Service revamp lean six sigma black belt project

SERVICE REVAMP
Supply Chain overhaul
Lean Six Sigma Black Belt Sample Project
Sumit K Jha (MBA (Fin), LSSGB, PMP®)

Flow of the Presentation


Define



Measure



Analyze



Improve



Control

Define Measure Analyze Improve Control

Business opportunity

Project cycle time schedule variance

x1- Purchase
schedule variance

x2-Warehouse
schedule variance

x3- Delivery
schedule variance

x4- Installation
schedule variance


Team Charter
Project Title- Service Revamp
Business Case
XYZ executes multiple projects for its clients. Timely delivery of goods
according to the specification is paramount for the business success of
XYZ. Timely delivery is measured in terms of total project cycle time. The
project starts with getting an order from the client. The date of delivery is
decided. The project goes through four key stages- 1) Purchase, 2)
Delivery, 3) Warehouse and 4) Installation. The increase in the total
cycle time leads to liquidated damages, which can be severe in the
industry that XYZ operates in.
Goal statement
Metric
Current level
Goal / Target
Target date
Total project
-0.59
+ve
30th Jun 2013
schedule
variance mean
CPk
0.6
>1
30th Jun 2013

Phase
Define
Measure
Analyze
Improve
Control

Project plan
Start
End
st Feb 2012
1
29th Feb 22012
1st March
31st March
1st April
30th April
1st May
31st December
1st Jan
30th Jun

Opportunity Statement
Pain- Liquidated damages
Impact of pain in Rs. (or soft)- INR 5
crores per year

Sigma Level- 3.14
Project scope
Process under improvement: Project
execution

Starts with: Generation of purchase order
Ends with: Installation of equipments
Team Selection

Remarks
Done
Done
Done
Done
Done

Champion:: CEO
GB / BB: Mr. Sumit K Jha
Member: Plant Head
Member: Production manager


Critical to Quality and Critical to Process Chart
Critical to Quality Critical customer
Customer
requirement
issues
Installation on
Timely installation Late delivery
time

Voice of
business
Project not
executed on
time

Business
issues
Liquidated
damages due
to late
installation

Voice of
customer
Goods not
delivered on
time
No customer
Installed
Installed
Customer
complaints
equipment should equipment not complaints
regarding
give pre-stated
working properly regarding
specification not performance
quality
met
increasing
Critical business
Critical for
requirement
processes
On-time installation Project cycle
time brought
within the
customer
specification

Remark
1. Voice of customer and voice of business to be prioritized to those which are related to project objective
2. Use VOB or VOC or both depending on the project objectives


SIPOC DIAGRAM- Purchase
Starting point: Consignment inward
Supplier
SCM SPOC
SCM SPOC
SCM SPOC

SCM SPOC

End point: Delivery task assignment

Input
Process
Approval Data
After approval, SCM releases a Purchase order based on the
Entry in AX / XYZ
approval
MIS
Data Entry in AX / In case of other than back to back orders, get confirmation from
XYZ MIS
the distributor for releasing their internal PO to OEM
Data Entry in AX /
SCM determines date and address of delivery from the vendor
XYZ MIS
SCM updates date of delivery to all stakeholders through email
and on Google docs. Exact date of delivery is not in hands of
SCM and thereby SCM will update tentative date to all
Data Entry in AX /
stakeholders.
XYZ MIS
- Raw material required for production
- Peripherals (SCM to fix date of deliery with Vendor in such a
way that it is stayed for least amount of time at warehouse).
SCM also update delivery address.

Output

Customer

PO

Vendor

Actionable Data Entry
Vendor
in AX / XYZ MIS
Vendor
in AX / XYZ MIS

System
in AX / XYZ MIS

Data Entry in AX / At this stage, Zonal hubs are not in place and thereby cannot be Actionable Data Entry
System
XYZ MIS
made at hubs. Also, because of logistics concerns, delivery to in AX / XYZ MIS
customer's address directly is also difficult. Processes for above
two options can be made once SCM starts implementing it.
Based on tentative delivery date, Projects team to send an email
Data Entry in AX / to Commercial team for Performa Invoice preparation date.
Actionable Data Entry Commercial
Project SPOC
XYZ MIS
Performa Invoice should be available with Logisitics SPOC 7
in AX / XYZ MIS
team
days before DC date.
SCM SPOC


