Supply Chain Ch.8

joseph juran

defined quality as "fitness for use". He developed the concept of the cost of quality

quality control

determine what to control - establish standards of performance - measure performance, interpret the difference, take action

sustain

stick to the rules. Maintain and review the standards

buyer's risk

the buyer accepts a shipment of poor-quality units because the sample falsely provides a positive result against the acceptance standard (type II error)

supplier's risk

the buyer rejects a shipment of good-quality units because the sample quality level did not meet the acceptance standard (type I error)

manufacturing management

the management of all the processes which are involved in manufacturing

quick response

the rapid replenishment of a customer's stock by a supplier with direct access to data from the customer's point of sale

quality improvement

show the need for improvement - identify projects for improvement - implement remedies - provide control to maintain improvement

components of LEAN

- LEAN manufacturing - respect for people - total quality management

root cause analysis

- a collective term that describes a wide range of approaches, tools, and techniques used to uncover causes of problems - core issue that sets in motion the entire cause-and-effect reaction that ultimately leads to the problem

make to order

- a manufacturing strategy in which manufacturing starts only after a customer's order is received - creates additional wait time for the customer to receive the product, but allows customers to purchase products that are customized to their specifications - relieves the problems of excessive inventory created by MTS - not appropriate for all types of products: not appropriate for products where customers expect immediate availability/delivery -- ex: grocery items - appropriate for highly configured products like aircraft vessels, bridges, expensive products - focus on manufacturing cycle

Kanbans

- small batch scheduling can be facilitated through the use of these - means "signal" or "card" in Japanese and is used for communication between workstations. - authorize production or the movement of materials to the next workstation - could be facilitated through the use of a computer software program

Small Batch Scheduling

- smaller batches will facilitate producing at the same rate as customer demand. - creates a smooth workload as production can be synchronized with customer demand, facilitating a pull system. - increases flexibility - throughput times in manufacturing go down

inventory

- some inventory is necessary, but excess is a waste - excess inventory takes up space and costs money to hold and maintain - ties up financial capital which could be used for other things - reducing inventory frees up capital and reduces holding costs

continuous improvements

- system that is based on making little changes on a regular basis, anywhere changes can be made, to reduce process, delivery, and quality problems - continuous small improvements - changes are implemented quickly - everyone gets involved

voice of the customer

- term used in business to describe the in-depth process of capturing internal and external customer's expectations, preferences, likes, and dislikes - data is used to identify the quality attributes needed for a process or product - customer interviews, surveys, focus groups, observation, data, field reports, logs, etc...

waste categories

Defects Overproduction Waiting Non-utilized talent Transportation Inventory Motion Extra-Processing

DMADV Methodology

Define, Measure, Analyze, Design, Verify - a data-driven quality strategy for designing products and processes - used when the company wants to create a new product design or business process that is more predictable and defect free

DMAIC methodology

Define, Measure, Analyze, Improve, Control - a data-driven quality strategy for improving products and processes - used when the company wants to improve an existing product or business process - most widely adopted and recognized Six Sigma methodology in use. - defines the steps a Six Sigma practitioner typically follows during a project.

role of suppliers

LEAN involves building long-term supplier relationships - partnerships with suppliers - improving process quality - sharing info - goal: have the fewest number of high-quality suppliers as possible without unnecessarily increasing risk.

Six Sigma

a disciplined, statistical-based, data-driven methodology for identifying and removing the causes of defects and minimizing variability in manufacturing and in business processes. - originally developed by Motorola

efficient consumer response

a strategy to increase the level of services to consumers through close cooperation among retailers, wholesales, and manufacturers

just in time

an inventory strategy to decrease waste by receiving materials only when and as needed in the production process, thereby reducing inventory costs

tcm vs strategic alternatives

as volume goes up... - manufacturing and procurement costs go down due to economies of scale. - inventory and warehousing costs go up - transportation costs go down, but level off at high volumes as the shipping container gets filled to capacity and another container must be used.

shine

clean the work area so it is neat and tidy

philip crosby

coined the phrase "quality is free" as defects are costly. He introduced the concepts of zero defects, and focus on prevention and not inspection

appraisal costs

costs associated with the evaluation of purchased materials, processes, products, and services to ensure that they conform to specifications - include costs for: -- testing, evaluating, inspecting quality of incoming materials -- quality assessment and approval of suppliers - performing audits to confirm that the quality system is operating properly

role of management

create the cultural change needed for LEAN to succeed: - provide an atmosphere of cooperation - empower workers to take action based on their ideas - develop incentive systems to recognize and reward LEAN behaviors

quality planning

identify internal/external customer and needs - develop products satisfying those needs - managers set goals, priorities, and compare results

changeover time

the time taken to adapt and modify the manufacturing equipment and systems to produce a different product or a new batch of the same product - a non-value added operation and should be minimized as much as possible

setup time

the time taken to prepare and format the manufacturing equipment and systems for production. - a non-value added operation and should be minimized as much as possible

