the caterpillar 6 sigma journey - asq...
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MAKING PROGRESS POSSIBLE
The Caterpillar 6 Sigma JourneyAlfredo Garcia
2008
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CATERPILLAR: PUBLIC
The world's largest manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines.Technology leader in logistics, construction, transportation, mining, forestry, energy and electric power generation.
Caterpillar is …
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MachineryEnginesFinancial Products
Three Principal Lines of Business
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Caterpillar by the Numbers
68,440
$1.51
$1.1
$20.1
2000
100,000Employment
$5.37Earnings Per Share
$3.5Profit After Tax (in billions)
$44.96Sales (in billions)
2007
2008 EPS Outlook: increase of 5 to 15 %
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278 Company facilities198 Caterpillar dealers 1,689 Dealer branch storesMore than 400 FG Wilson, MaK, Perkins and Solar distributors1,437 Dealer rental outlets3,000+ key suppliers
Global Value Chain….Global Complexity
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DEFINING 6 Sigma
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What is 6 Sigma?
A measurement of variation 3.4 defects per million opportunities – it’s near perfection
A method for improving our processesThe disciplined application of statistical tools
The higher the Sigma value, the lesser the chance of defects occurring
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Reducing process output variation
Product or Service Output
Mean
Defects: Service
unacceptable to customerVariation
Critical Customer Requirement
Variation
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> Relentless quest for perfection to meet customer needs
> Data-driven, fact-based decision making
> Focusing your best people on your highest priorities
> Improving the processes
> Rigorous alignment of actions with strategy
> Measuring bottom-line impact
> Transforming how people work
6 Sigma is About Success
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New products, services, processes Multiple tools and techniques Sustains long-term improvement Acts as an agent of change
DMEDI: Creation Process
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“Real problems”
Balance VOC and VOB
Results in up to 4-6 months
Multiple tools & techniques
Sustains long-term improvement
Acts as an agent of change
DMAIC: Improvement Process
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When there is an Output . . . there is a Process
When there is a Process . . . there is Performance Variation
When there is a Variation . . . there is a 6 Sigma Opportunity
All Inclusive
6 Sigma can be applied to ALL functions, disciplines and business processes
Does 6 Sigma Apply to Me?
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6 Sigma AT CATERPILLAR
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Global Launch of 6 Sigma – 2001
Jan 22Leadership Workshop
May 7Leadership Workshop
Feb 19 May 21 July 23 Sept 10
Wave 4 100 Black Belts300 Green Belts
700 Business LeadersWave 1 300 Black Belts
1,000+ Green Belts
300 Business Leaders
Wave 2 200 Black Belts800 Green Belts
Wave 3 100 Black Belts400 Green Belts
Black Belt & Green Belt Training
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Global Deployment With Different Cultures
> Caterpillar Enterprise – January 2001> Caterpillar Dealers & Suppliers – October 2001> External scope over 10X greater than internal
168 DealersMore than 500 Key Suppliers
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High flexibilityIsolation & elitismfor black beltsNo common languageLower initial investment Can’t integrateelsewhere
Focused resourcesHard to deployelsewhereLimitedcommitmentNo commonlanguage acrossthe organization
High awarenessConsistent methodologyCommon languageCommitted leadershipThe way to do workHigher initial investment
Pros & Cons
Overview +specific methods & tools
Overview + fundamental tools,advanced tools
Overview + basic concepts,common fundamentaltools, advanced tools
Course Content
Strategicallyselected individuals
Product andprocess designers
EverybodyPersonnel Trained
TargetedFunctionalTransformational6 Sigma Deployment Strategies
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6 Sigma RolesExecutive LeadershipDeployment ChampionsProject SponsorsProcess OwnersMaster Black BeltsBlack BeltsGreen BeltsYellow Belts
Inspire, own and drive 6 Sigma within
the organization
Executive LeadershipDeployment ChampionsProject SponsorsProcess OwnersMaster Black BeltsBlack BeltsGreen BeltsYellow Belts
Develop and implement deployment within their business units
