value methodology – a complementary tool in a lean

Value Methodology Value Methodology ––A Complementary Tool in a A Complementary Tool in a Lean Thinking CultureLean Thinking Culture

By: Drew Algase, CVSFreudenberg – NOK

International ConferenceCanadian Society of Value Analysis

October 16, 2001

16 October 2001 VM at FNGP 2

AgendaFNGP & Growtth®

VM at FNGP� Beginning� Expansion� Institutionalization

Lessons LearnedQ & A


The Freudenberg & NOK Global PartnershipServing Customers Worldwide

FREUDENBERG-NOK

NOK CORPORATION

FREUDENBERG & COMPANY

$3.5 Billion

$1.0 Billion$3.0 Billion

WORLDWIDE� Global R & D technology exchange� Globally integrated supply of products from factories in 27 countries� One-piece-flow lean manufacturing� “Zero Warranty” focus� Over 30,000 employees serving our customers� Total global sales over $7.5 billion� Total automotive sales of approximately $4 billion


Better Global Capabilities

57 Automotive Operations

25 in North and South America

21 in Europe

11 in the Pacific Rim

$4.0 Billion Automotive Sales

$1.5 billion in Europe

$1.5 billion in the Pacific Rim

$1.0 billion in the Americas


Freudenberg-NOK

Annual Sales: Approximately $1.0 billionEmployees: Over 5000Headquarters: Plymouth, Michigan� Established July 1, 1989� General Partnership between Freudenberg of Germany and NOK of Japan� Integrates Japanese, German and American technology� 25 Locations in the Americas

Designs and Manufacturers:� Seals and gaskets� Custom molded rubber products� PTFE and plastic components� Anti noise, vibration and harshness products� Brake hoses� Rebuild kits


Freudenberg-NOK Mission

Grow to be a highly profitable $1.5 billion company by 2006

as a Global Technology Specialist which incorporates Six

Sigma into the passionate practice of Growtth® -- all with the

goal of driving out warranty costs and driving up customer

satisfaction.


Growtth Is An Acronym For Get Rid Of Get Rid Of Waste Through Team HarmonyWaste Through Team Harmony, And

Represents Freudenberg-NOK’s Company-Wide Program Stressing Lean

Business Practices.


®

PRODUCT DESIGN� Value Engineering

Design to achieve targets� Production Preparation Process

Initial lean process design� Design for Six Sigma

Breakthrough Designs

PRODUCTION� Value AnalysisImprove existing products

� Shop Floor KaizenImprove existing processes

� Six SigmaBreakthrough Improvements


FreudenbergFreudenberg--NOK’s Journey to LeanNOK’s Journey to Lean

1989FNGP

Established

1995 - VA/VE Introduced

1998 - 3 P Introduced

2000 - Six Sigma Introduced

1992 - GROWTTH Initiated• Kaizen• 5-S

• SMED• TPM

1999 - Lean Supplier Initiative

2000 -Six Sigma Introduced


Value Analysis / Value Engineering

VA/VE is a proven team oriented, creative, systematic, cross-functional approach that enhances decision making, improves products and processes, and increases customer satisfaction.

Value Analysis examines current products in an effort to detect and correct value problems and reduce costs. VA is part of our Growtth® program for continuous improvement and lean manufacturing.

VA

Value Engineering focuses on new products in an effort to identify and prevent value problems before production. VE is an important feature of our product development process (APQP).

VE

The objective of VA/VE is to improve value as defined by:

Value = Function ÷ Cost


Key Elements of VA/VE

� Focus on Improving Customer Value� Dedicated Cross-Functional Teams� Cost to Function Analysis� Competitive Product/Process Analysis� Disciplined Methodology


VA/VE WORKPLAN

- Select Project and Team, Define Scope and - Objectives, Perform Information Gathering Tasks

- Define Functions, Assign Costs to Functions- Identify Improvement Opportunities

- Brainstorm ideas to Perform Function-“How Else Can We...” Functional Thinking-Idea Categorization, Idea Prioritization, ‘T’ Chart

