Supply Chain Exam 2 - Chapter 8

Six Sigma

Six Sigma is a structured and data-driven approach to drive a near-perfect quality goal, i.e., "Zero Defects"

Acceptance Sampling

When a shipment is received from a supplier, a statistically significant representative sample is taken and measured against the quality acceptance standard. The entire shipment is assumed to have the same quality as the representative sample that was taken.

six sigma certification levels

Yellow belt green belt brown belt black belt master black belt (see slide 59 for descriptions)

In an ideal LEAN supply chain relationship, both customers and suppliers get connected in ways that allow them to easily _____________ _____________ , demand data, and the visibility of status.

exchange information

natural variations

expected and random (can't control)

small batch increases ________________ allowing the company to respond to changes in customer demands more quickly.

flexibility

Six Sigma

focuses on improving the quality of process outputs by: identifying and removing the causes of defects (errors) minimizing variability in manufacturing and business processes

what products are make to order

for highly configured products aircraft ocean vessel bridges products that are very expensive to keep in inventory.

Pareto Analysis

for presenting data in an organized fashion, indicating process problems from most to least severe

Sampling is less time-consuming than testing every unit but can result in errors: Supplier's Risk: Buyers' Risk:

suppliers The buyer rejects a shipment of good-quality units because the sample quality level did not meet the acceptance standard (type I error) buyers The buyer accepts a shipment of poor-quality units because the sample falsely provides a positive result against the acceptance standard (type II error)

as volume goes up...

Manufacturing and Procurement costs go down (economies of scale) Generally-step function applies as more capital is required to produce. Inventory and Warehousing costs go up as volume goes up. Transportation costs go down as volume goes up, but level off at high volumes as the shipping container gets filled to capacity and another container must be used.

4. Small Batch Scheduling and Uniform Plant Loading

Large batches can exacerbate the Bullwhip Effect as production in large batches creates an uneven workload Smaller batches will facilitate producing at the same rate as customer demand. Production in small batches creates a smooth workload as production can be synchronized with customer demand, facilitating a pull system.

external failure costs include costs for

Handling and responding to customer complaints. Failed products that must be replaced or services that are repeated. Repair of returned products and products still in the field. Handling and investigation of rejected or recalled products, including return transportation costs.

assignable variations

Have a specific cause (can control)

attribute data

Indicate some attribute such as color and satisfaction, or beauty.

people invlovement

It is important that all Six Sigma team members are assigned specific well-defined role with measurable objectives. A company must involve all its employees in the Six Sigma program, and provide opportunities and incentives for employees to focus their talents and ability to satisfy customers. All employees are responsible to identify quality problems.

Six Sigma became famous when _________ ___________ made it central to his successful business strategy at General Electric in 1995

Jack Welch

small batch scheduling can be facilitated through use of

Kanbans

The most successful implementations begin with ___________ , followed by the more technical _____ ________ statistical tools used to resolve process problems.

LEAN Six Sigma

Three component of LEAN

LEAN Manufacturing Total Quality Management Respect for People

5 LEAN principles

1. Define Value 2. Map Value Stream 3. Create Flow 4. Establish Pull 5. Pursuit Perfection

key principles of TQM

1. management commitment 2. employee empowerment 3. fact based decision making 4. continuous improvement 5. customer focus

six sigma three foundational aspects

1. quality defined by customer 2. used of technical tools 3. people involvement

Cost of Quality (COQ)

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. Any cost that would not have occurred if quality was perfect, contributes to the cost of quality

5 Whys is used in the "___________" phase of the Six Sigma DMAIC (Define, Measure, Analyze, Improve, Control) methodology

Analyze

seven tools of quality control

Check Sheets Histograms Pareto Analysis Cause & Effect Diagrams Flow Diagram Control Charts Scatter Diagrams

variable data

Continuous (e.g., weight)

7. Continuous Improvement

Continuous approach to reduce process, delivery, and quality problems, such as machine breakdown problems, setup problems, and internal quality problems

internal failure costs

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.

Major Manufacturing strategies

Make-to-Stock (MTS) Make-to-Order (MTO) Assemble-to-Order (ATO) Engineer-to-Order (ETO)

6. 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.

2. LEAN layouts

Move people and materials when and where needed, and as soon as possible Are very visual (lines of visibility are unobstructed) with operators at one processing center able to monitor work at another

role of workers

Perform tasks and actively pursuing company goals: Improve production process Correct quality problems Monitor quality Work in Teams

Uniform Plant Loading

Planning up to capacity in earlier time periods to meet demand in later time periods. Also called "front-loading" the plan or "leveling" the plan. Production schedule is frozen in the up-front time period (i.e., month) Helps suppliers better plan production.

manufacturing cells

Process similar parts or components saving duplication of equipment and labor Are often U-shaped to facilitate easier operator and material movements

TCM includes (3)

Production and Procurement activities Inventory and Warehousing activities Transportation activities

Crosby - 4 absolutes of quality

Quality is conformance to requirements The system of quality is prevention. Performance standard is zero defects. The measure of quality is the price of nonconformance

reducing waste results in

Reduced cycle times Greater throughput Better productivity Improved quality Reduced costs

3. Inventory & Setup / Changeover Time Reduction

Reducing inventory can free up capital and reduce holding costs. There is less likelihood of waste being created by obsolescence, expiry, spoilage, or damage with lower inventory levels.

