Walking the Design for Six Sigma Bridge with Your Customer

By Carl Cordy

Besides providing a technical overview of design for Six Sigma, this is a text that goes the extra step beyond in presenting real-life examples of structured tool use to satisfy the needs of the customer. The discussion covers the background behind the tools used and real-life examples of their use. The general theme of this text is to know what the customer wants out of a product or service and to keep these in mind throughout the project life cycle through implementation.

Topics are arranged in the design cycle that Taguchi devised: identify, define, develop, optimize, and verify. Throughout the book, Carl Cordy presents the technical discussion and example applications with a reminder as to why we are using them: to satisfy customer wants and desires for a product or service. Also, as continuous improvement, design for Six Sigma is part of a firms strategy for maintaining the competitive edge and ensuring it is the supplier of choice for its goods and services with its current and potential customers.

Specific tools coveredincluding survey design, Kano analysis, quality functional deployment, and SWOTare examples of soft or subjective analysis tools. Risk analysis includes DFMEA, fault tree, and variation effect analysis. The hard or quantification tools include regression analysis, designed experiments, response surface, and transfer function generation. At the end of topic discussion, a sample real-life project illustrates tool use from start to end.

The last set of tools and principles includes the initial setting of tolerances in a linked pattern from system performance to component tolerances. A new concept of determining the value of a design includes placing a financial number on its function. A discussion of ensuring the design makes both mathematical and physical sense wrap up the tools discussion.

Finally, the conclusion briefly sums up the design cycle phases and tools used to complete the actions from identifying customer needs to verification and validation of the physical system. The last statement is an emphasis on ensuring that we continue to understand what the customer wants and needs out of the system we provide.

• Language: English
• Publisher: Xlibris US
• Release date: Dec 30, 2017
• ISBN: 9781543454772

Carl Cordy

Carl E Cordy Biography Carl Cordy is an IQF (International Quality Federation) Certified DFSS and DMAIC Six Sigma Master Blackbelt. His current responsibilities include managing Global DFSS and Americas Regional DMAIC deployment, with multi-million US dollar annual project value results. Previously, he served as a Global DMAIC Master Blackbelt, with 40 completed Black Belt level projects as a project leader in his portfolio. Previous publication was Champions Practical Six Sigma Summary. He holds 4 US patents for Cobalt-Tin coatings. Education University of Louisville MEng /Industrial Engineering, BS/Chemistry. Hobbies Auto Mechanics, Gardening, History, and Star Gazing.

Book preview

Copyright © 2018 by Carl Cordy.

Library of Congress Control Number:                   2017915066

ISBN:                   Hardcover                             978-1-5434-5475-8

                              Softcover                              978-1-5434-5476-5

                              eBook                                     978-1-5434-5477-2

All rights reserved. No part of this book may be reproduced or transmitted

in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system,

without permission in writing from the copyright owner.

Any people depicted in stock imagery provided by Thinkstock are models,

and such images are being used for illustrative purposes only.

Certain stock imagery © Thinkstock.

Rev. date: 12/29/2017

Xlibris

1-888-795-4274

www.Xlibris.com

753120

Contents

Acknowledgments

Prologue

Design for Six Sigma Overview

Identify

The Business Case and Identifying Customer Requirements

SWOT — A Method to Measure Organization Readiness

Customer Product Strategy

Customer Product Mix

Problems with Product Strategy

Survey Design

Define

Define — Translating the Customer Voice

Project Value

Project Time Management

Affinity Diagram

Quality Functional Deployment — QFD-1

Kano Analysis

Project Scorecard

Design Failure Mode Effects Analysis (DFMEA)

Variance Mode Effect Analysis (VMEA)

Design for Six Sigma Product, Function, and Process Maps

Reliability-and-Robustness Matrix

Benchmarking

System Analysis — Axiomatic Design

TRIZ and Contradiction Analysis

Develop Concept

Develop Concept

Quality Functional Deployment — QFD-2

Pugh Analysis

Key Design Input Variables Matrix (KDIV)

Measurement-System Analysis (MSA)

Statistical Analysis

Data Types

Central Limit Theorem

Confidence Interval

Degrees of Freedom

Descriptive Statistics

Graphical Analysis

Inferential Statistics

Correlation and Regression

Analysis of Variance (ANOVA)

Chi-Square Analysis—Test of Association (Independence)

Monte Carlo Simulation and Math Modeling

VAVE—Value Analysis and Value Engineering

Fault Tree Analysis

Reliability

Conformance Testing

Design for Manufacturability and Serviceability

Documenting Innovation

Optimize Design

Optimization

Statistical Assembly Tolerance

Optimization Strategy

Designed Experiment Series

Designed Experiment Pattern Generation

Planning the Designed Experiment

Setting Real-World Factor Levels

Example Designed Experiment Series

Other Designed Experiment Techniques

Variance Minimization

Evolutionary Optimization (EVOP)

Verify

Taguchi Experiments

Verify Phase

Verify and Validate Design Example

Process Capability

Statistical Process Control (SPC)

Putting It All Together

Epilogue

Conclusion

Bibliography

Acknowledgments

For the sisters—P, K, L, and E—and the granddaughters—K, A, E, and R.

Thank you, Larry, for creating the spark that started this project.

Thank you, Lisa Miller and Thomas Steuer, for the title concept.

1097_a_ab.jpg

Prologue

Six Sigma was created in 1979 at Motorola as a reaction to the poor quality that was seen in the firm’s mobile pagers. One item of note was that a reworked unit was four times as likely to wind up as a warranty failure than one that made it through the process with no rejects during production. This observation was enough to start the philosophy of discovering the hidden factory of repairs and eliminating them by reducing process variation.

