MGMT Test 3
synchronous manufacturing
A production process coordinated to work in harmony to achieve the goals of the firm •Find the bottleneck •Determine which products to make
Pareto chart
a bar graph whose bars are drawn in decreasing order of frequency or relative frequency. help to break down a problem into components
ordering costs
costs of placing an order •Supplies •Forms •Order processing •Clerical support
shortage costs
costs of running out of inventory
ok
for Kanban math problems always round your decimal up (6.11 would be 7 etc)
queue time
the time that a part waits for a resource while the resource is busy with something else
wait time
the time that a part waits not for a resource but for another part so that they can be assembled together
process time
the time that the art is being processed
idle time
the unused time (the cycle time less the sum of the setup time, processing time, queue time, and wait time)
finished goods
products read yfor shipment
a (producer's risk) [should be greek alpha]
type 1 error The probability of rejecting a good lot
b (consumer's risk) [should be greek Beta]
type 2 error The probability of accepting a bad lot
raw materials
unprocessed purchase inputs.
internal failure costs
costs for defects incurred within the system
weeks of supply formula
(average aggregate inventory value / COGS) X 52
external failure costs
costs for defects that pass through the system
dimensions of quality for goods
-Performance: primary product/service characteristics -Features: secondary characteristic, bells and whistles - reliability/durability: consistency overtime, probability of failing, useful life - serviceability: ease of repair - aesthetics: sensory characteristics (sounds, feel, etc.) - perceived quality: past performance and reputation
conformance quality
-The degree to which the product or service design specifications are met. Reliability of product.
c charts
-Use only when the number of occurrences per unit of measure can be counted; nonoccurrences cannot be counted. -Scratches, chips, dents, or errors per item -Cracks or faults per unit of distance -Breaks or Tears per unit of area -Bacteria or pollutants per unit of volume -Calls, complaints, failures per unit of time
p charts
-When observations can be placed into two categories. --Good or bad --Pass or fail --Operate or don't operate -When the data consists of multiple samples of several observations each
hyptoheses
1. A supposition or explanation (theory) that is provisionally accepted in order to interpret certain events or phenomena, and to provide guidance for further investigation. A hypothesis may be proven correct or wrong, and must be capable of refutation. If it remains unrefuted by facts, it is said to be verified or corroborated. 2. Statistics: An assumption about certain characteristics of a population. If it specifies values for every parameter of a population, it is called a simple hypothesis; if not, a composite hypothesis. If it attempts to nullify the difference between two sample means (by suggesting that the difference is of no statistical significance), it is called a null hypothesis. In short: An educated guess
stages in operations consulting process
1.Develop sales and proposal development 2.Analyze problem 3.Design, develop, and test alternative solutions 4.Develop systematic performance measures 5.Present final report 6.Implement changes 7.Assure client satisfaction 8.Assemble learnings from the study
forms of ISO certification
1.First party: a firm audits itself against ISO 9000 standards 2.Second party: a customer audits its supplier 3.Third party: a "qualified" national or international standards or certifying agency serves as auditor
Goldratt's TOC (theory of constraints)
1.Identify the system constraints. 2.Decide how to exploit the system constraints. 3.Subordinate everything else to that decision. 4.Elevate the system constraints. 5.If, in the previous steps, the constraints have been broken, go back to step 1, but do not let inertia become the system constraint.
lean supply chain design
1.Lean Layouts a.Group technology b.Quality at the source c.JIT production 2.Lean Production Schedules a.Uniform plant loading b.Kanban production control system c.Determination of number of Kanbans needed d.Minimize setup times 3.Lean Supply Chains a.Specialized plants b.Collaboration with suppliers c.Building a lean supply chain
lean services
1.Organize problem-solving groups 2.Upgrade housekeeping 3.Upgrade quality 4.Clarify process flows 5.Revise equipment and process technologies 6.Level the facility load 7.Eliminate unnecessary activities 8.Reorganize physical configuration 9.Introduce demand-pull scheduling 10.Develop supplier networks
case interviews
1.The Consultant's Motto: "Often right, never without data-driven justification" 2.It's not about being right, it's about being right in a client friendly way •Things that are NOT client friendly: •Making a conclusion without showing your work •Scatter brained •Can't be explained visually •Can't be justified with facts and data •Logically correct, but not practical 3.Don't be an a jerk
run chart
A chart that displays the history and pattern of variation of a process over time. Depicts data trends over time.
flowchart
A diagram that shows step-by-step progression through a procedure or system especially using connecting lines and a set of conventional symbols. a diagram of the sequence of operations
histogram
A graph of vertical bars representing the frequency distribution of a set of data.
