Chapter 8 Supply Chain

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)

Waiting (downtime)

Elapsed time between processes when no work is being done

Waiting

Excess idle machine & operator & inventory wait time

Transportation

Excess movement of materials & multiple handling

Inventory

Excess products or materials not being processed

Natural Variations

Expected and random (can't control)

Attribute Data

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

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)

Goal of Operations Management

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.

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

Excess movement

Unnecessary movements of employees in when working

Overproducing

Unnecessary production to maintain high utilizations

Extra-processing

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

Operations Management

the design, execution, and control of the operations that convert resources into desired goods and services, aligned with the company's business strategy.

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.

LEAN History

(1910) Henry Ford's mass production line used continuous assembly and flow systems - Ohno and Shingo created Toyota Production System (TPS) - the term LEAN was coined by Krafcik

Buyer's Risk

The buyer accepts a shipment of poor-quality units because the sample quality level did meet the acceptance standard (type II error)

Inventory & Setup / Changeover Time Reduction

- excess inventory is waste - reducing inventory levels can uncover production problems - 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. - Setup time is the time taken to prepare and format the manufacturing equipment and systems for production. - 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.

(7) 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

LEAN Green Practices:

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

Statistical Tools - The core of quality improvement

-Firms: Gather process performance data Create control charts to monitor process variability Then collect sample measurements of the process over time and plot on charts. -Allows firms to: Visually monitor process performance Compare the performance to desired levels or standards Take corrective action as necessary

The key principles of TQM are:

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

In the 1990s, Supply Chain Management combined:

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

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: *Supplier's Risk *Buyer's Risk

Total Quality Management (TQM)

-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 -______ is a combination of quality and management tools designed to increase business and reduce losses resulting from wasteful practices. -Six Sigma can be an integral part of _________.

Six Sigma (in depth)

-a quality management process that 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 of Six Sigma 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

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. -He introduced the four absolutes of quality:

Joseph Juran

-defined quality as "fitness for use". He developed the concept of the cost of quality -Quality Planning, identify internal / external customers & needs: *Develop products satisfying those needs. *Mangers set goals, priorities, and compare results. -Quality Control, determine what to control: *Establish standards of performance. *Measure performance, interpret the difference, take action. -Quality Improvement, show need for improvement: *Identify projects for improvement. *Implement remedies *Provide control to maintain improvement.

W. Edwards Deming

-is widely considered the father of TQM. He is the creator of the Plan-Do-Check-Act model. -He stressed management's responsibility for quality, and he developed 14 points to guide companies in quality improvement.

Make-to-Stock (MTS)

-literally 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 ____ 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.

Make-to-Order (MTO)

-manufacturing strategy that allows customers to purchase custom products to their specifications. *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 examples. *Often includes services with the product (architect, designer, technology expert)

Assemble-to-Order (ATO)

-manufacturing strategy where final products are produced quickly as ordered by customers. This enables products to be customized to a certain extent. *requires that the main sub assemblies for the product be completed and inventoried along with the final assembly parts. *Once an order is received, the product is assembled quickly and shipped to the customer. This is often called a "Postponement" Strategy *Similar to MTS, demand forecasting and inventory management are key processes to a successful ____ 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.

LEAN Layouts

-move people & materials when and where needed, ASAP -very visual

Deming's 14 points

1. Create constancy of purpose to improve product and service 2. Adopt the new philosophy 3. Cease dependence on inspection to improve quality 4. End the practice of awarding business on the basis of price 5. Constantly improve the production and service system 6. Institute training on the job 7. Institute leadership 8. Drive out fear 9. Break down barriers between departments 10. Eliminate slogans and exhortations 11. Eliminate quotas 12. Remove barriers to pride of workmanship 13. Institute program of self-improvement 14. Put everyone to work to accomplish the transformation

Six Sigma has two key methodologies:

1. 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. 2. 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. DMAIC is the most widely adopted and recognized Six Sigma methodology in use.

