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Improving Your Bottom Line

Kentucky manufacturers play a vital role in the national economy, contributing 13% to GDP and employing around 14.3 million. However, they face challenges like rapid technological advancements and global competition. To thrive, companies must embrace innovation, productivity, and speed. KMAC offers essential tools such as Lean Manufacturing, Six Sigma, and strategic planning to drive performance improvements. With proven results including increased sales, cost savings, and new investments, KMAC is dedicated to strengthening Kentucky's manufacturing sector and ensuring a competitive edge in the global market.

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Improving Your Bottom Line

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  1. Improving Your Bottom Line Making Kentucky manufacturers more competitive

  2. Why Manufacturing? • 13% of the nation’s total Gross Domestic Product (GDP) • Nearly 14.3 million employees • Average annual wage of $45,916 • Conducts two-thirds of all private sector R&D • Every $1 in manufactured goods generates an additional $1.43 worth of economic activity

  3. Competitiveness Challenges • Rapidly advancing technology • Customer demands – faster, better, cheaper • Offshore competition from low wage countries • China’s average wages are: • 25% of Mexico’s • 10% of Hong Kong & Taiwan’s • 3% of U.S.’

  4. How Will Firms Compete? It’s all about ... Innovation …Productivity …Speed

  5. 2 Key Tools for Competitiveness Lean Manufacturing / Lean Office Six Sigma

  6. KMAC • Mission: Increase the competitiveness of Kentucky manufacturers • Private, not-for-profit corporation • Statewide operations • Industry-driven Board of Directors • Kentucky affiliate of the national Manufacturing Extension Partnership (MEP) program

  7. Productivity Improvement • Lean Manufacturing / Lean for the Office • Facilities Planning & Layout • Process Improvement • Problem Solving Training • Employee Development • Team Building & Team Leader Development

  8. Quality Improvement • Quality Systems • ISO and QS/TS Standards • Six Sigma • Statistical Process Control • Poka-Yoke / Error Proofing

  9. Product Improvement • New Product Development • Accelerate to Market for Small & Medium Enterprises (ATOM-SME) • Value Engineering / Design for Manufacturability

  10. Business Improvement • Strategic Planning • Meeting Facilitation • Performance Measurement • Financial Planning

  11. Benefits • Expertise • Staff of seasoned manufacturing professionals • Results • Proven track record will all types of industry • A national leader among MEP Centers for delivering quantifiable, bottom-line impacts to clients • Value • Clients realize significant returns on their investments in KMAC services

  12. FY06 Client-Reported Results • Increased Sales: $21 Million • Retained Sales: $12 Million • Annual Cost Savings: $4.8 Million • New Investment: $27 Million

  13. Lean Manufacturing Lean Office

  14. What is Lean? A systematic approach to identifying and eliminating waste (non-value added activities) through continuous improvement by flowing the product at the pull of the customer.

  15. Defining Value-Added Activities • VALUE ADDED: • Increases the market form or function of the product or service • NON-VALUE ADDED: • Does not add market form or function or is not necessary • ESSENTIAL NON-VALUE ADDED: • Cannot be eliminated completely

  16. Lean = Eliminating the Wastes Value Added • Overproduction • Waiting • Transportation • Non-Value Added Processing • Excess Inventory • Defects • Excess Motion • Underutilized People Non-Value Added Typically 95% of all lead time is non-value added

  17. Lean Tools Pull/Kanban Cellular/Flow TPM Quality at Source POUS Quick Changeover Standardized Work Batch Reduction Teams 5S System Visual Plant Layout Value Stream Mapping Continuous Improvement

  18. Value Stream Mapping • Visually document current material & information flow • Identify non value-added activities • Quantify non value-added lead time • Create an ideal future state • Eliminate wastes & simplify processes • Results in development of a Lean Implementation Action Plan • Prioritized improvement projects • Determines Lean Tools to be applied

  19. 5S System • Designed to improve workplace organization and standardization

  20. Visual Workplace • Simple signals providing an immediate understanding of a situation or condition • Kanban cards • Color-coded dies, tools, pallets

  21. Plant Layout Ship QC Rec Raw Stock QC Screw Machine Shear Stamp Drill Lathe Assembly Brake Mill Weld Grind Finish Parts Stock

  22. Standardized Work • Tasks organized in the best known sequence • Most effective combination of: • People • Materials • Methods • Machines

