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Reducing Process Costs with Lean, Six Sigma, and Value Engineering Techniques by Jon M. Quigley, Kim H. Pries

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CHAPTER 1 – Introduction
I. The Use of Rubrics
For most of our chapters, we have a rubric at the very start. The idea of the rubric is
to indicate levels of competence required to perform the task outlined in that chapter.
We use rubrics in our company for many situations where we have to perform some
kind of evaluation.
II. Questions to Ponder
What are the benets to the company to have annual cost improvement activities
and targets?
What is value? How do you maximize value?
How does my company value cost improvement successes?
What is my company’s cost improvement philosophy?
Where are the products or services of your organization in the life cycle model?
How do you know what stage of the life cycle you are in?
What exercises does my company do to generate cost improvement ideas?
What is cost avoidance? Provide three examples of cost avoidance at your
company.
What is the difference between revenue improvement and cost improvement?
What is the role of marketing in generating revenue improvement? How quickly
do we see the results of our marketing efforts?
Is it possible to improve the cost without negative impact to quality?
Provide an example of a cost improvement exercise you were part of that eroded
the product quality.
How does sales volume impact our costs? How does outsourcing impact our
costs?
At what point in the product (or service) life cycle are cost improvement efforts
best served?
III. Cost Improvement Scenario
A. Situation
An instrument cluster recently released from production is experiencing high zero
kilometer rates. Zero kilometer failures are anomalies found at the manufacturing
facility. The vehicle has not traveled any distance. The failures can be found throughout
the vehicle manufacturing process. The contractual obligation was to have a part per
million (ppm) failure rate of less than 500 ppm. Currently, the failure rate is well above
20,000 ppm.
2 Reducing Process Costs with Lean, Six Sigma, and Value Engineering Techniques
B. Objective
The objective is to reduce the failure rate at the installation site of the product into
the vehicle.
C. Action
A cross-functional team consisting of the supplier engineering, manufacturing
personnel and engineering at the customer was put together. The faults reported at the
installation site (vehicle manufacturer) were recorded on a weekly basis. We could see
the symptom of the failures and where these failures were in the process these failures
were reported.
From this weekly report we came to see some of the problems were due the vehicle
manufacturers material handling. We scheduled a review of the vehicle manufacturers
material handling processes with the supplier. We found a number of handling issues
that were easily corrected, one of which resulted in a packaging improvement, which
was also a cost reduction.
D. Results
The fault frequency was reduced from 20,000 ppm down to approximately 2,500
ppm. Note that we went from approximately 3.6 sigma to 4.4 sigma—not Six Sigma
yet, but a decided improvement!
E. Aftermath
At the end of the exercise, the remaining signicant failure was around a Bourdon
tube air gauge. The air gauge was a pneumatic/mechanical device. Each instrument
cluster had at least two of these gauges, and 30% of the vehicle builds had three of
these gauges. The supplier of the gauges indicated the failure rate for one gauge was
500 ppm (approximately 4.8 sigma). This meant that the target for the entire cluster
of 500 ppm was not feasible since there were at least two of these air gauges in each
instrument cluster.
Eventually, the customer came to realize this deciency and moved from these
mechanical gauges to a more reliable transducer and analog signal to the instrument
cluster with stepper motor gauges.
IV. A Brief Overview of Value Engineering
V. Product Life Cycle
Any product or service will start with some kind of development process, which
may be a matter of days or a matter of years, depending on the complexity of the
product or service (see Figure 1.1). Once the product is launched, the product has
a metaphorical lifetime, terminated by retirement and a kind of product or service
“death.” If we are especially creative, we may be able to produce another product or
service that will have another discrete life cycle to continue our previous product or
service. Thus starting the process all over again.

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