Chapter 5: Manufacturing
Total Cost of Manufacturing
What is Total Cost of Manufacturing (TCM) or Total Delivered Cost and why is it important to manage? TCM is generally expressed as cost per unit Total Cost of Manufacturing (TCM) includes: 1. Manufacturing and Procurement activities 2. Inventory and Warehousing activities 3. Transportation activities
Line Flow Production (continued)
Advantages: ▪ Cost per unit of production reduced through improved work and material flow ▪ Suitable for manufacture of large quantities ▪ Capital intensive which means it can work consistently ▪ Less need for training and skills Disadvantages: ▪ Very long set up time and reliant on high quality machinery ▪ High raw materials and finished stocks unless lean production is used ▪ Goods are mass produced - less differentiation for the customer ▪ Production is shut down if flow is stopped
Continuous Flow Production (continued)
Advantages: ▪ Processes can normally be automated which reduces unit costs ▪ Large quantities can be produced ▪ Ideal for products which have to be of a consistent quality Disadvantages: ▪ Heavy investment required in process design and production equipment/facilities ▪ Difficult and disruptive if the production process has to be stopped ▪ Little opportunity to make different version of the product
Manufacturing - Strategies
As companies seek to create the products customers desire, they must consider when and how those items will be created and stored. Effectively, the market you choose will drive your decision. Companies must develop a manufacturing strategy that suits the type(s) of products that they produce, their customer's expectations, and their strengths. ▪ Manufacturing strategies can vary significantly depending on the product and/or the customer requirements. ▪ Developing a manufacturing strategy that suits a company's strengths is essential for establishing and maintaining an effective supply chain.
Typical Lean Manufacturing Performance Metrics Establishment and mastering of lean production would allow you to achieve the following benefits:
Direct Labor/Productivity Improved: 45-75% Cost Reduced: 25-55% Throughput/Flow Increased: 60-90% Quality (Defects/Scrap) Reduced: 50-90% Inventory Reduced: 60-90% Space Reduced: 35-50% Lead Time Reduced: 50-90%
ISO Standards - Quality
Standards in the ISO 9000 family include: ▪ ISO 9001: 2015 - Requirements of a quality management system. ▪ ISO 9000: 2005 - Basic quality concepts and language ▪ ISO 9004: 2009 - focuses on how to make a quality management system more efficient and effective ▪ ISO 19011: 2011 - Guidance on internal and external audits of quality management systems.
What is a Production System?
Those activities of an organization where resources, flowing within a defined system, are combined and transformed, in a controlled manner, to add value, following the policies communicated by the organization's management. Inputs: Resources: - Materials - Labor - Equipment - Money - Time - Etc. Conversion Process: - Manual Operations - Mechanical Operations - Chemical Operations Outputs: - Finished Products - Services
Manufacturing Strategy -vs- Performance Cycle
The choice of strategy determines which performance cycles (i.e., lead time) the customer experiences Least to Most Time: MTS, ATO, MTO, ETO MTS Strategy: Customer Delivery Cycle ATO Strategy: Manufacturing or Assembly Cycle MTO Strategy: Procurement Cycle ETO Strategy: Product Design
Total Quality Management
Total Quality Management (TQM) is a philosophy focused on meeting customer expectations with respect to all needs, across all company functions, and recognizing all customers, both internal and external * It is a total, organization-wide activity versus a technical task ▪ TQM's basic conceptual elements are: ─ Top Management commitment and support ─ Maintaining a customer focus in product, service and process performance ─ Integrated operations within and between organizations ─ A commitment to continuous improvement TQM Model: - Customer Focus, - Planning Process, - Process Management, - Process Improvement, - Total Participation
Lean Manufacturing - Waste Reduction The Eight Wastes (remember the acronym "DOWN TIME") : Defects Overproduction Waiting Non-Utilized talent Transportation Inventory Motion/Movement Extra-Processing
Defects: Anything that does not meet the acceptance criteria Overproduction: Production before it is needed, or in excess of customer requirements. Providing a service that is not needed. Waiting: Elapsed time between processes when no work is being done 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 Inventory: Excess products or materials not being processed Motion/Movement: 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
DMAIC Methodology - Define: Define the problem - Measure: Map out the current process - Analyze: Identify the cause of the problem - Improve: Implement and verify the solution - Control: Maintain the solution
Define: - What is the customers' expectation of the process? Measure: - What is the frequency of defects? Analyze: - Why, when and where do defects occur? Improve: - How can we fix the process? Control: - How can we make the process stay fixed?
