Ch5: Manufacturing

Perceived Quality

Based on customer's experience before, during, and after they purchase a product

Six Sigma Methodology- 2 Key Approaches

DMADV methodology DMAIC methodology

Waste Reduction 8 Wastes

DOWN TIME Defects Overproduction Waiting Non-utilized talent Transportation Inventory Motion/movement Extra processing

DMADV Methodology

Define Measure Analyze Design Verify Designing products/processes Used when company wants to *create a new product design or process* that is more predictable and defect free

DMAIC Methodology

Define Measure Analyze Improve Control Improving products/processes Used when company wants to *improve an existing business process* Most widely adopted six sigma methodology in use Defines the steps a six sigma practitioner typically follows during a project

Design for Manufacture

Design for assembly- minimize number of parts and on easing assembly processes Design for product serviceability- eases disassembly and reuse of product components Design for six sigma- evaluates consistency with which a good/service can be produced given capacities of processes used

Design for Logistical Interfaces

Design for logistics concept incorporates the requirements and framework for logistical support of the product in the early phases of product development Considers- what are we going to make? how are we going to make it? etc

Conformance

Does the product meet its specifications as designed

Waiting

Elapsed time between processes when no work is being done

Inventory

Excess products or materials not being processed

International Organization for Standardization (ISO)

Formed after World War II Management standards have been established by ISO in quality and environment

Manufacturing Perspective: Variety

Frequent product runs and high repetition of small lot sizes Processes that can rapidly switch production from one product of another while retaining efficiency have economies of scope

Line Flow

Has standard products with a limited number of variations moving on an assembly line through stages of production Typical assembly line production Limited product variety High volume ATO/MTS Short customer lead time

ISO Certified are Preferred by Procurement

Have to conform to an externally defined set of standards for quality and delivery of service Usually more open to sharing supply chain information Welcome building relationships with customers- formal processes for continual improvement of products Firms have to be re-certified every 3 years

Performance

How well the product performs in comparison to how it was designed to perform

Standards in ISO 14000 Series

ISO 14001- specification of environmental management systems ISO 14004- guideline standard ISO 14010-14015- environmental auditing and related activities ISO 14020-14024- environmental labeling ISO 14031-14032- environmental performance evaluation ISO 14040-14043- life cycle assessment ISO 14050- terms and definitions

Total Cost of Manufacturing

Includes procurement and production activities, inventory and warehousing activities, and transportation activities Generally expressed as "cost per unit" Procurement/production costs go down as volume goes up Inventory/warehousing costs go up as volume goes up Transportation costs go down as volume goes up, level at high volumes

Mass Customization

Individually customized products being produced at the low cost of standardized, mass produced goods Objective: increase variety for customer while realizing the cost advantages of high volume continuous and line flow processes On demand, to order, postponement Ex: dell, m&m's, reebok

Manufacturing Perspective: Constraints

Interact with volume and variety to create realistic manufacturing plans Capacity is how much you can produce in a given unit of time Equipment considers how flexible it is Bottleneck Setup/changeover considers how quickly you can change from one variety of product to another

ISO 14000

International Environment Standard Manage the environmental effect of their business practices How a company manages environment inside its facilities and immediate outside environment Analyze entire life cycle of a product from raw material to eventual disposal Do not mandate particular level of pollution, focus on awareness of processes and procedures that can effect environment Adhering to this does not release a company from national/local regulations regarding environment performance issues

ISO 9000

International Quality Standard Provides guidance/tools for companies who want to ensure their products/services consistently meet customer's requirements and that quality is improved Shows commitment to providing a higher level of customer satisfaction Shows existence of effective quality management system that satisfies rigors of an independent/external audit Boost organization's brand reputation, useful promotional tool, especially against competitor's who aren't certified

Reliability

Likelihood that the product will perform throughout its expected life

Manufacturing Contemporary Developments

Mass customization Lean systems Six sigma Requirements planning Design for manufacture Design for logistics

Manufacturing Perspective: Brand Power

Measure of customer preference based on reputation, product quality, and supply chain capabilities

