Supply Chain Exam 3
Total Cost Model
Financial analysis when fixed and variable costs can be determined -Find FC (land, equip) -Find VC (DL, DM) -Use to find the total cost for each location -ID range with lowest cost
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 more scattered, negatively affect customers -After Waste is removed, processes are more streamlined, resulting in more satisfied customers. You'll also save your organization time and money
Contribution Factory
Focused on product development and engineering. A server factory that includes engineering -Server factory responsibilities plus R&D Ex: Panasonic built a Server factory in Tijuana for CRT television production which developed into the engineering center for Plasma technology
Offshore Factory
For manufacturing or assembly in a country where production is cheap. -exports to key selling markets -local supervisers not involved in making management decisions Ex: clothing produced in Bangladesh
Source Factroy
For manufacturing or assembly where production is cheap. -Similar to offshore but higher skilled labor and local production management -End to end production planning of products (including supplier selection) -Supply worldwide demand for the company -Production transitions to the source factory after the product has been established in the market Ex: Hewlett-Packard Singapore factory produces calculators and keyboards
Firmed Time Period
From the current date out several weeks into future. -is is established as the period when changes can no longer be made by the planning system. Changes during this period must be reviewed and approved by the Production Manager or an authorized person
Planned Time Period
From the end of the Firmed Time Period to the end of the planning horizon -is free to create or make changes to planned orders in this time period. The changes are constrained by long lead time components, capacity and the demand plan
Business Clusters
Geographic concentration of interconnected companies and institutions. -Often naturally developed around the industry leader Reason for cluster: Innovation, cooperation, companies recruit from local skilled workers, extended support systems are established
International Trade Legislation
Global supply chains must comply with the ever changing laws and regulations in every country they do business Import Export rules differ US companies needs to deal with embargos; 10 laws since 9/11, only 7 in the previous 70 years
U.S. Department of Homeland Security
Government agency who's mission is to: 1. Prevent terrorist attacks 2. Reduce vulnerability to terrorism 3. Minimize damage from attacks and natural disasters
Assignable Variations
Have a specific cause (can control)
Level Demand Strategy
Capacity remains constant regardless of demand. When demand exceeds capacity, queue management tactics deal with excess customers
Chase Demand Strategy
Capacity varies with demand. Need to prepare options -Open up additional line(s) -Call in additional off-shift workers to meet increased demand
Supply Chain Planning Diagram
Closed Loop MRP<Manufacturing Resource Planning(MRP2)<Enterprise Resource Planning (ERP)
Managing Waiting time
Involves managing both the actual waiting time and the perceived waiting time
Environmental Issues
Local environmental regulations need to be considered vs. the type of activity the company is looking to establish Companies must stay true to CSR mission and objectives when evaluating environmental impacts
Top Management
Long-Range (over 3-5 year) R&D New market / product family plans Capital investments Facility expansion
1st Rule of service
Satisfaction= customer perception - customer expectation
Managing Distribution Channels- methods to deliver service:
Self Service Internet Franchising Partnership
Service Strategy: Focus
Serve a narrow niche better than other firms Ex: Vegan restaurant
State Utility
Services which directly involve things owned by the customer Ex: car repair, hair cut
End Products
Services which offer tangible components along with the service component Ex: restaurants
Operations Managers, Supervisor, Foremen, etc.
Short-Range (up to 3-4 months) ordering scheduling producing delivering
Multiple channel, single phase
Many single servers Ex: Grocery Store
LEAN Layouts
Simplified manufacturing operation which moves people and materials when & where needed to achieve smooth product flow Have clear lines of visibility (unobstructed) with operators at one processing center abel to monitor work at another. A quality or bottleneck can be quickly identified and corrected Manufacturing cells -Sub assembly process for similar parts or components saving duplication of equipment & labor -Positioned close to the manufacturing line to feed the line directly vs building inventories to be stored
Single channel, single phase
Single counter retail store
Explosion
The process of converting a parent item's planned order releases into component gross requirements
Deemed Exports
The release of technology or source code that is subject to the Export Administration Regulations, to a foreign national located in the United States An intentional or unintentional export of controlled technology can occur within the walls of a company, even if located within the borders of the United States
Material Requirements Planning
The short-range plan from a computer-based materials management system that calculates the exact quantities, need dates, & planned order releases for subassemblies & materials required to manufacture a final product
Net Requirement
The unsatisfied item requirement for a specific time period. Gross requirement for period minus current on-hand inventory
Partnership
Operate/partner with firms familiar with the region's markets, suppliers, infrastructure, government regulations, customers, language & cultural barriers
Operations Management
Operations Management refers to the design, execution, and control of the operations that convert resources into desired goods and services, aligned with the company's business strategy. The goal is to convert materials and labor into goods and services as efficiently and effectively as possible, while also controlling costs to maximize profits. This entails managing the process of creating the goods and services. The nature of how Operations Management is carried out varies by company and depends on the nature of the products and/or services in the portfolio.
