LSSGB Project

Improve on-time deliveries

■ Executive Summary : ABC Manufacturing Co. is a maker of consumer durables that has initiated a
project to improve the on-time deliveries from its warehouse to factory from a current level of 87.9% to
98%. On-time delivery at the factory is a critical metric to measure warehouse performance.

■ Business Problem : ABC Manufacturing Co. operates a factory which is supplied various components from its
warehouse. On-time deliveries (OTD) at the factory are critical to sustaining mass production and sales to final
customers. It is also critical to future growth. Analysis of past one year of deliveries shows that the OTD% is at a
level of 87.9% resulting in production and sales losses at the factory. This project has been scoped to increase the
OTD% to levels required by the factory.

■ Statistical Problem : Current OTD% is 87.9% based on the past one year’s data. Target is to increase it to 98%.

■ Statistical Solution : The root-causes of the low OTD% are found to be high variability in factory demand, high
variability in deliveries from suppliers to warehouse, poor efficiency & inaccurate stock levels at warehouse due to
manual processes, lack of standard practices, driver shortage, long lead-times.

Improvement actions taken are – Improved S&OP maturity at ABC Manufacturing with joint planning & forecasting,
increased efficiency and accurate stock levels through process automation (WMS) & training, process
standardization, optimized driver count/best practices to recruit and retain drivers, optimized lead-times by using
standard processes & training.

■ Business Solution : OTD% has increased to 98.7% vs. the target of 98%, based on the pilot run. The
improvements in the pilot run have been institutionalized at the Control phase.

8th Dec 2015 LSSGB Project_Mahit Ohri 1

 Improve on-time deliveries : Core Project Team
DEFINE

Project Champion : RV

Master Black Belt : RP Project Leader (Black Belt): SA

Process Owner : AG

Team Team Team Team Team

Member 1 Member 2 Member 3 Member 4 Member 5

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 Improve on-time deliveries : SIPOC Diagram
DEFINE

S I P O C
SUPPLIERS INPUTS PROCESSES OUTPUTS CUSTOMERS
Factory Forecast of demand Production/logistics Adequate capacity to Suppliers, W/H
capacity planning at meet demand &
Suppliers, Warehouse on-time deliveries
Suppliers of On-time supply of Maintain inventory at Adequate inventory to W/H
components components specified levels at W/H meet service levels

Factory Delivery Schedule Sort/pack & dispatch Payload deliveries Factory

required components from
W/H
Driver coordinator Suitable truck, driver Provide truck & driver to Empty truck ready for Shipping
at W/H shipping dock loading personnel at W/H

Shipping personnel Components, Invoice, Load payload on the truck, Full truck ready for Drivers at W/H
at W/H Excise/Sales Tax provide documents dispatch to factory
documents, Gate pass
Drivers Delivery Schedule, Arrive with payload at Unloading at factory Factory receiving
payload, documents factory unloading dock dock personnel

Factory receiving Payload, documents Unloading at factory dock, Receipt confirmation, Driver,
personnel confirmation of receipt delivery update by driver coordinator
drivers at W/H

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 Improve on-time deliveries : Identify Stakeholders & VOC
DEFINE

Stakeholder Who Voice

Customer Factory Eliminate Production/Sales losses due to
Late Deliveries

Shipping personnel Warehouse Want accurate delivery schedule, on-time

receipt of empty trucks/drivers to improve on-
time deliveries
Driver coordinators Warehouse Want accurate delivery schedule, on-time
dispatch information, correct location of trucks
to improve on-time deliveries
Drivers Warehouse Want accurate delivery schedule, correct
location of trucks, on-time dispatch from W/H to
improve on-time deliveries
Suppliers of Suppliers Want accurate forecast and stock-levels at
components warehouse to improve on-time deliveries

VOC : Improve on-time deliveries

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 Improve on-time deliveries : CTQ Drill-down
DEFINE
On-time
Output Characteristic Deliveries
Eliminate
Production/Sales
On-time
losses due to Deliveries%
Late Deliveries Project ‘Y’ Metric