Manufacturing Perspectives: Lead Time

Measure of elapsed time between release of a work order to the shop floor and completion of work on the product to achieve ready-to-ship status

Mass Customization Product/Process Characteristics

Modular or adjustable product building blocks- need to be able to stop manufacturing at a logical place to be able to customize Predictable components/functions interactions Standardized process/skill blocks Reasonable lead times, steps, work content Boeing waits until customer order placed to manufacture in order to customize

Manufacturing Strategies

Must develop a strategy that suits the types of products they product, customer's expectations, and their strengths Vary significantly depending on product/customer requirements Essential for establishing/maintaining effective supply chain

Materials Requirements Planning (MRP) Interfaces

Procurement has key role in ensuring all the components are obtained on time to make an end item Bill of materials is key More complex for manufacturing where large numbers of sub-components or sub assemblies are used to produce final product Planning can span multiple manufacturing locations

Business

Activity of providing goods/services involving financial, commercial, and industrial aspects

Durability

Actual life expectancy of the product

Make to Order (MTO)

Allows customers to purchase products that are customized to their specifications Only manufactures end product once customer places order Creates additional wait time for customer to receive the product but more flexible customization Relieves the problems of excessive inventory common in MTS strategy Appropriate for highly configured products, computer servers, aircraft, ocean vessels, bridges, or products very expensive to keep in inventory

Primary Objectives of Lean System

Produce only products that customers want- MTO, inventory is waste Produce products only as quickly as customers want them Produce products in perfect quality Produce in minimum possible lead times Produce produts with features customers want and no others Prouce with no waste of labor, materials, or equipment- designate a purpose for every movement to leave zero idle inventory Produce with methods that reinforce the occupational development of workers

Six Sigma Quality Level

Produces defect free product 99.99966% of the time 3.4 defects per million

Role of Production in Business

Product- performance, quality, reliability Plant- future demand, health/safety, productivity of equipment Processes- available capacity, available skills, type of production Programs- purchasing patterns, cash flow, need for storage People- wages/salaries, safety/training, working conditions

Overproduction

Production before it's needed or in excess of customer requirements Providing a service that isn't needed

Assemble to Order (ATO)

Products ordered by customers are produced quickly and are customizable to a certain extent Basic parts for product are already manufactured but not yet assembled Order received, parts assembled quickly, sent to customer Hybrid between make to stock (produced fully in advance) and make to order (manufactured once order received) - combines benefits of both strategies, quickly to customer and also customized

Benefits of Mass Customization

Profits- focus shifts from price to benefits, option to charge a premium while still retailing below price of custom product Lower costs- allows customer to receive customized product at competitive price, good value for money Inventory- no extra inventory accumulation, reduce inventory costs and spoilage Market exploitation- companies form close relationships with suppliers, distributors, and customers, lead customers provide good sources of new ideas

Just in Time (JIT) Interfaces

Purchased materials/components arrive at manufacturing/assembly point just at the right time they are required for transformation process Raw material and WIP inventory minimized Demand for materials depends on finalized production schedule Close cooperation with suppliers is essential Lot sizes are low as one unit

Benefits of Lead Systems

Reduce waste by greater than 80% Reduce production costs greater than 50% Reduce manufacturing cycle time greater than 50% Reduce labor greater than 50% Reduce inventory greater than 80% Increase capacity greater than 50% Increase quality,profits, flexibility, strategic focus, cash flow

Logistical Interfaces

Resources must be procured, positioned, and coordinated as needed to support manufacturing strategy selected 4 approaches: Just in time (JIT) Materials requirements planning (MRP) Design for manufacture (DFM) Design for logistics (DFL)

Stakeholders in Manufacturing

Sales and marketing Design/development Finance Quality All departments contradict each other and it creates conflicts

Manufacturing

To make or process a raw material into a finished product by means of a large sale industrial operation Mass production Entire process of converting the raw material into finished goods Includes machines used, personnel involved, inventory handling, warehousing, etc