Supply Chain Planning in a manufacturing environment uses a combination of the planning processes used across the supply chain:
Overall company Business Planning Capacity Planning Aggregate Production Planning (APP) Master Production Scheduling (MPS) Materials Requirement Planning (MRP) Distribution Requirements Planning (DRP)
Supply Chain Planning in a wholesale / retail environment uses a smaller combination of the planning processes:
Overall company Business Planning Supply Order Planning Supplier Capacity Planning Distribution Requirements Planning (DRP)
Quality of Life Issues
People will work at these locations, often relocated from existing facilities to start up and operate the facility so quality of life must be good
Global Location Decisions
Companies can locate anywhere in the world as technology, transportation, and communication has enabled globalization -must consider legal & political environments -Location still matters as innovation and competition are concentrated geographically
Global Logistics Specialists
Companies can outsource custom clearance activities: -Import/ Export Customs Brokers -Trading Companies/ Import Merchants
The Weighted-Factor Rating Model
Compares the attractiveness of several locations along a number of quantitative and qualitative dimensions -assign weights to each factor (weights add to 1) -location with highest score is best
LEAN and Six Sigma____________ one another
Complement. -LEAN focuses on eliminating wastes and improving efficiency -Six Sigma focuses on reducing defects and variations -(nothing is more wasteful than a defective product)
Reliability
Consistently performing the service correctly and dependably
Variable Data
Continuous
Software Systems Implementation Challenges:
Cost, committed resources, time, staff inertia, inability to change processes to leverage system capabilities, top management commitment, data conversion, "Go Live" methodology
Penalties For Violations (in regards to technology release) Can Be Substantial
Criminal Penalties Civil Penalties Statutory Sanctions: -Seizure of items and vessels -loss of import or export privileges
Managing Service Quality
Customer satisfaction with the service depends not only on the ability of the firm to deliver what customers want, but on the customers' perceptions of the quality of the service received Service quality depends on the firm's employees to satisfy customers varying expectations The key is to exceed the customers expectations . . . so you also need to help form their expectations
Bundle of Service Attributes
Customers evaluate the entire Bundle of service attributes: -Supporting Facility -Facilitating Goods -Explicit Services -Implicit Services
Eight Wastes
DOWN TIME 1. Defects- not meet accepted criteria 2. Overproduction- Production in excess of customer requirements. Provide a service that is not needed 3. Waiting- Elapsed time between processes when no work is being done 4. Non-Utilized Talent- Underutilizing people's talents, skills or knowledge. De-motivating the workforce by not asking for input or recognizing success 5. Transportation- Unnecessary movement of materials or products 6. Inventory- Excess products or materials not being processed 7. Motion- Unnecessary movement of people. Multiple hand-offs 8. Extra-Processing -Unnecessary steps in a process. Redundancies between processes. More work or higher quality than required by the customer
DMADV
Define Measure Analyze Design Verify
DMAIC
Define Measure Analyze Improve Control
Black Belt
A full-time quality professional who has a thorough knowledge of Six Sigma philosophies and principles, and possesses technical and managerial process improvement / innovation skills
Resource Requirement Planning (RRP)
A long-range capacity plan used to check whether aggregate resources (labor, manpower) are capable of satisfying the Aggregate Production Plan
Rough-Cut Capacity Planning (RCCP)
A medium- range capacity plan used to check the feasibility of the Master Production Schedule. Converts MPS from the production needed to the capacity required, then compares it to capacity available
Yellow Belt
A person who has passed the Green Belt certification exam but has not yet completed a Six Sigma project. Basic understanding
Firmed Planned Order
A planned order that can be frozen in quantity and time so that the MRP computer logic cannot automatically change when conditions change. Established by the Planner or Supply Chain Manager to prevent system nervousness. This can aid planners working with MRP systems to respond to material and capacity problems by firming up selected planned orders.