  23. Batch Reduction The best batch size is: ONE PIECE FLOW Make One . . . Move One!

  24. Teams • More flexible • Greater productivity & use of resources • Collaborative & cross-functional • More creative & innovative

  25. Quality at the Source • Quality built • Operators inspect • Necessary equipment • Established standards • Process documentation

  26. Point of Use Storage • Materials are stored where used • Simplifies physical inventory tracking, storage, and handling

  27. Quick Changeover • Changing over a process to produce a different product in the most efficient manner

  28. Pull/Kanban • Push System • Production based on forecasts or schedules • Pull/Kanban System • Production based on actual demand using Kanbans to signal replenishment

  29. Cellular Flow • Linking of manual and machine operations into the most efficient combination of resources • Flexible layout • Simplify flows • Minimize materials handling • Make use of people

  30. Total Productive Maintenance • Systematic approach to the elimination of equipment downtime as a waste factor • Designed to maximize the productivity of equipment for Its entire life

  31. Going Lean • Training in Lean tools • Using Lean tools in improvement events • Kaizen Events • Organizational / Cultural changes • Move toward team environment • Defined problem-solving approach • Performance metrics that support Lean

  32. Improvements Achieved with Lean 0% 25% 50% 75% 100% Lead Time Reduction Productivity Increase WIP Reduction Quality Improvement Space Utilization

  33. Six Sigma

  34. Definition of Six Sigma Methodology for disciplined quality improvement

  35. History of Six Sigma • Originated at Motorola in the early 1980s • Process modified by others • Implemented by IBM & Allied Signal • Adopted by General Electric in 1995 • Broadly deployed • By 1998, GE claimed $750 million in net benefits

  36. Goal of Six Sigma • Optimize process capability by identifying and minimizing variation • Virtual elimination of all defects • No more than 3.4 defects per million opportunities (DPMO) • 99.9996% acceptable

  37. Cost of Poor Quality • Scrap/Rework • Materials, labor costs, disposition costs • Warranty Costs • Customer credits, return/restocking costs, penalties • Lost Sales • Lost revenues, cost of gaining new customers

  38. Competitive Performance

  39. Benefits of Improved Quality • Bottom-line cost savings • Greater customer satisfaction • Increase in throughput • Reduction in waste and rework • Improvement in process capability

  40. Six Sigma Core Philosophies • Values defect-prevention over defect-detection • Emphasizes reducing variation in processes • Tackles root causes of poor performance • Is customer-focused by driving improvement in areas most important to your customers

  41. Six Sigma Characteristics • Defined, problem-solving approach • Data-driven • Project-based • Commitment and support from the top level

  42. Problem-Solving Approach • Uses a defined approach (DMAIC) • Define the project • Measure the baseline process capability • Analyze when, where and how often defects occur • Improve process capability to reach a Six Sigma level • Control the process to maintain the gain

  43. Data-Driven • Based on data rather than perception • Uses statistical tools during the DMAIC process • Calls for training in “statistical thinking” for many; advanced statistics and project management for some

  44. Project-Based • Project selection is critical • Should advance organization’s strategic initiatives • Have impact on a Critical to Quality (CTQ) characteristic • Should have bottom-line financial impact • Begin and end with performance measure

  45. Top Level Leadership • Requires leadership, commitment and active support from top level management • Leaders should use Six Sigma to drive strategic improvement • Six Sigma projects should support strategic goals

  46. Six Sigma – The Players • The Champion • Black Belt • Green Belt • Quality Process Analyst

  47. KMAC’s Approach to Six Sigma • Developed specifically for small- and mid-sized manufacturers • Affordable • Flexible • Focuses on implementation of Six Sigma not just training • Emphasizes bottom-line results

  48. Two Part Approach • On-Site Deployment Planning & Mentoring • Helps the company gain the most benefit from implementing Six Sigma • Online Six Sigma Training • Provides an affordable way to train Black Belts, Green Belts, and Quality Process Analysts

  49. Lean and Six Sigma • Two powerful tools to help a company improve: • Quality • Productivity • Bottom-line results

  50. Lean & Six Sigma Together • Use Lean to: • Reduce or eliminate non-value-added activities • Use Six Sigma to: • Improve value-added activities • Solve complex problems uncovered by Lean or those requiring advanced analysis

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