Engineer to Order (ETO)
Engineer-to-Order (ETO) is a manufacturing strategy in which the product is designed, engineered, and built to specifications only after the order has been received. ▪ The essence of ETO is building a unique product every time. It is the ultimate form of customization. Components may be common from one product to another, but not in the same quantity as in repetitive manufacturing. ▪ Impact on Logistics • Limited warehousing space needed • Significant WIP inventory management • Typically uses customized transportation for finished product to the customer 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. ▪ Quality must be part of the entire process, and not just part of purchasing and manufacturing.
ISO Standards - Environment
ISO 14000 — International Environmental Standard - Intended to assist organizations to manage the environmental effect of their business practices. - Deal with how a company manages the environment inside its facilities and the immediate outside environment. - Call for analysis of the entire life cycle of a product, from raw material to eventual disposal. - They do not mandate a particular level of pollution or performance but focus on awareness of the processes and procedures that can effect the environment. - Adherence to the ISO 14000 standards does not release a company from any national or local regulations regarding specific performance issues regarding the environment.
Design for Logistics Concept
Incorporates the requirements and framework for logistical support of the product in the early phases of product development ▪ Considers: ─ What we are going to make? ─ How we are going to make it? ─ What logistics capabilities do we need? ─ Will we need to outsource any parts or subassemblies? ─ How we are going to integrate our suppliers into the process?
Mass Customization: What Is It?
Individually customized products being produced at the low cost of standardized, mass produced goods. ▪ Mass customization produces a unique product quickly and at a low cost using a high volume production process ▪ Objective ─ Increase variety for customer while realizing the cost advantages of high volume continuous and line flow processes ─ "On-Demand", "To Order", "Postponement", "Agile Mfg" ▪ Examples: Dell, M&M's, Reebok
Types of Manufacturing Processes
Intermittent Product Systems: - Job Shop Production - Batch Production Repetitive Product Systems: - Line Flow Production - Continuous Flow Production
Manufacturing Process Characteristics
Intermittent: - Job Shop: Very High Variety Very Low Volume ETO & MTO Very Long Lead Time - Batch Production High Variety Low Volume MTO & ATO & MTS Long Customer Lead Time Repetitive: - Line Flow Production Limited Variety High Volume ATO & MTS Short Customer Lead Time - Continuous Flow Production Very Limited Variety Very High Volume MTS Very Short Customer Lead Time
Basic Characteristics of a Production System
1. It is an organized activity, so every production system has an objective 2. It transforms various inputs into useful outputs 3. It does not operate in isolation from other organizational systems (e.g. sales, planning, etc.) 4. There exists feedback about the activities, which is essential to control and improve system performance.
Chapter Outline
1. Manufacturing Perspective 2. Manufacturing Strategies 3. Manufacturing Processes 4. Facility Layout Strategy 5. Total Cost of Manufacturing 6. Mass Customization 7. Lean Manufacturing/Six Sigma 8. Logistical Interfaces with Manufacturing
Batch Production (continued)
Advantages: ▪ Cost savings can be achieved by buying in bulk ▪ Still allows customers some choice ▪ Products can be worked on by specialist staff or equipment at each stage ▪ Allows a firm to handle unexpected orders Disadvantages: ▪ Takes time to switch production of one batch to another ▪ Requires the business to maintain higher stocks of raw materials and work-in-progress ▪ Tasks may become boring (repetitive) - reducing motivation ▪ Size of the batch is dependent on the capacity allocated
Job Shop Production (continued)
Advantages: ▪ Customer requirements and changes can be easily handled ▪ Generally associated with higher quality ▪ Employees can be better motivated - more job satisfaction ▪ A very flexible production method Disadvantages: ▪ Cost of each individual unit may be high ▪ Often labor intensive = high labor costs ▪ Requires close consultation with the client ▪ Usually reliant on highly skilled workers
Planning for Production - The (5) Five P's *This chart shows the important aspects to consider in each of these Production Areas
Product(s): - Performance - Aesthetics and Features - Quality - Reliability - Quantities that will be required - Turnaround or Lead Time - Production Costs Plant(s): - Current and Future Demand - Health & Safety Aspects - Productivity of the Equipment - Reliability of the Equipment - Environmental Issues & Impact - Maintenance Requirements Processes: - Type of Production - Available Skills - Available Capacity - Safety - Production Costs - Maintenance Requirements Programs: - Purchasing Patterns - Cash Flow - Requirement for Storage - Availability of Storage - Transportation People: - Availability of Labor - Wages & Salaries - Training Requirements - Working Conditions - Leadership & Motivation - Unionization - Communication
Manufacturing Process Manufacturing Process strategy involves developing a manufacturing process that can create the exact product that has been designed.