Gross Requirement
A time-phased requirement prior to netting out on-hand inventory and lead-time
Available-to-Promise (ATP) calculations
Work backwards: see example on how to
Material Requirements Plan (MRP)
Requires: -The independent demand information -Parent-component relationships from the Bill of Materials -Inventory status of final product & components. -Lead time and lot size for each component (buy) and Time required for each process step (make) -Safety Stock amount for each level of the BOM
Southern Common Market
Argentina, Brazil, Paraguay, and Uruguay
Assemble-to-Order (ATO)
Assemble-to-Order (ATO) is a manufacturing strategy where final products are produced quickly as ordered by customers. This enables products to be customized to a certain extent -strategy requires that the main sub assemblies for the product be completed and inventoried along with the final assembly parts -when sub assemblies are made, stocked to forecast, but products are not assembled until customer -This is often called a "Postponement" Strategy -demand forecasting and inventory management are key processes to a successful ATO process. The main sub assemblies and final configuration parts must be forecasted and inventoried -Most high tech products with customization available (computers, audio systems), Quick serve restaurants, and individualized products are ATO
Goods are not legally entered into US commerce until:
1. Shipment has arrived within the port of entry 2. Delivery to the shipping destination has been authorized by CBP 3. Estimated duties have been paid
Waste Reduction- The 5 S's
1. Sort- Keep only necessary items in the workplace, eliminate the rest 2. Straighten- Organize and arrange items to promote an efficient workflow 3. Shine- Clean the work area so it is neat and tidy 4. Standardize- Schedule regular cleaning and maintenance 5. Sustain- Stick to the rules. Maintain good work habits 6. Safety- has been added as a key standard of workplace management
The MRP requires the following information
1. The independent demand information 2. Parent-component relationships from the Bill of Materials 3. Inventory status of final product & components. 4. Lead time and lot size for each component (buy) and Time required for each process step (make) 5. Safety Stock amount for each level of the BOM MRP output - Planned order releases (purchase & produce) Basic MRP relies on information provided and ignores capacity & shop floor conditions. (Utopian plan)
If the demand exceeds capacity there are 3 alternatives:
1. Turn customers away and not serve them 2. Make the wait until service is available for them 3. Increase service capacity
The Seven Elements of LEAN Manufacturing
1. Waste Reduction 2. LEAN layouts 3. Inventory, Setup Time, & Changeover Time Reduction 4. Small Batch Scheduling and Uniform Plant Loading 5. LEAN Supply Chain Relationships 6. Workforce Empowerment 7. Continuous Improvement (Kaizen)
Multilevel Bill of Materials
A comprehensive listing of all the components used in a product, the parent - component relationships along with the quantity of each component required for corresponding parent (the planning factor).
Land Availability and cost
Available and cost of land and construction continue to escalate in population centers. The trend is to locate production in more rural areas. -Needs to be balanced with resource availability
Manufacturing Resource Planning (MRP 2)
A computer-based system that creates detail production schedules using realtime data Coordinates the arrival of materials with the availability of machine and labor MRP2 is used widely by itself in manufacturing environments, but is also as a module of more extensive enterprise resource planning (ERP) systems
Just-in-Time (JIT)
an inventory strategy to decrease waste by receiving materials only when and as needed in the production process, thereby reducing inventory costs
Goal of Six Sigma
attain near quality perfection - less than 3.4 Defects Per Million Opportunities (DPMO) (99.99966%)
Implicit Services
attitude of the servers, atmosphere, waiting time, status, privacy and security, and convenience
Explicit Services
availability and access to the service, consistency of service performance, comprehensiveness of the service, and training of service personnel
Structured queues
clearly marked and set in a fixed position such as a super market checkout line or airport security "take a ticket #"
Philip Crosby
coined the phrase "quality is free" concepts of zero defects, and focus on prevention, not inspection
Continuous Flow
consistent manufacturing of the same product (gas, chemicals, laundry detergent) -Not Flexible -Very Limited variety -Very high volume -High FC -Low VC -Very short lead time -MTS
Level Production Strategy
constant output rate over an extend period of time based on worker productivity while varying inventory and backlog according to fluctuating demand. Works well for *make-to-stock firms*
Keiretsu Relationships
cooperative coalitions with cross financial dependence involves companies throughout the value chain, remaining independent but working closely together for mutual benefit
Kaoru Ishikawa
created the cause and effect diagram, which is also called the "Ishikawa" or "fishbone" diagram. 6 M's: Machines Methods Materials Mother Nature Manpower Measurements
Job Shop
creates a custom product for each customer (artist, craftsman) -highly flexible -High Product Variety -Low volume -Low FC -High VC -Very long lead time -ETO or MTO
LEAN is a ____________
culture
Joseph Juran
defined quality as "fitness for use" developed the concept of the cost of quality Quality Planning, Quality Control, and Quality Improvement
Short-Range
detailed planning process for components and parts to produce the master production schedule based on the demand plan e.g. - Daily production plan for every line and model at the Chattanooga, TN. Plant Includes ordering of raw materials, scheduling of human resources, delivery from suppliers, alignment of multiple production lines to feed the final assembly. Includes planning for transportation and warehouse needs Execution based plans
Production Planning Strategy: Counter-seasonal product mix
develop a product mix with offsetting seasonal trends to level the required production capacity
Counties with high tarrifs
discourage importing goods into the country and encourage multinational corporations to produce locally
Outpost Factory
established primarily to gain access to the knowledge or skills that the company needs in an area with the skilled resources and knowledge creation -Set up in a location with proximity to research facilities & universities -Advanced industry suppliers Ex: Silicon Valley
Currency Stability
exchange rates impact business costs and are included in location decisions. A stable currency is crucial for the business case to remain valid.