SPC/control chart
A graphic display of process data over time and against established control limits, which has a centerline that assists in detecting a trend of plotted values toward either control limit. Used to assure that processes are in statistical control
value stream mapping
A graphical way to analyze where value is or is not being added as material flows through a process. a special type of flowcharting tool for development of lean processes Used to visualize product flows through various processing steps Illustrates information flows that result from the process Also illustrates information used to control flow through the process Need a full understanding of the business including production processes Technique is used to identify all of the value-adding, as well as non-value-adding, processes that materials are subjected to within a plant
inventory turn
A measure of the expected number of times inventory is replaced over a year. COGS / average aggregate inventory value
DPMO (defects per million opportunities) (number of defects / (number of opportunities for error per unit ) X (number of units) ) X 1,000,000
A metric used to describe the variability of a process.
SQC (statistical quality control )
A number of different techniques designed to evaluate quality from a conformance view.. Process Control Procedures •Types of Variation •Variable data •Attribute data •Sampling to determine if the process is within acceptable limits •More proactive if done on a continuous basis. •Used to reduce variation within the process
group technology
A philosophy in which similar parts are grouped into families, and the processes required to make the parts are arranged in a specialized workcell. •The processes required to make the parts are arranged in a manufacturing cell •Eliminates movement and queue time between operations, reduces inventory, and reduces employees
cycle counting
A physical inventory-taking technique in which inventory is counted on a frequent basis rather than once or twice a year. •Items are counted and records updated on a periodic basis •Often used with ABC analysis to determine cycle •Has several advantages •Eliminates shutdowns and interruptions •Eliminates annual inventory adjustment •Trained personnel audit inventory accuracy •Allows causes of errors to be identified and corrected •Maintains accurate inventory records
FMEA (Failure Mode and Effects Analysis)
A procedure in which each potential failure mode in every sub-item of an item is analyzed to determine its effect on other sub-items and on the required function of the item.
bottleneck
A resource that limits the capacity or maximum output of the process. •Focus on bottlenecks as restricting throughput (defined as sales) •How: better tooling, higher-quality labor, larger batch sizes, reduction in setup time, etc. •AN HOUR SAVED AT THE BOTTLENECK ADDS AN EXTRA HOUR TO THE ENTIRE PRODUCTION SYSTEM •AN HOUR SAVED AT A NONBOTTLENECK IS A MIRAGE AND ONLY ADDS AN HOUR TO ITS IDLE TIME •Rule: Bottlenecks govern both throughput and inventory in the system. •Rule: An hour lost at a bottleneck is an hour lost for the entire system. •Rule: An hour saved at a non-bottleneck is a mirage. (1) with no setup required when changing from one product to another -sequence by delivery date (2) with setup times required to change from one product to another -larger batch sizes, similar jobs
CCR (capacity constrained resource)
A resource whose utilization is close to capacity and could be a bottleneck if not scheduled carefully (Goldratt's definition) (3) with no setup required to change from one product to another-sequence by delivery date (4) with setup time required to change from one product to another -larger batch sizes, similar jobs
level schedule
A schedule that pulls material into final assembly at a constant rate
kanban (pull system)
A signaling device used to control production. Japanese word for card •Pronounced 'kahn-bahn' (not 'can-ban') Authorizes production from downstream operations •'Pulls' material through plant May be a card, flag, verbal signal etc. Used often with fixed-size containers •Add or remove containers to change production rate -Kanban squares: marked spaces on the floor to identify where material should be stored -Container system: the container is used as a signal device -Colored golf balls: appropriate golf ball signals production
six sigma
A statistical term to describe the quality goal of no more than 3.4 defects out of every million units. Also refers to a quality improvement philosophy and program -Seeks to reduce variation that lead to product defects -"six sigma" refers to the variation that exists within plus or minus three standard deviations If you are good 99% of time (3.8σ) •9,884 surgical errors per week1 If you are good 99.99966% of time (6σ) •1.7 surgical errors per week1 •Executive leaders must champion the process of improvement •Corporation-wide training in Six Sigma concepts and tools •Setting stretch objectives for improvement •Continuous reinforcement and rewards
process improvement
A systematic approach to improving a process
checksheet
A technique used to collect and analyze data; sometimes called a tally sheet or checklist. A basic form to standardize data collection
Goldratt's definition of inventory
All the money that the system has invested in purchasing things it intends to sell.
