levels have improved aswell, as parts shortages and production

downtimes have been greatly reduced and,in some cases, virtually eliminated.

As a consequence of combining Lean Manu-facturing and Six Sigma quality improvementtechniques, Baxter Battery realized a one-timesavings of $18 million in plate stock (reduction instock from $20 million to just $2 million) in justsix months. Furthermore, the company will con-tinue to realize annual savings of roughly $3 mil-lion (17 percent) in the cost of capital tied up inplate stock. At the same time, the company’s bat-tery manufacturing process has been greatlystreamlined and improved. Customer satisfactionlevels have improved as well, as parts shortagesand production downtimes have been greatly re-duced and, in some cases, virtually eliminated.

CONCLUSIONS

Six Sigma principles and techniques can be ef-fectively used to drive completion of Lean Enter-prise objectives. Baxter Battery’s case amply il-lustrates the synergies between the two.

stores at some times and a variable or in-sufficient supply of plates at other times.Pull scheduling was thus recommended toimprove inventory management processes.It is a very effective and simple Lean pro-duction control tool that can be used tominimize working capital tied up in anycompany’s inventories. (See Exhibit 3 foran explanation of pull scheduling.)

2. Apply Lean SMED methodology to de-crease five-hour die changes in the com-pany’s pasting machines to a mere fourminutes per machine. SMED methodologyuses various techniques to dramaticallyreduce the amount of changeover time re-quired to service production machines asthey shift from performing one function toanother. In Baxter Battery’s case, doing thiswould greatly reduce battery manufactur-ing downtimes as well as improve processefficiencies and eliminate production bot-tlenecks that had occurred during lengthymachine changeovers in the past.

3. Improve the company’s communicationssystem to achieve better contact and com-munication between Baxter’s Pasting andAssembly Departments. The two Leanproduction-control tools recommended forthis purpose were Kanban and Andon sys-tems. The Kanban system uses simple cardsto strictly control production amounts. Thecards are attached to containers of parts andlocated at key steps or work points in man-ufacturing processes. They contain infor-mation about “Previous operation,” “Nextoperation,” and number of parts in the con-tainer. The cards regulate pull schedulingby signaling upstream production and de-livery. The Andon (the Japanese word for“lantern”) system uses visual displays inproduction areas (typically illuminatedoverhead signs) to show production statusand alert workers to potential problems.

The team first applied the recommended Leanapproaches to managing material flow in a smallpilot process area (the plate manufacturing and as-sembly area). As the team experienced success, itquickly began to apply these techniques to all othermanufacturing and nonmanufacturing processes in

Page 10: Implementing Lean principles with the Six Sigma advantage: How a battery company realized significant improvements

JOURNAL OF ORGANIZATIONAL EXCELLENCE / Summer 2003

52 Udit Sharma

There are many advantages to using StrategicSix Sigma principles in tandem with Lean Enter-prise techniques. While Lean enterprise tech-niques can lead to quick process improvements,it is sometimes difficult for a company to trans-late or leverage such improvements enterprisewidebecause no infrastructure exists to do so quicklyand efficiently. By introducing Six Sigma princi-ples into the improvement mix, however, it be-

comes possible to put in place a business processframework with which to leverage benefits in oneprocess to other processes in an organization. In-deed, the strategic use of Six Sigma principlesand practices ensures that process improvementsgenerated in one area can be leveraged elsewhereto maximum advantage, resulting in quantum in-creases in product quality, process improvement,or corporate earnings performance. �