Chapter 8 - Process Management - SCM

1910s

Henry Ford's mass production line was a first breakthrough by using continuous assembly and flow systems that made parts find their way into finished products.

Six Sigma

Identifies root problems using quality control tools (Process Capability, DMAIC, Statistical Quality).

Continuous Improvement (Kaizen)

Emphasis on quality and continuous improvement.

Inventory Waste

Excess products or materials not being processed

Natural Variations

Expected and random variations (can't control)

Waste (Muda) Reduction

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

LEAN Six Sigma Step 4

Identify and implement system improvements (Value Stream Mapping (VSM))

Simplicity

The simpler the solution the better.

Seiton

Tidiness

Motion Waste

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.

Assignable variations

Variations that have a specific cause (can control)

Visibility

Visible problems identified and solved.

JIT Purchasing

includes delivering smaller quantities, at right time, delivered to the right location, in the right quantities.

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.

1990

the term "LEAN Manufacturing" first appeared in the book "The Machine That Changed The World"

1979

Six Sigma started at Motorola

1995

Six Sigma used by Jack Welch at GE

Five-S's

Seiri, Seiton, Seiso, Seiketsu, Shitsuke

Standardize (Seiketsu)

Set standards for a consistently organized workplace

Classical View of Quality

"99% Good" (3.8 Sigma)

Total Quality Management

An integrated organizational effort to improve quality at every level: Quality Gurus, Voice of the Customer, Costs of Quality, Quality Tools, ISO 9000

Six Sigma Step 3

Analyze. Identify the cause of the problem. Why, when and where do defects occur?

Manufacturing cells

Are often U-shaped to facilitate easier operator and material movements.

LEAN Layouts

Are very visual (lines of visibility are unobstructed) with operators at one processing center able to monitor work at another

Set in Order (Seiton)

Arrange items to promote efficient workflow.

Yellow Belt

Basic understanding of Six Sigma Methodology and tools in the DMAIC problem solving process. Team member on process improvement project.

LEAN Six Sigma Step 3

Develop key financial and operational metrics.

Value

anything for which the customer is willing to pay

LEAN

often results in: (1) Large cost reductions, (2) Improved quality, (3) Increased customer service.

Value Added Process

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

Defects

Anything that does not meet the acceptance criteria.

LEAN Six Sigma Step 1

Jointly define value.

Sort (Seiri)

Keep only necessary items in the workplace.

Six Sigma Step 2

Measure. Map out the current process. What is the frequency of defects?

LEAN Layouts

Move people and materials when and where needed, and as soon as possible.

Broad View

Of supply chain members - decisions made for success of entire SC. Responsible for adding value.

Seiri

Organization

Overproduction

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

Acceptance Sampling

When shipments are received from suppliers, samples are taken and measured against the quality acceptance standard. Shipment is assumed to have the same quality.

Variable Control Charts

X-bar chart, R-chart

Non-Value Added Process

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

Six Sigma

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

Flow Diagrams

annotated boxes representing process to show the flow of products or customers.

LEAN Supply Chain Relationships

developed with key customers. Mutual dependency and benefits occur among these partners.

Waste

encompasses wait times, inventories, material and people movement, processing steps, variability, any other non-value-adding activity.

Channel Integration

extending alliances to suppliers' suppliers and customers' customers

LEAN

focuses on eliminating wastes and improving efficiency

Six Sigma

focuses on reducing defects and variations

Pareto Charts

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

Kanbans

generate demand for parts at all stages of production creating a "pull" system

LEAN

is a culture

Goal of Six Sigma

to attain less than 3.4 Defects Per Million Opportunities (DPMO)

Check Sheets

to determine frequencies for specific problems.

X-bar chart

tracks central tendency of sample means.

R-chart

tracks sample ranges.

Cause and Effect Diagrams (Fishbone or Ishikawa diagrams)

used to aid in brainstorming and isolating the causes of a problem.

Six Sigma Training Levels

(1) Yellow Belt, (2) Green Belt, (3) Black Belt, (4) Master Black Belt

People Involvement

(1) All employees responsible to identify quality problems. (2) All employees trained to use technical tools.