Goldratt's definition of operation expenses
All the money that the system spends to turn inventory into throughput (Goldratt's definition).
p model (fixed time period model)
An inventory control model that specifies inventory is ordered at the end of a predetermined time period. The interval of time between orders is fixed and the order quantity varies
q model (fixed order quantity model)
An inventory control model where the amount requisitioned is fixed and the actual ordering is triggered by inventory dropping to a specified level of inventory
reorder point
An order is placed when inventory drops to this level
single period problem
Answers the question of how much to order when an item is purchased only one time and it is expected that it will be used and then not reordered. •One time purchasing decision (e.g. vendor selling t-shirts at a football game) •Seeks to balance the costs of inventory overstock and under stock *newspaper problem* •Consider the problem that the newsperson has in deciding how many newspapers to put in the sales stand outside a hotel lobby each morning •Too few papers and some customers will not be able to purchase a paper, and profits associated with these potential sales are lost •Too many papers and the price paid for papers that were not sold during the day will be wasted, lowering profit •This is a very common type of problem •Consider how much risk we are willing to take of running out of inventory •Assume a mean of 90 papers and a standard deviation of 10 papers •Assume we want an 80 percent chance of not running out •Assume that the probability distribution associated of sales is normal, stocking 90 papers yields a 50 percent chance of stocking out
nonbottleneck
Any resource whose capacity is greater than the demand placed on it (Goldratt's definition) •Focus on bottlenecks as restricting throughput (defined as sales) •How: better tooling, higher-quality labor, larger batch sizes, reduction in setup time, etc. •AN HOUR SAVED AT THE BOTTLENECK ADDS AN EXTRA HOUR TO THE ENTIRE PRODUCTION SYSTEM •AN HOUR SAVED AT A NONBOTTLENECK IS A MIRAGE AND ONLY ADDS AN HOUR TO ITS IDLE TIME •Rule: Bottlenecks govern both throughput and inventory in the system. •Rule: An hour lost at a bottleneck is an hour lost for the entire system. •Rule: An hour saved at a non-bottleneck is a mirage.
waste
Anything that does not add value from the customer's perspective.
operations consulting
Assisting clients in developing operations strategies and improving processes
backflush
Calculating how many of each part were used in production and using these calculations to adjust actual on-hand inventory balances. This eliminates the need to actually track each part used in production.
the management consulting industry
Can be categorized in three ways: 1.By size •Most consulting firms are small 2.By specialization •Frequently characterized as •Strategic planning •Tactical analysis and implementation 3.As in-house or external ●Are also frequently characterized according to whether their primary skill is in strategic planning or in tactical analysis and implementation
lean six sigma
Combines the implementation and quality control tools of Six Sigma and the inventory management concept of lean manufacturing.
An improvement methodology followed by companies engaging in Six Sigma programs. Define- identify customers and their priorities Measure- determine how to measure the process and how it is performing Analyze- determine the most likely causes of events Improve- Identify means to remove the causes of defects Control- determine how to maintain the improvements
DMAIC
designing a sampling plan
Determine (1) how many units, n, to sample from a lot, and (2) the maximum number of defective items, c, that can be found in the sample before the lot is rejected
assignable variation
Deviation in the output of a process that can be clearly identified and managed.is caused by factors that can be clearly identified and possibly managed A poorly trained employee that creates variation in finished product output. -goes above the chart control limits -multiple data points above/below the mean in a row
common variation
Deviation in the output of a process that is random and inherent in the process itself. A molding process that always leaves "burrs" or flaws on a molded item. -stays within the control limits
ABC inventory classification
Divides inventory into dollar volume categories that map into strategies appropriate for the category. •Items kept in inventory are not of equal importance in terms of: •dollars invested •profit potential •sales or usage volume •stock-out penalties Identify inventory items based on percentage of total dollar value, where "A" items are roughly top 15 %, "B" items as next 35 %, and the lower 65% are the "C" items
COQ (cost of quality)
Expenditures related to achieving product or service quality, such as the costs of prevention, appraisal, internal failure, and external failure.