What this traditional—or DMAIC—Six Sigma did not cover was the activity that designed the product in the first place. With 60% of issues in manufacturing attributed to the product design, why not reduce the variability caused by the product system in the first place? This is where Design for Six Sigma, or DFSS, comes into play. The method discussed in this book is based on Dr. Taguchi’s IDDOV design cycle:

- Identify customer wants

- Define the project, translate the customer desires to design parameters, and assign these to system components as functions

- Develop the product concept, identify key inputs that affect performance, and select the best design alternatives

- Optimize the design system

- Verify the design meets customer expectations

What we must keep in mind is the Design for Six Sigma process always ties back to what the customer wants and expects from the product. Customer wants are the reason for building this object and must be constantly in mind during the process. This is the symbolism behind walking across the bridge from these specific consumer desires to the product together with the customer.

As you will see in the Design for Six Sigma Cycle figure following this prologue, unlike most cycle illustrations, it is depicted in the counterclockwise direction. This is symbolic for two reasons:

- This method of building robustness into our designs upfront is a departure from tradition.

- The world turns counterclockwise.

Design for Six Sigma incorporates the laws of physics in its methodology. The techniques should be aligned with the world; thus, the method moves in the same direction as the world.

Following these precepts in a structured form creates robust design systems with low performance variation and is easier to manufacture. This results in fewer defects for the product. One final word before we begin—Design for Six Sigma is not just for physical products. As fundamentally every device, procedure, or process transforms some input into forms more usable to the customers of these, the same laws of physics are followed. This common ground means the same concepts presented by DFSS are applicable. Use these concepts to help yourself make system implementation easier.

1097_a_ab.jpg

Design for Six Sigma Overview

Literature sources from the construction, software, and manufacturing industries state that between 60% and 80% of all defects produced can be traced to the system design. An additional information technology source also states that 60% of all software developers are devoted to fixing program bugs that were inherent in the original design. Manufacturing sources and traditional DMAIC Six Sigma articles report the cost of poor quality as 25% of total company revenue.

While it is necessary and desirable to remove these inefficiencies, what if we could prevent 60% of the excessive costs or 15% of total revenue loss in the first place? This would eliminate many of the things gone wrong, panic improvement efforts, and wasted manufacturing efforts. In addition, we could reduce the incidence of botched manufacturing, software, and services launches that occur worldwide on a daily basis. One only needs to look at the demise of two major computer operating systems in 2010 and 2014 as examples of these issues. The replacements rushed into production were done at a premium cost to the company.

While a large amount of experience, thought, and knowledge goes into designing products and services, the lack of understanding the customer wants, strengths, and weaknesses in a system design leads to waste and panic fixes to make the product perform as intended. Much of the time, these design failures appear as highly variable performances. As traditional DMAIC, Six Sigma improves existing designed systems by reducing variation. What if there was an analogous method to prevent this highly variable performance from entering a system before it is conceived and implemented? Such a structured system has been developed and is known as Design for Six Sigma.

Design for Six Sigma, or DFSS, is a standard method that aims to produce a new product, service, or process where no exact system has previously existed. This is not to say earlier systems that perform the intended function do not exist; rather, the new system has significantly different functional patterns than the earlier designs. This element of developing a new system to meet customer wants and thus prevent defects from occurring distinguishes DFSS from traditional DMAIC Six Sigma.

While the five phases of traditional DMAIC Six Sigma are universally accepted in the improvement community, Design for Six Sigma methodologies have a number of phase variants. One example of a variant is the DMADV (define, measure, analyze, design, and verify) method adopted by ASQ (American Society for Quality). The International Quality Federation (IQF) adopted the Taguchi-defined IDDOV (identify, define, develop, optimize, and verify) phase strategy. This text will focus on the IDDOV strategy for structured, low-variation design development.

Using the IDDOV design for Six Sigma methodology, the five phases consist of the following:

- Identifying the customer requirements and business case for the design proposal

- Defining the customer requirements in technical terms and translating these to design parameters

- Developing and evaluating selected concepts that best achieve customer requirements

- Optimizing the selected design for customer-required performance robustness and variance resistance

- Verifying the performance meets customer intent

After these activities are complete, it is time to implement the final design. Identifying the business case is the first activity for implementing a new design. A fundamental step before proceeding with business justification is to ensure the organization is ready to effectively achieve sound results from implementing the product or service.

A popular illustration of organizational readiness comes from a 2015 television show where entrepreneurs make their case for investment in their businesses. Before any investment decisions are made, the potential investors want to know if the owner has identified the business strengths, the organization’s weaknesses, the market opportunity for the product, and the competitive threats to success. Once established, an offer is made, or rejection occurs.

There are a number of historical failed product delivery attempts that can be traced to a lack of organization readiness. The first example is the implementation of the initial video cassette recorder (VCR) in 1979. The company correctly observed the opportunity to develop a large market for this product, and the first model was introduced for sale. The strength of their electronics expertise allowed them to produce a highly reliable high-fidelity recorder. An internal weakness was their inability or inaction to reduce the cost of their product. While the opportunity to develop a sizeable, profitable market was recognized, the firm failed to see the threat from a lower-fidelity yet lower-cost competitor. Not understanding that the end-use consumer was willing to accept a lower-fidelity recording at a substantially lower price proved to be the failure mode for their recorder. Within two years, their competition’s models flooded the market, creating an entertainment revolution for its time, and the first recorder became a memory.