≥ 98%
Customer
CTQ Target
Need

100%
Specification/
Tolerance limits

Late delivery,
1 opportunity
Defect Definition for error

8th Dec 2015 LSSGB Project_Mahit Ohri 5

 Improve on-time deliveries : Project Charter
DEFINE
Project information Process information Team
Project title Improve the Business ABC Manufacturing Co. Project Champion RV
On-time delivery % Process Owner AG
Project Leader (BB) SA
Project ID Support function Warehouse MBB RP
Key milestones review dates Project delight parameters - Project 'Y' Team members Department % time
Define 3rd Jan'15 On-time delivery % 1 Factory 25%
Measure 10th Jan'15 Efficiency improvement 2 Factory 20%
Analyze 25th Jan'15 3 Warehouse 30%
Improve 24th Jun'15 4 Warehouse 20%
Validate 5th Oct'15 5 Warehouse 20%
Control 20th Oct'15

Business case Current OTD performance of the warehouse is average 87.9% based on past 1 year data, which is below the Target of 100%,
(expected benefits) leading to customer dissatisfaction due to production & sales losses

Problem statement Average OTD for the past 1 year is at 87.9%, not meeting the Customer target at 100%

Goal statement To increase On-time delivery (OTD) from 87.9% to 98%

Project scope All deliveries from warehouse to ABC Manufacturing Factory

Project plan Start: 3rd Jan'15, End: 20th Oct'15

Resources Warehouse Database, Minitab

Project C,I,A Customer: ABC Manufacturing Factory

Investor: EFG
Assciates: Warehouse team members

Concurrence

Project Champion RV Head Logistics VM MBB RP

Process Owner AG Project Leader (BB) SA

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 Improve on-time deliveries : High-level Process Map
MEASURE

Supplier 1

Daily /weekly Bi-weekly

Deliveries Schedule
Supplier 2 (VMI)
Warehouse ABC Manufacturing
(Supply & Inventory Daily/weekly
management) Factory
Deliveries

Supplier N

Monthly forecast

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 Improve on-time deliveries : Detailed Process Map
MEASURE
Receive Delivery
schedule from factory
Share schedule with shipping
personnel
Responsibility: W/H Incharge
▪Locate required components at W/H
▪Pack scheduled quantity
▪Prepare Invoice, Tax documents
▪Inform driver coordinator about
dispatch
Responsibility: Shipping Personnel
▪Locate suitable truck at the depot
▪Assign an available driver for the
dispatch
▪Inform driver about dispatch details
▪Record truck request-time, dispatch-
time, driver name, loading dock &
destination details in W/H Database
Responsibility: Driver coordinator
8th Dec 2015
Check actual availability of the truck
at the depot
Responsibility: Driver
Wait
Truck
Request Driver coordinator to
available? No
locate alternate truck
Yes Responsibility: Driver
Take the truck to the loading dock
Responsibility: Driver
▪Load the payload onto the truck
▪Handover Invoice, Tax Check Backhaul payload with Driver
documents, Gate pass to driver coordinator
Responsibility: Shipping Responsibility: Driver/coordinator
Personnel
▪ Take the truck to the Un-loading Backhaul?
dock at customer factory No
▪ Inform receiving personnel 30min Yes
before arrival
Responsibility: Driver Take the empty truck
back to W/H depot
Responsibility: Driver
▪Unload the payload
▪Check Invoice, Tax documents
▪Give receipt confirmation to driver
Responsibility: Customer receiving
Personnel
LSSGB Project_Mahit Ohri 8
 Improve on-time deliveries : Data collection plan
MEASURE

■ Data collection purpose:

To measure and baseline the Project Xs and Ys

■ What to measure:

Measure/ X or Y Data type Operational Definition How to measure Data Source

Metric
Total X Discrete Number of Total deliveries Daily delivery
deliveries per day report

On-time X Discrete Number of On-time Daily delivery

deliveries deliveries per day report

OTD% Y Continuous Calculated % of on-time (Number of on-time deliveries Daily delivery

deliveries per day by total per day / Total number of report
deliveries per day deliveries per day) x 100

■ Sampling Plan:
All deliveries from Jan 2014 to Dec 2014

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 Improve on-time deliveries : Baseline Performance
MEASURE

■ Base Data:

Period of data Total Deliveries On-time OTD% Late deliveries

collection Deliveries (defects)
Jan 2014 –
4630 4071 87.9% 559
Dec 2014

■ Baseline DPMO & Sigma Level:

Opportu- Total
Sigma Process Sigma
Process Defects Units nities Opportu- DPU DPO DPMO
LT Shift ST
per unit nities