Franchising
expand quickly in dispersed geographic markets build market share & when have limited financial resources
Independent Demand
external demand for the final product affected by trends, seasonal patterns, & general market conditions
Mobile queues
formed virtually with technology
Assembly Line
has standard products with a limited number of variations moving through stages of production (Cars, TVs, Smart phones) -Somewhat inflexible -Limited Variety -High Volume -OK FC -OK VC -Short lead time -ATO MTS
Six Sigma seeks to improve the quality of process outputs by:
identifying and removing the causes of defects (errors) and minimizing variability in manufacturing and business processes
Taichii Ohno and Shigeo Shingo created the Toyota Production System (TPS) which
incorporated Ford's production system and U.S. supermarket distribution systems to form the basis of what is now known as LEAN
Queuing models assume
infinite length of a queue
Reneging
is when customers decide to leave the queue
Trade Compliance
laws regulations and rules must be checked and complied with for every import/ export Face fines of up to 40% the value of the merchandise (even for a paperwork mistake)
Supporting Facility
location, decoration, layout, architectural appropriateness, equipment
Batch
manufactures a small quantity of an item in a single production run (Milk and other processed food, clothing) -Somewhat flexible -High variety -Low Volume -OK FC -OK VC -Long lead time MTO or ATO
Engineer to Order (ETO)
manufacturing process in which the component is designed, engineered, and built to customer specifications only after the order has been received -It is an evolution of a Make-to-Order supply chain to include customization at the component level -May include some common components but the use and configuration are different every time -building a unique product every time -reputation for quality and innovation are key to success -products are unique and extensively customized for the specific needs of individual customers -Ex: operation centers, stadiums, amusement rides
Multiple channel, multiple phase
many lines with multiple servers acting in parallel
Right to Work Laws
means employees are not forced to join or support a union as a requirement of employment
Make-to-Stock (MTS)
means to manufacture products for stock based on demand forecasts, a push supply chain -The accuracy of the forecasts is the key to inventory management and controlling costs. Accurate demand forecast limits excess inventory and loss sales from stock outs. -Most equipment intensive manufacturing (automobiles), commodities (processed foods, sundries) and low value products are MTS. A key issue of MTS is to balance inventory and demand. Companies struggle to make the correct product at the correct time in the correct quantities as forecasts are inaccurate at the detailed specification level Data analytics and current market feedback are key strategies to improve this business process features economies of scale, large volumes, long production runs, low variety, and multiple distribution channels
Capacity
the maximum amount or number that can be received or contained
Tangibles
the physical characteristics of the service including, facilities, servers, equipment, associated goods, and other cutomers
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
Lot Size
the required quantity of an item for ordering or production
LEAN provides value for customers through?
the use of the most efficient resources possible
Production Planning Strategy: Influence Demand
to align with production capacity -Pricing -Advertising -Promotions
Balking
when a customer refuses to join the queue
Production Planning Strategy: Fluctuating inventory levels
Increase inventories- build stock in advance of demand in order to use available capacity Decrease inventories- temporarily reduce inventory below normal safety stock levels during peak demand periods to meet customer requirements
Attribute Data
Indicates some attribute such as color and satisfaction, or beauty
Enterprise Requirement Planning Systems (ERP)
Information system connecting all functional areas and operations of an organization, and in some cases suppliers and customers, via common software infrastructure and database -SAP is #1 in the world -All of the subsystems work off of one set of data.
