Case Study: Lean Six Sigma Delivers for Pelco Products, Inc.
While many focus Lean Six Sigma on manufacturing, Pelco project focused on delivery.
Most organizations focus the majority of their Six Sigma or Lean Six Sigma projects on manufacturing processes. One of Pelco Products, Inc.’s recent Lean Six Sigma projects was instead focused on the delivery process. Why is on-time and faster delivery important to this organization? On-time delivery can mean the difference between communities functioning versus being paralyzed. During the aftermath of severe weather, Pelco’s products are needed quickly to restore order during times of chaos.
Pelco Products, Inc. is an Oklahoma based, family-owned business specializing in the design and manufacture of traffic signal hardware, utility products and decorative outdoor lighting. Celebrating 28 years of success in 2012, Pelco Products, Inc., has become a world leader in its industry by providing high quality, custom designed products and outstanding customer service. The company is the largest traffic signal hardware manufacturer in the nation, selling products in all 50 states and multiple, international markets.
The products manufactured by Pelco must meet strict quality standards due to the nature of how its products are used. Traffic signal hardware is used to hold traffic signals and signs to mast arms and poles at intersections and along roadways. The mast arms and poles used in intersections, as well as smaller signage poles and light structures must be capable of withstanding strong winds and minor collisions, yet be engineered in such a way as to protect the motoring public in the event that a major collision brings down a pole.
The focus, in all aspects of our society in recent years, has centered on faster response times to customer demand. In the traffic signal hardware industry this same demand for new, repair and replacement parts holds true. Volatile weather patterns have wreaked havoc across the globe increasing demand for these products and reducing the time requested for delivery of new and replacement products. Pelco has built its reputation on products designed to withstand the force of a tornado; being able to ship replacement parts to hurricane and tornado ravaged areas in days instead of weeks or months; and, by listening to and understanding the unique problems of customers and designing solutions that meet those needs.
The Case for Improvement
Pelco has been a proponent of Lean for many years and in the past two years has added the Six Sigma methodology to its continual improvement efforts. During a recent Black Belt training session taught by Pinnacle Partners, Inc., and sponsored by Francis Tuttle Technology Center in Oklahoma City, one of Pelco’s Black Belt candidates pursued his Lean Six Sigma certification utilizing a project focused on “Production Flow Restrictions Reduction.” Customers require on-time shipments of their orders and issues related to a new Enterprise Resource Planning (ERP) system arose that were causing jobs to stop flowing through the production process. The goal of this project was to reduce the top three causes of job flow restriction by 50% in 4 months. By pursuing this goal, secondary improvements were targeted to increase on-time delivery, improve production flow and minimize WIP.
“Where once we were the best in the industry because our customers told us so, suddenly we were faced with measureable data that said there were many areas of improvement that we needed to make; and make quickly.” says Mark Nash, Operations Manager. “The better we became using our new ERP system, the more opportunity we saw. Our challenge was how to realize the improvements we knew we needed to make.”
The Improvement Process
Analyzing orders “stuck” on a daily basis through the use of Process Behavior (Control) Charts, CEDAC and Pareto Analysis provided great insight into what was happening throughout the process. However, it was not until a basic Designed Experiment was conducted that the major root cause was discovered; management in the area was not providing proper direction in handling problem work orders “stuck” in the system. Once this was understood, a change in how management handled problem orders was implemented. Controls were designed into an improved process and implemented in order to sustain improvements.
Lean Six Sigma Delivers Results
The project was completed in just under four months. The following benefits/results were realized:
“Stuck” orders: Reduced by 88%
Parts picked per man-hour: Increased 32%
Material handling crew: Reduced by 38%
Past due orders: Reduced by 73%
Additional monetary improvements included:
Estimated annual savings through improved productivity: $15,567
Estimated annual savings through labor reduction: $99,840
Increased Customer Satisfaction: Priceless.
Because of Pelco’s focus on continual improvement and particularly their focus on customer satisfaction, it is easy to understand why Pelco Products was named Quality Magazine’s 2010 Plant of the Year. Phil Parduhn, President of Pelco, summarizes it as well as anyone. “Pelco will continue to strive for perfection in the quality of our products and in the delivery to our customers,” he says. “We know the importance of getting superior products to our customers in the quickest time possible. We can never forget the impact that severe weather has on our community almost every year since we sit in the middle of tornado alley. We will continue to strive to help other communities recover just as quickly as we have from the ravages of Mother Nature. We will continue to use Lean Six Sigma to optimize our processes. Lean Six Sigma has certainly delivered for Pelco and, more importantly, for our customers.”