when to hire a consultant
Hire a consultant only if any of these statements apply to your dilemma: •Office politics interfere with a project and you need a neutral third party •You need a different perspective to "invigorate a jaded organization" •"Your company lacks specific expertise or experience" •You lack the resources to finish a project •You can't sacrifice a valuable employee to one project, and you need an outside project leader to get it done •Your employees aren't communicating across departments
50 / (1 X 750) X 1,000,000
In one US city we know that on average 50 packages are delivered to the wrong address in a single day by a delivery service. On any given day there are 750 packages delivered in that city by the delivery company. How is the delivery service doing? Solve for DPMO
customer value
In the context of lean production, something for which the customer is willing to pay.
black belts master black belts green belts
Individuals with sufficient Six Sigma training to lead improvement teams. Individuals with in-depth training on statistical tools and process improvement. Employees who have enough Six Sigma training to participate in improvement teams.
lean production
Integrated activities designed to achieve high-volume, high-quality production using minimal inventories of raw materials, work-in-process, and finished goods •Involves the elimination of waste in production effort •Involves the timing of production resources (i.e., parts arrive at the next workstation "just in time")
kaizen
Japanese philosophy that focuses on continuous improvement.
grinders finders minders
Junior consultants whose primary function is to do the work Partners or senior consultants whose primary function is sales and client relations Managers of a consulting firm whose primary function is managing consulting projects •ypically work in project teams •Selected according to •Client needs •Project manager's preference •Other first-line consultants' preference •It pays to be in demand!
lean focused supply chain components
Lean logistics •Optimized mode selection and pooling orders •Combined multi-stop truckloads •Optimized routing •Cross docking •Import/export transportation processes •Backhaul minimization Lean customers •Understand their business needs •Value speed and flexibility •Establish effective partnerships with suppliers Lean suppliers •Able to respond to changes •Lower prices •Higher quality Lean procurement •Key is automation (e-procurement) •Suppliers must see into the customers' operations and customers must see into their suppliers' operation Lean warehousing •Eliminate non-value-added steps and waste in storage process
external benchmarking
Looking outside the company to examine what excellent performers inside and outside the company's industry are doing in the way of quality.
TQM (Total Quality Management)
Managing the entire organization so it excels in all dimensions of products and services important to the customer. Two fundamental operational goals 1.Careful design of the product or service 2.Ensuring that the organization's systems can consistently produce the design
questions leading to operations consulting projects
Manufacturing strategy consulting •Sustainability •Outsourcing •Supply chain management •Global manufacturing Tactical analysis and implementation •How can the client cut lead times? •How can inventory be reduced? •How can better control be maintained over the shop floor? •E-operations •Product development •ISO 9000 quality certification •Designing and implementing decentralized production control systems
financial performance measurements
Net profit •an absolute measurement in dollars Return on investment •a relative measure based on investment Cash flow •a survival measurement
action workout
Overview •Change Process originating at GE •Empowers employees and creates a new dynamic w/ Leadership •Emphasizes quick action •Necessitates a clear challenge to solve identify business challenge -> creates cross functional team -> develop solutions in small teams and create specific recommendations -> present recommendations to leaders with action plan -> leader makes decisions with participant input -> owner drives implementation and report out in 30 day intervals. *workout timing* 1. design event (3-4weeks) 2. conduct event (2-3 days) 3. implement recommendations (3-4 months)
preventive maintenance
Periodic inspection and repair designed to keep equipment reliable.