- Value Ratio: V=F/C, Proposal Selection- Write Proposals and Action Plans

- Recommendation and Presentation- Implement Action Plan

Information Phase

Function Phase

Creative Phase

Evaluation Phase

Development Phase

Implementation Phase


FNGP’s Journey to VM

Corporate “Push”� Executive Support – Lean Strategy� Corp. VM Program ManagerInitially focused on VA, hard savings on current products – “Success Stories”VE focus to get cost avoidance –Engineering supportPlant & Sales request VM – “Pull”


LEAN STRATEGY

Product Development� Simultaneous Engineering/Development� Team Comprised of Product, Process and

Industrial Engineering� Career Paths for Strong Team Players� Robust Products� Visual Management/Performance Measurements� Enhancement of Product Features

(Variety Time Compression)� Value Management; Value Analysis/ Value EngineeringValue Management; Value Analysis/ Value Engineering


LEAN STRATEGY

Customer� Massive Database of Buying Preference� Target Cost; “Market Price Minus” System

� Value Engineering � Declining Price Over Life of Part

� Value Analysis� Share Cost and Production Techniques Information� Share Profit from Joint Activities

� Suppliers Keep Profits from Additional Activities� Fixed Demand


INITIATIVE ELEMENTS

� Steering Committee

� GROWTTH Office at Each Facility� Planning� Coordination� Follow Up

� Introduction to All Employees

� Leadership Course (Vital Learning)

� Leader Training

� Inter-Plant Participation

� Cadre of Facilitators/Trainers

� Networking


Corporate PolicyCorporate Policy(Supports Lean Strategy)(Supports Lean Strategy)

Must conduct VE and/or 3P for:� All new products & programs > $ XXX � All A/Rs > $ XXX

Built into Policies & Procedures (QS-9000)� Contract Review – Commercial Issues� Financial Review – Capital Requests

Implemented in 1998


VA/VE Program Improvements

Incorporate VA/VE into Growtth Manager’s responsibilities (certification requirements):� Project Selection & Scheduling� Facilitation & Training� Implementation Tracking & Follow-up

Local Growtth Steering Committee to include VA/VE activities such as project selection & prioritization, Savings calculations.


Expectations - Best PracticesSelection GuidelinesProject CharterTeam Leader & Members – R&R


Sample ExpectationsProject Charter & SponsorLocal Manager LeadershipCustomer InvolvementMinimum Potential Savings of $100,000/YearAnnual Sales > $650,000Minimum Life of 3 Years


Project Charter

Prepared or Approved by Project SponsorFramework for SOW or TOWS� Background - “Motivation”� Business Problem – Objective from PDM� Expectations – Realistic Deliverables� Boundaries – sacred cows, dates, resources,…

(From Project Management Tools & Techniques)


PROJECT CHARTERTo Initiate project and framework for S.O.W.

Date: Project Sponsor: (Champion)

Project Manager:

BACKGROUND (Why is project requested?):

BUSINESS PROBLEM TO BE SOLVED:

MANAGEMENT EXPECTATIONS (What outcomes are desired?):

N BOUNDARIES (Resources, time, interfaces):sired Completion date: ential participants:

ations and Constraints:

PROJECT TITLE:

KNOW* De* Pot* Consider


Roles & ResponsibilitiesTeam LeaderCore Team MemberSupport Team MemberFacilitatorLocal C.I. Manager� Guide Project Selection� Support Facilitator & Team Leader� Maintain visibility of projects until completion


Cross FunctionalTeam Member Guidelines� Must be project stakeholders

(i.e.., invested in project’s success)� Consists of 7-8 members

� Do not overload in specific functional area

� Include suppliers & customers

� Support members with specific expertise


Planning Deliverables

Approved Project CharterCustomer ParticipationCore Team Members NominatedFacilitator AssignedPre-Workshop Meeting ScheduledWorkshop Dates Scheduled


2-5 Weeks prior to WorkshopFacilitator leadsCore Team Members must attendProject Sponsor should “Kick-Off”Agenda:� Team Organization Worksheet� Information Gathering Assignments� Workshop Logistics