A second example came from recent computer operating system releases. In these two cases, a major software company failed to identify the weaknesses in its new revisions. Also, customer wants critical to quality attributes were blindly ignored. These incidents made crash releases of new versions to satisfy its customer base; previous software versions had extended support applied, and its reputation suffered. Issues such as these caused a chief executive officer (CEO) change in 2012.

Now that the business case has been made for the product or service, customers have been identified, and opportunities have been weighed against threats to the potential market, we must now define what the customer wants from this product. The define phase translates these customer wants to a series of design requirements. The first tool, quality functional deployment (QFD), takes a list of customer wants, weighs these according to customer priority, correlates these to certain technical design parameters, and produces a map of what actions need to be taken. These actions are directed toward obtaining a design that meets exactly what the customer wants.

How are these customer requirements obtained? A list of wants is obtained from customer surveys, specified requirements in request for quotes, or historical data. Now comes the need to sort these desired attributes into categories. An affinity diagram, similar to a traditional Six Sigma fishbone diagram, is used to take these desired wants into distinct categories. These categories will provide the input into the first translation into design requirements through a tool known as quality functional deployment 1 (QFD-1).

Elements of the first assessment, known as QFD-1, allow for benchmarking how well these design requirements are met, which requirements are compromises to each other, and how our product compares to the competition for meeting individual customer needs. Other tools used to resolve customer wants for our design are the SIPOC (supplier, input, process, output, and customer) diagram, benchmarking different design alternatives against a baseline or the competition, parameter diagramming to show how a system will react to a customer input (signal), and functional analysis. This functional analysis shows how different elements of a system interact with other internal elements, elements outside the system, and the customer. The use of variance analysis, together with robustness matrices, identifies variation sources that need to be reduced or eliminated. Finally, a way to document what can go wrong with the design, known as design failure mode effects analysis (DFMEA), is used to document and pinpoint the effects of failure to meet customer expectations. This documentation creates an action list to remove and reduce these failure modes. Tools such as project value and project management are used to protect the design’s profitability through cost control and timely delivery of the design. When the voice of the customer is translated to a feasible design, it is time to define the project.

Quality functional deployment 2 (QFD-2), which translates design requirements into part specifications, represents the transition from opportunity definition to developing the product concept. The general physical properties of the design are correlated with actual physical components. Based on performance, dimensional, and technical targets, the first component specification intents are set. Included is an initial ranking of how well the current concept performs to expected values. Moving further from computer-aided design (CAD) to physical prototypes, fault-tree diagramming is used to deduce the product failure pattern. The use of value analysis and value engineering (VAVE) concepts to maximize the benefit-to-cost ratio by finding the most financially efficient way to perform required functions is used to maintain a competitive edge. Reliability tools predict the product’s ability to perform as intended for required product life. This analysis goes hand-in-hand with design for manufacturability. A product that is less difficult to produce will tend to have a greater reliability. For serviceable systems, design for serviceability is a necessity to ensure the customer performs routine maintenance as scheduled. Difficult-to-service items mean neglected maintenance, early failure, and unhappy customers.

As the alternatives are fashioned in a CAD system, the time comes to evaluate these against any preexisting benchmarks and one another. Performing a Pugh analysis allows the design team to look at overall scores as well as individual advantages and disadvantages for each alternative. This allows a first selection of a few desired alternatives without the expense and time of producing and testing prototypes. As a confirmation check, simulation of performance, ability to meet tolerances, and capabilities can be made using Monte Carlo analysis.

Now that the best alternatives have been selected from the computer/paper analysis, the physical prototypes can be built and tested for the final selection. Understanding how statistical analysis can optimize the number of samples needed and evaluate test results is important. The use of the hypothesis tests for analysis of performance results also assigns a risk factor to the results decision. Understanding the risk of not detecting differences as well as detecting changes is also important. To predict performance changes because of design attributes, regression tools are used. Finally, Weibull analysis and 90% reliability predictions are available to develop a lifetime curve and ensure the proposed design will meet customer life expectations with agreed-upon confidence.

At this point, it is a good idea to correlate predicted performance versus prototype test units. Ensuring this correlation is a sanity check to the initial modeling method provides evidence that performance parameters are correctly predicted and specifications are understood. This also prevents performance surprises as the team moves further into the design process. Correlating results, checking variation differences, and quantifying the bias between average predictions and test results are key exercises.

As with the initial alternative comparison with model data, the actual test results should be input into a new Pugh analysis. Now the final alternative is selected for design optimization. Test results verification of significant characteristics or design features with significant impact on product performance are a necessity. Using screening-designed experiments to determine changes in system response to variation in parameters in the chosen alternative help determine this set of important features. If the design depends on too many significant factors, the concept needs to be reevaluated to reduce this count and make the system robust. The results of the screening experiments and significant characteristics count enter the parameter design portion of the actions, where critical factors are established and performance noise strategy is identified.

After the parameter design is completed, a tolerance design exercise occurs. Variability in design parameters and their effects on performance is fed into the allowable specification tolerances. Along with these tolerances, a component noise strategy is developed. To confirm the ability to meet tolerance capability before a pilot production run, simulation methods, whose inputs come from statistical analysis of previous parameter- and tolerance-design activities, are performed. Given the results of the simulation results, the design phases are either recycled or confirming designed experiments are performed on prototypes.

After the confirming experiments are performed and previous results are correlated, optimization begins. For discrete design levels, the Taguchi method is more effective to select the most favorable factor levels. If the design control factors are continuous values, response-surface methodologies and potentially evolutionary optimization techniques are recommended. These optimizations are performed to the multiple criteria established by customer wants and should include the effects of variation (noise). Finding factor levels that produce low variation introduces the concept of design robustness.