Executive LeadershipDeployment ChampionsProject SponsorsProcess OwnersMaster Black BeltsBlack BeltsGreen BeltsYellow Belts
Identify and sponsor Black Belt led 6 Sigma projects
Executive LeadershipDeployment ChampionsProject SponsorsProcess OwnersMaster Black BeltsBlack BeltsGreen BeltsYellow Belts
Sustain the gains of 6 Sigma projects
Executive LeadershipDeployment ChampionsProject SponsorsProcess OwnersMaster Black BeltsBlack BeltsGreen BeltsYellow Belts
6 Sigma experts who coach and train Black Belts
Executive LeadershipDeployment ChampionsProject SponsorsProcess OwnersMaster Black BeltsBlack BeltsGreen BeltsYellow Belts
Full-time, trained leaders of 6 Sigma projects
Executive LeadershipDeployment ChampionsProject SponsorsProcess OwnersMaster Black BeltsBlack BeltsGreen BeltsYellow Belts
Key subject matter experts that work on 6 Sigma projects part-time
Executive LeadershipDeployment ChampionsProject SponsorsProcess OwnersMaster Black BeltsBlack BeltsGreen BeltsYellow Belts
Employees that have completed 6 Sigma awareness training
Executive LeadershipDeployment ChampionsProject SponsorsProcess OwnersMaster Black BeltsBlack BeltsGreen BeltsYellow Belts
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DMAIC: Improve existing processes, products, services, and plants to 6 Sigma quality
Process Management:Leverage and sustain the gains achieved by improvement and creation
DMEDI: Create new processes, products, services, and plants to 6 Sigma quality
6 Sigma at Caterpillar
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Our Recipe For Success — Guiding Principles
Follow the recipe with:
> Clarity
> Consistency
> Commitment
BusinessProcess
Framework
Customer & Market
Network
Quantifiable Measures &
Results
Strategy Integration
Incentives &Accountability
Committed Leadership
Full Time6 Sigma Leaders
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Committed Leadership
HOW WE DEPLOYED> Leadership training
expectations set at all levels> Uniform message: Lead with
clarity, consistency and commitment
> Formal leadership review structure
WHAT WE LEARNED> Project sponsor engagement
critical > Risk of transferring leadership
responsibility to Master Black Belts
> Commitment not enough…requires energy
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Business Process Framework
HOW WE DEPLOYED> 6 Sigma as the common
operating system> Consistent training and
integrated curriculum for Black Belts and Green Belts
> Improvements are sustained through process accountability
WHAT WE LEARNED> Global company, global
needs–-deliver training in language
> Process ownership was lacking
> Specialized training used to supplement core curriculum
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Customer and Market Network
HOW WE DEPLOYED> Voice of the Customer and
Critical Customer Requirements defined and tied to outcome of the project
WHAT WE LEARNED> VOC tied to external customer> VOB tied to internal process
partner> Need common global
collection management process
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Strategy Integration
HOW WE DEPLOYED> Project selection aligned with
enterprise and business unit strategies
WHAT WE LEARNED> Utilize MGPP to manage
scope> Formal strategic alignment
process to help select the right projects
> Project filters at CSF and SAI/KBA levels
> Projects run at enterprise and business unit levels
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Full-Time 6 Sigma Team Leaders
HOW WE DEPLOYED> Full time Black Belts reporting
to Project Sponsor > Full time Master Black Belts> No direct reports for either BB
or MBB
WHAT WE LEARNED> Create velocity – 2 year
assignment> Maintained 10:1 ratio of
MBB/BB> Underutilized potential for
Green Belt project leaders> Include in normal succession
planning process
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Incentives & Accountability
HOW WE DEPLOYED> Value creation through 6
Sigma rewarded and recognized
WHAT WE LEARNED> Project-based rewards had
limited impact> Broader short-term incentive
plans rewards helps focus attention
> Leadership discretionary pay linked to 6 Sigma
> Non-financial recognition is important
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Quantifiable Measures & Results
HOW WE DEPLOYED> Auditable measurement of
value creation
WHAT WE LEARNED> There is value in tracking both
“hard” and “soft” benefits> Black Belt density targets can
lead to resource imbalance> Important to create
transparent link to business results
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At the technical level it is about using facts & data with proven analytical tools & methods to make better decisions in support of agreed upon requirements (VOC / VOB).