On-time
559 4630 1 4630 0.12073 0.12073 120734 1.17 1.5 2.67
Deliveries

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 Improve on-time deliveries : Pareto Analysis (vital few causes)
ANALYZE

83% of the late deliveries are caused by 3 causes:

▪ Schedule Variation
▪ Irregular Replenishment
▪ Misplaced Trucks

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 Improve on-time deliveries : Root-cause analysis (Cause & Effect)
ANALYZE
Leadtime High Demand Variability

Too long SOP vague

Manual Low forecast
process Promotional
accuracy
offers
Dispatch
Time schedule
Low
variation/
efficiency
Too long rush orders
Improperly
Unloading Time/ Trained operators
Seasonality Market trends
Truck turnaround not factored not factored

No SOP
Low
Incorrect Location W/H stock levels OTD%
recorded inaccurate
Manual Manual stock
process Irregular Update in DB
Misplaced
Replenishment
trucks
Manual
process
W/H Capacity lags
Location not market demand Truck/driver Low forecast
Driver recorded
shortage accuracy
Count Inefficient
cash-to-cash
High driver management
Ill-timed capacity
attrition
investment
Shortage
Resource Constraints High Supply Variability

8th Dec 2015 LSSGB Project_Mahit Ohri 12

 Improve on-time deliveries : Vital X’s summary
ANALYZE
No. Vital X
1 Low forecast accuracy

2 Market trends not factored

3 Seasonality

4 W/H stock levels inaccurate

5 Ill-timed investment in W/H capacity

6 Misplaced trucks at W/H

7 Driver shortage

8 W/H dispatch time is long

9 Factory unload time is long

8th Dec 2015 LSSGB Project_Mahit Ohri 13

 Improve on-time deliveries : FMEA (current process)
ANALYZE
Potential Current Responsibilit
Process Potential Potential effects Recommended
SEV cause(s) of OCC process DET RPN y and Target
function failure mode of failure action
failure controls date
W/H & supplier Factory
Low forecast S&OP process- Improve S&OP
S&OP capacity inadequate 10 6 - 6 360 management;
accuracy maturity low maturity th
vs. demand 20 Feb’15
Factory
Market trends not S&OP process- Improve S&OP
S&OP Rush orders 8 6 - 4 192 management;
factored maturity low maturity th
20 Feb’15
Factory
S&OP process- Improve S&OP
S&OP Seasonality Rush orders 6 4 - 6 144 management;
maturity low maturity th
20 Feb’15
W/H
Inventory W/H stock levels Suppliers can’t know W/H Automation
10 Manual process 4 - 6 240 management;
recording inaccurate reorder point (WMS) th
24 Jun’15
Inefficient W/H
Truck Standardize
Late dispatch Late Delivery 10 process, SOP 6 - 6 360 management;
dispatch process th
vague 8 Feb’15
Factory
Investment in Ill-timed W/H capacity lags Cash-to-cash Improve S&OP
8 4 - 8 256 management;
capacity investment market demand cycle long maturity th
20 Feb’15
W/H
Truck Wrong location Truck not available Install GPS in
6 Manual process 4 - 6 144 management;
location recorded for loading trucks th
10 Feb’15
Driver W/H
Driver Low driver
High attrition Driver shortage 4 4 - 6 96 hiring/retention management;
retention satisfaction th
best practices 15 Feb’15
Improper
Factory
Factory Unloading too operator Operator training,
Late truck turnaround 4 4 - 2 32 management;
Unloading long training, No Make SOP th
20 Feb’15
SOP

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 Improve on-time deliveries : Improvement action plan
IMPROVE
No. Cause Improvement Action Responsibility Target
date
1 Low forecast ▪Improve S&OP maturity Factory 20th May’15
accuracy ▪Better segmentation by channel, region & customer management
▪Review forecasts at aggregate levels
▪Regularly monitor forecast accuracy
2 Market trends not ▪Improve S&OP maturity Factory 20th May’15
factored ▪Better forecast intelligence management
▪Involve people with right market & product-line
knowledge
3 Seasonality ▪Improve S&OP maturity Factory 20th May’15
▪Better forecast intelligence management
▪Create dashboard to monitor trends & seasonal effects
th
4 W/H stock levels ▪Control inventory through Warehouse Management System W/H 24 Jun’15
inaccurate (WMS) management