Workshop LogisticsRoom – No Distractions� Off Site or “50 Mile Rule”� Round or Conference Table set-up (not classroom)

Meals & Snacks; like KaizenThree full days + Report-out on 4th. MorningA-V Materials & Equipment� Overhead Projector & screen (or equiv)� Flip Charts, colored markers, masking tape� 3x5 Index Cards & Post-it notes� Network computer, phone, fax availability


POST-WORKSHOP IMPLEMENTATION

Presentation to ManagementBusiness Benefits – MeasurablesProject ManagementImplementation Tracking & Follow-Up


Management Presentation

Begins the Implementation PhaseImmediately following Workshop –Morning of 4th Day.Invite people key to implementation:� Project Sponsor & Plant Manager & Staff; Sales, Purchasing,

Finance, Engineering, Operations, etc.

Same Room as Workshop 30 – 45 Minutes- to answer Management’s Questions


1. What did you set out to do?

2. What do you propose?

3. What are the benefits?

4. What are the costs & risks?

5. What are your plans to implement?

6. What do you need from us?


Financial Benefits

Use C/R Form with Finance Dept. supportIdentify initial cost impact opportunities� Hard & Soft savings � Customer Benefits; Price & Operations savings

Report initial savings at next BOS Meeting (per local procedures)


Freudenberg - NOK General Partnership

Financial Results Of Kaizen Activities (FROKA)

Project Data Financial Summary (Annualized $'s)Facility Data Project Type:

Lead Center: xxxx Major Minor FNGP Savings Customer Savings TotalLocation: xxxx Hard Soft Hard Soft Savings

Project Title: XXXX Event Type: Material $0 $0 -$ x -$ Project No.: XXXX Kaizen Pre-Production Direct Labor $0 $0 -$ -$ -$

BPR VA Variable Labor Burden $0 $0 -$ -$ -$ Part Data VE Other Variable Machine Burden $0 $0 -$ -$ -$

Scrap $0 $0 -$ -$ -$ FNGP Part No.: x Other $0 $0 -$ -$ -$

Customer: x Report Timing: Total Variable Cost Reduction -$ -$ -$ -$ -$ Customer Part No.: x Event…………………………. Less: Price Share $0 -$

Product Line No.: x Initial Follow-up……………… x Operating Income -$ -$ -$ -$ -$ EAU: 0 Implemented/Stabilized…….. Opportunity Cost Reduction $0 -$

Est. Annual Sales: 0 Total Annual Cost Reduction -$ -$ -$ -$ -$ Inventory Reduction $0 -$ -$ Investment Avoidance $0 -$ -$ Investment Requirements $0 -$ -$ Total One Time Cash Flow $0 $0 $0 $0 $0

Notes -Cash Flow -$ -$ -$ -$ -$ Payback in Years - Hard #DIV/0!Payback in Years - Soft & Hard #DIV/0!Notes - 1. Savings should only be reported on the quarterly report when the improvement is fully implemented and stabilized. 2. Amounts for Opportunity Cost and Investment Avoidance should not be included in "Hard" savings. 3. Payback includes the effect of a 40% income tax. To KIS it does not take into account the cash flow effects of book versus tax depreciation. General rule of thumb, if the payback is less than 3.5yrs, the investment required to generate the savings is worth while to pursue.

Financial Results


Tracking & Follow-up

“30-Day” Follow-up to confirm assumptions; � design, process, quality, cost.

Report “30-Day” benefits on Quarterly VA/VE Savings ReportMonthly BOS Meetings – Regular Agenda Item� Local Metrics� Status of all open proposals


Suggested Metrics

For each VA/VE Proposal:� Identified or Confirmed Savings� Savings Implemented/Approved� If Rejected, Reason (technical, commercial, policy)

For Total VA/VE Proposals & Projects� Total Savings Identified / Confirmed� Average Savings per Project� Total Savings Implemented / Approved� Percentage of savings Approved, Rejected, and

Open.