At an employee level it is about developing peopleincluding Black Belts, Green Belts, Master Black Belts, and assigning them to work on the most important business issues.
At a project level it is about following a rigorous proven change management & project managementmethodology that helps increase the rate for implementing change.
6 Sigma is about demonstrating results….
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At a cultural level it is about creating a more process oriented, proactive, customer-centric approach to running the business.
At a business level it is about alignment of resources to enterprise goals and about delivering real / meaningful dollars to the bottom line.
At a leadership level it is about creating a vision for the future and leveraging 6 Sigma methodologies as an enabler to ensure long term business objectives are met.
….and about ensuring sustainability
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RELENTLESS EXECUTION OF STRATEGY
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VISION
2020STRATEGIC PROFILE
STRATEGIC GOALS
CRITICAL SUCCESS FACTORS
ENTERPRISESTRATEGIC AREASOF IMPROVEMENT
Our Values in Action – INTEGRITY, EXCELLENCE, TEAMWORK, COMMITMENTWORLDWIDE CODE OF CONDUCT
New Product Introduction
Order-to-Delivery
Encoding 6 Sigma
Sustainable Development
Growth Beyond Core
PEOPLE QUALITY PRODUCT VELOCITY DISTRIBUTION EMERGING TROUGH
People Profitable GrowthPerformance
Product & Process
EMERGINGMARKETS
Encoding 6 Sigma
Caterpillar’s Strategy
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ManageProcesses(products, systems)- Process Mgmt
DefineStrategy- Enterprise- BU
DefineProjects- Structured- Top-down & - Bottom-up
ExecuteProjects- DMAIC- DMEDI
6 Sigma Core Process
ManageProcesses(products, systems)- Process Mgmt
DefineStrategy- Enterprise- BU
DefineProjects- Structured- Top-down & - Bottom-up
ExecuteProjects- DMAIC- DMEDI
6 Sigma Core Process
To make the culturaltransformation, 6 Sigma
cannot be limited toproject execution.
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Believe there is a compelling reason to change6 Sigma is about the culture – tools are secondary.Deploy following the proven, best practices deployment strategy - speed is your ally.6 Sigma must be deployed across the entire value chain to achieve the full potential.Develop a unifying 6 Sigma framework – replicate.What gets measured gets done – keep numbers real.
Best Practice - Lessons Learned
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DELIVERING RESULTS
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2001 20042002 2003
Strong earnings per share in 2007
0
1
2
3
4$s
5
6
2005
$1.30* $1.15$1.56
$2.88
$4.04*
2006
$5.17
2007
$5.37
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Performance Through 6 Sigma
168
450
32,500
301
3,600
46,000
2006
159
388
27,000
292
3,500
35,000
2005
168
647
37,100
331
3,390
57,000
2007
15097409Cumulative Dealer Deployments
35024610038Cumulative Supplier Deployments
24,00017,00010,0003,800Green Belts
28018612550Active Master Black Belts
3,4002,4001,550700Active Black Belts
24,00015,0006,0002,000Cumulative Projects
2004200320022001
Tremendous Progress since 2001
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VISION
2020STRATEGIC PROFILE
STRATEGIC GOALS
CRITICAL SUCCESS FACTORS
ENTERPRISESTRATEGIC AREASOF IMPROVEMENT
Our Values in Action – INTEGRITY, EXCELLENCE, TEAMWORK, COMMITMENTWORLDWIDE CODE OF CONDUCT
New Product Introduction
Order-to-Delivery
Encoding 6 Sigma
Sustainable Development
Growth Beyond Core
PEOPLE QUALITY PRODUCT VELOCITY DISTRIBUTION EMERGING TROUGH
People Profitable GrowthPerformance
Product & Process
EMERGINGMARKETS
Order-to-Delivery
CPS andVision 2020
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What is the Caterpillar Production System (CPS)?