The last step in the IDDOV process is to verify the design meets customer intent. Some of the questions that need to be answered during this phase are the following:

- Will the product perform as expected by the customer?

- Will the product provide expected performance at and possibly beyond expected useful life?

- Can we effectively produce the product with minimal defects?

Answering these questions is the idea behind product model verification to specification and testing the product with validation tests. Three types of validation exist.

- Validating the design to ensure it meets customer-intended performance

- Validating the product reliability

- Validating process capability

The emphasis during this validation-and-verification phase is to prove the worth of the product with facts. The confirmation of performance and reliability with real products and virtual testing with authentication of performance according to our customer’s requirements are the cornerstone of this phase. Some of the validation techniques used are key life testing, virtual testing through simulation, real-world testing, and field trials under all reasonable possible customer use scenarios. Other activities used to validate the design include pilot runs, correlation of pilot-run performance to predictions, and mistake-proofing the production process. Manufacturing engineering becomes involved with this phase of the design, and process capability is established. Additionally, the process control plan for critical to quality attributes is established.

A tool commonly used to transition from prototype to manufacturing processes for the design is a series of pilot builds to final design specification. At this point, dimensional layouts of these production intent parts are performed to get an indication of process variation, and performance/reliability tests are performed to determine the ability of the production process to make units that meet customer expectations. These tests are parts of a production verification (PV) test plan. Examples of tests during this phase are benchmarking to existing products or competitors, conformance and reliability tests with statistical confidence, variability analysis, and robustness management.

Now that the design concepts are validated, we must ensure the product can be reasonably produced to reasonably meet customer demands over all tolerance ranges. Tools used to ensure the process is capable of producing the product to expectations and protecting the customer from defects include the following:

- Initial poke-yoke (error proofing) devices to prevent or trap errors

- Gauge R&R (variation analysis) to ensure a satisfactory measurement system

- Monte Carlo simulation for manufacturing run capability estimates

From the DFMEA, a process-failure-mode-effects analysis (PFMEA) is derived to document the effects on product performance when the process goes wrong. The control plan to ensure the proper quality settings and checks is derived from this and other failure input data. As pilot runs are performed and the project proceeds toward launch, iterative variation-reduction exercises are performed and results compared to model predictions. As the process variation is brought to desired levels to meet design intent, the poke-yokes, PFMEA, and control plan are modified to reflect these changes.

With implementation into production, the design summary is now placed in the appropriate design bookshelf for replication.

001_a_ab.jpg

The Business Case and Identifying

Customer Requirements

Before a product or process can be designed, we must identify what personal needs it will serve. These needs come from a customer, who is defined as someone who uses the product or service. The reason why he or she wants this object or service is to fulfill a set of needs and wants. This fulfillment also carries a certain value—the price that the product or service will command in the market. As this value is an input into the business case for production, deriving it is the first step to determine if it is a viable product to produce. Thus, the first step is to determine the business case to proceed with the design.

The business-case Analysis begins with determining if the product or service aligns with the organization’s business strategy. Does the opportunity match the company’s mission? As the mission statement is a definition of the firm’s direction and strategy, the opportunity must fit into this direction to avoid divergent efforts and allocation of resources. Within this strategy, a physical portfolio of products is grouped into product lines. The quantification of these product lines is referred to as the product mix. A rigorous analysis needs to be performed to ensure the new product mix and the new production fit into future business plans that are set down as the firm’s strategy.

After it has been determined our new opportunity is a good strategic fit with the firm, the risks and rewards must be quantified. First, determining customer demand and value, or price, the customer will pay to have this new product provide the revenue estimate. Next, the costs to produce, inventory, distribute, and service the customer must be considered. For these aftersales costs, warranty projections are usually the most important financial issue to tally. Within the costs to produce are materials, labor, scrap, and distribution/storage expenses. Other considerations are the need for new machines to handle the increased capacity required and, in some cases, bricks and mortar to construct a new facility. As a new building creates a quantum leap in production costs, the new opportunity must demonstrate a large and sustained return at an attractive profit for this to be considered. Depending on the level of risk the company chooses to take, future business opportunities are rolled into this equation. From the projected revenue minus projected costs, a calculation over the product life is obtained. Many firms will multiply the difference by a risk factor to determine an adjusted rate of return.

Depending on the threshold rate of return specified by the business strategy, available capital, and competing opportunities, the decision is made to pursue or not to go forward.

Steps in the Business Case Analysis

- Identify business case requirements

- Assess initial risk in meeting business-case requirements

- Assess the impact of risk in meeting financial metrics

- Analyze the potential of the Design for Six Sigma (DFSS) process in reducing the risk in meeting financial objectives

- Revise the risks in meeting business-case requirements as new information available

Step 1: Identify Requirements

Requirements can be based on the following items: customer value and program content. Determine how much of the proposed design is new content and which is carryover from previous designs. From the content analysis, determine if any of the attributes identified will enhance customer value. This enhancement is often the key to showing that the new concept is one step better than the competition. Distinguishing your product from the competitor is extremely important to increasing market share and keeping existing customers delighted.

