Written by Jeffrey T. Luftig, Ph.D.
This is the second paper by Dr. Luftig, explaining how to use Total Asset Utilization and a cost allocation scheme to understand the true profitability of your products and/or services.
White Papers
These are articles and scholarly papers written by associates of The ROI Alliance.
Summary
Six Sigma is a useful management philosophy and problem-solving methodology, but it is not a comprehensive management system. Many experienced practitioners of the quality sciences are becoming concerned, as Six Sigma is increasingly the only focus of managers while the day-to-day activities suffer neglect. Managers implementing Six Sigma may wonder where all those past cost savings claimed by the Six Sigma teams have gone since they are not showing up on the bottom line today. This paper presents an integrated daily management technology that complements the project-driven problem-solving DMAIC methodology. This daily management structure systematizes monitoring, prioritizing, and reacting to daily variation in a way that mobilizes the entire workforce to continuously improve the process in a way that compliments Six Sigma and improves your chances of success.
This paper proposes a methodology for starting up new equipment (also applicable to new products) to minimize problems typically associated with start-ups.
The reader will attain a fundamental understanding of how advanced quality planning and a statistics-based start-up strategy have been used successfully in industry to commission over $750 million worth of new and existing equipment over the last 15 years with vast reductions in the real costs of specifying, commissioning, and operating equipment.
Process performance analysis, introduced here, uses performance measures such as Pp, Ppk, and Ppm with analysis to assess performance, sources of variation, process potential, and improvement opportunity. This analysis may be conducted where control may not have been achieved and where a large number of process streams exist.
In 1985, while working with IBM, General Motors, and Ford Motor Company, it was discovered that a significant need existed in industry. The requirement was a need for a disciplined, low cost approach to the successful installation of new equipment. In a number of cases when new equipment, lines, and plants were “started up” it took months or sometimes years (and in a few cases, never) for the installed systems to reach a projected or acceptable level of performance related to operational cost, reliability, maintainability, internal and/or customer quality and delivery requirements. Clearly, what was needed was a method that could be utilized to avoid these conditions, while at the same time minimizing the additional time or cost required for the design and installation process.
The East Chicago, Ill., plant of the former Inland Steel Co. (now Ispat Inland) was considering changing the type of rolling mill lubricant used on a temper mill. Mill lubricants are critical to a variety of product and process characteristics in rolled product since they transmit the force of the mill rolls to the surface of the material being rolled, in this case varieties of steels. Rolling lubricants can affect mill reduction efficiencies and speeds, as well as the surface quality and roughness and metal fine generation. This article shows how an analysis was done to select the new lubricant that saved over $70 million dollars.
Like Maslow’s “Hierarchy of Needs,” this paper proposes the existence of a business improvement hierarchy. The “Improvement Hierarchy” suggests that businesses must address fundamental system issues to sustain or even achieve improvement objectives. Knowledge of the Improvement Hierarchy can suggest where an organization should start on their road to improvement.
Written by Jeffrey T. Luftig, Ph.D.
This is a paper by Dr. Luftig on a method for measuring how well assets are used to generate salable product/services. It is the first step to understanding Customer / Product Rationalization.