It’s about:Applying a consistent set of standard processesContinuously improving processes through waste eliminationCreating an environment to facilitate change and improve the way we workCreating the measurements and management structure that support continuous improvement Achieving breakthrough improvementsIdentifying challenges and determining what must changeCreating a culture that shares successful practices and learns from mistakesDelivering on our promises – our 2010 strategic goals
The Caterpillar Production System is the common Order-to-Delivery process being implemented enterprise-wide to achieve our Safety, Quality and Velocity goals for 2010 and beyond.
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3 Sub-systems and 15 Guiding Principles of CPS
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The Management Systemis focused on creating the
measurements and management structure to
support Continuous Improvement
CPS unites the 3 Sub-systems - essential to continuous improvement
The Operating Systemis focused on waste
elimination using 6 Sigma and 6 Sigma lean tools
The Cultural Systemis focused on making change possible and
improving the way we work
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8 WastesThe ultimate goal of CPS is the elimination of waste. Waste is any activity that consumes resources, but creates no value for the customer
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Demand Management
S&OP
Mfg. EngineeringCapacity Planning
Mfg. Production Execution
Orders Management
Mfg. Support
Supply Chain / Materials Management
TransportationTransportation
Finished Goods Dist.
Quality Management
Assessment and Governance
Environment, Health and Safety
Capability Building
Value Stream Transformation
Tools Development
Information Management
Core
Governing
Enabling
17 Processes of CPS
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6 Sigma is Foundational to CPSCPS uses 6 Sigma:
Methodology (DMAIC, DMEDI & Process Mgt.) supplemented with lean tools
Practitioners (DCs, MBBs, BBs, & GBs) with additional CPS training
Full time job roles in defined salary grades (BBs, MBBs, DCs)
Strategy Integration process to align, prioritize, and select CPS projects
Financial Principles to quantify CPS project benefits
Global deployment with clarity, consistency, and commitment
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TPM-OEE / 5S / Visual FactoryStandardized Work / Metrics Cascade
Process Improvement DialogueContinuous Improvement
6 Sigma VST Process
VST Planning
Current State Analysis
Future State Design & MGPP
6 Sigma RIWsQuick Wins
6 Sigma Projects
2 1
2
A
D
C
B
Current StateData Collection
Prework Find-It Fix-It Sustain-It
Define Measure Analyze Improve Control
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Legacy TimelineHolt & Best Form Caterpillar
Sales – $14 – 52 Million
Diesel Engine EmergesSales – $13 – 63 Million
World War IISales – $73 –255 Million
U.S. Manufacturing ExpansionSales – $394 – 742 Million
Global ExpansionSales – $716 – 7,618 Million
Factory ModernizationSales – $8.6 – 11.1 Billion
Company-Wide ReorganizationSales – $11.4 – 21 Billion
6 Sigma Deployed GloballySales – $20.2 Billion
Caterpillar Production System LaunchedSales – $36.4 Billion
1920
1930
1940
1950
1960-70
1980
1990
2000
2005
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“There’s no business challenge we can’t face when we unleash the talents of our people using 6 Sigma methodology to address them. The disciplines of 6 Sigma and the ingenuity of our people in applying them are a potent combination that give Caterpillar a unique opportunity to meet any business challenge that comes our way.”
-- Chairman and CEO Jim Owens