Intro to Supply Chain Ch. 8

5 Why's

questioning technique for identifying the root cause of the problem

Six Sigma- goals

- focuses on improving 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 less than 3.4 Defects Per Million Opportunities (DPMO)

LEAN Supply Chain Relationships

-Mutual dependency and benefits occur among these partners. -Suppliers and customers work to remove waste, reduce cost, and improve quality and customer service

Six Sigma Methodology

1. Quality is Defined by the Customer_ 2. Use of Technical Tools 3. People Involvement

The Components 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

TCM -vs- Strategic Alternatives

As volume goes up . . . - Manufacturing and Procurement costs go down due to economies of scale. Generally-step function applies as more capital is required to produce. - Inventory and Warehousing costs go up. - Transportation costs go down, but level off at high volumes as the shipping container gets filled to capacity and another container must be used.

Appraisal Costs

Associated with the evaluation of purchased materials, processes, products, and services to ensure that they conform to specifications.

Role of Management

Create the cultural change needed for LEAN to succeed: - Provide an atmosphere of cooperation. - Empower workers to take action based on their ideas. - Develop incentive systems to recognize and reward LEAN behaviors

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 for improving existing products and processes * Primary tool for Six Sigma

Role of Supplier

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

Non-Value Added Process

Process steps that take time, resources, or space, but do not transform or shape the product or service.

Value Added Process

Process steps that transform or shape a product or service which is eventually sold to a customer.

Small Batch Scheduling and Uniform Plant Loading

Production in small batches enables production to be synchronized with customer demand - large batches exacerbate the Bullwhip Effect

Inventory, Setup Time, & Changeover Time Reduction

Some inventory may be necessary, but excess inventory is a waste Reducing inventory can free up capital and reduce holding costs. - There is less likelihood of waste being created by obsolescence, expiry, spoilage, or damage with lower inventory levels.

Buyer's Risk

The buyer accepts a shipment of poor-quality units because the sample falsely provides a positive result against 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)

Manufacturing

To process or make raw materials or components into finished product, especially by means of a large-scale industrial operation, i.e., mass production - Manufacturing involves the entire process of converting the raw material(s) or the component(s) into a finished goods item. - It includes the machines used, the personnel involved, inventory handling, warehousing, etc.

The Pull System

Traditional Approach: Supply chains work as "push" systems, and inventory is carried to cover up problems Pull Approach: - Each stage in the supply chain requests quantities needed from the previous stage. - No excess inventory is generated. - Reducing inventory levels can also uncover production problems

Acceptance Sampling

When a shipment is received from a supplier, a _ statistically significant representative sample is taken and measured against the quality acceptance standard

Total Cost of Manufacturing

complete cost of producing and delivering products to your customers - corporates both fixed and variable costs used in the manufacturing, storage, and delivery of the product TCM includes: 1. Manufacturing and Procurement activities 2. Inventory and _Warehousing activities 3. Transportation activities

Small Batch Scheduling

drives down costs by: Reducing purchased, WIP, and finished goods inventories, Makes the firm more flexible to meet customer demand,

Value

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

LEAN

is an operating philosophy of waste reduction and value enhancement. It was originally created as the Toyota Production System (TPS) by key Toyota executives - is NOT a tool box of methods, ideas, or methodologies, it is philosophy/ culture LEAN regularly results in: - Large cost reductions - Improved quality - Increased customer service

Make-to-Order (MTO)

manufacturing strategy in which manufacturing starts only after a customer's order is received. - This strategy creates additional wait time for the customer to receive the product, but allows customers to purchase products that are customized to their specifications - The MTO strategy relieves the problems of excessive inventory that is common with the Make-to-Stock strategy - MTO is not appropriate for all types of products. It is appropriate for highly configured products such as aircraft, ocean vessels, bridges, or products that are very expensive to keep in inventory.

Engineer to Order (ETO)

manufacturing strategy in which the product is designed, engineered, and built to the customer's specifications after receipt of the order - It is a more dramatic evolution of Make-to-Order strategy. - ETO involves building a unique product every time. There may be components that are common from one product to another, but the finished product is different each time. - In the ETO world, the _cost of poor quality can be very high. -The warranty costs, and the cost of rework to replace an item in a complex assembly, can have a serious negative effect on profit margins.

Voice of the Customer (VOC)

term used in business to describe the in-depth process of capturing internal and external customer's stated and unstated expectations, preferences, likes, and dislikes

Intermittent Processes

used to produce a large variety of products

Repetitive Processes

used to produce one, or a few, standardized products in high volumes

Internal Failure Costs

when the product or service does not meet the designed quality standards, and are identified before the product or service is delivered to the customer

In the 1990s, Supply Chain Management combined:

- 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. - Efficient Consumer Response (ECR)- a strategy to increase the level of services to consumers through close cooperation among retailers, wholesalers, and manufacturers. - 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. - Keiretsu Relationships- involves companies both upstream and downstream of a manufacturing process, remaining independent but working closely together for mutual benefit

Manufacturing Strategies

Companies must develop a manufacturing strategy that suits the s) of products that they produce, their customer's expectations, and their strengths.

