Operations Management

Proposal:

To retain current CNC Machines and improve on production by application of LEAN-SIX SIGMA.

What is LEAN SIX-SIGMA:

Lean Six Sigma is a team-focused managerial approach that seeks to improve performance by
eliminating waste and defects. It combines Six Sigma methods and tools and the lean manufacturing
philosophy, striving to eliminate waste of physical resources, time, effort and talent while assuring
quality in production and organizational processes. Simply put, under the tenets of Lean Six Sigma any
use of resources that doesn't create value for the end customer is considered a waste and should be
eliminated. (Kenton, 2018)

After much deliberation, we have decided that switching from CNC to FMS may not be the best option
for RMC. This is mainly attributed to RMC’s business strategy of producing products of High Variety and
Low Volume to accommodate a variety of customers.

Changing the status quo from CNC to FMS will not only cost the company over $3 Million to purchase
the machines, but more money will have to be spent for installation, necessary modifications to current
infrastructure, staff retraining, loss of skilled capital, and loss of time capital, which will result in an
investment amount of more than $3 million and, with the current forecast of a 10 to 15 percent ROI, a
return of investment of more than 7 to 10 years, which far exceeds RMS’s expectation for less than 5
years payback duration. In addition to this, the time taken to switch from the older process to the newer
process will far out justify the large investment that the switch calls for in the first place. This loss of
time will further add to the growing cost of switching from CNC to FMS.

Taking into account RMC’s business model and weighing the pros and cost of switching from CNC to
FMS, we suggest that RMC maintain the current system but adopt the LEAN-SIX SIGMA doctrine to
address the issues with the current system and refine the production process.

Granted, that LEAN-SIX SIGMA is a slow process, but it has yielded excellent results with a success rate
of 99.9997% (Kwak and Anbari, 2004). The application of LEAN-SIX SIGMA will yield a much better result
than switching to FMS.

Kenton, W. (Investopedia) (2018) Lean Six Sigma, Lean Six Sigma. doi: 10.1201/b19260.
Kwak, Y. H. and Anbari, F. T. (2004) ‘Success factors in managing Six Sigma projects’, Proceedings of PMI
Research, pp. 1–14. Available at: https://www.pmi.org/learning/library/success-factors-managing-six-
sigma-projects-8293 (Accessed: 2 February 2021).