5 Ill-timed investment ▪Improve S&OP maturity Factory 20th May’15

in W/H capacity ▪Better management of cash-to-cash cycle management

6 Misplaced trucks at ▪Install GPS in trucks, integrate system with WMS W/H 24th Jun’15
W/H management 10th Mar’15

7 Driver shortage ▪Develop driver hiring & retention best practices W/H 15th Apr’15
▪Optimize driver count management

8 W/H dispatch time ▪Control workflow through WMS W/H 24th Jun’15
is long ▪Document precise SOP management

9 Factory unload time ▪Provide operator training Factory 20th Apr’15

is long ▪Standardize Unload process management

8th Dec 2015 LSSGB Project_Mahit Ohri 15

 Improve on-time deliveries : Updated Process Map
IMPROVE
Receive Delivery
schedule from factory
Share schedule with shipping
personnel/driver coordinators thru
WMS (reduced lead-time & error)
Responsibility: W/H Incharge
▪Locate required components thru
WMS (reduced time & error)
▪Pack scheduled quantity
▪Prepare Invoice, Tax documents
▪Inform driver coordinator about
dispatch
Responsibility: Shipping Personnel
▪Locate suitable truck at the depot
thru GPS system (reduced time & error)
▪Assign an available driver for the
dispatch
▪Inform driver about dispatch details
▪Record truck request-time, dispatch-
time, driver name, loading dock &
destination details in WMS (reduced
time & error)
Responsibility: Driver coordinator
8th Dec 2015
Take the truck to the loading dock
Responsibility: Driver
▪Load the payload onto the truck
▪Handover Invoice, Tax Check Backhaul payload with Driver
documents, Gate pass to driver coordinator
Responsibility: Shipping Responsibility: Driver/coordinator
Personnel
▪ Take the truck to the Un-loading Backhaul?
dock at customer factory No
▪ Inform receiving personnel 30min Yes
before arrival
Responsibility: Driver Take the empty truck
back to W/H depot
Responsibility: Driver
▪Unload the payload
▪Check Invoice, Tax documents
▪Give receipt confirmation to driver
Responsibility: Customer receiving
Personnel
LSSGB Project_Mahit Ohri 16
 Improve on-time deliveries : FMEA (after improvement)
IMPROVE

Potential Potential
Process Recommende Responsibility Action result
failure effects of
function d action and Target date
mode failure
Action taken SEV OCC DET RPN
W/H & supplier
Factory ▪Improved S&OP maturity
Low forecast capacity Improve S&OP
S&OP management; ▪Better segmentation by channel, 10 3 2 60
accuracy inadequate vs. maturity th
20 Feb’15 region & customer
demand
Factory ▪Improved S&OP maturity
Market trends Improve S&OP
S&OP Rush orders management; ▪Better forecast intelligence 8 3 2 48
not factored maturity th
20 Feb’15
▪Improved S&OP maturity
Factory
Improve S&OP ▪Better forecast intelligence
S&OP Seasonality Rush orders management; 6 4 2 32
maturity th ▪Created dashboard to monitor
20 Feb’15
trends & seasonal effects
W/H stock
Inventory Suppliers can’t W/H Automation W/H management;
levels th Implemented WMS 10 1 1 10
recording know reorder point (WMS) 24 Jun’15
inaccurate
W/H ▪Implemented WMS
Truck Standardize
Late dispatch Late Delivery management; 10 2 1 20
dispatch process th
8 Feb’15
Factory ▪Improved S&OP maturity
Investment Ill-timed W/H capacity lags Improve S&OP
management; ▪Better management of cash-to- 8 4 1 32
in capacity investment market demand maturity th
20 Feb’15 cash cycle
W/H ▪Implemented WMS
Truck Wrong location Truck not available Install GPS in
management; ▪Installed GPS in trucks 6 1 1 6
location recorded for loading trucks th
10 Feb’15
Driver W/H ▪Developed driver hiring &
Driver
High attrition Driver shortage hiring/retention management; retention best practices 4 2 4 32
retention th
best practices 15 Feb’15 ▪Optimized driver count
Factory ▪Provided operator training
Factory Unloading too Late truck Operator training,
management; ▪Standardized factory unload 4 1 2 8
Unloading long turnaround Make SOP th
20 Feb’15 process

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 Improve on-time deliveries : FMEA RPN (Before vs. After improvement)
IMPROVE

FMEA RPN Before vs. After Improvement

2000
1800
1600
1400
1200
1000
800
600
400
200
0
RPN_Before RPN_After
Low forecast accuracy Late dispatch Ill-timed investment
W/H stock levels inaccurate Market trends not factored Seasonality
Wrong location recorded High attrition Unloading too long

8th Dec 2015 LSSGB Project_Mahit Ohri 18

 Improve on-time deliveries : Cost-benefit analysis
IMPROVE

■ Project Investment Rs 6 cr (approx.)

