Supply Chain Management Chapter 8

Non-Value Added Process

process steps that take time, resources, or space, but do not add value to the product or service.

Six Sigma focuses on

reducing defects and variations.

Inventory and Setup Time Reduction

the end result is a smoother running organization with less inventory investment.

Kanbans

(visual signal card used to maintain high level of production) generate demand for parts at all stages of production creating a "pull" system.

Statistical Tools for Six Sigma

-- Flow Diagrams: annotated boxes representing process to show the flow of products or customer -- Check Sheets: to determine frequencies for specific problems --Pareto Charts: for presenting data in an organized fashion, indicating process problems from most to least severe. -- Cause and Effect Diagrams: used to aid in brainstorming and isolating the cause of a problem.

These approaches have emerged as philosophies and practices known as LEAN Manufacturing (or LEAN Production) and Six Sigma.

-- Quick Response (QR): speed and flexibility. -- Efficient Consumer Response (ECR): speed and flexibility. -- Just-in-Time (JIT): continuous reduction of waste. --Keiretsu Relationships: including suppliers in JIT/TQM efforts.

The Pull System

-- each stage in the supply chain requests quantities needed from the previous stage. -- no excess inventory generated. -- reduced inventory exposes problems.

Manufacturing cells

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

Uniform Plant Loading

-- production schedule frozen for month -- also called "leveling" -- helps suppliers better plan production

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 Supply Chain Relationships

-- supplier and customers work to remove waste, reduce costs, and improve quality and customer service. -- JIT purchasing includes delivering smaller quantities, at right time, delivered to the right location, in the right quantities.

LEAN is composed of three elements working in unison:

1. LEAN Manufacturing 2. Total Quality Management 3. Respect for People

The Elements of LEAN Manufacturing

1. Waste Reduction 2. LEAN Supply Chain Relationships 3. LEAN Layouts 4. Inventory and Setup Time Reduction 5. Small Batch Scheduling 6. Continuous Improvement 7. Workforce Empowerment

Seven Tools for Quality Controls:

1. cause and effect (aka root cause analysis) 2. flowcharts 3. checklists 4. control charts 5. scatter diagrams 6. pareto analysis 7. histogram

Tools to help determine customer wants:

1. focus groups 2. market surveys 3. customer interviews

Small Batch Scheduling drives down costs by:

1. reducing purchased, WIP (Work in Progress), and finished goods inventories 2. makes the firm more flexible to meet customer demand

(Six Sigma) Two Aspects:

1. use of technical tools -- statistical quality control -- seven tools of quality 2. people involvement -- all employees responsible to identify quality problems -- all employees trained to use technical tools

Role of Supplier

LEAN building long-term supplier relationships

Producer's risk (type I error)

a buyer rejects a shipment of good quality units because the sample quality level did not meet standards.

Value Added Process

a process step that transforms or shapes a product or service which is eventually sold to a customer.

Small Lot Production

amount of products produced at any one time is small: -- reduces inventory and excess processing -- increase flexibility -- responds to customer demands more quickly -- shortens manufacturing lead time -- setup time must be low

Total Quality Management

an integrated organizational effort to improve quality at every level

Value is defined as

anything for which the customer is willing to pay.

Consumer's risk (type II error)

buyer accepts a shipment of poor-quality units because the sample falsely provides a positive answers.

Visual Signals

communication between workstations

Continuos Improvement

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

Role of Management

create cultural change needed for LEAN to succeed

LEAN focuses on

eliminating wastes and improving efficiency.

Waste (Muda) Reduction

firms reduce costs and add value by eliminating waste from the productive system.

Six Sigma

is an enterprise and supply chain-wide philosophy that emphasized a commitment toward excellence and encompasses supplier, employees, and customer.

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.

Value

is the inherent worth of a product as judged by the customer and reflected in its selling price and market demand.

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.

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

performing different tasks and actively pursuing company goals

X-bar chart

tracks central tendency of sample means

R-chart

tracks sample ranges