The Eight Wastes (downtime)

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

LEAN Supply Chain Relationships

1. 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. 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

Seven Wastes

1. Overproducing 2. Waiting 3. Transportation 4. Over-processing 5. Excess inventory 6. Excess movement 7. Scrap & rework

There are three main foundational aspects of Six Sigma:

1. Quality is defined by the customer: Customers expect performance, reliability, competitive prices, on-time delivery, good service, clear and correct transaction processing and more. 2. 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. 3. People involvement: Six Sigma follows a structured methodology, and has defined roles for the participants

Crosby's four absolutes of quality:

1. The definition of quality is conformance to requirements - do it right the first time 2. The system of quality is prevention. - take preventative action 3. Performance standard is zero defects. - commit to eliminate defects 4. The measure of quality is the price of nonconformance . - the loss from poor materials and workmanship

7 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)

Six Sigma Training and Certification Levels

1. Yellow Belt 2. Green Belt 3. Brown Belt 4. Black Belt 5. Master Black Belt

Small Batch Scheduling and Uniform Plant Loading

1._____: DRIVES DOWN COSTS by use of kanbans creating a pull system 2. _________: 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.

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, _______ belts 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. A _______ is typically mentored by a master black belt

Defects

Anything that does not meet the acceptance criteria

LEAN is a

CULTURE (provides value for customers) often results in: Large cost reductions Improved quality Increased customer service

Shine

Clean the work area so it is neat and tidy

Continuous Flow

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

Variable Data

Continuous (e.g., weight)

Master Black Belt

Is a career path. A __________ 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

Manufacturing Processes

Job Shop Batch Assembly Line Continuous Flow

Sort

Keep only necessary items in the workplace, eliminate the rest

complement

LEAN and Six Sigma _____________ one another; LEAN focuses on eliminating wastes and improving efficiency Six Sigma focuses on reducing defects and variations

6 M's

Machine Methods Manpower Mother Nature Materials Measurements

Manufacturing Strategies (types)

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

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

Over-processing

Non-value adding manufacturing, handling, inspection & other activities

Straighten

Organize and arrange items to promote an efficient workflow

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)

Overproduction

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

Standardize

Schedule regular cleaning and maintenance

Scrap & rework

Scrap materials & rework due to poor quality

Waste Reduction - The Five-S's

Sort Straighten Shine Standardize Sustain

Sustain

Stick to the rules. Maintain good work habits

Excess inventory

Storage of excess inventories

quality gurus (experts) of TQM

W. Edwards Deming Philip Crosby Joseph Juran Kaoru Ishikawa

"Ishikawa" or "fishbone" diagram.

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

DPMO Formula

[Number of Defects/(Opportunities for a Defect*Number of Units)]*1 million

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. 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. The essence of ____ is building a unique product every time. Project Management is a key skill for profitable success reputation for quality and innovation are key to success. Complicated technology solutions such as operations centers, stadiums, amusement rides are _____.

Efficient Consumer Response (ECR)

a strategy to increase the level of services to consumers through close cooperation among retailers, wholesalers, and manufacturers.

LEAN is NOT

a tool box of methods, ideas, or methodologies

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.

LEAN

an operating philosophy of waste reduction and value enhancement and was originally created as the Toyota Production System (TPS) by key Toyota executives

Assembly Line

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

Keiretsu Relationships

cooperative coalitions with cross financial dependence involves companies throughout the value chain, remaining independent but working closely together for mutual benefit

Job Shop

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

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.

Manufacturing Strategies

established to satisfy customer demand while balancing manufacturing costs and inventory levels

Waste Reduction

firms reduce costs & add value by eliminating waste from production system (more streamlined process)

Six Sigma

is a quality philosophy that emphasizes a commitment toward excellence, encompassing suppliers, employees, and customers

Total Cost of Manufacturing (TCM)

is the complete cost of producing and delivering products to your customers. It incorporates both fixed and variable costs used in the manufacturing, storage, and delivery of the product. It includes all costs associated with: Production and Procurement activities Inventory and Warehousing activities Transportation activities generally expressed as a cost per unit for each product.

Batch

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