Now that these features are identified and categorized, attention must be paid to the facilities and logistics requirements for these new program characteristics. Do we have the appropriate capacity and equipment already existing? If not, substantial capital investment must take place. With the requirement identification comes the customer product survey, where the relationship between business-case product strategy and critical-to-quality attributes is performed. At this point, it is prudent to identify strategies that are linked with the customer-critical quality needs. Such a correlation is not only desired but is also necessary to ensure the product built satisfies customer wants within the company’s business scope. Business history has shown the marketplace can be unforgiving if the product and business model do not match. An example of this mismatch was a major retailer attempting car sales through catalog orders. What the company did not understand was that a critical-to-quality aspect of vehicle sales was the customer wants to see, touch, and drive a new car. After two years of dismal sales, this grand experiment was shelved as a part of history. Other aspects of identifying customer product details include identifying the changes to the product as the customer wants have changed. We need to know when the product is demanded by the consumer, what values are required together with schedule, and the product-application mix.

After customer requirements for application have been identified, a risk assessment in meeting these wants include the need for new technology, design complexity, manufacturing capability, the component-supplier selection and capabilities, and the ability to test the design effectively with acceptable risk. An additional source of risk is the almost inevitable project delay. We do not like to factor in project recycles because of slips in design, testing, manufacturing, suppliers, and logistics. However, it is highly unusual for a project to go entirely smoothly with no delay. Unfortunately, Murphy’s law of whatever can go wrong will go wrong is quite prevalent. After these sources of requirements risk are identified, each must be assessed according to severity, probability of occurrence, ability to recover, and priority to address.

Now that the risks are identified and their impact on the project is assessed, it is time to translate these risk items into financial metrics. As the business makes decisions based on financial benefit, it is prudent to identify these issues in monetary terms. Some metrics that are often used to quantify impact are returns on sales, engineering/manufacturing expenses, production/logistics losses, and warranty costs. These warranty costs are often a great risk to the financial benefit of a project. As a field fix involves recovering a unit from consumer service, disassembly, and service, the cost is usually ten to a hundred times the price of the produced unit. A rigorous Weibull analysis of similar product histories is justified for the risk analysis.

As part of the financial analysis, the product must also come under scrutiny. The steps taken to convert design attributes into financial risks are to define relevant product cost parameters that can be controlled and to distinguish these from uncontrollable (noise) factors. Identify and develop a total cost function that compiles the cost of all product parameters. These can also feed into cost reduction initiatives later. Plan a what if analysis to capture probabilistic events and their financial impact. Performing this analysis includes analyzing the statistical data for probabilistic cost and pinpointing critical cost parameters with their potential financial impact on the project. When the product risk impact is completed, it is time to assess the entire program-finance risk.

If the financial risk analysis seems unfamiliar to the design engineer, a comparison between designed-experiment and financial-risk methods can help with understanding this concept. Table 1 is a summary of this comparison.

Table 1: Comparing Designed Experiment (DOE) with Financial Risk Assessment

002_a_ab.jpg

Once we have obtained the total program financial risk analysis, the DFSS assessment to mitigate financial risk is made. In summary, we identify which DFSS tasks and tools can help in reducing risk and estimate the impact of our efforts to reduce these along with other contingency costs.

Assessing the potential of DFSS to contain and mitigate financial metrics risk is analogous to the failure-modes-effects analysis (FMEA) performed on designs and processes. Potential risks and uncertainty of finance risk from design implementation is analogous to the potential failure-mode identification. Risk-source identification is similar to potential failure-cause discovery.

Finally, risk from financial metrics is the same method as determining potential effects of the failure on the physical design. Table 2 shows the design failure mode effects analysis (DFMEA) versus the business-case analysis.

Table 2: DFMEA Content versus Comparable Business-Case Analysis

003_a_ab.jpg

After the DFSS financial risk mitigation study, as with the DFMEA approach, it is time to determine how risks and uncertainties will be addressed by the Design for Six Sigma process, determine corrective actions, and revise the risks associated with the financial metrics affected by the project.

Sample Business Case

This example illustrates the business-case assessment of a new technology—the mobile heating-ventilation-air-condition (HVAC) system. Market and customer-survey data indicate that consumers are demanding two-zone airflow for climate control. While the market opportunity is highly attractive, an approximate 50% total adjusted rate of return for this system, risks that diminish this attractive gain to the business need to be evaluated. Table 3 shows the initial study performed to assess risks to fulfilling the business case requirements.

Table 3: Sample XYZ Program Dual HVAC Airflow Business Case

004_a_ab.jpg

The risk associated with key business requirements has been mainly driven by new technologies to be implemented and no previous manufacturing experience with the design. As appropriate, DFSS tools that are used to mitigate these risks are listed in this document. As part of this business case summary, supporting documents such as program content, customer product strategy and details, the financial summary, and a revision to the risk matrix after DFSS tools are applied will be filed with the program documents. An example of this filing is Table 4, the program content summary for our dual-zone HVAC system.

Table 4: Dual-Zone HVAC System Program Content Summary

005_a_ab.jpg

Specific Business Case Issues

Is the organization ready for this new project? While it is prudent to identify the customer requirements, financial risks to best possible payback, and how the financial risks can be mitigated by design and process robustness, it is equally important to ensure the organization is prepared to maximize the opportunity and minimize the threats to a long-term profitable program.

Ignoring this preparedness has been a historically costly mistake. As mentioned earlier, the major consumer electronics supplier who was the pioneer in home video recording was unable to capitalize on their product deployment. The audio and video fidelity of their product was supreme for 1979 and was shown to satisfy a customer demand for home movie recording and entertainment. However, the product weakness caused by a higher cost system that used a nonstandard signal that could only be played back on a full-sized recorder could not be overcome. The ability of the competing system to miniaturize the recorder element and tape with a standard signal allowed a prerecorder review in a camera recorder that was desired by the consumer and represented a competitive threat to the company’s opportunity. Ignoring this threat allowed the competing system to become the recording standard, and the pioneering design faded into obscurity.

