Case Studies: A Data-Driven Culture
December 1, 2009
Think back to the fall of 2008. It looked like the economy was in a freefall. Respected financial institutions such as Washington Mutual, Lehman Brothers and Wachovia were collapsing and being forced into shotgun weddings with competitors. Manufacturers such as Spectrum, Smurfit Stone and others were either filing or about to file for Chapter 11. Meanwhile, the stock market was imploding, and businesses were shedding employees like trees shed autumn leaves.
In the midst of this, Crown Audio (Elkhart, IN) launched a major data systems initiative to improve data collection and analysis of repair and rework data across the organization. Why would a company invest in technology when most businesses were entrenching?
By 2008, Crown had been on a lean Six Sigma journey for more than five years. The team believed the project would pay for itself in two ways. First, it would reduce the time required to capture in-plant and customer-return data. Second, it would enable the team to make better use of failure data to improve throughput and first pass yield.
“Any time a technician repairs an amplifier or a circuit board that fails during production, we had them record that data in a quality database,” says Andy Stump, vice president of operations at Crown. “It turned out that we were collecting that data from 11 different processes and storing it in three or four different databases. None of these systems were linked, so we had multiple operators entering similar data for similar issues.
“Furthermore, there were no defined processes to enforce the use of this failure data,” Stump says. “The result was that we’d see the same problems surface again and again, rather than see the elimination of the issues.”
The purpose of this project was to establish a companywide, user-friendly database that would further Crown’s evolution into a data-driven, fix-to-root-cause culture. The project helped refine and improve defect categorization, and defined processes that enforce the use of data to investigate, resolve to root cause and monitor quality.
An Outstanding PartnershipCrown first began working with Hertzler Systems (Goshen, IN) in 2006 when Hertzler was invited to review the company’s quality systems and identify gaps between the current system and an ideal system.
Crown was interested in Hertzler’s ability to evaluate its quality system and help chart a course for improvement. Hertzler was able to deliver an executive report outlining recommended action steps to get everyone on the same page and rally the company to go after quality improvement.
Because of the success of those projects in 2007 and 2008, it was only natural that Stump and his team would again seek a collaborative effort with Hertzler Systems when it came time to overhaul the repair system.
“We have a really strong engineering team,” says Stump. “They needed to set up the business infrastructure for making this project successful. Because they knew the Hertzler software so well, and because the Hertzler consultant knew our business, we had an outstanding example of teamwork and cooperation between the Crown team and Hertzler Systems.”
The result was a comprehensive data collection system that captured repair data from any one of 11 processes. The system gives technicians the ability to enter data using the computer keyboard or bar code reader. Operators also can select data from lookup tables and lists from a variety of auxiliary data systems. Furthermore, where possible, the system automatically calculates data based on values in other fields.
After capture, data is stored in the GainSeeker suite in a single, central data repository. Once there, data is accessible to engineers from production, test and design, as well as operations and quality staff. The system can track defect levels (DPMO) over time, and provides automated drill down Pareto analysis to enable operators to obtain the root cause of defects.
The results have been impressive. In a review seven months after the project was completed, Stump demonstrated that he paid for the initial investment in less than three months, with a total return on investment (ROI) after seven months of 171%.
Surprising ROIAccording to Evan Miller, president of Hertzler Systems, the ROI was not as surprising as the way it was achieved.
“I had a pretty good idea that we could help Andy’s team automate and streamline repair data collection,” says Miller. “I expected that the ROI would be based on the efficiencies gained by eliminating islands of data, removing duplicate data entry and integrating disparate data systems. I expected that he paid for the project by eliminating staff through automation. Clearly we could help Crown move laterally on the data cost/value matrix from expensive data to low-cost data.”
The data, however, revealed a number of surprises.
“First,” says Miller, “Crown didn’t eliminate any jobs because of this project. As Andy reduced rework he reassigned the rework staff to more productive activities. They shifted from nonvalue-added status to value-added production staff.
“More importantly, I was surprised to learn that reducing the cost of the data contributed only about 2% to the ROI. It was such a puny number.”
It turned out that most of the return on investment came from improved throughput and reduced repair. Cheaper, more reliable and more accessible data enabled Stump’s staff to drive defects out of the process.
“We break it down by yield increase savings and repair cost savings by month,” says Stump. “Obviously, if the yield is better you don’t have to repair defective product. And then the scrap and inventory carrying cost savings per month follow. That’s all driven by the yield.”
Nearly 70% of the cost savings came from reducing the amount of repair work needed. By building product right the first time, Crown nearly eliminated a substantial “hidden factory” that took a substantial amount of time and held up work in process.
Of course, building it right the first time increased yield. Yield increases accounted for nearly 20% of the savings. Increased yield also triggered the balance of the savings: reduced scrap and inventory carrying costs.
“In a recessionary economy, it is exciting to see a project pay for itself in just three months,” says Miller. “It is dramatic evidence of the power of the shift to a data-driven, fix-to-root-cause culture.”
“We can’t credit GainSeeker with all of these benefits,” says Stump. “We still had to do the work. But we would never have been able to capture the changes we needed to make if we didn’t have GainSeeker. We’d never have been able to do any of this if we didn’t have the system. So truly it deserves the credit. GainSeeker is the tool that enabled our people to make the changes.”
Hertzler Systems Inc.