Seven Tools of Quality Control:

(1) Cause and Effect Diagrams (aka root cause analysis), (2) Flowcharts, (3) Checklists, (4) Control Charts, (5) Scatter Diagrams, (6) Pareto Analysis, (7) Histograms

Philip Corsby

(1) Coined phrase "quality is free" as defects are costly. (2) Introduced concept of zero defects. (3) Focus on prevention and not inspection.

Edwards Deming

(1) Considered the "father" of TQM. (2) Stressed management's responsibility for quality. (3) Developed "14 Points" to guide companies in quality improvement.

Kanban

(1) Contains information passed between stations. (2) Authorizes production or the movement of materials to the next workstation. (3) "Signal" or "Card"

Role of Management

(1) Create cultural change needed for LEAN to succeed. (2) Provide atmosphere of cooperation. (3) Empower workers to take action based on their ideas. (4) Develop incentive system for lean behaviors.

LEAN Incorporation Techniques

(1) Cross-training, (2) Satisfying internal customer demand, (3) Quickly moving products in the production system, (4) Communicating demand forecasts and production schedules up the supply chain, (5) Optimizing inventory levels across the supply chain, (6) Channel integration

Eight Wastes ("DOWN TIME")

(1) Defects, (2) Overproduction, (3) Waiting, (4) Non-Utilized Talent, (5) Transportation, (6) Inventory, (7) Motion, (8) Extra-Processing

Six Sigma Steps

(1) Define, (2) Measure, (3) Analyze, (4) Improve, (5) Control

Joseph Juran

(1) Defined Quality as "fitness for use" (2) Developed Concept of cost of quality

Pull Approach

(1) Each stage in the supply chain requests quantities needed from the previous stage. (2) No excess inventory generated. (3) Reduced inventory exposes problems.

LEAN Guidelines

(1) Elimination of Waste (Muda), (2) A Broad View, (3) Simplicity, (4) Continuous Improvement (Kaizen), (5) Visibility, (6) Flexibility

Inventory and Setup Time Reduction

(1) Excess inventory is a waste. (2) Reducing inventory levels can create production problems. (3) Once problems are detected, they can be solved. (4) The end result is a smoother running organization with less inventory investment.

Respect for People

(1) Flatter hierarchy than traditional organizations. (2) Ordinary workers given great responsibility. (3) Supply chain members work together in cross functional teams. (4) Respect for all people must exist for an organization to be its best

Worker Duties

(1) Improve production process, (2) monitor quality, (3) correct quality problems

LEAN Six Sigma Steps

(1) Jointly define value. (2) Conduct supply chain capability analysis. (3) Conduct supply chain capability analysis. (4) Identify and implement system improvements (Value Stream Mapping (VSM))

LEAN Six Sigma Impact on Suppliers

(1) Lower costs due to efficient systems. (2) Shorter lead times. (3) Lower safety stock.

LEAN Six Sigma Impact on Logistics

(1) Optimization models to select routes. (2) Warehouse design changes reduce waste.

Uniform Plant Loading:

(1) Production schedule frozen for month. (2) Also called "leveling" (3) Helps suppliers better plan production.

LEAN Six Sigma Impact on Operations

(1) Proper cycle time calculation ensures production according to customer demand. (2) Uniform work flow. (3) Pull production.

Benefits of Reducing Waste

(1) Reduced cycle times, (2) Greater throughput, (3) Better productivity, (4) Improved quality, (5) Reduced costs, (6) improve customer satisfaction and the company's competitive advantage

Benefits of Small Lot Production

(1) Reduces inventory and excess processing. (2) Increases flexibility. (3) Responds to customer demands more quickly. (4) Shortens manufacturing lead time. (5) Setup time must be low.

Technical Tools

(1) Statistical quality control. (2) Seven tools of quality.

Traditional Approach

(1) Supply chains work as "push" systems. (2) Inventory carried to cover up problems.

Four Absolutes of Quality

(1) The definition of quality is conformance to requirements. (2) The system of quality is prevention. (3) Performance standard is zero defects. (4) The measure of quality is the price of nonconformance.

Aspects of Six Sigma

(1) Use of technical tools, (2) People Involvement

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

Producer's Risk

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

LEAN Manufacturing

A coordinated system producing the exact products desired, delivered in the right quantities, where needed, and Just-in-Time (JIT). (1) The Pull System. (2) Visual Signals. (3) Small Lot Production. (4) Uniform Plant Loading.