where operations consulting is needed 5ps of production
Plants •Adding and locating new plants •Expanding, contracting, or refocusing facilities People •Quality improvement •Setting/revising work standards •Learning curve analysis Parts •Make or buy decisions •Vendor selection decisions Processes Technology evaluation Process improvement Reengineering Planning and control systems Supply chain management ERP MRP Shop floor control Warehousing Distribution
spaghetti chart (minimizing waste hospital example)
Power of observation: •Track the motion of employees •Track the motion of a product Look for opportunities: •Co-location •Supplies / Inventory • Documentation reduction
poka yokes
Procedures that prevent mistakes from becoming defects. They are commonly found in manufacturing but also can be used in service processes.
acceptance sampling
Sampling to accept or reject the immediate lot of product at hand Advantages: •Economy •Less handling damage •Fewer inspectors •Upgrading of the inspection job •Applicability to destructive testing •Entire lot rejection (motivation for improvement) Disadvantages: •Risks of accepting "bad" lots and rejecting "good" lots •Added planning and documentation •Sample provides less information than 100 percent inspection
attribute data
Quality characteristics that are classified as either conforming or not conforming to specification • Number or percent of defective items in a lot. • Number of defects per item. • Types of defects. • Value assigned to defects (minor=1, major=5, critical=10)
variable data
Quality characteristics that are measured in actual weight, volume, inches, centimeters, or other measure.
roles consultants choose
Roles Consultants Choose •Expert Role (Traditional View of Mgmt. Consultant) •Pair of Hands Role (Staff Augmentation) •Collaborative Role (Strategic Partner) (goals, pretend these are in a pyramid) 8. improve org effectiveness 7. facilitate client learning 6. build consensus and commitment 5. assist implementation 4. provide reocmmendations 3. conduct diagnosis that may redefine problem 2. provide solution to given problem 1. provide requested information
5s
Seiri -> organization -> sort Seiton -> tidiness -> set in order Seiso -> purity -> sweep/shine Seiketsu -> cleanliness -> standardize Shitsuke -> discipline -> self discipline/sustain
minimizing waste (baseline and identify)
Shigeo Shingo Model: Analyze Separately, Design as One Analyze Separately: •Activity of the product •Activity of the associate •Activity of the equipment •Activity of the customer Design as One: •Solutions integrate the elements
the Shingo system fail safe method (and poka yokes)
Shingo's argument: •SQC methods do not prevent defects. •Defects arise when people make errors. •Defects can be prevented by providing workers with feedback on errors. 1.Successive check 2.Self-check 3.Source inspection • Poka-yoke includes: •Checklists •Special tooling that prevents workers from making errors
fail safe procedures
Simple practices that help prevent errors
lean supply chains
Specialized plants •Small specialized plants rather than large vertically integrated manufacturing facilities •Can be constructed and operated cheaper Collaborate with suppliers •Important part of process •Share projections with suppliers •Link with suppliers online
uniform plant loading
Smoothing the production flow to dampen schedule variation. producing 300 units every month instead of 120 the first month 500 the next month and 280 the third month.
SPC (statistical process control)
Techniques for testing a random sample of output from a process to determine whether the process is producing items within a prescribed range. •Sampling to determine if the process is within acceptable limits •More proactive if done on a continuous basis. •Used to reduce variation within the process
problem statement
The Problem Statement is a brief description of the business problem targeted by this project . The Problem Statement should include relevant business conditions, performance measures, and identification of performance gaps; but should not propose a solution. •Characteristics Of A Good Problem Statement -It should be a concise but complete description of the issue -It should focus on a specific problem aligned to high-level business objectives -It should be as detailed as possible including quantifiable performance characteristics -It should not include any presumed causes or pre-determined solutions -Answer Who, What, When, Where and How (much) •Purpose and Function Of Problem Statements -To provide teams with a well defined issue -To quantify current performance relative to customer expectations -To identify the financial impact of current performance
safety stock
The amount of inventory carried in addition to the expected demand.
inventory position
The amount on hand plus on-order minus backordered quantities. In the case where inventory has been allocated for special purposes, this is reduced by these allocated amounts
independent demand
The demands for these items are unrelated to each other, or to activities that can be predicted with certainty.