SIPOC DIAGRAM- Warehousing
Starting point: Consignment inward
Supplier

Input


Process
Output
Customer
On receipt of material at Warehouse gate, Security checks for
Material /
Security
documents, condition of goods, and allow the goods to be taken Data Entry in AX / XYZ
Consignment
Transporter
personnel
inside after making entries in the Security material inward register MIS
inward
and stamping the documents.
In case of any damage or short receipt of goods, security SPOC
immediately informs warehouse supervisor / executive.
Security
Data Entry in
Data Entry in AX / XYZ Warehouse
Supervisor mentions the fact on acknowledgement and POD and
personnel AX / XYZ MIS
Supervisor
MIS
gives copies to transporter. However, security will inward all
material. SCM to do Purchase return on a later date.
Warehouse Data Entry in
Data Entry in AX / XYZ
SCM SPOC
Supervisor executive inturn informs SCM about the damage.
Supervisor AX / XYZ MIS
MIS
Data Entry in SCM SPOC initiates discussion with supplier and finance for
Actionable Data Entry Supplier /
SCM SPOC
Finance team
AX / XYZ MIS insurance claim depending upon price of the damaged item.
in AX / XYZ MIS
Warehouse SPOc completes barcode scanning activity and
Warehouse Data Entry in
NA
verifies the serial numbers mentioned on documents received with
SPOC
AX / XYZ MIS
in AX / XYZ MIS
material. Incase of any discrepancy, informs to SCM spoc.
Warehouse Data Entry in Warehouse executive generate goods receipt note after checking Actionable Data Entry
NA
Executive AX / XYZ MIS purchase order details.
in AX / XYZ MIS
Warehouse Data Entry in Warehouse executive sends all original documents to SCM at
SCM SPOC
Executive AX / XYZ MIS corporate office and keeps a copy of it for their record.
in AX / XYZ MIS
Warehouse Data Entry in Physical transfer of packed goods from Stores to Logistics
Actionable Data Entry Logistics
Executive AX / XYZ MIS Warehouse
SPOC
in AX / XYZ MIS
Data Entry in Status of SO will change to " Dispatched" and Delivery task is
System
System
AX / XYZ MIS automatically assigned to Logistics SPOC
in AX / XYZ MIS


SIPOC DIAGRAM- Delivery
Starting point: Material Consignment
Delivery Challan (DC) courier
Supplier

Input
Material
Consignment DC

End point: End customer update

Process
Output
Customer
Warehouse SPOC will courier DC to the Zonal Data Entry in AX /
Project SPOC
Zonal head
Head of relevant region once DC is generated. XYZ MIS
Zonal head receives DC document. The Zonal
Head manually assigns the task to the
Actionable data entry
Zonal head
Engineer
in AX
Actionable data entry available Zonal engineer for Permit
Documentation
in AX
Engineer coordinates with consultant for
Actionable data entry
Engineer
Consultant
Actionable data entry Permit document preparation. Refer road
in AX
permit process for details.
in AX
Actionable data entry Zonal head / Engineer couriers the Permit to Actionable data entry
Zonal head
Courier
material delivery address
in AX
in AX
Material
Receipt of material at
Material delivered via Transporter
transporter location Transporter
Logistics SPOC Consignment
Material Receipt
Docket number of Delivery entered in AX &
Data Entry in AX /
Google docs
XYZ MIS
Logistics SPOC Note / POD / DC
System
Material
Transporter delivers Material to end customer Delivery of
Customer/Wareho
Consignment
location
Consignment
Transporter
use
Data Entry as per
Transporter updates the POD in website
MIS in Transporters'
POD
against LR no/Docket no
portal
Transporter
System
Tracking the booked On availability of POD date, SCM SPOC to
Data Entry in AX /
consignment no
update the AX.
XYZ MIS
SCM SPOC
AX


SIPOC DIAGRAM- Installation
Starting point: Material Delivery alert
Supplier
Project SPOC

