This Six Sigma project was undertaken to improve the profitability of a job shop. A job shop undertakes projects from various clients who have different manufacturing needs. The projects are usually short term in duration - some lasting for a few days and others as long as 1 year. There is no guarantee that the job shop gets the same work over and over again. Due to the different needs of its customers, the job shop had accumulated different types of machinery such as Gear cutting machine, lathes, numerical control centres, electric discharge machining etc. Over the years, costs had spiralled out of control and the company was no longer being profitable.

Define Phase

A survey of the job shop's customers indicated that they were generally happy with on-time delivery and quality but required the company to reduce its prices. As the costs of doing business had increased and the market was fixing the pricing for services, the job shop also had become unprofitable and was bleeding red ink for the last several years. A project charter was developed and signed and approved by management. The project team consisted of 4 team members and 2 subject matter experts. The project sponsor was the division manager and the process owner was the manager of the machine shop.

Measure Phase

Data was collected from various pieces of equipment - machine utilization, rates charged for its services, number of people working etc. Data was collected based on computer records and actually walking through the shop floor and making observations. Based on preliminary findings, there was no well established methodology to determine the cost of operating the machines. The only rates available were the rates charged to the customer which was based in an ad-hoc manner based on market rates.

Analyze Phase

The root cause of the high costs for assets was identified as poor machine utilization. There were more than 85 pieces of equipment with some assets seeing less than 100 hours of work per year. Some of these assets were more than 40 years old - just sitting there occupying space and collecting dust. Based on the analysis, the assets owned by the company were divided into dogs & stars. The dogs were assets that were driving down business performance and the stars were assets that were contributing value to the business.

Improve Phase

The "dog" assets were auctioned off and the people assigned to these machines were re-trained to operate other assets. The attrition due to people retiring was not replaced. Some business that could not be profitably handled within the company was outsourced to nearby providers who could provide the same service and quality level at half the costs. The remaining star assets were regrouped to occupy less space and personnel and were operated on a 24x7 basis. An FMEA (Failure Modes & Effects Analysis) was also performed to identify potential failure modes of the suggested solutions and minimize risks.

Control Phase

The process was transitioned to the process owner who was now responsible to monitor the utilization of assets from a cost perspective and keep things under control. This project resulted in a savings of $1.3 million. The savings was due to reduction in the number of people required to run the operations, floor space, maintenance costs, tooling inventory, and recovery of surplus machine value over book value.

What happened to the Dog Assets, Those are still there or you have sold them.You may look at further outsourcing Work done be Dog asstes to some other vednor who have expertize of those jobs which will help you to futher reduce your OPex.