design quality
The inherent value of the product in the marketplace. performance features compared to customer expectations
dependent demand
The need for an item is a direct result of the need for some other item, usually an item of which it is a part. Also, when the demand for the item can be predicted with accuracy due to a schedule or specific activity
waste reduction
The optimization of value-adding activities and elimination of non-value-adding activities that are part of the value stream.
freeze window
The period of time during which the schedule is fixed and no further changes are possible
quality at the source
The philosophy of making workers personally responsible for the quality of their output. Workers are expected to make the part correctly the first time and to stop the process immediately if there is a problem. •Workers are personally responsible for the quality of their output •Workers become their own inspectors •Workers are empowered to do their own maintenance
primary functions of inventory
The primary functions of inventory are to: •Buffer uncertainty in the marketplace & •Decouple dependencies in the supply chain (e.g., safety stock) to maintain independence of operations -> to meet variation in product demand -> to allow flexibility in production scheduling -> to provide a safeguard for variation in raw material delivery time -> to take advantage of economic purchase order size
upper and lower specification limits
The range of values in a measure associated with a process that is allowable given the intended use of the product or service.
throughput
The rate at which money is generated by the system through sales (Goldratt's definition)
Capability index (C pk)
The ratio of the range of values allowed by the design specifications divided by the range of values produced by a process. shows how well parts being produced fit into design limit specifications. As a production process produces items small shifts in equipment or systems can cause differences in production performance from differing samples. •Process (Control) limits •Specification (Tolerance) limits •How do the limits relate to one another? •Cpk larger than one indicates process is capable of producing all output within specifications. •If the two numbers are not equal, then the mean has shifted from the center of the specification limits.
value stream
These are the value-adding and non-value-adding activities required to design, order, and provide a product from concept to launch, order to delivery, and raw materials to customers.
price break model
This model is useful for finding the order quantity of an item when the price of the item varies with the order size
optimal order quantity
This order size minimizes total annual cost.
operational performance measurements
Throughput •the rate at which money is generated by the system through sales (goods sold) Inventory •all the money that the system has invested in purchasing things it intends to sell Operating expenses •all the money that the system spends to turn inventory into throughput
Uncertainties and Variabilities that are Hard to Control in Service
Uncertainty in task times •Each service delivery has some uniqueness and therefore variability in task times Uncertainty in demand •Forecasts are uncertain •Manufacturing can buffer with finished goods inventory but services cannot •Capacity must be available when the demand arises Customers' production roles •Customers typically are involved in the production of a service •This introduces uncertainty
control limits
We establish the Upper Control Limits (UCL) and the Lower Control Limits (LCL) with plus or minus 3 standard deviations from some x-bar or mean value. Based on this we can expect 99.7% of our sample observations to fall within these limits.
PDSA (plan do study act)
a framework for problem solving and improvement activities
drum, buffer, rope
a planning and control system that regulates the flow of work-in-process materials at the bottleneck or the capacity constrained resource in a productive system -Drum --- bottleneck-control point, rate of bottleneck, where the bottleneck is. -Rope --- communication link to other processes -Buffer --- time buffer - guarantees that bottleneck always has work to do. do things while waiting on bottleneck
gap analysis
a type of analysis that compares the differences between the consumer's expectations about and experiences with a service based on dimensions of service quality
quality
ability for a factory or service process to produce the products
value chain
each step in the supply chain should create value •If it does not create value, it should be removed
a firm needs to reduce the amount of inventory or increase sales or both.
how does one increase inventory turns?
issue tree
issue tree
manufacturing inventory
items that contribute to or become part of a firm's product output
MRO (maintenance, repair & operating)
materials used in production (e.g., cleaners & brooms).
productivity
outputs / inputs A measure of how well resources are used. According to Goldratt's definition, all the actions that bring a company closer to its goals •Productivity typically measured in terms of output per labor hour. •Does not guarantee profitability. •Has throughput increased? •Has inventory decreased? •Have operational expenses decreased?
WIP (work in process inventory)
partially processed materials not yet ready for sales.
