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EMS Lean Sigma Shortens Cycle Time, Reduces Costs, and Improves Quality for the Entire Supply Chain
By Maths E. Andersson, Global Quality & Processes Director, Elcoteq
Lean Sigma, an approach that has been in practice for several years, mixes the Lean Manufacturing concept and problem solving approach with Six Sigma for a more efficient manufacturing process. Lean Sigma is combined with a company’s strategic objectives to make sure every project and activity benefits these strategic objectives and always has a positive affect on net profit. By implementing Lean Sigma, Elcoteq has shortened cycle time, reduced costs, and improved quality for its entire supply chain.
A Lean Manufacturing Case History
Because Lean Sigma is an adaptation of two well-documented and used concepts, many companies individualize their approach, incorporating the aspects of each concept they find to be successful for their company. This Lean Sigma program is unique to Elcoteq and these techniques have been applied throughout Elcoteq’s plants globally to gain consistency in manufacturing operations and structure. To better monitor the project and improve the results, implementation was divided into phases.
Phase 1: To improve demand flow in the manufacture of semiconductor products in the surface mount (SMT) line, the inventory level for the SMT and final assembly (FA) lines were defined based on a process map to maintain an optimal buffer level to improve cash flow and reduce warehouse space.
Phase 2: To transform the final assembly to a demand-driven flow assembly. To share use of the general and common parts of the test and assembly operations in individual production lines to increase total production line capacity.
Phase 3: To align material and capacity available with flexibility targets set towards fluctuations in the customer’s demand. To apply a computerized software system to closely monitor the daily requirements of materials from the customer and execute quick changeover.
Benchmarking and sharing best practices were conducted after the project was completed. The result was that line capacity increased about 40% and the plant’s operation could respond daily to the changes in the customer’s demand more efficiently.
This approach incorporates Lean Sigma using a kanban pull production model implementation between SMT and final assembly. Operation is based on a daily production plan. There is visualization planning, so there is actual on-site data of what is being used and what needs replenishing. Inventory is reduced because you pull just what is needed, when it’s needed, speeding response time in planning and reducing the wait for materials. Materials are delivered directly into the manufacturing process so some of the component buffer can be removed and manufacturing is done to production instead of stock, resulting in just-in-time delivery with single piece flow. On demand material acquisition minimizes obsolescence and helps to ensure that purchased materials meet the most up-to-date environmental compliance requirements. The cost of capital is reduced. Things happen simultaneously. An MRP system is used for inventory planning and to get materials from the warehouse to the assembly line quickly and as needed.
To improve response time and control work in process (WIP), the maximum inventory for WIP is designed between the SMT and final assembly steps based on a process map. A factory throughput time (FTT) project provides well-controlled WIP. Results show that work in progress was reduced from 2.8 days to 1.1 days. The secondary benefits are the reduction of WIP and control over calculated buffers, meaning that at no point in time will the calculated maximum of WIP be exceeded. These benefits are rendered based on a defect free, balanced single-piece pull flow with kanban replenishment systems.
The EMS’s plant in Monterrey, Mexico previously took about 20 weeks to source and purchase materials and have them delivered, about a week to set up the SMT lines and do the SMT assembly, and 1 or 2 days for final assembly and test and to get products packaged and ready to ship. Now, with the demand pull system, sourcing and receiving time remain the same at about 20 weeks, but SMT production takes only 1-2 days because only product that is needed is manufactured, so there is a limit to the amount of work in progress.
The Dongguan, China plant achieved similar improvement. Changeover time for the handling process improved 55%, from 40 minutes to 18 minutes. This was due to having standard operating equipment for each process, an electrical common part checking system set-up, centralizing management of the feeder and material, and instituting a new material replenish set-up process.
By revising the layout of the production line to a work cell and material flow approach, line capacity increased 42%, from 1.3 to 1.8 pieces per square meter. Line capacity per direct work (human resources) increased 40%, from 2.7 to 3.7 pieces per person. This was the result of rebalancing the assembly process for manufacturing time and through resource reduction. An example of a layout change can be seen in Figure 1.
As in the Mexico plant, the operation depends on real consumption rather than forecasted consumption, which minimizes the buffer level for warehouse space and supplier response time reduction. Demand response time went from 14–21 days to 10-12 days. Expectations are that will be shortened to 8-9 days by reducing supplier response time to reduce surface mount component hub buffer levels to 1-2 days for stored space savings.
Conclusion
Lean Sigma consists of pull processing, perfect first-time quality, waste minimization, continuous improvement, flexibility, building and maintaining a long term relationship with suppliers, automation, load leveling and production flow, and visual control. Using the pull principal enables the EMS to produce almost anything with short lead times and deliver when the customer wants it almost all the time. Lean thinking is part of the company culture which can create profitable business only when every supplier in the partnership helps translate its principle in an effective way. Using an outsourcing partner with a global footprint and the ability to provide rapid response to changes in capacity and services allows OEMs to optimize their total cost of ownership without incurring restructuring costs.
Lean Manufacturing vs. Six Sigma
Lean Manufacturing is an operational strategy to require less human effort, less inventory, less product development time, and more efficient handling of customers’ demands while producing top quality products in the most efficient and economical manner possible. The main theme, according to the original concept, is to increase cost-effectiveness through continuously eliminating non-value added work.
Six Sigma is aimed at moving an organization towards Six Sigma quality and is similar to Lean Manufacturing as the goal is to reduce production and development costs, reduce cycle times and inventory levels, eliminate defects, increase profit margins, and improve customer satisfaction. It uses a data-driven structured approach to attack defects to improve the sigma level of goods and services.
Lean Sigma
Lean Sigma, mixes the concepts of Lean Manufacturing and Six Sigma to reduce the limitations of each program and combines the best of each to bring more efficiency. Lean Sigma takes into account the mind-set of optimizing process flow while at the same time continuously improving quality levels with a fact based approach. The benefits are dramatically reduced throughput time with much less defects than in a normal production or process flow.
Incorporating these principles into a company’s operation improves value streams and material flow, builds quality into the processes, keeps the factories clean, orderly, and visually appealing, and involves everyone in continuous improvement. Lean Sigma principles require not only converting processes or machinery, but also adapting mindset, behavior, and management tools. Companies must identify and measure the main sources of waste and define opportunities to eliminate it.
It is the role of the EMS to coordinate the process and the supply chain. The EMS has the responsibility to get the correct products, in the right quantity, where they should be delivered, on time, while achieving perfect work flow and minimizing waste by reducing the total cost. This involves immediately identifying root commonalities in defects and making immediate improvements whether within the EMS company itself or in another part of the supply chain.
Collaboration and transparency between the OEM and EMS help them anticipate market changes and provide agility to evolve with market demands. When the OEM and EMS work together there is less chance for unexpected changes and costs.
Topics:
6 Sigma, 6Sigma, AMS, China, cycle time, ems, FTT, Lean, lean manufacturing, Lean Sigma, material flow, Mexico, Quality, Reduce Cost, SMT, Strategy, supply chain, WIP
