Six Sigma: A Case Study on Product Cost Improvement

ABSTRACT

Manufacturing organization is well-known for its volume of production. Having processes in which errors or defects occasionally occur may not seem such a big deal. But considering the number of errors or defects that lurking in the entire processes within the manufacturing floor, the impact on overall productivity, customer satisfaction, and profitability multiplies dramatically. Therefore the Six Sigma approach is a problem solving method that uses human assets, data, measurements, and statistics to identify the vital few factors to decrease errors and defects while increasing customer satisfaction, productivity, and profit. This paper review some related literatures to describe the basic concept of Six Sigma and the major part will be a case study on the Six Sigma implementation in one of the product produced by an Original Equipment Manufacturer (OEM).

Keywords: manufacturing, Six Sigma, basic concept, case study.

INTRODUCTION

Six Sigma was conceptualized as a quality goal in the mid-80s at Motorola because technology was becoming so complex that traditional ideas about acceptable quality levels were inadequate. As the number of opportunities for defects increases, the percentage of perfection must rise.

A performance level of Six Sigma equates to 3.4 defects per million (Dr Jiju Antony, Banuelas Coronado, 2002) where sigma can be defined from statistic point of view as a process in which the range between the mean of a process quality measurement and the nearest specification limit is at least six times the standard deviation of the process (Hongbo Wang, 2008); shown as Figure 1.

Figure 1: Illustration of Six Sigma process

In relation with process capability, Six Sigma can be generalized into three cases:

Case 1: 6? < Upper Specification Limit (USL) – Lower Specification Limit (LSL)

This is the most desirable case since the process is in control and the tolerance limit is far greater than the process capability. Even if there is a shift in process average and the process is out of control but there are no waste produced. However if the process is getting out of control, corrective action still need to be taken. Figure 1 depicts Case 1.

Figure 1

Case 2: 6? = Upper Specification Limit (USL) – Lower Specification Limit (LSL)

This is a satisfactory case since the process is still in control. However if there is a shift in process average and the process is out of control, waste will be produced and corrective action need to be taken immediately. Figure 2 depicts Case 2.

Figure 2

Case 3: 6? > Upper Specification Limit (USL) – Lower Specification Limit (LSL)

This is an unacceptable case since the process is already out of control and corrective action is a must since the process is producing a lot of waste or defects. If this case happen, full inspection is necessary. Figure 3 shows Case 3 scenario.

Figure 3

METHODOLOGY

Six Sigma methodology uses statistical tools to identify vital few factors, the factors that matters most for improving the quality of processes and generating bottom-line results. It consists of five phases (DMAIC):

1. Define

• A phase where the project goals and deliverables to customer is determined.

2. Measure

• A phase where the product characteristics, measurement system evaluation, and capability estimation is identified.

3. Analyze

• A phase where the variables is evaluate and reduce through analysis and testing and identifies the vital few factors for process improvement.

4. Improve

• A phase where the relationship between the variable and vital few is discovered, operating tolerances is establish, and measurements will be validated.

5. Control

• A phase where the ability to control the vital few factors is established and process control systems being implement.

Basically DMAIC is a closed loop-process that eliminates unproductive steps, often focuses on new measurements, and applies technology for continous improvement (Hongbo Wang, 2008). Six Sigma approach is not rigid and it may vary depends on the respective organizations. For example, some organizations use all five phases while others do not applied the Define phase. The phase implementation is flexible so that it can suits the organization process. However in this paper we will look into all the five phases.

CASE STUDY

SNY (pseudonym) is one of the leading manufacturers of electronics, products for the consumer and prefessional markets. Their Video Design Centre which is located in Malaysia has been facing with challenges in terms of product cost. In order to compete in the worldwide DVD market, the team need to come out with a product that can maintain SNY quality but at a lower cost.

In 2003, price trend in USA shows that 70% of the DVD player in the market is below than USD99 whereas SNY DVD player's price is at USD129 (source SNY DVD Product Planning). Therefore the strategy is set so that the Video Design Team must reduce the material cost to be able to compete in the market and achieve USD99 price. Figure 4 shows DVD player market distribution from 2001 to 2004.

Figure 4

In order to achieve the target, the team has identified the solution which is they need to use a low cost material but at the same time maintaining SNY well-known quality and playability. For the next model, new device main processor and power supply has been introduced. All the five phases (DMAIC) in Six Sigma approach will be discussed in the next section.

DEFINE

The primary Critical-to-Quality (CTQ) for this project has been identified. Sales quantity target for the new product is expected to be 650,000 units and plan to be produced by July 2003. In order to achieve USD99 market price, the cost for the new device which is the main processor and power supply need to be in the range of between USD41.50 to USD47.50 since there will be about 23% increase in-terms of total number of parts in the product compared to the previous model. The quality target is to achieve 0.2% market quality issue.

From the project definition, Ishikawa diagram was created to identify potential factors causing an overall defect that will contribute to cost increase of the product. Figure 5 shows the Ishikawa diagram for this project.

Figure 5

In this paper, the Six Sigma method was apllied to improve and control the new main processor and power supply performance since these are the major factors that will determined the success of the project.

MEASURE

The measure phase in this project involved 3 area that need to be improved.

The first measurement is related to the voltage instability of the power supply unit. Basically there are 4 different voltages supply to the main board from the power supply unit. Three voltages which are 3.5V, 5.0V and -15.5V are already stable. However from the measurement done, it seems that the 8V supply is not stable. Figure 6 shows the results from the measurement.

Figure 6

The second measurement is related to power noise caused by the main board. From the measurement done, it seems that the power noise created by the main board reach -50dB noise margin (NM) which is not acceptable within SNY specification. The target is to achieve -60dB ? NM ? -70dB. Figure 7 shows the results from the measurement.

Figure 7

The third measurement is related to the radiation noise caused by the main board. The radiation noise was measured and from the measurement it shows that the radiation noise level was at 1.6dB. The new target is to achieve minimum radiation noise level of 4dB.

ANALYZE

Based on all the measurements done, three Ishikawa diagrams were created referring to each area.

The first analysis done by the power supply team was to identified the vital few factors that can improve voltage instability of the power supply unit. Five factors have been identified which is parts, environment, human factor, and surface mount machine. And from the analysis,