Lean Manufacturing

Satisfying internal and external customers 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

flow diagram

Sequence of movements or actions of people or things involved in a complex system or activity

control charts allow firms to

Visually monitor process performance Compare the performance to desired levels or standards Take corrective action as necessary

7 parts of LEAN

Waste Reduction LEAN Layouts Inventory, Setup Time, & Changeover Time Reduction Small Batch Scheduling and Uniform Plant Loading LEAN Supply Chain Relationships Workforce Empowerment Continuous Improvement

goal of six sigma

attain less than 3.4 Defects Per Million Opportunities (DPMO)

LEAN and Six Sigma are __________________ __________________ with significant overlap. They are frequently implemented together but the two initiatives approach their common purpose from somewhat different angles.

complementary principles

project process

creates a custom product for each customer. High customization ETO/MTO lead time very long

LEAN is NOT a tool box of methods, ideas, or methodologies, it is _______________/______________

culture/ value

two goals of LEAN

elimination of waste minimization of the amount of all resources used in the operation of a company

TCM incorporates both _______ and __________ costs used in the manufacturing, storage, and delivery of the product.

fixed and variable

control charts

graph to study how a process changes over time

line process

has standard products with a limited number of variations moving on an assembly line through stages of production ATO/MTS

critical issue in make to stock

how to forecast demands accurately avoid having excess inventory

assemble to order is a ____________________ strategy

hybrid

Voice of the Customer (VOC)

in-depth process of capturing internal and external customer's expectations, preferences, likes, and dislikes The VOC can be captured in a variety of ways: Customer Interviews Market Surveys Focus Groups Customer Specifications Observation Warranty Data Field Reports Complaint Logs

two broad manufacturing process categories

intermittent repetitive

Operations Management

refers to managing the process to create goods and services in alignment with the company's business strategy as efficiently and effectively as possible, while also controlling costs

5 pillars of the visual work place

sort straighten shine standardize (schedule regular cleaning and maintenance) sustain

LEAN + Six Sigma =

speed and accuracy

_____________ is a LEAN conecpt

sustainablitity

manufacturing management

the management of all the processes which are involved in manufacturing

value

the usefulness of a product as judged by the customer, and reflected in its selling price and market demand.

ETO involves building a _____________ ______________ every time. There may be components that are common from one product to another, but the finished product is different each time.

unique product

Setup Time and Changeover Time are both considered a __________ and __________________ _____________ as they are times when the equipment is not performing its intended function . . . . producing product.

waste non-value added items

value added vs non-added

whether it transform or shapes the product/services

______________ is the most widely adopted and recognized Six Sigma methodology in use

DMAIC

waste categories

DOWN TIME defects overproduction waiting (time between processes) non-utilized talent transportation (unnecessary movement of materials) inventory motion/movement (unnecessary movement of people) extra-processing

5. LEAN Supply Chain Relationships

Firms develop lean supply chain relationships with customers and suppliers. Mutual dependency and benefits occur among these partners. Suppliers and customers work to remove waste, reduce cost, and improve quality and customer service

1. waste reduction

Firms reduce costs and add value by eliminating waste from the production system.

respect for people

Flatter hierarchy than traditional organizations. Ordinary workers given great responsibility. Supply chain members work together in cross functional teams.

Use of technical tools

Statistical quality control. Six Sigma provides a statistical approach for solving any problem and thereby improves the quality level of the product as well as the company. All employees should be trained to use the seven tools of quality.

appraisal costs include costs for

Testing, evaluating, and inspecting the quality of incoming materials, process setups, and products, against agreed upon specifications. Quality assessment and approval of suppliers. Performing audits to confirm that the quality system is operating properly.

differences in LEAN and Six sigma

The goal of LEAN is the elimination of waste and the minimization of the amount of all resources (including time) used in the operation of a company LEAN achieves its goals by using less technical tools such as value stream mapping, LEAN Layouts, Continuous Improvement, and Respect for People. Six Sigma focuses on the elimination of defects and the reduction of variations Six Sigma uses technical tools such as Root Cause Analysis, Statistical Process Control, and DMAIC.

manufacturing

The process of making a raw material into a finished product; especially in large quantities.

scatter diagrams

The values of two variables plotted along two axes, to reveal any correlation present.

Changeover Time

is 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.

Setup Time

is the time taken to prepare and format the manufacturing equipment and systems for production.

continuous process

is used to manufacture such items as gasoline, laundry detergent and chemicals. Inflexible processes. High capital investment MTS very short lead time

LEAN regularly results in

large cost reductions improved quality increased customer service

Total Quality Management (TQM)

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. combination of quality and management tools which are designed to increase business and reduce losses resulting from wasteful practices

make to stock

manufacture based on demand forecasts push system

batch process

manufactures a small quantity of an item in a single production run MTO/ATO/MTS lead time long

with small batch times in _______________ go down, and ___________________________________ goes down, reducing costs and eliminating or minimizing waste in the system.

manufacturing Work-in-Process inventory

make to order

manufacturing starts only when the customer places order additional wait time but allows for customer customization

six sigma originally developed by

motorola

external failure costs

occur when the product or service does not meet the designed quality standards, but is not detected until after the product or service is delivered to the customer.