Operations Middle-Management
Intermediate-Range (6 - 18 months) Sales & production planning Long lead time components Setting employment, inventory, and subcontracting objectives Operating and financial plans
Key Principles of TQM
-Management Commitment -Employee Empowerment -Fact Based Decision Making -Continuous Improvement -Customer Focus
DPMO Equation
(# of defects / (opportunity for a defect X Number of units)) X 1,000,000
Import/ Export Customs Brokers
-Move shipments through customs and handle all documentation on behalf of the company -Company follows broker's instruction
Global Facility Types
1. Offshore Factory 2. Source Factory 3. Server Factory 4. Contributor Factory 5. Outpost Factory 6. Lead Factory
Intermediate-Range - Business Plans
(financial, operational, product) establishing annual goals and timing of key events (entering new market, new product introduction)
3 Main foundational aspects of Six Sigma
1. Quality is defined by the customer 2. Use of technical tools 3. People involvement
Waiting Time Management Techniques
1. Keep customers occupied 2. Start the service quickly 3. Relieve customer anxiety 4. Keep customers informed 5. Group customers together (they often talk to pass the time) 6. Design a fair waiting system
Four primary activities of Service Response
1. Service capacity 2. Waiting times 3. Distribution channels 4. Service quality
Labor Issues
-Availability, productivity, and skill -Unemployment rates -Wage rates, labor force competition -Unionization vs Right-to-Work Laws
Services:
-Cannot be inventoried -Capacity planning is key -Services unique to customer -Decentralized- located near customer base
Global Location Determination
-Competitiveness of location -taxes and incentives -Currency Stability -Access/Proximity to markets -Access to suppliers -Labor cost -Utility cost -Land cost -Environmental issues -Quality of life -Business clusters -Trade Agreements
Utility Availability and Cost
-Consistent, dependable supply of utilities is not always available -Development of utility production and distribution systems has not kept pace with the high speed of business development: -developing nations do not have infrastructure
LEAN Green Practices
-Eliminating waste in production and SCM eliminated wasting natural resources -Sustainable management process get adopted -Implement ISO14000 processes
Statistical Tools are used by Firms to
-Gather process performance data -Create control charts to monitor process variability -Then collect sample measurements of the process over time and plot on charts
Developing the Production Plan
-Gather the demand for each product -Compare to the available capacity for each period in planning horizon. Develop the capacity plan. -Identifying constraints / risks which may influence the plan -Determining the labor and material requirements to achieve the production plan -Calculate the production costs each product (labor, materials, overhead) -Develop the detailed Materials Requirements Plan for execution
Global Service issues:
-IDing global customers -Labor, facilities and infrastructure support vary by country -Legal and political -Domestic competitors -Economic climate
Global Supply Chain Presents Opportunities:
-Increased revenue (more customers) -Increased sourcing options (more supply options)
Inventory & Setup/ Changeover Time Reduction
-Inventory can hide underlying problems (safety stock covers inefficiencies). -Lowering inventory will help to expose the hidden problems, such as Bottlenecks, idle time, unbalanced flow . -Once the problems are detected, they can be solved -Inventory takes up space and increases costs. -Setup Time and Changeover Time are both considered a waste as they are times when the equipment is not performing its intended function; producing product
Manufacturing Processes
-Job Shop -Batch -Assembly Line -Continuous Flow
3 Basic production Strategies
-Level Production Strategy -Chase Production Strategy -Mixed Production Strategy
Manufacturing strategies include:
-Make-to-Stock (MTS) -Assemble-to-Order (ATO) -Make-to-Order(MTO) -Engineer-to-Order(ETO)
Relationship of TCM to Manufacturing Strategy
-Procurement and Production costs per unit go down as volume goes up (generally, a step function applies as more capital will be required to produce more as volume grows) -Inventory and Warehousing costs per unit go up as volume goes up (must hold more inventory and pay for more storage space, insurance, taxes, etc.) -Transportation costs per unit go down as volume goes up, but level off at high volumes (economies of scale in transportation until the container/conveyance is filled up)
Queue System Characteristics:
-Queue discipline is the order in which customers are served -Can be single or multiple lines -Serviced by a single server or multiple servers
Manufacturing Strategies Objectives:
-Satisfy demand -Manage capacity -Manage inventory levels -Minimize cost: (labor, Materials, and Plant and Equipment)
Objectives of Production Planning Strategies
-Satisfy demand -Manage capacity efficiently -Manage inventory levels -Minimize cost: (labor, inventory, Plant and Equipment, and Workforce)
Differences in Service industry compared to Manufacturing
-Tangibility of product -Involvement of the customer in the production process -Assessment of quality -Labor content ratio (higher ratio of labor to materials in service) -Facility Location (location critical for service)
Global supply chains can present challenges:
-Tariffs or duties (i.e., import taxes) -Transporting goods across borders -Customs, business practices, laws and regulations vary by country -Foreign markets are not homogeneous even within the country
Available to Promise (ATP) Quantity
-The difference between confirmed customer orders & the quantity the firm planned to produce (amount available to other orders) -It enables the firm to respond to customer order inquiries, based on planned product availability -It generates available quantities of the product along with expected availability dates -Represents the uncommitted portion of a company's inventory and planned production maintained in the master schedule to support customer order promising
Revenue Collection (tariffs and duties) is determined by
-Valuation -Classification -Country of Origin
Production Planning Strategy: Change capacity
-Vary production output through overtime or idle time -Vary work force size by hiring or layoff -Using part-time workers -Subcontrct
