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I just wanted to take a moment to update you on what we are seeing and doing in this tough economy.

1)   We have worked with several folks over the past year just looking for where we could cut costs without sacrificing anything with respect to customers. To that end, I’ve found that the cost of registrations (ISO Quality and Environmental, plus the emerging certifications for carbon credits) vary more than you would suspect. We’ve found up to 20% savings by shopping the registrar. I know some feel strongly about which registrar they use, but at the end of the day the piece of paper hanging on the wall says the same thing. How many of you believe you are a better company because of your continued use of a specific registrar? This is not anything I am doing business on, but if you are interested, tell me who you are using and I’ll tell you if there is an opportunity and make an introduction for you

2)   This is not the time to invest in training the masses in programs that promise a nebulous payout in the future. The next quarter is uncertain and you have processes that are not working right because volumes have diminished, people have been moved around, suppliers are struggling, customers are not paying on time, … You need improvement on some critical process now. To that end, we have done more business in the past year fixing specific problems for customers. Some quick examples of what we’ve worked on – field reliability of a critical valve in a heavy duty truck application, financial and physical forecasting for a Fortune 50’s Latin American operations, inventory and customer delivery from a Chinese supply chain, seamless tubing yield issues throughout an automotive supply chain. The annual value of fixing these issues has ranged from about $75K for the valve to >$2 billion for the Latin American operation. Cost has never been more than one-forth of the annual value of the problem and in most cases was less than 5%.

3)   We have been working a new model with some old friends from Motorola. I believe it is the natural evolution from Lean and Six Sigma implementations that were heavy on training and heavy on the use of your internal resources. We have been going into companies that are successful, but struggling. Most are in high growth industries and have recently acquired, then integrated two or more companies. They have poorly documented processes, too many SKU’s, bad delivery, and are losing customer business and confidence. We go in with a small team of people and completely analyze the existing situation and formulate and execute a plan to correct it for the customer. We still need resources from the customer, but is on the order of one-twentieth what we asked for in the old model. It is tedious work, but we have focused resources not taking away from the customers focus on the day to day, and everyone participating has ten years or more experience in improving these type problems.

I just wanted you to think about these. I believe 1) just makes sense. 2) and 3) make good sense in this economy – engage outsiders on very specific tasks instead of the shotgun efforts like we’ve done in the past.

Regards,

These are fairly simple relationships. With the exception of %Tolerance, all the other metrics are just different manipulations of the same numbers.

s²_Total = s²_parts + s²_{Measurement System} 

s²_{Measurement System} = s²_{Repeatibility} + s²_{Reproducibility}

s²_{Reproducibility} = s²_Operator + s²_{Operator*Part}

P/T = %Tolerance = 6* s_{Measurement System} / (USL-LSL)

P/TV = %Study Variation = s_{Measurement System} / s_Total

%Contribution = s²_{Measurement System} / s²_Total

Distinct Categories = Round-down ((s_{Measurement System} / s_parts) * 1.41)

And for Don Wheeler fans -

Discrimination Ratio = Square Root ((s²_{Measurement System} / s²_parts) * 2 – 1)

Look at the table showing how the numbers change depending on how much variation the measurement system is contributing and the tolerance. Distinct Categories and Discrimination Ratio are basically the same number. %Study Variation is simply the square root of %Contribution.

Most are introduced to the ideas of DPU and RTY as part of Six Sigma training. Where

                           RTY = e^-DPU

Most were not exposed to the assumptions behind this or how to use this as an analytical tool.

This relationship is based on defect densities follow the Poisson distribution and this is simply the equation for the Poisson when defects = 0. RTY is the proportion of units that will come through a process with no defects. 1 – RTY is the proportion that comes through a process with 1 or MORE defects. This assumes that the defect density is predictable.

When this idea was first put out as part of a DFA course sponsored by Bill Smith in 1987, several of us took a lot of data to convince ourselves this was true. We found that on our well-controlled processes it was true. What we found was when it was not true, there were always easy fixes possible that followed an idea put out by Juran several decades earlier. That is the idea of splitting the analysis into streams. 

How to Find the Expected Defect Distribution –

Find out you DPU for the process you are interested in. Either use a Poisson table from a stat book or Excel.

If you are using a stat book, you’ll find the first column labeled np which is your DPU. Go down until you find the closest match. Then read across. These are cumulative tables so if you want to find the probability of a specific number of defects it will be the probability of that number – the probability of (1- that number).

If you are using Excel (preferred), start by creating a column labeled defects and go from 0 to about 4xDPU (Poisson is skewed right with a fairly long tail).  Label the next column expected proportion. Use the f_x function (called Paste Function in a mouse over) and go to Statistical – Poission and click on it. The x it asks for is the defect number (cell A2 if you started in the upper left hand corner of the worksheet). The mean is your DPU and for cumulative put false (you will get back the exact probability of the individual defect counts). Fill in actual proportions from your data and compare. A chi-squared test could be applied, but usually the numbers line up nicely or they are way out of wack.