Input
Material Delivery
alert in AX
Actionable data
entry in AX

Project SPOC
Call center
Tele calling
SPOC
Zonal head /
Actionable data
Support Manager entry in AX
Service engineer Actionable data
entry in AX
Service engineer HIR Data Entry
Service engineer HIR Data Entry


Process
Output
Project Team SPOC to retrieve a dump of updated POD file from Actionable data entry in
AX
AX
Actionable data entry in
Project SPOC to forward the dump to Call centre SPOC
AX for Telecalling
Call centre SPOC telecall on POD sites to check for site
Appointment with
readiness
customer
The zonal Head assigns task to engineer

Engineer goes to Customer site for installation. If the material is
partially delivered, Zonal SPOC to take a call on whether engineer Customer visit
will visit the site for installation or will wait till full delivery is done.
Engineer installs
HIR Data Entry
Engineer carries an HIR form
HIR Data Entry
Customer Acceptance
Customer Signs on physical HIR form
of installed material

Customer

HIR Data Entry

Service engineer

Data Entry in AX / Engineer calls up Zonal head / SD (Service delivery SPOC) &
XYZ MIS
provides HIR number against SO number

Zonal head / SD
Data Entry in AX / Zonal head / SD (Service delivery SPOC) uploads the scan HIR
(Service delivery
XYZ MIS
on FTP
SPOC)
Call Centre
SPOC

Tele calling

Service SPOC

Telecall

Service SPOC

Feedback Rating

Service SPOC

Feedback Rating
AnalyXYZ

Customer visit

Call Centre SPOC pulls dump form the FTP and uploads in
system and flashes report

Customer
AX
Call center
SPOC
Customer
Service
engineer
Customer
Customer
HIR form
HIR form

Zonal head / SD
(Service
MIS
delivery SPOC)
Actionable data entry in FTP
AX for Telecalling
All stakeholders
MIS and feedback
/ AX
verification

Call center executive calls on the same / next day of HIR date /
Feedback
Issue resolved date
Call center SPOC to take CSAT on set of parameters (parameters
Feedback Verification
to be defined)
Call center SPOC to collate the score of every monthly and sends Decision Making /
it to all stakeholders.
Actions taken

Customer
Customer
Stakeholders


Pugh Matrix
Sr.No
Criteria / Objectives
1 Total project cycle schedule variance

CTC
9

CTQ
9

CTK
3

CTG
9

Sum
30

2

Installation schedule variance

9

9

3

9

30

3

Delivery schedule variance

3

9

9

9

30

4

Warehouse schedule variance

9

3

9

9

30

5

Purchase schedule variance

9

9

9

9

36

6

Procurement schedule variance

9

1

9

9

28

7

Defect Density in production

9

3

9

3

24

8

No display defect %

9

9

9

3

30

9
10

Electro-static Density (ESD)
Torque

9
9

3
9

9
1

3
3

24
22

11

Procurement Quality

9

9

3

9

30

12

Skill Index (Manufacturing unit)

9

1

1

9

20

13

Collections cost planned vs. actual

9

1

3

3

16

14

Warehousing cost planned vs. actual

9

3

1

1

14

15

Delivery cost planned vs. actual

9

3

1

1

14

16

% units delivered vs. ordered

3

3

1

3

10

17

Installations cost planned vs. actual

9

1

3

3

16

Define

Measure Analyze Improve Control

Fishbone analysis (Cause and Effect Diagram)
Major Categories of causes of Problem Statement

Define


Ishikawa Diagram (Cause and Effect Diagram)
Major Categories of causes of Problem Statement

Define


Data Measurement Plan
Organizational Measure
process
s/UOM
Total Project
cycle time
schedule
variance

Ratio

X1

Purchase
schedule variance

Ratio

X2

Warehouse
schedule variance

Ratio

X3

Delivery schedule
variance

Ratio

Installation
schedule variance

Ratio

Y

X4

Operational definition

Planned number of days Actual number of days
/Planned number of days

Data source

Measurement Organizational / Controllable/
Frequency
Project Level Uncontrollable

As per Project Organization/
Plan
Project

Controllable

AX
AX

Monthly

Organization/Pro
Controllable
ject

AX

Monthly

Organization/Pro
Controllable
ject

AX

AX

As per Project Organization/Pro
Controllable
Plan
ject
As per Project Organization/Pro
Controllable
Plan
ject