Manufacturing

to process or make raw materials or components into a finished product, especially by means of a large-scale industrial operation -- ex: mass production - converting raw materials into a finished goods item - machines used, personnel involved, inventory handling, warehousing

W. Edwards Deming

widely considered the father of TQM. He is the creator of the Plan-do-check-act model

repetitive process

- used to produce one, or a few, standardized products in high volumes - line flow and continuous flow production

standardize

schedule regular cleaning and maintenance

engineer to order

- a manufacturing strategy in which the product is designed, engineered, and built and to the customer's specifications after receipt of the order. - involves building a unique product every time. - cost of poor quality can be very high - ex: customized piece of manufacturing equipment - focus on product design

assemble to order

- a manufacturing strategy where products ordered by customers are produced quickly and are customizable to a certain extent - requires the basic parts for the product are already manufactured but not yet assembled - a hybrid strategy to combine benefits of make-to-stock and make-to-order while allowing for some customization - ex: dell laptops - focus on procurement cycle

cost of quality

- an approach that supports a company's efforts to determine the level of resources necessary to prevent poor quality, and to evaluate the quality of the company's products and services - cost of good quality: appraisal costs, prevention costs - cost of poor quality: internal failure costs, external failure costs

LEAN

- an operating philosophy of waste reduction and value enhancement. - originally created as the Toyota Production System by key Toyota executives - eliminates everything that does not add value to the customer - value stream mapping - focus on improving process performance - learn-by-doing approach to performance improvement

large batches

- can exacerbate the bullwhip effect as production in large batches creates an uneven workload - production not synchronized with customer demand, making a pull system impossible.

people involvement

- company must involve all its employees and provide opportunities and incentives for employees to focus their talents on satisfying customers - responsible to identify quality problems.

job shop production

- creates a custom product for each customer - one-off or small number of items produced, generally one unit manufactured at a time - high customization -- normally made to customs specifications - often undertaken by small, specialist businesses - ex: architects, ship builders, road builders

value

- defined as the inherent worth of a product as judged by the customer, and reflected in its selling price and market demand - any activity that increases the market, form, or function of the product/service - things for which the customer is willing to pay

pull system

- each stage in the supply chain requests quantities needed from the previous stage - no excess inventory is generated - reducing inventory levels can also uncover production problems

LEAN supply chain relationships

- firms develop lean supply chain relationships with key customers and key suppliers - ideally, both customers and suppliers get connected in ways that allow them to easily exchange info, demand data, and the visibility of status - mutual dependency and benefits occur among these partners - suppliers and customers work to remove wast, reduce cost, and improve quality and customer service

waste reduction

- firms reduce costs and add value by eliminating waste from the production system - waste encompasses wait times, inventories, material and people movement, processing steps, variability, any other non-value-adding activity. - before waste is removed, processes are often scattered, which can negatively affect your customers - after waste is removed, processes are more streamlined, resulting in more satisfied customers. You'll also save your organization, time, and money

5 S's

- five pillars of the visual workplace, a systematic process of workplace organization - focuses on effective workplace organization and standardization. Allows us to easily spot variation from standard operating conditions. - sort, set in order, shine standardize, sustain

Line flow production

- for standardized products with a limited number of variations - product moves on an assembly line through various stages of production - when one task is finished the next task must start immediately, therefore, time taken on each task must be the same - ex: automobile assembly, cell phones, toilet paper

continuous flow production

- high capital investment -- frequently dedicated to one specific product - involves a series of processes which raw materials flow through. processes are very inflexible - generally highly automated and workers act as monitors rather than as active participants - production runs 24 hours - ex: oil refining/gasoline, laundry detergent, cement, chemicals

Keiretsu Relationships

- involves companies both upstream and downstream of a manufacturing process, remaining independent but working closely together for mutual benefit

Total Quality Management

- management philosophy based on the principle that every employee must be committed to maintaining high standards of work in every aspect of a company's operations - a combo of quality and management tools which are designed to increase business and reduce losses resulting from wasteful practices

Workforce Commitment

- managers must support LEAN manufacturing by providing subordinates with the skills, tools, time, and other necessary resources to identify problems and implement solutions - managers can create a culture where workers are encouraged to speak out when problems are found

Operations Management

- managing the process to convert resources into goods and services, in alignment with the company's business strategy as efficiently and effectively as possible, while also controlling costs - varies by company and depends on the nature of the products of services in the portfolio

Batch production

- manufacturing of a small fixed quantity of an item in a single production run - each individual item in the batch goes through one stage of the production process before the whole batch moves on to the next stage - better use of equipment - produces good quality products more economically than manufacturing them individually - ex: bakeries, textiles, furniture, pharmacies