VA/VE Enablers

Project “sponsored” by ManagementCustomer’s Release Engineer on TeamPreparation meeting adequate & timelyCore Team full participationWorkplan followedAction plans prepared at workshopPresentation of results to sponsorsMonthly status reporting until completion


VA/VE Implementation Improvements

Use Growtth Cost Benefit Analysis sheet to determine hard & soft savings.

Local Emphasis for Implementation:� Local Growtth Manager to track implementation,

as with Kaizen actions.� Agenda item at Monthly BOS meetings for status

of all open proposals.� Report results on OD forms, along with other

improvement activities.

VA/VE Savings & Status as an agenda item at Senior Staff Meetings.


DESIGN INPUT(Value engineering)

DESIGN INPUT(Value engineering)

YES

-Voice of customer-Commercial targets-Benchmarking-Assumptions-Design/Reliability goals-Management support-Form APQP team-Team feasibility

-Voice of customer-Commercial targets-Benchmarking-Assumptions-Design/Reliability goals-Management support-Form APQP team-Team feasibility

CT MatrixFM-04-TECH-009 (Value Ratio)FM-04-TECH-008 (Function Worksheet)FM-04-TECH-007 (VA/VE)FM-04-TECH-001 (Design Val)

CT MatrixFM-04-TECH-009 (Value Ratio)FM-04-TECH-008 (Function Worksheet)FM-04-TECH-007 (VA/VE)FM-04-TECH-001 (Design Val)

TARGET/PLAN/DESIGNTARGET/PLAN/DESIGN

CUSTOMERREQUEST(OP-03-SALES-002)

CUSTOMERREQUEST(OP-03-SALES-002)

MARKET NEED(From customer input)

MARKET NEED(From customer input)

TECHNOLOGY ADVANCEMENT(R&D)

TECHNOLOGY ADVANCEMENT(R&D)

INQUIRY INITIATED(WI-03-CS-001)(WI-03-SALES-021)

INQUIRY INITIATED(WI-03-CS-001)(WI-03-SALES-021)

REVIEW TO PROCEED

(WI-03-SALES-006)

REVIEW TO PROCEED

(WI-03-SALES-006)

APQP FLOW CHART

NO


VA/VE Workplan Checklistor, you’re doing VM when the following actions are followed

VA/VE Workplan Phase & Description Suggested VA/VE Form

Used; Yes or No Documentation or Evidence of use:

INFORMATION PHASE: Cross-functional team composed of stakeholders (e.g. APQP team)

Team Organiz.

Work Sheet

Identify customer requirements; Functional & Commercial; Quality, Cost, Timing. (e.g. QFD)

TOWS or X-Y Matrix

Set specific, measurable objectives to improve value (Value = Function / Cost)

TOWS

FUNCTION PHASE:

Analysis of functions the product must do to meet customer requirements (results, not activities)

Function Worksheet

Allocate actual costs to functions Cost/Function Worksheet

Prepare (or review) Function Diagram F.A.S.T. Diagram

Select functions for value improvement (high cost, low performance); Identify value mis-matches.

CREATIVE PHASE:

Brainstorm to generate ideas to perform functions identified in Function Phase. Create by function.

Revisit ideas from previous events (kaizen, VA/VE, etc.) ; leverage your creativity.

Idea Worksheet

EVALUATION PHASE:

Select feasible solutions to improve value; categorize & prioritize.

ABCD Matrix

For feasible solutions, list advantages & disadvantages or risks, estimate magnitude of changes, identify ways to overcome disadvantages

T-Chart


ChampionsChampions - Set The Agenda

Steering CommitteesSteering Committees - Guide the Process

+C.I. Manager/OfficeC.I. Manager/Office - Resource to just do it


6-Sigma & VM; Problem Solving Processes

System Des.Parameter & Tolerance des.

Taguchi Product Development Cycle

?Jack Welch GEVisibility (Champion)

Function Analysis

DMAICUnique Feature

Value Impvt.V=F/C

Defect Redn.DPMO

Deliverable

Job Plan6-Phase

Breakthrough Strategy - DMAIC

Methodology

Gen. ElectricMotorolaWhere developed

VM6-Sigma

value methodology – a complementary tool in a lean

Documents