A twenty-first century example is the introduction of the first smartphone in 2001. As it was the first phone to introduce multimedia capability, explosive growth for this product’s demand and sales grew well into 2011. This phone was even able to hold its own with demand and sales against today’s (2017) preeminent smartphone suppliers in 2007. However, the supplier failed to assess the threat from these two competitors. Poor introduction of their first touch-screen phone in 2008 resulted in low customer satisfaction and poor editorial reviews. Overlooking their organizational weakness in touch-screen technology created this stumbling block and allowed today’s premier suppliers to assert their market supremacy and capture sales.

Ignoring the threat from the competition meant a slipping market share and continued poor launches of technologies to compete with these two new leaders. The end result was a loss of market credibility with the everyday consumer. Today, this supplier is a niche marketer for executives and officials in need of specialized encryption and high levels of phone security.

001_a_ab.jpg

SWOT — A Method

to Measure

Organization Readiness

A structured method of measuring business readiness to pursue a product opportunity is known as SWOT. The four letters correspond to the first letters of the words strengths, weaknesses, opportunities, and threats. To characterize the organization’s readiness, a listing of internal advantages (strengths), internal disadvantages (weaknesses), external potential (opportunities), and external roadblocks (threats) is made. For structural and visual ease, these are arranged in a four-quadrant diagram as shown in Figure 1.

Figure 1: Basic SWOT Diagram

008_a_ab.jpg

Before we get into the mechanisms of a SWOT analysis, why would we want to perform the structured exercise? First, we need to determine the alignment of the business with the potential pursuit. If the opportunity does not mesh with the mission, vision, and resources available to the business, it will be poorly executed. The 2008 order-a-car catalog was a repeat of the 1950s’ short-lived endeavor of a major retailer. This new venture did not have the right resources, had an ill-defined mission, and lacked a vision for sustained growth. This ill-fated combination was enough to prevent the company from receiving necessary funding, and the venture fell through in 2009.

When internal strengths and weaknesses and external opportunities and threats are identified, it is time to quantify the potential pursuit in terms of business opportunities and risks of pursuit. From this quantification, we either identify areas for remedy or decline to pursue the concept any further.

Before beginning the SWOT analysis, the leadership needs to be ready to do so. This means a fact-based objective look at alignment of the proposed product to the organization. If opinion and bias are allowed to creep into this investigation, it is best not to do the analysis at all.

Now that the business has decided to investigate its alignment with the new opportunity objectively, the first element is to gather our data. We need to gather the data regarding the internal organization strengths; the internal weaknesses that will hinder project execution; the external opportunities that represent the potential market reach; and the external threats best represented by competitors, long-term market acceptance, and product life cycle within technology and market trends. Threats can and will manifest themselves in competing technologies as well. A good example of this threat type is the short-lived CD camera. While this device was a step-up from the 3½" floppy disk, the company management ignored the onset of higher-capacity, smaller-sized, and more reliable SD card storage. The result, the CD camera, had a market lifespan between one and two years.

As these four categories’ information are gathered, they are listed within the SWOT diagram (Figure 1). As this matrix is completed, the analysis begins. This analysis is conducted within six distinct perspectives known as hats. Each one of these offers a different viewpoint of organizational readiness.

The first perspective, known as the white hat, examines all these matrix attributes factually and gathers additional details regarding these facts. If we have made the statement that one of our core strengths is a global technological base, we might want to get the details about this technology resource, such as the following:

- Location of engineering offices and their proximity to potential markets

- How close these are to production facilities

- The stability of the engineering workforce

- How rapidly gaps in technology can be filled

- What testing development facilities are available

To perform the best possible analysis, we must fully flesh out the details for each high-level point entered on the SWOT diagram.

After full fact-and-detail discovery comes the feelings analysis. The next perspective, the red hat, looks at all categories and their details in an emotional manner. How do we feel about what we found? Do we feel upbeat about our company’s chances to fully profit from the project? Do we have a nagging concern about the product becoming a loss leader because we became obsessed with winning every program we are asked to submit a bid?

Given the facts we found and the feelings held toward them, we may be on our way to a great business fit, a mediocre program, or one that we wish the business never saw come our way. Sometimes the best answer to a business bid request is no. We should especially be concerned when an analysis turns up too many unknowns, small market opportunities, or unreasonable productivity expectations.

After the emotional red hat phase, the analysis now takes a 180-degree turn with the black hat phase. Here, we look at the facts and details discovered about our organization and its readiness to pursue this new product in a logical and rational manner. With all feelings and opinions aside, objective, rational, and logical thinking of the discovered facts occurs. We seek to determine how the organization is poised to take advantage of the new pursuit, what rational potential is expected, what shortcomings exist in the organization that will prevent us from reaching the full business potential with the new product, and an objective quantification of the market forces, along with competition that can derail the opportunity. With this portion of the analysis complete, what is the logical conclusion from data analysis?

After the objective, rational analysis, we now proceed to the eternal-optimist yellow hat phase. Here, the best possible outcome to all the organization’s attributes and facts discovered is recorded. Often, a rate of return is assigned to the most optimistic outcome, and this is compared to the business’s minimum threshold. If our best outcome fails to meet this bogey, the organization can make the decision to no quote the new product and not spend additional resources to define and implement a poor pursuit.

Given the outcome from our best case still warrants pursuit of the opportunity, the green hat phase of the analysis begins. The results of the previous fact finding, emotional assessment, objective analysis, and best-case determinations are examined in total to get a picture of what we know and what is still unknown that is necessary to make a sound assessment of how ready the organization is to pursue the new opportunity. Depending on what is discovered at this point, one or more iterations of the previous hat phases may be necessary to assimilate and analyze the newly discovered data. Once we have determined the analysis is complete, the final phase, the blue hat, is where we pull all the information obtained together to create the overall picture of organization readiness for our new pursuit.

