CPI Intel TOC Lean Six Sigma May 2008

Using TOC, Lean, and Six Sigma
to Improve Supply Chain

Operations
C. Grant Lindsay, CSCP, Jonah

Scott Edwards, Jonah
CUSTOMER FULFILLMENT
Planning and Logistics Group
Objective
Demonstrate how using TOC, Lean,

and Six Sigma together can deliver
fast measurable results in
distribution operations
THIS PRESENTATION CONTAINS THE GENERAL INSIGHTS AND OPINIONS OF INTEL CORPORATION (INTEL).
THE INFORMATION IN THIS PRESENTATION IS PROVIDED FOR INFORMATION ONLY AND IS NOT TO BE RELIED
UPON FOR ANY OTHER PURPOSE THAN EDUCATIONAL. USE AT YOUR OWN RISK! INTEL MAKES NO
REPRESENTATIONS OR WARRANTIES REGARDING THE ACCURACY OR COMPLETENESS OF THE INFORMATION
IN THIS PRESENTATION. INTEL ACCEPTS NO DUTY TO UPDATE THIS PRESENTATION BASED ON MORE CURRENT
INFORMATION. INTEL IS NOT LIABLE FOR ANY DAMAGES, DIRECT OR INDIRECT, CONSEQUENTIAL OR
OTHERWISE, THAT MAY ARISE, DIRECTLY OR INDIRECTLY, FROM THE USE OR MISUSE OF THE INFORMATION
IN THIS PRESENTATION.
2 CUSTOMER FULFILLMENT
40 Years of Experience
From our founding in 1968, we’ve grown into the world’s

leading silicon innovator with around 86,000 employees,
approximately 300 facilities in 50 countries, and over
$38 billion in revenues.
Intel’s Supply Chain
Supplier Factory Shipment

Delivery
Fab Customer
Warehouse
Operations
Warehouse Network
Worldwide Manufacturing
Operation
Amsterdam
Warehouse and
distribution operations have
to ship the right orders to
the right place at the right
time
This is our journey using
TOC, Lean, and Six Sigma
to improve distribution
operations
Understanding the System
Current Reality Tree
Value Stream Map
Maintain a
Planning the change stable
predictable
operation
“In the long run you

only hit what you
aim at.” - Thoreau
Identify the
correct
We started here organizational
goals
Warehouse Operation
FACTORY Shipment
Delivery
Inventory
Receiving
Storage
WH Order Order
Order Pick
Creation Staging
Processing
Order
Lines Order
Processing QA
Packing
(WOrP)
WOrP
Before we started…
• High WIP levels

• High Cycle Time at each site
• High Cycle Time Variability from site to site
• Difficult to determine site Output capability
• Balance capacity policy & staffing model
• Safety risks (due to high WIP levels)
Improving Production Operations
Old Process New Process
DBR
Balance Capacity Unbalance Capacity
Unbalance Flow Balance Flow
It's not about keeping people busy; it's about keeping orders busy.
Example: Single Site Results
Process
Before DBR
Daily Avg Cycle Time
DBR
0
0 25 50 75 100 125 150 175 200 225
Days
Daily Avg Cycle Time
UnEqual Variances
Difference t Test DF Prob > |t|
Estimate 3.26633 9.841 137.528 <.0001
Std Error 0.33190
Lower 95% 2.61004
Upper 95% 3.92263
0
Before DBR DBR
Process Planning and Logistics Group
Pull for Lean & SPC
With an understanding of flow and managing constraints, people
began to ask questions…
How do I know when the

process is running well
vs. when I need to fix it?
When do I
need to react?
Are there tools

available to help
us get more out of
the constraint?
SPC and Buffer Reports
Cycle Time
Control Chart
Buffer Report
World Wide Cycle Time Results
Process
UCL Before DBR
DBR
Implementation
CL
75% Reduction
across all
LCL
Cycle Time
sites!
UCL
CL
LCL
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48
Months
Qualitative Results of DBR
BEFORE AFTER
• Operations metrics were not • Clear link between
directly effected by daily operations performance and
activity
metrics
• Large unexplainable
difference in cycle time from • Site to site differences are
site to site small and can be explained
• Difficult order prioritization • Easy order prioritization
• Each operation/station was • Increase in site team work
focused on only their
process
Keeping the Momentum Going
• The fast and stable process drove many follow on

projects that enabled increased performance
– Next Generation Capacity Model
– Boards and Systems warehouse implementations
– Reduction to early Order Creation
A New Capacity Model
The Old model The New Model

• Balanced capacity (resource • Balanced flow (time efficiency)
efficiency) • Prioritizes the constraint
• Each operation equal operation
• Numerous static point • Few distribution inputs (3)
estimate inputs (9) • Considers process variability
• Did not effectively account • More informed decision making
for variation (provides estimate of risk)
• Incomplete decision making • Simplified maintenance
(unable to quantify risk)
• Intensive model maintenance
“Next Generation Capacity Model”
INPUTS Monte Carlo OIM Operation