Define


Validation of Xs
Regression analysis
Regression Analysis: TT versus Del, Warehouse, Installation, Purchase
The regression equation
is
TT = 0.0367 + 0.477 Del + 0.418 Warehouse + 0.0389
Installation
+ 0.0059 Purchase
Predictor
Coef SE Coef
T
P
Constant
0.036663 0.007122 5.15
0.000
Del
0.47732 0.02402 19.88 0.000
Warehouse
0.41843 0.02402 17.42
0.000
Installation -0.03893 0.01459 -2.67 0.008
Purchase
0.00587 0.01459 0.40 0.687
S = 0.0490296

R-Sq = 72.3%

R-Sq(adj) = 72.2%

Analysis of Variance
Source
DF
SS
MS
F
P
Regression
4 8.1775 2.0444 850.44 0.000
Residual Error 1302 3.1299 0.0024
Total
1306 11.3074
Source
DF Seq SS
Del
1 7.4316
Warehouse
1 0.7283
Installation 1 0.0172
Purchase
1 0.0004
Inference
Delivery ,Warehouse and Installation are most significant x's to the Y of Total project cycle time schedule variance

Define


Hypothesis testing

Hypothesis testing / ANOVA
Purpose : To test the Hypothesis derived during the measure phase out of the data and CE diagrams

Null Hypothesis, H0 :

Alternate Hypothesis, H1 :

Q4 mean = Q8 mean

Q4 mean < Q8 mean

Define


…1/2

List Possible Solutions
Sl
Area
No.

Potential Area for
improvement

Root Cause

Suggested Action Points

1

Installation

Delay in Installation of
Material at customer site

Manpower
Shortage

Pre planning of deployment of engineers for
installation on the Dispatch date ( Estimated time of
travel and task completion documented)

2

Installation

Installation

Manpower
Shortage
Manpower
Shortage


Manpower
Shortage

The average Timeline for
delivery of material (receipt of
material at Parwanoo
Warehouse) is significantly
higher than the target.
Delay in delivery of Material
to XYZ warehouse from
Suppliers/OEM’s
Delay in delivery of Material
to XYZ warehouse from
Suppliers/OEM’s

Manpower
Shortage
Manpower
Shortage
Manpower
Shortage

3
4

Installation

5

Installation

6

Installation

7

Installation

8

Warehouse

9

Warehouse

10

Warehouse

11

Warehouse

12
13

Delay of Material at
Warehouse
Delay in Material delivery
Warehouse
timeline ( Supplier )
Delay in Material delivery
Warehouse timeline ( Supplier )

Low
Easy to
Visible
Manpower
Capital
implement short term RPN
Utilization
utilization
and cascade benefits
9

9

9

9

36

9

9

9

9

36

1

9

3

3

16

1

9

3

3

16

1

9

3

3

16

1

9

3

3

16

1

9

3

3

16

Delay in permit Strict adherence Online permit documentation started
documentation for some states.(Karnataka , Andhra, WB, Orrisa ,MP)

9

3

9

9

30

Delay in permit Circulation of pending DC status to Zonal SPOC for
documentation permit documentation.

9

9

9

9

36

Delay in permit Permit documentation activity to start with XYZ PO
documentation generation

1

9

3

3

16

1

9

3

3

16

1

9

3

3

16

1

9

3

3

16

Delay in permit
documentation
Delay in permit
documentation

Product trainings conducted for engineers
Auto assignment of tasks to Engineer task force via AX
HHHT terminals to be carried by Engineer for
generation of online HIR with intimation to XYZ for
installation
Auto Material issue and replacement on request by
engineers with triggers and escalation
GPS tracking of engineers by the Zonal head for
optimum utilization of resources
Contract based manpower planning model to be
worked out for remote locations

Automation of Permit documentation task assignment
via AX
Triggers and escalations to be incorporated based on
the Task assignment module

Delay in permit Development of registered office premises al all
documentation strategic location to avoid permit documentation

Define


…2/2

List Possible Solutions
Sl
No.