Continuous Improvement

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

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

Role of Workers

Perform tasks and actively pursuing company goals: -Improve production process -Correct quality problems -Monitor quality

Six Sigma

is a disciplined, statistical-based, data-driven methodology for identifying and removing the causes of defects (errors) and minimizing variability in manufacturing and in business processes. It was originally developed by Motorola.

Total Quality Management

management philosophy based on the principle that every employee must be committed to maintaining high standards of work The key principles of TQM are: Management Commitment Employee Empowerment Fact Based Decision Making Continuous Improvement Customer Focus

Operations Management

managing the process to convert recourses into goods and services, in alignment with the company's business strategy as efficiently and effectively as possible, while also controlling costs

Assemble-to-Order (ATO)

manufacturing strategy where products ordered by customers are produced quickly and are customizable to a certain extent - The ATO strategy requires that the basic parts for the product are already manufactured but not yet assembled. - Once an order is received, the parts are assembled quickly into the finished product which is then sent to the customer. ATO is a hybrid strategy, attempting to combine the benefits of both Make-to-Stock and Make-to-Order strategies, getting products into customers' hand

Make-to-Stock (MTS)

means to manufacture products for stock based on demand forecasts. Push system. - Since accurate forecasts will prevent creating excess inventory and avoid stockouts, the critical issue is how to forecast demands accurately. - Most daily necessities such as foods, sundries, and textiles are MTS-type products - The challenge of MTS is to avoid having excess inventory

External Failure Costs

when the product or service does not meet the designed quality standards, but is not detected until after the product or service is delivered to the customer

Components of LEAN

- LEAN Manufacturing - Total Quality Management - Respect for People

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 - Manufacturing cells - Process similar parts or components saving duplication of equipment and labor - Are often U-shaped to facilitate easier operator and material movements 5 S's Sort- keep necessary items only Straighten- organize to promote efficient flow Shine- clean work area Standardize- schedule regular cleanings and maintenance Sustain- stick to rules. maintain + review standards

Uniform Plant Loading

- Planning up to capacity in earlier time periods to meet demand in later time periods. - Also called "front-loading" the plan or "leveling" the plan. - Production schedule is frozen in the up-front time period (i.e., month) - Helps suppliers better plan production. -Demand exceeds capacity at points in the planning horizon.

Manufacturing Process Characteristics

- Project Process (also known as a "Job Shop") creates a custom product for each customer. High customization - Batch Process manufactures a small quantity of an item in a single production run - Line Process has standard products with a limited number of variations moving on an assembly line through stages of production - Continuous Process is used to manufacture such items as gasoline, laundry detergent and chemicals. Inflexible processes. High capital investment

Seven Tools of Quality Control

1. Check Sheets 2. Histograms 3. Pareto Analysis 4. Cause & Effect Diagrams 5. Flow Diagram 6. Control Charts 7. Scatter Diagrams

Cost of Quality

An approach that supports a company's efforts to determine the level of resources necessary to prevent poor quality, and to evaluate the quality of the company's products and services. - Any cost that would not have occurred if quality was perfect, contributes to the cost of quality. - Helps a company determine the benefits and savings generated by potential process improvements. Can be divided into the: - Cost of Good Quality - Appraisal Costs - Prevention Costs -Cost of Poor Quality - Internal Failure Costs - External Failure Costs

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

Setup Time

is the time taken to prepare and format the manufacturing equipment and systems for production

LEAN Manufacturing

natural fit within the discipline of Supply Chain Management as all of the LEAN goals and objectives help to facilitate an efficient and effective supply chain - Satisfying internal _customer demand_ - Communicating demand forecasts and production schedules up the supply chain - Quickly _moving products in the production system - Optimizing inventory levels across the supply chain - Increasing the value, capabilities, and flexibility of the workforce through cross-training_ - Extending _collaboration_ and alliances beyond just 1st tier suppliers and customers to include 2nd and 3rd tier suppliers and customers as well

Waste Reduction

reduce costs and add value by eliminating waste from the production system before waste is removed, processes are often scattered, which can negatively affect your customers After waste is removed, processes are more streamlined, resulting in more satisfied customers. You'll also save your organization time and money

Prevention Costs

related to the design, implementation, and maintenance of the quality management system. They are planned, and experienced before actual products or materials are acquired or produced