Statistical Tools allow Firms to
-Visually monitor process performance -Compare the performance to desired levels or standards -Take corrective action as necessary
W. Edwards Deming
-father of TQM: creator of the Plan-Do-Check-Act mod -14 points to guide companies
2 Types of Software Implementation
1. Best-of-breed- pick the best application for each individual function. . Challenge - integrating the software, data duplication, support resource requirements, training 2. Single software solution- implement the desired applications from a single vendor. Resolves integration and data issues but individual system functionality may be reduced
LEAN Supply Chain Relationships
1. Building alliances with suppliers and customers to remove waste, and reduce cost and to increase quality and customer service 2. Customer Focused to satisfy end customer demand 3. Moving products efficiently through the system 4. Increase Supply chain visibility beyond just 1st tier suppliers to include 2nd, and 3rd tier suppliers 5. Optimize inventory levels across the supply chain
2 key Methodologies of Six Sigma
1. DMADV- create new product designs or process that is defect free DMAIC- improve products and processes (most widely adapted 6 sigma in use)
Global location decisions involve
1. Defining the strategic role of each facility 2. Determining the location for each facility 3. Identifying the market(s) that each serves
If capacity exceeds demand
1. Dispose of excess capacity (reduce service hours, reduce employees) 2. Find other uses for service capacity (restaurant cooking for banquets) 3. Increase Demand: -Pricing/ Promotion -New use for service -Change location
4 Key elements needed for an effective DRP
1. Forecasted demand by Distribution Center (DC) 2. Current inventory levels by DC 3. Target safety stock by DC 4. Established replenishment quantities 4. Replenishment lead times
12 Pillars of Country Competitiveness
1. Institutions 2. Infrastructure 3. Macro stability 4. Health and primary education 5. Higher education 6. Goods market efficiency 7. Labor market efficiency 8. Financial market sophistication 9. Technological readiness 10. Market size 11. Business sophistication 12. Innovation
Brown Belt
A Six Sigma Green Belt who has passed the Black Belt certification examination but has not yet completed their second Six Sigma project
Green Belt
A Six Sigma trained individual that can work as a team member on complex project and also lead small, carefully defined Six Sigma projects
Master Black Belt
A career path. A master black belt has successfully led ten or more teams through complex Six Sigma projects
Scheduled Receipt
A committed order awaiting delivery for a specific period
Queuing Systems
A queue management system is used to help control the flow and prioritization of people expecting to receive a service
Capacity Requirement Planning (CRP)
A short-range capacity plan used to check the feasibility of the Material Requirements Plan
Planned Order Release
A specific order for a specific item and quantity to be released to the shop or to the supplier
Manufacturing Lead Time
ATO Strategy
Chase Production Strategy
Adjusts capacity to match demand. Firm hires and lays off workers to match output to demand. Finished goods inventory remains consistent based on worker productivity. Works well for *make-to-order firms*
Taxes, Incentives & Regulatory Fees
All levels of government must be considered -Many types of taxes (tariffs, income, property, employment, welfare, environmental, etc) -Many regulatory fees (permits, licenses, regulatory approval)
Continuous Improvement (Kaizen)
Always trying to reduce costs by eliminating waste and improving process, delivery and quality Big results can come from many small changes
Type 2 Error
Buyer's Risk: The buyer accepts a shipment of poor-quality units because the sample quality level did meet the acceptance standard
Enterprise Resource Planning (ERP)
ERP is an information system connecting all functional areas & operations of an organization via common software infrastructure and database. It ties together the specialized system needs with a common, shared centralized database All areas are updated simultaneously as data is updated- eliminates duplicate data entry and inconsistent information across an organization Came from Y2K concerns A key enabler to efficient operations, access to critical information, speed and flexibility
Product Design Lead Time
ETO Strategy
Service Delivery System
Either: Low Customer Contact Systems (Mass produced) OR High Customer Contact Systems (Highly Customized)
Production Planning Strategies
Establish the production methodology that will satisfy customer demand while balancing production costs and inventory through workforce management
Access to Markets
Establishing manufacturing to develop access to new markets or to be within delivery proximity of your customers. -Logistics timelines and costs can be reduced.
Natural Variations
Expected and random (can't control)
Service Response Logistics
Is the management and coordination of the organization's service activities that occur while the service is being performed -Demand management tactics are important, as services cannot be inventoried and demand must be met
Distribution Requirements Planning (DRP)
It establishes requirements for the distribution network and balances warehouse capacity with production plans. A time-phased finished goods inventory replenishment plan in the distribution network determining the need to replenish inventory at branch warehouses An extension of MRP system and ties physical distribution to the manufacturing planning and control system
2nd Rule of Service
It is hard to make-up for poor perception. You get one chance to get it right
U.S. Customs and Border Protection
It is the gateway agency for more than 20 other government agencies each of which has some control over various aspects of international trade -Mission is to safeguard America's borders -CBP protects U.S. through active inspections at ports of entry -has a strong base of industry partnerships and technology to safeguard the American public
Parent
Item generating demand for lower-level components
The term LEAN was first coined by
John Krafcik
Procurement Lead Time
MTO Strategy
Customer Delivery Lead Time
MTS Strategy
Lead Factory
