SIX SIGMAOVERVIEW

Six SigmaSix Sigma

““Six Sigma” refers to tools, Six Sigma” refers to tools, processes and cultures made processes and cultures made famous by Motorola and General famous by Motorola and General Electric in the 1980s and are Electric in the 1980s and are aimed at reducing variability and aimed at reducing variability and defects.defects.

Six Sigma OriginsSix Sigma Origins

Motorola deployed Six Sigma Motorola deployed Six Sigma Methodology in 80’sMethodology in 80’s

In1981, Motorola set out to improve In1981, Motorola set out to improve the quality of their products and the quality of their products and services tenfold.services tenfold.

In 1988, accepted Malcolm Baldrige In 1988, accepted Malcolm Baldrige National Quality Award, and began National Quality Award, and began the Six Sigma Quality movement.the Six Sigma Quality movement.

Motorola ExperienceMotorola Experience

Between 1983-87: spent $70 Million on Between 1983-87: spent $70 Million on quality related education.quality related education.

Productivity increased average of 12.3%/yr.Productivity increased average of 12.3%/yr. Cost of Quality reduced by more than 84%.Cost of Quality reduced by more than 84%. 99.7% of in-process defects eliminated.99.7% of in-process defects eliminated. $11 Billion in manufacturing costs saved.$11 Billion in manufacturing costs saved. Average annual compounded growth rate of Average annual compounded growth rate of

17% in earnings, revenues and stock prices.17% in earnings, revenues and stock prices.

Six Sigma ApplicationsSix Sigma Applications

Manufacturing , Service, Manufacturing , Service, Chemical, Financial..Chemical, Financial..

High or low volume.High or low volume. Thousands, Millions or Billions in Thousands, Millions or Billions in

Revenue.Revenue. Even Non-Profit Organizations.Even Non-Profit Organizations.

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GE ExperienceGE Experience

GE ExperienceGE Experience

Capacity improvements of 12-18%.Capacity improvements of 12-18%. Rise in operating margin to 16.7%.Rise in operating margin to 16.7%. $750 millions in savings.$750 millions in savings.

GE plasticsGE plastics

Reduced color variation in plastic Reduced color variation in plastic products.products.Raised quality from 2 sigma to 4.9 Raised quality from 2 sigma to 4.9

sigma over 4 months.sigma over 4 months.Saved $400,000 a year for one plant. Saved $400,000 a year for one plant.

(ref GE Way).(ref GE Way). In 1996, first year of Six Sigma In 1996, first year of Six Sigma

deployment, GE Plastics achieved deployment, GE Plastics achieved benefits of $20 million benefits of $20 million

GE Medical SystemsGE Medical Systems

Developed a new Developed a new UltrasoundUltrasound technology which allows medical technology which allows medical personnel to more Cleary diagnose personnel to more Cleary diagnose risk factors contributing to stroke.risk factors contributing to stroke.

Technology became available two Technology became available two years earlier than otherwise years earlier than otherwise possible, due to GE's Design for possible, due to GE's Design for Six Sigma deployment.Six Sigma deployment.

Other Six Sigma Other Six Sigma Industry LeadersIndustry Leaders

Boeing, IBM, Bombardier, Asea Boeing, IBM, Bombardier, Asea Brown Boveri, DuPont, Kodak, Brown Boveri, DuPont, Kodak, Compaq and Texas Instruments.Compaq and Texas Instruments.

GMAC Mortgage, Citibank, JP GMAC Mortgage, Citibank, JP Morgan and Cendant Mortgage.Morgan and Cendant Mortgage.

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Integral MQS Integral MQS AchievementsAchievements

Sample of Six Sigma Projects Implemented

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Project 1: Project 1: Optimization of Optimization of

Calcium AdditionCalcium Addition

Project 1: Project 1: Optimization of Calcium Optimization of Calcium

AdditionAddition

• EFS loss of 1,481,544 L.E per year due to the uses of the heated Calcium-wire after Calcium optimization.

• The process current sigma level is 2.15

Opportunity Statement: Opportunity Statement: ((Problem DefinitionProblem Definition))

• Reduce defects percentage from 25% to 11% by July 2006.• Reduce revenue losses by 740,772 L.E.• Improve process Sigma level to 3.69 sigma.

Goal Goal Statement:Statement:

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ProjectProject 2: 2:Reduce Casting Reduce Casting

TimeTime

ProjectProject 2: 2:Reduce Casting TimeReduce Casting Time

• Achieve the average process time

• Save annual revenue loss of LE 20,000,000.

• Increase productivity.

• Improve On-Time Delivery.

• Improve Employee Morale.

• Improve Flexibility & Reduce Production Interruption.

• Currently the Variable operation process current sigma level is 2.49, if it increased to 3; So there will be 0.51 increase in sigma level.