Area

14

Delivery

15

Delivery

16

Delivery

17

Delivery

18

Delivery

19

Delivery

Delay by
transporter

20

Delivery

Delay by
transporter

21

Delivery

22

Delivery

23

Delivery

24

Delivery

25

Delivery

Root Cause
Delay by
transporter
Delay by
transporter
Delay by
transporter
Delay by
transporter
Delay by
transporter

Delay by
transporter
Delay by
transporter
Delay by
tranporter
Delay by
transporter
Delay by
transporter

Suggested Action Points

Easy to
Low Capital Manpower
Visible short
implement and
RPN
utilization Utilization
term benefits
cascade

Proper Monitoring and tracking by phone and mail

9

9

9

9

36

Daily tracking of material from Transporters website

9

9

9

9

36

Flashing of transporters tracker to transporter to
transporter in order to deliver

9

9

9

9

36

MIS report from transporters to track material

9

9

9

9

36

9

9

9

9

36

1

9

9

1

20

1

9

9

1

20

1

9

9

1

20

1

9

9

1

20

1

9

9

1

20

1

9

9

1

20

1

9

9

1

20

Timely up-dation of POD by monitoring of
transporters website
Synchronization of XYZ AX with transporters
website to flash delivery reminders to transporter
and online updating of the POD
HHHT terminals to be carried by Transporters
SPOC for generation of online POD with intimation
to XYZ for installation
SLA based payment deduction form transporters
Payout
SLA's to be incorporated in the agreement for every
transporter
Deduction form transporters payout in case of
Damaged delivery
Strict SLA adherence in case of DOA and Wrong
delivery
GPS tracking of every transporter truck to be
informed on the status of all deliveries

Define


Technology led efficiency and effectiveness
improvement


XYZ decided to streamline the activities with the help of ERP
solution. The process maps have been created to restructure the
activities and bring more efficiency within them



Technologies such as handheld devices to capture the information
from the vouchers has been created. It has the capability to
transmit the data that can be easily fed into the ERP



This has allowed for the information flow to be quick and precise.
Most of the delays that were happening earlier was due to late and
imprecise information flow

Define


Normality tests and control charts
Process capability of total project schedule variance
(Jul 2012 to Sep 2012)

Define


Box plot
Boxplot of total project schedule
variance (Apr 2013 to June 2013)

Value plot (Q4- Apr 2012 to Jun
2012, Q8- Apr 2013 to Jun 2013)

Define


Normality tests and control charts
Test carried out : Hypothesis testing [ One sample / t test / Paired etc., ] / One way ANOVA /
Two way ANOVA

Probability plot of project schedule
variance (Mar 2013 to Jun 2013)

IMR for project schedule variance
(Mar 2013 to Jun 2013)

Define


Process Capability - Total Project Cycle Time
Process capability of total project schedule
variance (Mar 2013 to Jun 2013)

•
•
•

The Process Capability has
increased from 0.8 to 1.11 .
The process control chart is stable
with no outliers in Individual Chart .
Therefore there has been a
considerable improvement in the
process

Define


Project Benefit
Initial estimate / COPQ: INR 168 lacs
Project Name

Service Revamp

Black Belt (Candidate)

Sumit K Jha

Financial Benefits

(Numbers in INR lacs)

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

Direct savings (Liquidated
damages)

5

15

30

40

90

Increased revenues

-

15

20

23

58

Reduced costs

-

2

5

7

15

Working capital changes

-

1

1.7

2.4

5.1

Investment/ loan changes

-

-

-

-

Total

5

33

56.7

72.4

Non-Financial Benefits

Improved csat score
Signature

Approvals

MBB Name

XYZ

Date
Champion Name

CEO

Date
Finance Name

CFO

Total

168.1

Define


Conditions Worksheet
Initial estimate / COPQ: INR 168 lacs
Project Name
Black Belt (Candidate)
Financial Benefits

Calculation formulas
Approvals

Service Revamp
Sumit K Jha
1)
Reduction in liquidated damages, which is levied if the goods are not
delivered in time. The liquidated damages have come out to be less than INR
2)
10 lacs in the control phase.
3)
4)
1)
Sum of (Project delivered late* % liquidated damages clause in the project)
2)
Signature
MBB Name
XYZ
Date
Champion Name
CEO
Finance Name
CFO

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