LEAN

operating philosophy of waste reduction and value enhancement.

The goal is NOT to reduce the number of people in an organization, it is to use ____________ ____________ more wisely.

people resources

engineer to order

product is designed, engineered, and built to the customer's specifications after receipt of the order

Reducing inventory levels can also uncover _____________ ____________.

production problems

3 components from Juran

quality planning quality control quality improvement

Deming's 14 points

1. Create constancy of purpose 2. Adopt philosophy of prevention 3. Cease mass inspection 4. Select a few suppliers based on quality 5. Constantly improve system and workers 6. Institute worker training 7. Instill leadership among supervisors 8. Eliminate fear among employees 9. Eliminate barriers between departments 10. Eliminate slogans 11. Eliminate numerical quotas 12. remove barriers to pride of workmanship ***** 13. Institute vigorous training and education programs 14. Develop a commitment from top management to implement above 13 points

role of management

Create the cultural change needed for LEAN to succeed: provide atmosphere of cooperation empower workers to take action develop incentive systems

Six Sigma two key methodologies

DMADV DMAIC

internal failure costs include costs for

Defective product or material that cannot be used, sold, or repaired, and the costs associated with correction of these defects. Unnecessary work or inventory resulting from errors. Activities required to establish the root causes of product or service failures.

DMADV

Define, Measure, Analyze, Design, Verify

DMAIC

Define, Measure, Analyze, Improve, Control

quality gurus

Deming, Juran, Crosby, Ishikawa (see slide 62 for more)

for a control chart firms must

Gather process performance data Create control charts to monitor process variability Then collect sample measurements of the process over time and plot on charts

pull approach

Each stage in the supply chain requests quantities needed from the previous stage. No excess inventory is generated.

prevention costs include costs for

Establishment of specifications for incoming materials, processes, products, and services Creation of quality plans Development, preparation, and maintenance of quality training Creation and maintenance of the quality system

role of supplier

LEAN builds long-term supplier relationships: -Partner with suppliers. -Improve process quality. -Information sharing. -Goal to have single-source suppliers of high qaulity suppliers

Baldridge Categories

Leadership Strategic Planning Customer and Market Focus Information and Analysis Human Resource Focus Process Management Business Results

Lean Green Practices

Reduce the cost of environmental management Lead to improved environmental performance. Increase the possibility that firms will adopt more advanced environmental management

LEAN originally created by

Toyota Production System (TPS) by key Toyota executives

cause and effect diagrams

Used to aid in brainstorming and isolating the causes of a problem

appraisal costs

associated with the evaluation of purchased materials, processes, products, and services to ensure that they conform to specifications.

Ishikawa tool

cause and effect diagram With this tool, the user can see all possible causes of a problem to help find the root cause.

cost of quality can be divided into

cost of good quality (appraisal costs, prevention costs) cost of bad quality (internal failure costs, external failure costs)

In the ETO world, the ____________ ___ __________ ___________ can be very high

cost of poor quality The warranty costs, and the cost of rework to replace an item in a complex assembly, can have a serious negative effect on profit margins.

TCM generally expressed as

cost per unit

normal make to stock products

daily necessities foods sundries textiles

check sheets

determine frequencies for specific problems

Kanban

means "Signal" or "Card" in Japanese and is used for communication (e.g., visual signal) between workstations. Kanban's authorize production or the movement of materials to the next workstation. Could be facilitated through the use of a computer software program, i.e., ERP system.

assemble to order

products ordered by customers are produced quickly and are customizable to a certain extent

the 5 why's technique

questioning technique for identifying the root cause of a problem. By repeatedly asking the question "Why" (five is a good rule of thumb), you can peel away the layers of symptoms which can lead to the root cause of a problem (i.e., the underlying factors or causes of an event).

In the 1990s, Supply Chain Management combined:

quick response efficient consumer response (ECR) Just in time (JIT) keiretsu relationships (companies both upstream and downstream of a manufacturing process, remaining independent but working closely together for mutual benefit)

prevention costs

related to the design, implementation, and maintenance of the quality management system. They are planned, and experienced before actual products or materials are acquired or produced

Six Sigma is concerned with the permanent fix to quality problems and seeks to identify and correct the _______________ __________ of the problem

root cause

Total Cost of Manufacturing (TCM)

the complete cost of producing and delivering products to your customers

intermittent

used to produce a large variety of products with different processing requirements in lower volumes project process batch process

repetitive

used to produce one, or a few, standardized products in high volumes. line process continuous process

when is DMADV used

used when the company wants to create a new product design or business process that is more predictable and defect free

when is DMAIC used

used when the company wants to improve an existing product or business process.

crosby introduces the concepts of (2)

zero defects prevention not inspection