Opportunity Statement: Opportunity Statement: ((Problem DefinitionProblem Definition))

Goal StatementGoal Statement

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Project 3: Width Project 3: Width Drop DefectDrop Defect

(Project Charter)(Project Charter)

Project 3: Project 3: (Project Charter)(Project Charter) Width Drop Defect Width Drop Defect

Business Case:Business Case:

The Width Drop defect beside causing The Width Drop defect beside causing an annual revenue loss of 6,704,422.50 an annual revenue loss of 6,704,422.50 L.E., it causes rework and production L.E., it causes rework and production disturbance and it might cause a delay disturbance and it might cause a delay in finished product delivery. By in finished product delivery. By reducing this defect, the company will reducing this defect, the company will improve its financial performance, improve its financial performance, increase productivity and deliver increase productivity and deliver finished product on time.finished product on time.

Opportunity Statement:Opportunity Statement:

Currently, in EFS, there are 0.62% Currently, in EFS, there are 0.62% defective Coils due to width drop defective Coils due to width drop after the hot strip Mill process. after the hot strip Mill process. This represents a revenue loss of This represents a revenue loss of 6,704,422.50 L.E. per year. The 6,704,422.50 L.E. per year. The process current sigma level is 3.76process current sigma level is 3.76

Project Goal :Project Goal :Reduce the cost of width drop defect by Reduce the cost of width drop defect by 6,033,979 LE 6,033,979 LE Improve process Sigma level from 3.76 to Improve process Sigma level from 3.76 to 4.54 sigma.4.54 sigma.Improve Delivery on time.Improve Delivery on time.Reduce production interruption.Reduce production interruption.Improve employee morale.Improve employee morale.Increase Customer satisfaction.Increase Customer satisfaction.

Project Scope:Project Scope:HSM Operation Process:HSM Operation Process:

1.1. HSM: Start with slabs and ends HSM: Start with slabs and ends with Hot Rolled Coils (HRC).with Hot Rolled Coils (HRC).

2.2. The Project scope is to control The Project scope is to control the width drop which occurred the width drop which occurred in the Hot Strip Mill.in the Hot Strip Mill.

Time Schedule & Project Plan: Time Schedule & Project Plan: Activity From ToActivity From To

Define Phase 15/01/2006 Define Phase 15/01/2006 15/02/200615/02/2006

Measure Phase 15/02/2006 Measure Phase 15/02/2006 30/04/200630/04/2006

Analyze Phase 01/05/2006 Analyze Phase 01/05/2006 15/05/200615/05/2006

Improve Phase 15/05/2006 Improve Phase 15/05/2006 30/06/200630/06/2006

Control Phase 01/07/2006 Control Phase 01/07/2006 10/07/200610/07/2006

Team Selection: Team Selection: Dr.Gamal Megahed Sponsor TD ManagerDr.Gamal Megahed Sponsor TD Manager

Nabil Douban Black BeltNabil Douban Black Belt

Ahmed Nabil Adhoc Financial Ahmed Nabil Adhoc Financial ManagerManager

Usama Ahmed Member HSM Process Usama Ahmed Member HSM Process EngineerEngineer

Mohammed Awad Member HSM Mohammed Awad Member HSM Production Eng.Production Eng.

Mohammed Ibrahim Member Quality Control Mohammed Ibrahim Member Quality Control Eng.Eng.

Ahmed Attala Member Automation Ahmed Attala Member Automation EngineerEngineer

Niraj SinghNiraj Singh Member SKP in Charge Member SKP in Charge

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Improve Sales Order Improve Sales Order cycle and Scrap cycle and Scrap

Products Due To ExpiryProducts Due To Expiry

1- Definition of key terms1- Definition of key terms Return GoodsReturn Goods:: The Returned Products which is stayed on the customer shelf The Returned Products which is stayed on the customer shelf

until expiration or any kind of defect.until expiration or any kind of defect. Returns InvoicesReturns Invoices:: The invoices which are totally returned, the customer did The invoices which are totally returned, the customer did

not accept any of it’s contents.not accept any of it’s contents. Partial R. InvoicesPartial R. Invoices:: The invoices which are partially returned, the customer The invoices which are partially returned, the customer

accepted some of it’s contents and returned the others.accepted some of it’s contents and returned the others. Contract Contract : : Local or exportation tenders.Local or exportation tenders. Sales Sales :: The Net sales (Total Sales – Returns)The Net sales (Total Sales – Returns) Sale order cycle: From Salesman visits schedule, physical visit, Sale order cycle: From Salesman visits schedule, physical visit,

order taking, order follow-up, order delivery to on shelf products order taking, order follow-up, order delivery to on shelf products follow-upfollow-up

ScrapScrap :: The Executed Finished Products The Executed Finished Products Scrape due to expiry date:Scrape due to expiry date: The scraped products due to The scraped products due to

exceeding the expiration date at the customer place.exceeding the expiration date at the customer place. ReworkRework: The needed work on returned products to reuse them: The needed work on returned products to reuse them CustomersCustomers: Pharmacies, Distributors, and others like hospitals, : Pharmacies, Distributors, and others like hospitals,

Health insurance, …Etc.Health insurance, …Etc.