Standards in ISO 9000 Series

2008- set requirements of quality management system, replaced with ISO 9001:2915 updated version 2005- covers basic concepts and language 2009- focuses on how to make a quality management system more efficient/effective 2011- sets out guidance on internal/external audits of quality management systems

Waste

Anything that doesn't add value to customer

Defects

Anything that doesn't meet the acceptance criteria

Six Sigma Quality Concepts

Approach to identify sources of variability and then systematically reduce them- get to root of cause Goal is to achieve a process standard deviation that is 6 times smaller than the range of outputs allowed by the product's design specification

Disadvantages of Mass Customization

Communication- getting information from customers is hard Logistics- distributing right product to right customer at the right time at reasonable price is very difficult Process- production must be flexible Costs- increase in material and manufacturing costs

Engineer to Order (ETO)

Component is designed, engineered, and built to specifications only after order is received Dramatic evolution of MTO *Build a unique product every time* Cost of poor quality is very high- warranty and cost to reqork to replace an item has negative effects on profit margins, quality is essential throughout the entire process

Job Shop

Creates a custom product for each customer High customization Very high product variety Very low volume ETO/MTO Very long customer lead time

Choice of Strategy Determines which Performance Cycles the customer Experiences

Customer delivery cycle- MTS Manufacturing cycle- ATO Procurement cycle- MTO Product design- ETO

Manufacturing Processes

Job shop Batch Line flow Continuous flow

Types of Manufacturing Strategies

Make to stock Assemble to order Make to order Engineer to order

Manufacturing Management

Management of all the processes which are involved in manufacturing Conversion of raw material to finished product Management of personnel, raw materials, planning for production, etc

Make to Stock (MTS)

Manufacture products for stock based on demand forecasts Push system Must forecast accurately to prevent excess inventory and opportunity loss due to stockout Forecasted demand can be determined from past data Need certain amount of excess inventory without having too much excess Daily necessities, processed foods, sundries, and textiles are MTS products

Batch

Manufactures a small quantity of an item in a single production run High product variety Low volume ETO/MTO/ATO Long customer lead time

8 Dimensions of Product Quality

Performance Reliability Durability Conformance Features Aesthetics Serviceability Perceived quality

Lean Systems

Philosophy focused on customer Elimination of waste Emphasizes minimization of the amount of all resources (including time) used in operation of a company Need to figure out what doesn't add value

Total Quality Management

Philosophy focused on meeting customer expectations with respect to all needs, across company functions, and recognizing all customers, both internal and external Total organization-wide activity versus a technical task

Aesthetics

Styling, color, workmanship pleasing to the customer

Mass Customization Market Characteristics

Sufficiently large customer segment that values "translatable variety"- market has to want customization Turbulent, dynamic market Unpredictable demand (sort of) Little impact of regulation or other constraints

Total Quality Management Basic Conceptual Elements

Top management commitment and support Maintaining a customer focus in product, service, and process performance Integrated operations within and between organizations Commitment to continuous improvement

Manufacturing Perspective: Volume

Traditionally treated according to the principle of economy of scale Average cost to produce product declines as manufacturing volume increases Important when high fixed costs are present

Production

Transformation of raw materials and operational inputs and outputs that, when distributed, meet the needs of customers

Non-Utilized Talent

Under utilizing people's talents, skills, or knowledge Demotivating workforce by not asking for input or recognizing success

Transportation

Unnecessary movement of materials or products

Motion/Movement

Unnecessary movement of people Multiple hands off

Extra Processing

Unnecessary steps in process Redundancies between processes More work or higher quality than required by customer

Continuous Flow

Used to manufacture such items as gasoline, laundry detergent, and chemicals Inflexible processes High capital investment Pipeline- flows without stopping Very limited product variety Very high volume MTS Very short customer lead time

Elements of Lean Production

Waste reduction Lean supply chain relationships Lean layouts Inventory and set up time reduction Small batch scheduling Continuous improvement Workforce empowerment

Features

What different functions or tasks can the product perform

Serviceability

What is the ease of fixing/repairing the product if it fails