Main production facility of the organization. Source of product development, process innovation and competitive advantage -Often company HQ -Initial development and production of new goods that eventually move to other factories Ex: Air Products & Chemicals in Allentown Pa, US car companies in Detroit
Mixed Production Strategy
Maintains stable core workforce while using short-term means, such as overtime, subcontracting and part time helpers to manage short-term demand fluctuations. Works well for *make-to-stock firms with custom options, seasonal businesses*
Workforce Commitment
Managers must support LEAN Manufacturing by providing subordinates with skills, tools and necessary resources to ID problems and create solutions
Who pioneers six sigma
Motorola in 1987
Planning factor
Number of components needed to produce a unit of the parent item
Foreign (Free) Trade Zones (FTZ's)
Physical areas inside the US supervised by U.S. Customs and Border Protection that are considered to be outside of the U.S. territory (typically near a port) Foreign and domestic merchandise may be moved into FTZs for legal operations, such as storage, exhibition, assembly, manufacturing, and processing While in the FTZ, merchandise is not subject to U.S. duty or excise tax Foreign-trade zone sites are subject to the laws and regulations of the United States and those of the states and communities in which they are located No limit on time spent in zone
Uniform Plant Loading
Planning production to capacity in earlier time periods to create inventory to meet demand in later time periods Enables efficient use of resources. (Plant, machinery, human) Requires accurate demand plans with long forecast periods
Service Strategy: Cost Leadership
Requires large capital investment in state-of-the art equipment and significant efforts to control and reduce costs Ex: route planning, UPS optimization, McDonalds
Kanban
Production Kanban tells a manufacturing cell to produce to refill an empty container Withdrawal Kanban is used to tell previous cells that more parts are needed
Small Batch Scheduling and Uniform Plant Loading
Production in small batches enables production to be synchronized with customer demand -increases flexibility allowing the company to respond quickly to changes in customer demand -can drive down costs by reducing raw materials, WIP, & finished goods inventories minimizing waste in the system -Shortens manufacturing lead time however setup / change over time must be low so that it is easy to switch from producing one product to another -Small batch scheduling can be facilitated through the use of Kanbans ("visual signal" or "card.")
Service Productivity
Productivity = (OutputsProduced/ InputsUsed)
Projected On-Hand Inventory
Projected closing inventory at end of a period. Beginning inventory minus gross requirements, plus scheduled receipts plus planned receipts from planned order releases.
Responsiveness
Promptly and timely service
Types of Services
Pure Services End Products State Utility
Trading Companies/ Import Merchants
Put buyers and sellers from different countries together and handles export/import arrangements, documentation and transportation They do so by purchasing in the sellers market, handling the export and import, and selling in the buyers market.
Pegging
Relates the gross requirements for a component part to the planned order releases of the parent item, so as to identify the source(s) of the item's gross requirements. Pegging can be thought of as active where-used information.
The Five Dimensions of Service Quality
Reliability Responsiveness Assurance Empathy Tangibles
Facilitating Goods
Required by services, they are tangible elements that are used or consumed while providing the service (food, tools, equipment) -need to be purchased and transported
Type 1 Error
Supplier's Risk: Buyer rejects a shipment of good-quality units because the sample quality level did not meet the acceptance standard
Closed Loop MRP system
System for production planning and inventory control. Synchronizes the purchasing of materials with the master production schedule The system feeds back information about completed manufacture and materials on hand into the MRP system, so that these plans can be adjusted according to capacity and other requirements The system is called a closed loop MRP because of its feedback feature to address capacity, etc
Total Quality Management
TQM is a management philosophy based on the principle that every employee must be committed to maintaining high standards of work quality in every aspect of a company's operations Combination of quality and management tools designed to increase business and reduce losses from waste *Six Sigma can be an integral part of TQM
Aggregate Production Plan
The Intermediate to long range plan that translates annual business plan & demand forecasts into a production plan for a product family (products that share similar characteristics) in a plant or facility The planning horizon of APP is at least one year and is usually rolled forward by three months every quarter Sets the production output requirements, workforce needs and inventory plans Enables the firm to see its capacity requirements and address gaps (RRP) Determines the production strategy the firm will use (discussed later)
Master Production Schedule
The Intermediate-range plan that provides a detailed breakdown of the aggregate production plan, listing the exact end items to be produced by a specific period More detailed than APP & easier to plan under stable demand Breaks down months into weeks / days Planning horizon is shorter than APP, but longer than the lead time to produce the item so product is completed within the plan For the service industry, the master production schedule may just be the appointment log or book, where capacity (e.g., skilled labor or professional service) is balanced with demand
Mid Term Business Planning
The Mid Term Business Plan is long-term focus, provides the company's direction and objectives for the long term (3 - 10 years) states the company's objectives for profitability, growth rate, and return on investment Executive Management gathers input from the various organizational functions such as finance, marketing, operations, and engineering, on what is needed to achieve the objectives It determines the long term capital investment plan, business investments and funding requirements
What determines the capacity to meet the demand?