2- Project Selection2- Project Selection

SalesSales

Net SalesNet Sales ReturnsReturns

Distributors PharmaciesPharmacies Distributors PharmaciesPharmacies

Invoice Returns Return GoodsReturn Goods

ReworkScrapeScrape

Due to ExpirationDue to Expiration

Others

At CompanyAt PharmacyAt Pharmacy

Other customers

OtherCustomer

Work Break Down Structure

Returned ProductsReturned Products

Returned productsReturned products

Contract R. partiallyContract R. partiallyContract R. partiallyContract R. partially Contract R. InvoiceContract R. InvoiceContract R. InvoiceContract R. Invoice Contract ReturnsContract ReturnsContract ReturnsContract Returns

Invoice R. partiallyInvoice R. partially Invoice ReturnsInvoice Returns Returned GoodsReturned Goods Returned GoodsReturned Goods

Why is this so important?Why is this so important?

6.0%2.0%

92.0%

CategoryNet SalesSamplesReturns

Sales Transaction % 2006

The Total returns represent 6 % from The Total Sales while the samples represent 2 %

Returned Goods Returned Goods (A Closer (A Closer Look)Look)

7% 11%0.00%

41%

21%

18%

0%

20%40%60%

80%100%

Contract R.partially

Contract R.Invoice

Contract R Invoice R.Partially

Invoice R. ReturnGoods

92%

6% 2%

Sales

Samples

Returns

FactsFactsCount

Perc

ent

Customer TypeCount

56.8 99.2 100.0

1221801 910889 16881Percent 56.8 42.4 0.8Cum %

OtherDistributersPharmacies

2000000

1500000

1000000

500000

0

100

80

60

40

20

0

Pareto Chart of Customer Type ( Returned Goods Units 2004 - 2006)

Almost 57% of Returned goods are from Almost 57% of Returned goods are from the pharmaciesthe pharmacies

Business CaseBusiness Case

The defect of returned products The defect of returned products based on expiry date cause loss based on expiry date cause loss of about of about 3,000,0003,000,000 LE per year. LE per year.

The current sale order form not The current sale order form not adequate for sales man adequate for sales man requirements.requirements.

Opportunity StatementOpportunity Statement

Currently ,the returned products Currently ,the returned products represent represent 18%18% from all returned from all returned

Products. But Products. But 82 %82 % from them from them goes to scrap This represent loss goes to scrap This represent loss of aboutof about

2.5 - 32.5 - 3 Million - L.E. per year. Million - L.E. per year.

FactsFacts

The Company gives about 2 % form The Company gives about 2 % form sales value assales value as

A Samples , so there is an A Samples , so there is an opportunity toopportunity to reuse the reuse the

Returned products if we have Returned products if we have control control on the products in the on the products in the marketmarket

Project ScopeProject Scope

The Sales Cycle From Getting the The Sales Cycle From Getting the Customer Order until TheCustomer Order until The Expired product ExecutionExpired product Execution

Project ObjectivesProject Objectives

1- Reduce the Expired products by 1- Reduce the Expired products by 1,000,0001,000,000 L.E. per year. L.E. per year. 2- Improve process sigma level from 2- Improve process sigma level from 0.60.6 to to 1.6 1.6 Sigma.Sigma. 3- Improve the return cycle.3- Improve the return cycle. 4- Improve Sales order cycle4- Improve Sales order cycle 5- Increase the customer 5- Increase the customer

satisfaction.satisfaction.

Project CharterProject CharterBusiness CaseBusiness Case

The defect of returned products The defect of returned products

Based on expiry date cause loss Based on expiry date cause loss of about of about 3,000,0003,000,000 LE per year. LE per year.

Opportunity StatementOpportunity Statement

Currently ,the returned products Currently ,the returned products

due to expiry date due to expiry date represent represent 18%18% defect defect from all returned Products The Company from all returned Products The Company Scrape about Scrape about 82%82% from them. This from them. This represent loss of aboutrepresent loss of about

3 M3 M L.E. per year. The current sigma level L.E. per year. The current sigma level 0.60.6

Project GoalProject Goal

1- Reduce the cost of returned 1- Reduce the cost of returned products by products by

1,000,0001,000,000 L.E. per year. L.E. per year.

2- Improve process sigma level from 2- Improve process sigma level from

0.60.6 to to 1.6 1.6 Sigma.Sigma.

3- Improve the return cycle.3- Improve the return cycle.

4- Increase the customer 4- Increase the customer satisfaction.satisfaction.

Project ScopeProject Scope

The Sales From Getting the Customer The Sales From Getting the Customer Order until The Expired product Order until The Expired product Execution.Execution.

Time ScheduleTime Schedule

Define 2 WeeksDefine 2 Weeks

Measure 2 WeeksMeasure 2 Weeks

Analyze 2 WeeksAnalyze 2 Weeks

Improve 1 Improve 1 MonthMonth

Control 1 Control 1 MonthMonth

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Thank YouThank You