CH 8 Supply Chain

Kaoru Ishikawa

Developed one of the first tools used in quality management - the cause and effect diagram, which is also called the "Ishikawa" or "fishbone" diagram

Yellow Belt

Has a basic understanding of Six Sigma Methodology and the tools in the DMAIC problem solving process

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.

The Eight Wastes ("DOWN TIME")

- (D)efects - Anything that does not meet the acceptance criteria - (O)verproduction- Production before it is needed, or in excess of customer requirements. Providing a service that is not needed - (W)aiting - Elapsed time between processes when no work is being done - (N)on-Utilized Talent - Underutilizing people's talents, skills or knowledge. De-motivating the workforce by not asking for input or recognizing success - (T)ransportation - Unnecessary movement of materials or products - (I)nventory - Excess products or materials not being processed - (M)otion - Unnecessary movement of people. Multiple hand-offs - (E)xtra-Processing - Unnecessary steps in a process. Redundancies between processes. More work or higher quality than required by the customer

Manufacturing Strategy

- A strategy that is established to satisfy customer demand while balancing manufacturing costs and inventory levels

Setup Time and Changeover Time

- Are considered a waste as they are times when the equipment is not performing its intended function; producing product - Both are non-value added operations and the time taken should be minimized as much as possible

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

Continuous Flow

- Consistent manufacturing of the same product. (gasoline, chemicals, laundry detergent, PC Boards). - Highly inflexible, V limited variety, V high volume, high fixed costs, low variable costs, V short lead time - MTS

(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 KAIZEN = CHANGE FOR THE BETTER

Job Shop

- Creates a custom product for each customer. (artist, craftsman) - Highly flexible, V high variety, V low volume, low fixed costs, high variable costs, V long lead time - ETO/MTO

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

Joseph Juran

- Defined quality as "fitness for use" - He developed the concept of the cost of quality - Quality planning, Quality control, Quality Improvement

(3) 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

(1) Waste Reduction

- 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, etc.

Assembly Line

- Has standard products with a limited number of variations moving through stages of production (Cars, Televisions, Smart phones) - Somewhat inflexible, limited variety, high volume, moderate fixed costs, moderate variable costs, short lead time - ATO/MTS

LEAN History

- In the 1910's, Henry Ford's mass production line was the first manufacturing breakthrough by using continuous assembly and flow systems that made parts find their way into finished products - In the 1940's, Taichii Ohno and Shigeo Shingo created the 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. - The term LEAN was first coined by John Krafcik in 1988 and the definition was expanded in the 1990 book, The Machine that Changed the World. (Based on Toyota)

Master Black Belt

- Is a career path. - Has successfully led ten or more teams through complex Six Sigma projects

Engineer-to-Order (ETO)

- Is 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 - The essence is building a unique product every time. - Project Management is a key skill - Complicated technology solutions such as operations centers, stadiums, amusement rides are it

Make-to-Order (MTO)

- Is a 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 - Highly configured products such as computer servers, aircraft, ocean vessels, houses, bridges, custom furniture and custom tooling are it - Often includes services with the product (architect, designer, technology expert)

Assemble-to-Order (ATO)

- Is a manufacturing strategy where final products are produced quickly as ordered by customers. - 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 - Most high tech products with customization available (computers, audio systems), Quick serve restaurants, and individualized products are it

Six Sigma

- Is a quality management process & philosophy that emphasizes a commitment toward excellence, encompassing suppliers, employees, and customers - Pioneered by Motorola in 1987, it is a statistics-based decision-making framework designed to make significant quality improvements in value-adding processes - 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%) - Especially useful in manufacturing with a large number of parts

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. - Focuses on eliminating wastes and improving efficiency - Provides value for customers through the use of the most efficient resources possible - IS A CULTURE

Total Cost of Manufacturing (TCM)

- Is the complete cost of producing and delivering products to your customers - It incorporates both fixed and variable costs - It includes all costs associated with: 1. Production and Procurement activities 2. Inventory and Warehousing activities 3. Transportation activities - Generally expressed as a cost per unit for each product

W. Edwards Deming

- Is widely considered the father of TQM - He is the creator of the Plan-Do-Check-Act model - Developed 14 points to guide companies in quality improvement

Manufacturing processes

- Job Shop - Batch - Assembly Line - Continuous Flow

Make-to-Stock (MTS)

- Literally means to manufacture products for stock based on demand forecasts, a push supply chain - Most equipment intensive manufacturing (automobiles), commodities (processed foods, sundries) and low value products use this - A key issue of it 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.

Types of Manufacturing Strategies

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

Batch

- Manufactures a small quantity of an item in a single production run (Milk and other processed food, clothing) - Somewhat flexible, high variety, low volume, moderate fixed costs, moderate variable costs, long lead time - MTO/ATO

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

Relationship of TCM to Manufacturing Strategy

- Procurement and Production costs per unit go down as volume goes up - Inventory and Warehousing costs per unit go up as volume goes up - Transportation costs per unit go down as volume goes up, but level off at high volumes

(4) Small Batch Scheduling and Uniform Plant Loading

- Production in small batches 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 and minimize waste - Shortens manufacturing lead time

Lean Manufacturing Practices

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

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. - 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

(2) 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.

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 - Is less time-consuming than testing every unit but can result in errors: 1. 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) 2. 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)

(5) 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

3 Main 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.

5 pillars of workplace management & organization

1. Seiri: Sort - Keep only necessary items in the workplace, eliminate the rest 2. Seiton: Straighten - Organize and arrange items to promote an efficient workflow 3. Seiso: Shine - Clean the work area so it is neat and tidy 4. Seiketsu: Standardize - Schedule regular cleaning and maintenance 5. Shitsuke: Sustain - Stick to the rules. Maintain good work habits

7 Elements of LEAN Manufacturing

1. Waste Reduction 2. LEAN Layouts 3. Inventory, Setup Time, & Changeover Time Reduction 4. Small Batch Scheduling & Uniform Plant Loading 5. LEAN Supply Chain Relationships 6. Workforce Empowerment 7. Continuous Improvement (Kaizen)

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

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

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

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

Total Quality Management (TQM)

Is 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

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.

(6) 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