LEAN layouts

- move people and materials when and where needed, and as soon as possible - are very visual with operators at one processing center able to monitor work at another - manufacturing cells --> process similar parts or components saving duplication of equipment and labor --> are often U-shaped to facilitate easier operator and material movements

external failure costs

- occur when the product or service does not meet the designed quality standards, but is not detected until after the product of service is delivered to the customer -- include costs for: - responding to customer complaints - failed products that need to be replaced - repaid of returned products - investigation of rejected or recalled products

manufacturing process

- part of any manufacturing strategy involves developing a manufacturing process that can create the exact product that has been designed. - intermittent and repetitive processes

Uniform Plant Loading

- planning up to capacity in earlier time periods to meet demand in later time periods - production schedule is frozen in the up-front time period - helps suppliers better plan production problem: demand exceeds capacity at point in the planning horizon

quality is defined by the customer

- quality and excellence are what your customers say they are - customers of your products and services define quality - customers want quality that is appropriate to the price that they are prepared to pay and the level of competition in the market - key aspects: reliable, good functionality, durable, design...

Six Sigma

- quality my management process - focuses on improving quality of process outputs by identifying and removing the causes of defects and minimizing variability in manufacturing and business processes. - structured and data-driven approach to drive a near-perfect quality goal - Motorola -- jack welch

5 Hows

- questioning technique for drilling down into the details of a potential solution to a known problem - designed to bring clarity and refinement to a solution and arrive at the root solution - useful for brainstorming resolutions to resolve problem - up the ladder by asking why, and down by asking how

5 Whys

- questioning technique for identifying the root cause of a problem - repeatedly asking "Why", you can peel away the layers of symptoms which can lead to the root cause of a problem - understand where change is needed - used in the "analyze" phase

Benefits of LEAN waste reduction

- reduced cycle times - greater throughput - better productivity - improved quality - reduced costs -- providing customer satisfaction and provide the company with a competitive advantage

prevention costs

- related to the design, implementation, and maintenance of the quality management system. Planned, and experienced before actual products or materials are acquired or produced. - include costs for: -- establishment of specifications -- quality plans -- development, preparation of quality training -- creation and maintenance of the quality system

respect for people

- respect for all must exist to be the best org - LEAN involves flatter hierarchy than traditional organizations - ordinary workers are given greater responsibility - work together in cross functional teams - use people resources more wisely.

LEAN manufacturing

- satisfying internal customer demand - communicating demand forecasts and production schedules up the supply chain - quickly moving products in the production system - optimizing inventory levels across the supply chain - increasing the value, capabilities, and flexibility of the workforce through cross-training - extending collaboration and alliances beyond just 1st tier suppliers and customers to include 2nd and 3rd tier suppliers and customers as well.

use of technical tools

- six sigma provides a statistical approach for solving any problem and thereby improves the quality level of the product as well as the company - concerned with the permanent fix to quality problems and seeks to identify and correct the root cause of the problem through the use of root cause analysis

total cost of manufacturing

- the complete cost of producing and delivering products to your customers - incorporates both fixed and variable costs used in the manufacturing, storage, and delivery of the product --> includes: - manufacturing and procurement activities - inventory and warehousing activities - transportation activities

make to stock

- to manufacture products for stock based on demand forecasts --> push system - critical issue is how to forecast demands accurately - ex: daily necessities -- foods, sundries, and textiles - challenges: avoid having excess inventory --> companies tend hold more inventory just in case, so they struggle to ensure that inventory levels don't get out of control - focus on customer delivery cycle

Seven tools of quality control

- used by workers to identify and correct quality problems 1. check sheets 2. histograms 3. pareto analysis 4. cause & effect diagrams 5. flow diagram 6. control charts 7. scatter diagrams

intermittent process

- used to produce a large variety of products with different processing requirements in lower volumes - job shop and batch production

acceptance sampling

- when a shipment is received from a supplier, a statistically significant representative sample is taken and measured against the quality acceptance standard - sampling is less time-consuming than testing every unit but can result in errors

manufacturing strategies

-companies must develop a manufacturing strategy that suits the types of products that they produce, their customer's expectations and their strengths - can vary significantly depending on the product/the customer requirements - developing a manufacturing strategy that suits a company's strengths is essential for establishing and maintaining an effective supply chain - make to stock, make to order, assemble to order, engineer to order

Kaoru Ishikawa

developed one of the first tools in the quality management process, the cause and effect diagram, which is also called the Ishikawa or "fishbone" diagram

sort

keep only necessary items in the workplace, eliminate the rest

internal failure costs

occur when the product or service does not meet the designed quality standards, and are identified before the product or service is delivered to the customer -- include costs for: - defective products that cannot be repaired - unnecessary work or inventory from errors - activities required to establish the root cause of product failures.

set in order

organize and arrange items to promote an efficient workflow

role of workers

perform tasks and actively pursuing company goals: - improve production process - correct quality problems - monitor quality