The aggregation of all resources committed to production (space, equipment, personnel)
Sales & Operations Planning
The annual business plan simulates the business for a year to 18 months. It establishes the near term objectives aligned to the mid term plan. It covers all areas of the company (sales, marketing, R&D, operations, production, sourcing, service, finance, etc) to provide management with the knowledge of actions needed to be taken to achieve the objectives utilizes the Resource Requirements Plan (RRP). - Capacity plan utilizes the Aggregate Production Plan (APP). - Manufacturing Plan is the benchmark established to drive decision making throughout the year
Service Capacity
The number of customers per period the firm's service system is designed to serve
What do companies do to address the impact from changes to the MPS?
They adopt a time fencing policy separating the planning horizon into: 1. Firmed Time Period 2. Planned Time Period
Changeover Time
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
Time taken to prepare and format the manufacturing equipment and systems for production -Non-value added operation
Service Strategy: Differentiation
Unique service created. Customer feedback and response is critical.
Time Bucket
Unit of time / time period used in MRP, e.g., days, weeks, months
Export Process
When a shipment is ready to be exported, the shipper will file export documents for the goods' at the port of departure Shipments must conform to Export Administration Regulations Shipper must know: -What is being exported -Where it is being produced -Who it is being sent to -Who will use it -Know of restrictions on the export Complete and submit a Shippers Export Declaration (SED) Submit a Commercial Invoice for the product value
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. Sampling is less time-consuming than testing every unit but can result in errors
Import Process
When a shipment reaches the US, the Importer of Record (i.e., the owner, or purchaser) must file entry documents at the port of entry.
The Bill of Materials (BOM)
a document that shows an inclusive listing of all component parts and assemblies making up the final product Presented in a hierarchical manner to the lowest acquisition level
Make-to-Order (MTO)
a manufacturing strategy that allows customers to purchase custom products to their specifications -strategy only manufactures the end product once the customer places the order. Lead time for customer delivery is longer and customers pay for the ability to customize -Raw materials are carried in inventory with a few common sub assemblies -Highly configured products such as computer servers, aircraft, ocean vessels, houses, bridges, custom furniture and custom tooling are MTO -Often includes services with the product(architect,designer,ect)
Safety Stock
a quantity of stock planned to be in inventory to protect against fluctuations in demand or supply. Over planning supply versus demand can be used to create safety stock.
Resource
a source of supply, support, or aid, especially one that can be readily drawn upon when needed.
Efficient Consumer Response (ECR)
a strategy to increase the level of services to consumers through close cooperation among retailers, wholesalers, and manufacturers
Assurance
ability to convey trust and confidence to customers
Production Planning Strategy: Back-ordering during high demand periods
accept that demand is greater than supply capabilities, supply when available
Long-Range - Strategic Plans
involves planning for investments in markets, facilities and major equipment purchase -Multi-year plans establishing overall business goals driven by top executives -e.g.- VW groups wants to be the #1 car company in the world -All division, department complete a plan to achieve the overall goal -Normally 3-5 years, top down direction
Six Sigma
is a quality philosophy that emphasizes a commitment toward excellence, encompassing suppliers, employees, and customers
LEAN
is an operating philosophy of waste reduction and value enhancement and was originally created as the Toyota Production System (TPS) by key Toyota executives
Resource Planning
is the process of determining the required resources to effectively and efficiently produce the output required.
Production Capacity
the maximum amount an organization can complete in a given period of time based on the resources available. Excess capacity prevents the firm from manufacturing efficiently. Organizations must balance the production plan with capacity.
Single channel, multiple phase
multiple servers acting in a series
Pure Services
offering very few or no tangible products to customs Ex: consulting, education
Components
parts demanded by a parent
Unstructured queues
people form queues somewhat informally in various directions and locations Outside large venues, elevators
Empathy
providing caring attention to customers
Access to Suppliers
proximity influences the delivery of materials and the effectiveness of the supply chain. Often encourage suppliers to set up operations close to the production facility
Server Factory
take advantage of government incentives, reduce taxes/tariff barriers to meet regional needs -Often get gov incentives to build -Product customization to local market -End to end production planning Ex Coca-Cola bottling plants set up in most major markets. Mix the final ingredients and package
Facilitating Goods
tangible elements that are used or consumed by the customer or the service provider along with the service provided
Dependent Demand
the calculated internal demand for subassemblies and component parts based on the demand of the final product and the planning factor of each part
Total Cost of Manufacturing (TCM)
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 all costs associated with: -Production and Procurement activities -Inventory and Warehousing activities -Transportation activities Expressed as a cost per unit for each product
Master Production Schedule (MSP)
the core operating plan of a business. Changes in the MPS can cause major changes in the detailed production schedule and material plan thereby creating inefficiency and even instability throughout the organization
Supply Chain Planning
the element of supply chain management responsible for determining how operations will best satisfy the requirements created by the Demand Plan. Goal is to balance supply and demand so that financial and customer service objectives are achieved.
Henry Ford's mass production line was
the first manufacturing breakthrough by using continuous assembly and flow systems that made parts find their way into finished products