A Hypothetical Example (based on an actual improvement project) –

A process is run making structural components for the automotive industry. Every component has defects, but components with x or less defects are further processed, components with > x defects are scrapped. The scrape rate is high, but more importantly the components that are further processed have defects detected all the way out to the end user.

The process is to run several components of a given length and when enough components are collected, multiple components are put through a heating process where there are multiple locations. The heating process joins together two metal pieces to give the component its structural integrity. No care is taken to know what pieces pass through which location in the oven. After the heating the components are put through a non-destructive test that is looking for voids in the joining process. The number of voids is collected.

It is found that the DPU detected by this test is 20. What the Poisson would predict for this is -

So a real quick interpretation of this – 

1)   If I were placing +/- 3s limits on this like an SPC chart, they would be at 8 and 34. On my average daily production of 1,000 pieces, we would expect 2 pieces per day to be beyond the limits. This makes sense.

2)   The most likely number of defects in a single piece is 19 or 20 (equal to 8 significant digits), but numbers between 11 and 29 will show up quite often.

3)   Most important, I will never expect numbers like 0 – 3 or anything greater than 41. These numbers should occur less than once in our expected annual volumes.

The next thing to do is compare actual defect counts per unit with the theoretical counts –

Wow, something is wrong!

The team is reconvened to go back through the process maps to specifically brainstorm where there is clearly a consistent input at work and where there may be variation across the input. Things like material batches, the front end of the process where the metal pieces are straightened and fixtured to go to the heating process, and the cooling process prior to the non-destructive test. After discussion it is understood that the data is only one days production and the metal supplier was consistent making the front end of the process consistent (relatively speaking). After much discussion, it is agreed to keep track of the position inside the heating process. Long story short, the team finds that the middle 2/3’s of the oven is running at 12 DPU and the outer 1/6 on each side is running at 36 DPU.

The team decides on a containment action to only run in the center 2/3’s of the oven while further studying consistency of the oven.

There is a lot more to the study as the original containment did not work (the physics of it not working made sense), but the team learned to make the containment work achieving 12 DPU but production capacity was reduced. With about $5K worth of modifications, learned to run full loads again at 5 DPU.

I saw Steve Forbes Friday night and listened to a fairly compelling argument that our current financial crisis is a series of bad decisions. President elect Obama, you should talk to him. The rest of you should find what he has been writing over the past months because his knowledge and depth were wasted on my short-term memory.

Four things that did stick with me –

1)   We need a policy of a strong dollar. This is not negotiable.

2)   We need to help our domestic auto industry in ways that will help their sustainability. Simple question we all need to understand is why are GM and Ford phenomenally successful outside the US? Forbes made the point that if GM and Ford would close down their US operations they would be seen as world-class companies. Wow – something to think about and it has little to do with unions, although the unions need to get their workers to work more often. Ten percent absenteeism is obscene – if the UAW deals with that they will be seen as more relevant. The work needs to be made more interesting as well, which is on the leadership of GM, Ford and Chrysler.

3)   Taxes cannot be raised in a crisis. This means that spending must be cut. This is combination of stopping dumb things like bailouts that don’t address root causes. It also means efficiency in government vs the current placebos. Cut non-entitlement budgets across the board including the Pentagon and hire consultants that know how to implement and advise - instead of the mass training houses. Also buy all managers in government agencies a copy of Kotter’s latest book. Fire all who whine or block instead of seeing the opportunity. Efficiencies will be found and the work will be more interesting.

4)   Health care has to be addressed with efficient system wide solutions. Piece-meal solutions will not cut it which means expansion of existing programs won’t do. Forbes’ example was that of medical tourism – why is a flight to Singapore and surgery to have a knee replacement one-fourth the cost of doing it in the US? How can these hospitals offer first class results with infection rates that are nonexistent? Lasik surgery is another example – success rates are up and costs are substantially reduced from a decade ago. Why? Understand the answer and you will be looking at what efficient reform looks like.

Forbes says it is time for Obama to turn into a pragmatic politician to make sure he is there for 8 years. Steve has some good thoughts, take some time to understand them and encourage your government officials to understand them as well. I personally would like to keep a smart person in the White House and have them surrounded by smart people. I don’t want Steve as my President, but I would be impressed if he became a trusted advisor to Obama. 

Read what Steve is writing at - http://search.forbes.com/search/colArchiveSearch?author=Forbes

Gary

With the economic turmoil and the elation and fear to go with the recent elections, we sometimes make things more important than they are.

I listen to Christian radio sometimes and also NPR.  I have been intrigued with the absolute negative response to Obama in some circles - the sign of the coming apocalypse because of some of his views. I wonder how that is balanced with the killing going on daily on false premises. I honestly don’t know the answer. 

I would never want a child brought into this world that will not be loved often and always. I would not choose to impose my position on anyone, but I see children on a daily basis that are not loved, that are not taught values, that are not taught self worth. Life is tough anyway, and those children don’t have good chances in life - it is not their fault.

Tonight I held and danced with my almost four-week-old niece. I sang Jimmy Buffet songs to her and she cooed and made baby sounds and slept in my arms for more than an hour. 

I cried.

Tomorrow is my birthday – what a great birthday present.

Life does not get any better than this.

Gary

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