DNs per hour Heuristics/Assumptions
125
Simulation
100
Count
75
50
25
Model Output
0 10 20 30
Line & HC
Daily DN Demand Recommendations
500
400 Overlay Chart
300 .050
Frequency Comparison
Simulation based
DNs
200
.037 5 Line Total Output
Equations
f ( x) =
.025
100
.012
Demand
0
2 3 4 5 6 7 .000
50.00 118.75 187.50 256.25 325.00
Day
Warehouse Operation
FACTORY Shipment
Delivery
Inventory
Receiving
Storage
WH Order Order
Order Pick
Creation Staging
WH Process
Processing
Order
Lines Order
Processing QA
Packing
(WOrP)
WOrP
Before Six Sigma
Fr
eq
ue Inventory o
nt n hold
or
de
k rc
an
or
ce
w
lla
tio ly
rd
ns r
ea
da
ed
an
um
s
st
n
co
No
r y
t o
Custo e n
mer c nv
redit I
probl
ems
Identifying the Critical Variables
Y Inventory Holds Y
Y Cycle Time Cancellations Y
“Control Point” X
New Tool
Y = f (X)
The “Control Point” variable (X) impacts all these metrics (Y)
After Six Sigma…
• Cycle Time
– 44% reduction to Mean (41% to St Dev)
• Cancellations – 2 sites tracking
– Site 1 - 73% Reduction to Mean (44% St Dev)
– Site 2 - 51% Reduction to Mean (70% St Dev)
• Holds
– 30% Reduction to Mean (11% St Dev)
• Standardized process
• No increase in H/C required
• No additional investment required
Bigger System…Bigger Value…
~$15M in
inventory
savings
Combined Results Summary
• Eight implementations in six countries

• Mean cycle time reduction of 75% (over 75% st dev)
• Warehouse WIP reduction of over 65%
• Fast delivery of operations data (3 weeks to 1 hr)
• Next Generation Capacity Modeling
• $15M in inventory savings
• Increased employee safety
• No increase in operating expense
• No investment required
Overview of Process
Understand the system – TOC (TP) / Lean (VSM)

Understanding and using
Define your scope – TOC (TP) / Lean (VSM)
TOC, Lean, and Six Sigma
Ensure proper measures are in placeis– the
together TOC path to real
Production Improvementimprovement!
• Remove policy constraints – TOC (TP)
• Improve Production process – TOC (DBR) / Lean / SPC
Exploit the new process
• Next Generation Capacity Model – TOC / Simulation (MC)
• Early Order creation – TOC (TP and CCPM) / Six Sigma
C. Grant Lindsay
C. Grant Lindsay, CSCP, Jonah is a Senior Industrial

Engineer in the Supply Chain Strategy and Design
department for the Intel Corporation. His
professional experience has focused on
manufacturing and supply chain process
improvement for the semiconductor and aerospace
industries. Mr. Lindsay holds a Bachelors Degree in
Industrial Engineering from Arizona State University
and a Masters Degree in Engineering Management
from Washington State University. He is certified in
Supply Chain Logistics and the Thinking Process from
the Theory of Constraints International Certification
Organization (TOC-ICO) and is a member of the
TOC-ICO Fundamentals Exam Committee. Mr.
Lindsay received his “Jonah” recognition from
Washington State University / Avraham Goldratt
Institute, is a Certified Six Sigma Black Belt, and an
APICS Certified Supply Chain Professional.
Grant.Lindsay@intel.com
480-552-5678
Scott J. Edwards
Scott J. Edwards is an Industrial Engineer in the

Supply Chain Industrial Engineering and
Statistics department at Intel Corporation. His
professional experience includes process
improvement, capacity planning and modeling,
and network design in logistics/supply chain
areas. Scott has a Bachelor of Science degree
in Industrial and Management Systems
Engineering from Arizona State University and a
Masters degree in Business Administration from
the University of Phoenix. He is also a certified
Six Sigma Black Belt through Arizona State
University’s Ira A. Fulton School of Engineering
and received his “Jonah” recognition from
Washington State University / TOCICO.
scott.j.edwards@intel.com
480-552-1064
Related Papers
Edwards, Scott and Lindsay, C. Grant “Capacity Modeling

with Monte Carlo Simulation for Finished Good
Warehouses”. Crystal Ball User Conference, Denver,
Colorado May 2006
Lindsay, C. Grant, “TOC in the DC” Institute of Industrial
Engineers (IIE), Industrial Engineer magazine, Jun 2005

CPI Intel TOC Lean Six Sigma May 2008

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Using TOC, Lean, and Six Sigma

to Improve Supply Chain

C. Grant Lindsay, CSCP, Jonah

Demonstrate how using TOC, Lean,

From our founding in 1968, we’ve grown into the world’s

Supplier Factory Shipment

Current Reality Tree

Value Stream Map

“In the long run you

• High WIP levels

Balance Capacity Unbalance Capacity

Unbalance Flow Balance Flow

How do I know when the

Are there tools

• The fast and stable process drove many follow on

The Old model The New Model

INPUTS Monte Carlo OIM Operation

400 Overlay Chart

Y Cycle Time Cancellations Y

• Eight implementations in six countries

Understand the system – TOC (TP) / Lean (VSM)

C. Grant Lindsay, CSCP, Jonah is a Senior Industrial

Scott J. Edwards is an Industrial Engineer in the

Edwards, Scott and Lindsay, C. Grant “Capacity Modeling

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