Depending on the outcome of the blue hat phase, three conclusions are possible:

- Pursue the potential opportunity with the organization and market strategy as is. We are fully capable of effectively benefiting from the pursuit.

- Pursue the potential opportunity with revisions. We must strengthen our strengths and opportunities as well as lessen weaknesses and threats. We need to modify the organization, our market, and/or our product to resist the weaknesses and threats to the business.

- Do not pursue the opportunity. There are too much capital, resources, and efforts required to modify the business, market, or product to effectively pursue the opportunity.

Knowing the organization readiness and determining the course of action before beginning the pursuit activities will allow the firm to effectively pursue products that make sense to initiate and avoid those that are drains on the business treasury.

Application Example

To tie the theory together, an example of a refrigeration system connector is shown. With current nonhermetic (mechanically joined) lines, elastomer rubber O-rings are used as compliant seals to prevent refrigerant-oil loss. While this material is compliant enough to seal slight imperfections in joining parts, it is subject to tearing as the joint vibrates, can deteriorate because of chemical attacks, and is the number-one customer complaint for reliability. A recent survey determined the customer’s number-one priority is to coat a metal disk with a tough yet compliant fluorocarbon material. Based on the outcome, we are ready to determine if the organization is ready to design, produce, and distribute this improved joint to customers.

To perform the analysis, we will use the four-step SWOT procedure:

- Assess the internal-organization and external-marketplace positives (strengths and opportunities)

- Assess the internal-organization and external-marketplace negatives (weaknesses and threats)

- Perform the six-perspective (six-hat) analysis on our findings

- Take appropriate action for the best benefit to the business

We now illustrate the four-step SWOT analysis with the following example.

Step 1: Robust Mechanical Joint Seal — Internal and External Positives

Strengths:

- Patented technology

- Engineering expertise

- Engineering resources

Opportunities:

- Customer demand

- Improved quality perception

- Early on technology curve

Figure 2A: SWOT Matrix after Strengths-and-Opportunities Entry

013_a_ab.jpg

Step 2: Robust Mechanical Joint Seal — Internal and External Negatives

Weaknesses:

- No manufacturing facility

- No production history

- No manufacturing expertise

Threats:

- Competitor cost

- Competing technology

- External sourcing (confidentiality)

Figure 2B: SWOT Matrix after Weaknesses-and-Threats Entry

014_a_ab.jpg

Step 3: Robust Mechanical Seal — Six Perspectives (Six Hats) Analysis

White Hat: Gather Facts

- O-ring sealing of fitting has unacceptable warranty rate of 0.07%.

- O-ring tearing is significant source of scrap at 3.6% total production.

- O-ring seal 90% reliability is < 100K miles.

- Robust mechanical joint seal is patented by the business (expiration year: 2029).

- CAE and test data indicate warranty reduced 50%, scrap reduced 75%, and 90% reliability at 150K miles.

- OEM market survey indicates non-O-ring-sealing technology favored by 65% of the customer base.

- There is no competitive activity to eliminate O-ring detected in calendar year 2XXX.

- There is no current in-house manufacturing ability.

- Experienced supplier is identified.

- Supply base is limited.

- There is a good relationship history with supplier.

- There are savings of $1.1 million per year after the O-ring system because of warranty and scrap reductions.

Red Hat: Specific Feelings About Gathered Facts

- Favorable feeling about customer response

- Favorable feeling about technology

- Favorable view about supply

- Concern about no in-house manufacturing control

- Concern that the limited supply base could influence price and productivity

Black Hat: Objective, Logical View of Facts

- O-rings represent a design-and-manufacturing weakness.

- The robust mechanical seal joint concept is viewed favorably by a majority of customers.

- Technology has long-term viability.

- The $1.1 million per year savings is a large incentive.

- An experienced supplier with good working relationship exists.

- The limited supply base could influence price and productivity.

- It is possible to look to see if expanded supply base or in-house manufacturing is viable.

Yellow Hat: Optimistic View About Business Pursuit

- Improved quality perception will make product more desirable to customers.

- Patent gives lock at technology and licensing ability.

- Simple design and equipment needs allow for quick in-house capability.

- It is possible to eliminate the need for dual O-rings, give one less part in the bill of materials, and lower inventory-carrying costs.

- Warranty savings could bring a savings potential of new design above the initial $1.1 million per year.

Green Hat: Additional Information Needed Before Making a Final Decision

- Can we develop an in-house manufacturing capability?

- Can we negotiate a long-term agreement with the supplier?

- Can we interest other preferred suppliers?

- Can we get product-level experience with a field test?

Blue Hat: Drawing It All Together and Reaching a Final Conclusion

- The customer desires a new concept.

- Testing shows solid performance and design verification.

- It is initially dependent on outsourcing to an experienced and limited supply base.

- There are a general favorable feeling and indicators about the business pursuit.

- Market, resources, test data, and potential sales show this to be a viable concept.

- Financial benefits include a total adjusted rate of return (TARR) > 120% (payback is less than one year).

- Market share and revenue expansion occurs as competitors are prevented from using technology without license.

- Field test, manufacturing, and supply questions are answered.

Conclusions: Implement robust mechanical joint seal design with aggressive marketing campaign. Roll out product first as sourced part and then ramp up as an in-house manufactured system.

Step 4: Robust Mechanical Seal — Adjust Business Goals and Integrate Into Business Market Strategy

- Establish robust mechanical joint seal as preferred recommendation over current O-ring design.