▪WMS
▪GPS
▪Training, SOPs, others

■ Project Savings (One year estimate) Rs 30 cr (approx.)

▪Cost-avoidance (sales/production losses)
▪Increased process efficiencies
▪Increased revenues

■ Net Project Savings Rs 24 cr (approx.)

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 Improve on-time deliveries : Measure Pilot Run Results (Hypothesis Test)
CONTROL
■ H0: There is no difference between OTD% Before and OTD% After
■ H1: OTD% Before < OTD% After
Two-sample T for OTD% Before vs OTD% After

N Mean StDev SE Mean

OTD% Before 92 87.65 3.49 0.36
OTD% After 92 98.754 0.719 0.075

Difference = μ (OTD% Before) - μ (OTD% After)

Estimate for difference: -11.102
95% upper bound for difference: -10.485
T-Test of difference = 0 (vs <): T-Value = -29.86 P-Value = 0.000 DF = 98

Boxplot of OTD% Before, OTD% After

100
As the P-Value<0.05, we can reject H0 and
accept H1 at α=0.05 and conclude that there is
95 a significant increase from OTD% Before to
OTD% After.
90
Data

85

80

OTD% Before OTD% After

Worksheet: Worksheet 4

8th Dec 2015 LSSGB Project_Mahit Ohri 20

 Improve on-time deliveries : Control Plan
CONTROL

Control factor Spec or Measure Sample Sample Control Reaction plan

Tolerance Technique size frequency method
Forecast Per Standard MAD (Mean 100% Monthly Tracking signal ▪Alert user thru
accuracy #65 Absolute exception report
Deviation) ▪Review
forecasting model
W/H stock Count IRA % 100% 6 months Physical count Correct records,
accuracy tolerances (Inventory (one time after (ABC classification) if required
record deploying
WMS, no
accuracy) further need)

Truck location at Per Standard Audit 5% Monthly GPS system Review system
W/H #82
Driver availability Per Standard WMS 100% Daily WMS dashboard Optimize driver
#65 dashboard count
W/H dispatch Per Standard WMS 100% Daily WMS dashboard Review
time #83 dashboard process/impart
training
Factory unload Per Standard Time Study 5% Monthly Unload time Review
time #75 report process/impart
training

8th Dec 2015 LSSGB Project_Mahit Ohri 21

 Improve on-time deliveries : Performance (after improvement)
CONTROL

RESULTS

■ Before Project:

Period of data Total Deliveries On-time OTD% Late deliveries

collection Deliveries (defects)
Jan 2014 –
4630 4071 87.9% 559
Dec 2014

■ After Project:

Period of data Total Deliveries On-time OTD% Late deliveries

collection Deliveries (defects)
Jul 2015 –
1520 1501 98.7% 19
Sep 2015

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 Improve on-time deliveries : Performance (after improvement)
CONTROL

RESULTS

■ Before Project:

Opportu- Total
Sigma Process Sigma
Process Defects Units nities Opportu- DPU DPO DPMO
LT Shift ST
per unit nities

On-time
559 4630 1 4630 0.12073 0.12073 120734 1.17 1.5 2.67
Deliveries

■ After Project:

Opportu- Total
Sigma Process Sigma
Process Defects Units nities Opportu- DPU DPO DPMO
LT Shift ST
per unit nities

On-time
19 1520 1 1520 0.01250 0.012500 12500 2.24 1.5 3.74
Deliveries

8th Dec 2015 LSSGB Project_Mahit Ohri 23

 Improve on-time deliveries : Conclusion

Given the achievement of the Target On-time Delivery (OTD)%

and the cost-savings due to cost-avoidance (production & sales
losses) and increased operational efficiencies, the Project was
declared to be successful by the Customer and the
Stakeholders.
It was also clear that every effort must be made to sustain the
improvements.

8th Dec 2015 LSSGB Project_Mahit Ohri 24