Chapter 8 - Operations Management

Total Cost of Manufacturing (TCM)

the complete cost of producing and delivering products to your customers. generally expressed as a cost per unit for each product

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. - combined in LEAN manufacturing philosophy

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. considered a waste

Setup time

time taken to prepare and format the manufacturing equipment and systems for production considered a waste

Objectives of Manufacturing Strategies

Satisfy demand Manage capacity efficiently Manage inventory levels Minimize cost of: -Labor -Materials -Plant and Equipment

Sustain

Self Discipline. Maintain good work habits

After Waste is removed

,processes are more streamlined, resulting in more satisfied customers. You'll also save your organization time and money

Six Sigma

- is a quality philosophy that emphasizes a commitment toward excellence, encompassing suppliers, employees, and customers -focuses on reducing defects and variations

Assemble-to-Order (ATO)

-"Postponement" Strategy -is when sub assemblies are made, stocked to forecast, but products are not assembled until customer order is received - Most high tech products with customization available (computers, audio systems), Quick serve restaurants, and individualized products are this

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 able to monitor work at another. A quality or bottleneck can be quickly identified and corrected

Engineer to Order (ETO)

-a manufacturing process in which the component is designed, engineered, and built to customer specifications only after the order has been received. -building a unique product every time -Complicated technology solutions such as operations centers, stadiums, amusement rides are this -is used when products are unique and extensively customized for the specific needs of individual customers

Waste Reduction

-element of LEAN -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.

LEAN

-is an operating philosophy of waste reduction and value enhancement -was originally created as the Toyota Production System (TPS) by key Toyota executives. -focuses on eliminating wastes and improving efficiency

Make-to-Stock (MTS)

-manufacture products for inventory based on demand forecasts... a push supply chain. -Most equipment intensive manufacturing (automobiles), commodities (processed foods, sundries) and low value products are this -features economies of scale, large volumes, long production runs, low variety, and multiple distribution channels

Make-to-Order (MTO)

-manufacturing strategy that allows customers to purchase custom products to their specifications -Highly configured products such as computer servers, aircraft, ocean vessels, houses, bridges, custom furniture and custom tooling are this -includes services often -products are not produced until customer order is received

LEAN Green Practices

-reduces waste -Eliminating waste in production and SCM eliminates wasting natural resources Sustainable management processes get adopted Focus on improving environmental management performance. Implement ISO14000 processes

Waste Reduction - The Five-S's

1. Seiri -sort 2. . Seiton - straighten 3. Seiso - shine 4. seiketsu - standardize 5. shitsuke- sustain

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. On complex Six Sigma projects, they work closely with the Black Belt team leader to assist with data collection and analysis, and to keep the team functioning through all phases of the project.

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. Leads the Six Sigma project team and problem-solving efforts. Identifies projects and selects project team members. Trains and coaches project teams. -typically mentored by a master black belt

Six Sigma EXPLAINED

A quality management process: -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. The goal is to attain near quality perfection - less than 3.4 Defects Per Million Opportunities (DPMO) (99.99966%) Pioneered by Motorola in 1987, it is a statistics-based decision-making framework designed to make significant quality improvements in value-adding processes Especially useful in manufacturing with a large number of parts

Defects

Anything that does not meet the acceptance criteria

Manufacturing Strategies

Companies develop a manufacturing strategy aligned to their production strategy (Chapter 3). The strategy is to satisfy customer demand while balancing manufacturing costs and inventory levels.

Continuous Flow

Consistent manufacturing of the same product. (gasoline, chemicals, laundry detergent, PC Boards).

Variable Data

Continuous (e.g., weight)

Continuous Improvement (Kaizen)

Continuous approach to reduce costs by eliminating waste and / or improving process, delivery, and quality. Big results can come from the accumulation of many small changes over time KAI = CHANGE; ZEN = FOR THE BETTER CHANGE FOR THE BETTER

Waste Reduction - DOWNTIME

Defects Overproduction Waiting Non-Utilized Talent Transportation Inventory Motion Extra-Processing key: eliminate excess

DMADV Methodology

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

DMAIC Methodology

Define --> Measure --> Analyze --> Improve -->Control: which is a data-driven quality strategy for improving products & processes. This methodology is used when the company wants to improve an existing business process. - is the most widely adopted and recognized Six Sigma methodology in use

Waiting

Elapsed time between processes when no work is being done

LEAN Supply Chain Relationships

Eliminating waste in the supply chain by building alliances with suppliers, partners & customers to remove waste, reduce cost, improve quality and customer service by working together. Customer Focused to satisfy end customer demand Moving products efficiently through the system Increase Supply chain visibility beyond just 1st tier suppliers to include 2nd, and 3rd tier suppliers Optimize inventory levels across the supply chain

Inventory & Setup / Changeover Time Reduction

Excess inventory is a waste and hides other problems (safety stock covers inefficiencies) By reducing inventory levels you can highlight production problems to be solved such as Bottlenecks, idle time, unbalanced flow... The end result is a smoother running production process with less inventory investment. Inventory takes up space and increases costs.