- Establish and enhance robust mechanical joint seal expertise in design and manufacturing.

- Kick off preferred supplier with long-term contract for first-design iteration.

- Prepare in-house manufacturing site for increased volume of robust mechanical joint seal product.

- Weigh licensing benefits and risks.

Given the SWOT analysis result, the organization is ready to pursue this next-generation sealing technology.

001_a_ab.jpg

Customer Product Strategy

Now that we have looked at how the organization is prepared to pursue the new product proposal, it is wise to see if this prospect fits into the business’s customer-product strategy. This statement of policy provides an orderly direction from the organization for selecting the customer base it serves, provides a baseline for company performance against its mission, and creates objectives for performance to customer wants. This policy is also a template for future product marketing, product development, and research-development activity.

There is not just one but two strategies available. The first is known as deliberate strategy. This comes from a top-level analysis of the company’s mission or its statement of what it wants to provide to its customers. As with individual product proposals, a high-level SWOT analysis can be performed on the general organization according to its product policy. Questions include the following:

- Do we have the internal infrastructure to be able to carry out our product policy?

- What are the potential markets and customers available to us?

- What features in our organization do we need to reinforce?

- Who and what are the competitors, competing technologies, and external events that can reduce our benefit?

If we have a solid product strategy, we will affirm our business mission and have a clear corporate-level competitive direction. We also have in place the necessary functional groups and strategies to support our product policy and keep strong controls with regular report-outs to ensure our operational decisions conform to the corporate mission and policy.

The second strategy, known as emergent strategy, is a more fluid policy. The senior executives create incremental, consistent decisions that determine a company’s direction, such as a major computing company entering the smartphone market after seeing the pioneer introduce the highly profitable early version. In time, the major firm progressively immersed itself more deeply in this key market and captured a major share away from the competition. This is why their smartphone product base is now larger than their pre-2010 giant personal computer product group.

Another feature of the emergent strategy is the political model of decision making. Executives will arrange themselves in groups similar to governmental political parties and campaign for their strategy visions and directions. With this method, strong strategy controls are nonexistent. If this mode is strong within the company, combinations of these fluid policy decisions will override an existing deliberate strategy.

Regardless of the strategy type that exists in the corporation, product development (PD) has a key role to satisfy the established customer-product strategy. The first step that product development needs to perform regarding the implementation of programs according to the product strategy is to determine the basis of how our customers decide who the source for purchased products will be. Using the voice of the customer, PD determines customer demands for quality, defined as the ability to fulfill customer requirements, how the supplier services its customers regarding issues, delivery, and change requests. Additional items that customers judge and compare among competing suppliers are product cost, product service, delivery timeliness, and overall satisfaction with the customer-supplier relationship. Given the company’s mission, there are three pathways for the customer-product strategy to take—cost leadership, differentiation, and focus (niche) strategies.

The first strategy path, cost leadership, treats the products as market commodities that compete with others based on price. The assumption for these commodities is that all offerings from the company and its competitors have essentially the same features, with the only difference being price. This particular strategy is quite effective if the firm has a large number of customers who are price sensitive. This sensitivity is typically an indication that the large customer base also has significant bargaining power. Another feature of companies having this strategy is a low research-and-development budget because of the use of established technologies. Some of the risks of maintaining this type of strategy are imitators entering the lucrative market because of the low technology barrier presented, low profit margins for products because of the old technology, and cost pressure from customers. An additional hazard with this strategy is the sudden obsolescence with low demand as competitors make and market technological breakthrough products. An example of a company using this strategy is a low-end LED television maker. Its products are typically second- or third-generation back technology that has a low profit margin for the firm.

The second pathway is known as differentiation. Here, products are designed and marketed based on differences between the company’s offerings and its competitors. Typical differences used by the company to distinguish themselves from others include high quality and reliability, enhanced customer satisfaction, a high degree of customer service, and innovation. This innovation manifests itself as features that delight the consumer. This firm commands a premium price for the products it offers, requires significant market research to find the next trend, and high research-and-development budgets. Because of high prices, this company has a small but dedicated customer base. Fast follower competitors will attempt to rush in lower cost, competing products to cash in on a significant market. This leading innovation firm requires a high skill-set employee pool to support these first-entry technologies. However, the profit margin for sales of these products is larger than the cost leaders because of the lack of competition and the novelty of the product features. An example of a firm using this policy is a leading-technology vacuum-cleaner company.

The third and final path for product strategy is the focus or niche policy. The firm that adopts this strategy competes in a specific industry segment that has a specialized need to fulfill. This need is so unique, requires heavy research and development, and has such as small market that competitors are not willing to risk entry and challenge this existing player. Given this fact, limited competition means this supplier can command a premium price for the product within specialized requirements.

Additionally, because these products are very distinct from the general market, the company can choose to also pursue a cost-leader or differentiation substrategy to block competitor entry.

Some risks that may occur are additional competitors could see a viable potential benefit and enter the niche to compete for the specialized market, the specialized technology could become obsolete by new developments from competitors, and the customer base could see the relevance of the special features for the niche decrease over time. This would tend to drive the customer base into the general market. An example of a firm using this strategy is the pioneer smartphone supplier marketing their product to corporate executives and government officials. These personnel engage in sensitive communications that warrant the extra levels of encryption and security offered by these specialized devices.

001_a_ab.jpg

Customer Product Mix

Another tool for determining if a prospective product opportunity is a good fit for the business is the customer-product-mix analysis.

This analysis is a structured view of the current product portfolio that helps illustrate