Master Black Belt

A proven mastery of process variability reduction, waste reduction and growth principles and can effectively present training at all levels

Green Belt

A trained team member allowed to work on small, carefully defined Six Sigma projects, requiring less than a Black Belt's full-time commitment.

Statistical Process Control

Allows firms to: Visually monitor process performance, Compare the performance to desired levels or standards, Take corrective action

Consumer's Risk

Buyer accepts a shipment of poor-quality units because the sample falsely provides a positive answer (type II error)

Shine (Seiso)

Clean the work area so it is neat and tidy.

Seiketsu

Cleanliness

LEAN Six Sigma Step 2

Conduct supply chain capability analysis.

Continuous Improvement (Kaizen)

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

Variable data

Continuous data, (e.g., Weight)

Six Sigma Step 5

Control. Maintain the solution. How can we make the process stay fixed?

Prevention Cost

Cost incurred in the process of preventing poor quality. Includes costs of preparing and implementing a quality plan.

Appraisal Costs

Costs incurred in the process of uncovering defects. Includes testing, evaluating, and inspecting quality.

Internal Failure Costs

Costs of defects before they reach the customer. include scrap, rework, and material losses.

External Failure Costs

Costs of failure at customer site. Includes returns, repairs, and recalls.

14 Points

Create constancy of purpose to improve product and service. Adopt the new philosophy. Cease dependence on inspection to improve quality. End the practice of awarding business on the basis of price. Constantly improve the production and service system. Institute training on the job. Institute leadership. Drive out fear. Break down barriers between departments. Eliminate slogans and exhortations. Eliminate quotas. Remove barriers to pride of workmanship. Institute program of self-improvement. Put everyone to work to accomplish the transformation.

LEAN

Creates customer value through efficient use of resources.

Six Sigma Step 1

Define. Define the problem. What is the customers' expectation of the process?

Shitsuke

Discipline

Small Batch Scheduling

Drives down costs using kanbans

Flexibility

Easily switch from one product to another using flexible workers that perform different tasks.

Waiting

Elapsed time between processes when no work is being done.

Elimination of Waste (Muda)

Eliminate all non-value adding activities.

1990s

Quick response (QR), Efficient Consumer Response (ECR), Just-in-Time (JIT), Keiretsu Relationships

Six Sigma Step 4

Improve. Implement and verify the solution. How can we fix the process?

Keiretsu Relationships

Including suppliers in JIT/TQM efforts

LEAN & Six Sigma

Increases speed and accuracy

Attribute data

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

Elements of LEAN

LEAN Manufacturing, Total Quality Management (TQM), and respect for people.

Role of Supplier

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

Small Batch Scheduling

Makes the firm more flexible to meet customer 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

Small Batch Scheduling

Reducing purchased, WIP, and finished goods inventories

Cost of Quality

Prevention Cost, Appraisal Costs, Internal Failure Costs, External Failure Costs

Manufacturing cells

Process similar parts or components saving duplication of equipment and labor.

Seiso

Purity

Five-S's

Sort, Set in Order, Shine, Standardize, Sustain

Sustain (Shitsuke)

Stick to the rules. Maintain and review standards.

LEAN Supply Chain Relationships

Suppliers and customers work to remove waste, reduce cost, and improve quality and customer service.

1940s

Taichii Ohno and Shigeo Shingo created the Toyota Production System (TPS), which incorporated Ford's production system and other techniques to form the basis of what is now known as LEAN.

Black Belt

Thorough knowledge of Six Sigma philosophies and principles. Coaches successful project teams. Identifies projects and selects project team members.

Non-Utilized Talent

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

Transportation Waste

Unnecessary movement of materials or products

Six Sigma

is a quality management process.

Six Sigma

is an enterprise and supply chain-wide philosophy, that emphasizes a commitment toward excellence and encompasses 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.

LEAN

is standard in many industries

Value

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

Just-in-Time (JIT)

led to continuous reduction of waste

Efficient Consumer Response (ECR)

led to increased speed and flexibility

Quick response (QR)

led to increased speed and flexibility

Sampling

less time-consuming than testing every unit but can result in errors.

Quality

meeting or exceeding customer expectations

Role of Workers

perform different tasks and actively pursue company goals. Work in teams (quality circles).

After Waste Removal

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

Before Waste Removal

processes are often scattered, which can negatively affect your customers.

LEAN

provides value for customers through the use of the most efficient resources possible