Inventory

Excess products or materials not being processed

Natural Variations

Expected and random (can't control)

Yellow Belt

Has a basic understanding of Six Sigma Methodology and the tools in the DMAIC problem solving process. A team member that reviews processes and process improvements in support of a Six Sigma process improvement project. A person who has passed the Green Belt certification exam but has not yet completed a Six Sigma project..

Assignable Variations

Have a specific cause (can control)

Attribute Data

Indicate some attribute such as color and satisfaction, or beauty. slide 50

Master Black Belt

Is a career path. - has successfully led ten or more teams through complex Six Sigma projects. A proven change agent, leader, facilitator, and technical expert in Six Sigma. A seasoned individual with a proven mastery of process variability reduction, and waste reduction. Acts as an advisor to executives, and a coach and mentor on projects that are led by black belts and green belts. Functions as the keeper of the Six Sigma process, and can effectively provide Six Sigma training at all levels

4 manufacturing strategies

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

The key principles of TQM are:

Management Commitment Employee Empowerment Fact Based Decision Making Continuous Improvement Customer Focus

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

DPMO (Defects Per Million Opportunities)

Number of Defects/(Opportunity for a defect X Number of units) X 1,000,000 slide 38

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.

Overproduction

Production before it is needed, or in excess of customer requirements. Providing a service that is not needed.

main foundational aspects of Six Sigma

Quality is defined by the customer: Customers expect performance, reliability, competitive prices, on-time delivery, good service, clear and correct transaction processing and more. Use of technical tools such as 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. People involvement: Six Sigma follows a structured methodology, and has defined roles for the participants.

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

John Krafcik

The Machine that Changed the World. (Based on Toyota); first coined LEAN in 1988

Buyers's Risk

The buyer accepts a shipment of poor-quality units because the sample quality level did meet 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)

Non-Utilized Talent

Underutilizing people's talents, skills or knowledge. De-motivating the workforce by not asking for input or recognizing success

Transportation

Unnecessary movement of materials or products

Motion

Unnecessary movement of people. Multiple hand-offs

Extra-processing

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

shine

clean work area, neat & tidy

Efficient Consumer Response (ECR)

a strategy to increase the level of services to consumers through close cooperation among retailers, wholesalers, and manufacturers. -combined in LEAN manufacturing philosophy

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. -combined in LEAN manufacturing philosophy

Philip Crosby

coined the phrase "quality is free" (which is also the title of his book) as defects are costly. He introduced the concepts of zero defects, and focus on prevention, not inspection. slide 47

LEAN AND SIX SIGMA

complement one another

Keiretsu Relationships

cooperative coalitions with cross financial dependence involves companies throughout the value chain, remaining independent but working closely together for mutual benefit -combined in LEAN manufacturing philosophy

Job Shop

creates a custom product for each customer. (artist, craftsman)

Joseph Juran

defined quality as "fitness for use". He developed the concept of the cost of quality. slide 48

Kaoru Ishikawa

developed one the first tools used in quality management - the cause and effect diagram, which is also called the "Ishikawa" or "fishbone" diagram. slide 49-50

Small Batch Scheduling

enables production to be synchronized with customer demand. It increases flexibility allowing the company to respond quickly to changes in customer demand. It 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

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

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)

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.)

safety

has been added as 6th S key standard

Assembly Line

has standard products with a limited number of variations moving through stages of production (Cars, Televisions, Smart phones)

W. Edwards Deming

is widely considered the father of TQM. He is the creator of the Plan-Do-Check-Act model. slide 46

Sort

keep necessary items in workplace, eliminate the rest

Total Quality Management

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

Batch

manufactures a small quantity of an item in a single production run (Milk and other processed food, clothing)

straighten

organize and arrange items to promote efficient work flow

Before Waste is removed

processes are often scattered, which can negatively affect your customers

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.

standardize

schedule regular cleaning and maintenance

manufacturing process chart

slide 12

Classical versus Six Sigma Quality

slide 36

Six sigma metrics

slide 37

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. (1940s)