JIT production
producing what is needed when needed and nothing more •Anything over the minimum is waste •Typically applied to repetitive manufacturing •Ideal lot size is one •Vendors ship several times a day •JIT exposes problems otherwise hidden by inventory
Toyota production system
respect for people 1.Lifetime employment for permanent positions 2.Maintain level payrolls even when business conditions deteriorate 3.Company unions 4.Bonuses 5.View workers as assets Elimination of waste 1.Waste from overproduction 2.Waste of waiting time 3.Transportation waste 4.Inventory waste 5.Processing waste 6.Waste of motion 7.Waste from product defects 8.Underutilizing people (talent, skills, etc.)
fishbone / cause and effect diagram
show relationships between causes and problems
consulting business models
solution shop: •Diagnose & Solve problems w/ undefined Scope •Value through consultants judgement rather than repeatable processes •Customers pay premium fee-for-service value added process business: •Structured to address problems of defined scope •Processes are repeatable and controllable •Customers pay for results/output facilitated network: •Structured to enable exchange of products and services •Customers pay fees to the network, which goes to service provider
prevention costs
sum of all the costs to prevent defects
inventory system
the set of policies and controls that monitor levels of inventory •Determines what levels should be maintained, when stock should be replenished, and how large orders should be
inventory
the stock of any item or resource used in an organization •Inventory can be one of the most expensive assets of an organization •Inventory may account for more than 10% of total revenue or 20% of total assets •Management must reduce inventory levels yet avoid stockouts and other problems •Includes raw materials, finished products, component parts, supplies, and work-in-process •Manufacturing inventory: refers to items that contribute to or become part of a firm's product
according to Goldratt what is the goal of a firm?
to make money!
capital cost
•interest or opportunity cost of capital tied up in stock
greater than 1 (less than 1 is out of control)
what value must CPK be to determine whether or not it is in control?
Malcolm Baldrige National Quality Award
•An award established by the U.S. Department of Commerce given annually to companies that excel in quality •The Baldrige Quality Award is given to organizations that have demonstrated outstanding quality in their products and processes •The award program is administered by the National Institute of Standards and Technology, an agency of the U.S. Department of Commerce •A total of up to 18 awards may be given annually in these categories: manufacturing, service, small business, education and health care, and not-for-profit •Applications are scored on total points out of 1,000 •Those scoring over 650 get selected for site visits, which decide the final winner •Other benefits: •Feedback from the Baldrige examiners •"An audit report of the firm's practices" •Many states use Baldrige Criteria as the basis for their own awards
Pull System (customer pulls an inventory item from Final Assembly...)
•By pulling material in small lots, inventory cushions are removed, exposing problems and emphasizing continual improvement •Manufacturing cycle time is reduced •Push systems dump orders on the downstream stations regardless of the need
control of service inventories
•Can be a critical component of profitability •Losses may come from shrinkage or pilferage •Applicable techniques include •Good personnel selection, training, and discipline •Tight control on incoming shipments •Effective control on all goods leaving facility
examples of mistake proofing
•Checklists •Tooling or equipment change •Visual indicators •Automated inspections
setup/product change costs
•Costs for storage, handling, insurance, and so on Clean-up costs Re-tooling costs Adjustment costs
holding/carrying costs
•Costs for storage, handling, insurance, and so on •Space •Storage implements (e.g., shelving and stock-picking vehicles) •Insurance on space, equipment, and inventories •Inventory taxes •Stockkeepers' wages •Damage and shrinkage while in storage Semi-obvious carrying costs: Obsolescence Inventory planning and management Stock record keeping Physical inventory taking
attributes (go or no go information) (types of statistical sampling)
•Defectives refers to the acceptability of product across a range of characteristics. •Defects refers to the number of defects per unit which may be higher than the number of defectives. •p - chart application c - chart application
Goldratt's rules of production scheduling
•Do not balance capacity, balance the flow. •The level utilization of a non-bottleneck resource is not determined by its own potential but by some other constraint in the system. •Utilization and activation of a resource are not the same. •An hour lost at a bottleneck is an hour lost for the entire system. •An hour saved at a non-bottleneck is a mirage. •Bottlenecks govern both throughput and inventory in the system. •Transfer batch may not, and many times should not, be equal to the process batch. •A process batch should be variable both along its route and in time. •Priorities can be set only by examining the system's constraints, and lead time is a derivative of the schedule.
X bar / R chart
•For variables that have continuous dimensions •Weight, speed, length, strength, etc. •X ̅-charts are to control the central tendency of the process •R-charts are to control the dispersion of the process •The two charts are generally used together
ISO 9000
•Formal standards for quality certification developed by the International Organization for Standardization •Series of standards agreed upon by the International Organization for Standardization (ISO) •Adopted in 1987 •Used in more than 160 countries •A prerequisite for global competition? •ISO 9000 an international reference for quality; ISO 14000 primarily concerned with environmental management
Japanese approach to productivity
•Goal of full employment in the post WWII period. •Government supported improvement of targeted industries. •Imported technologies. •Efforts concentrated on factory floor. •Quality improvement focus •Elimination of waste & respect for people. •Waste is 'anything other than the minimum amount of equipment, materials, parts, space, and worker's time, which are absolutely essential to add value to the product.' - Fujio Cho President, Toyota 1999-2005
unbalanced capacity
•In earlier chapters, we discussed balancing assembly lines. •The goal was a constant cycle time across all stations. •Synchronous manufacturing views constant workstation capacity as a bad decision. •Random variations must be handled using inventory. •When one process takes longer than the average, the time can not be made up.
lean logic pull system
•Lean is based on the logic that nothing will be produced until it is needed🔽 •A sale pulls a replacement from the last position in the system🔽 •This triggers an order to the factory production line🔽 •Each upstream station then pulls from the next station further upstream
benefits from dollar day measurement
•Marketing •discourages holding large amounts of finished goods inventory • Purchasing •discourages placing large purchase orders that on the surface appear to take advantage of quantity discounts • Manufacturing •discourage large work in process and producing earlier than needed
AQL (acceptance quality level)
•Maximum acceptable percentage of defectives defined by producer
lot for lot ordering convention
•Order exact quantity needed -- required for most inventory models.
LTPD (lot tolerance percent defective)
•Percentage of defectives that defines consumer's rejection point
mistake proofing levels 1,2, and 3
•Physical prevention of error at the source •Design for mistake-proof •Automated checks to prevent further processing •Warning system that alerts when error occurs •Buzzers, lights, alarms, color change, or other signals •Passive warning that sends a caution signal to users •Checklists or templates •May prevent future errors
minimized setup times (kanban)
•Reductions in setup and changeover times are necessary to achieve a smooth flow •Kanban significantly reduces the setup cost •The organization will strive for a lot size of one
specific lot size ordering convention
•Supplier provides items only in fixed quantities.
variables/continuous (types of statistical sampling)
•Usually measured by the mean and the standard deviation. •X-bar and R chart applications
building a lean supply chain
•Value must be defined jointly for each product family based on the customer's perception •All firms along the value stream must make an adequate return on their investments •Firms must work together to eliminate waste so overall target cost and ROI targets are met •When cost targets are met, the firms will conduct new analyses to identify remaining waste and set new targets •Every participating firm has the right to examine every activity relevant to the value stream as part of the joint search for waste
appraisal costs
•costs of the inspection and testing to ensure that the product or process is acceptable
inventory accuracy
•refers to how well the inventory records agree with physical count *record accuracy* •Accurate records are a critical ingredient in production and inventory systems •Allows organization to focus on what is needed •Necessary to make precise decisions about ordering, scheduling, and shipping •Incoming and outgoing record keeping must be accurate •Stockrooms should be secure
BPR (business process reengineering)
•the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance such as cost, quality, service, and speed •As a engineering discipline, reengineering can be applied to any process in manufacturing and service businesses, education, and the government. •Business process reengineering (BPR) is focused on reengineering business processes. •Rule 1: Organize around outcomes, not tasks. •Rule 2: Have those who use the output of the process perform the process. •Rule 3: Merge information-processing work into the real work that produces the information. •Rule 4: Treat geographically dispersed resources as though they were centralized. •Rule 5: Link parallel activities instead of integrating their results. •Rule 6: Put the decision point where the work is performed, and build control into the process. •Rule 7: Capture information once and at the source. •