▪ Although there are differences between processes of companies, many manufacturing processes have certain characteristics in common. ▪ Based on these characteristics, processes can be grouped into two broad categories: ✓ Intermittent Processes - used to produce a large variety of products with different processing requirements in lower volumes. ✓ Repetitive Processes - used to produce one, or a few, standardized products in high volumes.
Mass Customization - Drawbacks - Communication - Logistics - Process - Costs
▪ Communication: Getting information from customers is not an easy job ▪ Logistics: The logistics of distributing the right product, to the right customer, at the right time, at a reasonable price, is very difficult ▪ Process: The production process must be flexible. Since usually only certain stages of production are flexible, only some attributes of the product can be customized. ▪ Costs: Increase in material and manufacturing costs
Job Shop Production (aka Project Production)
▪ Creates a custom product for each customer ▪ One-off or small number of items produced, generally one unit manufactured at a time. ▪ High customization - Normally made to customs specifications ▪ Often undertaken by small, specialist businesses ▪ Examples: - Architects - Custom Home Construction - Ship Builders - Road Builders
Six Sigma Methodology Six Sigma has two key methodologies that provide a systematic approach to eliminating defects and keeping the process in control: DMADV: - Define - Measure - Analyze - Design - Verify DMAIC: - Define - Measure - Analyze - Improve - Control
▪ 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. ─ It defines the steps a Six Sigma practitioner typically follows during a project.
Design for Manufacture
▪ Design-for-Assembly - focuses on minimizing the number of parts and on easing the assembly process. ▪ Design-for-Product-Serviceability - focuses on easing the disassembly for repair, replacement, and reuse of product components ▪ Design-for-Six-Sigma - systematically evaluates the consistency with which a good or service can be produced or delivered given the capabilities of the processes used.
Cellular Layout Manufacturing Process = Batch Production Manufacturing Strategies = MTO / ATO / MTS
▪ Group products based on similar processing characteristics and arrange workstations to form a number of small assembly lines called work cells. ▪ Identify products that have similar processing requirements, called product families. ▪ Each work cell can be dedicated to make a product family. ▪ Best suited for producing a high volume of one or a very few similar products.
Process Layout Manufacturing Process = Batch Production Manufacturing Strategies = ATO / MTS
▪ Groups resources, people, and equipment performing similar functions together in the same physical area. ▪ Product is moved between groupings based on need. ▪ Each product may take a different route through the operation. ▪ Scheduling resources and work flow is more complex ▪ Best suited for a factory producing several products that undergo a similar process.
Benefits of Lean Manufacturing
▪ Improved customer satisfaction ▪ Increased sales and profits ▪ Improved quality and lower costs ▪ Enhanced process flows ▪ Improved throughput ▪ Seeing things differently than we do today ▪ Resource utilization optimized ▪ Achieving a competitive advantage
Continuous Flow Production
▪ Involves a series of processes which raw materials flow through. These processes are very inflexible. ▪ Generally highly automated, and workers act as monitors rather than as active participants. ▪ High capital investment - frequently dedicated to one specific product ▪ Typically, production runs 24 hours a day with the end result being a large quantity of finished product ▪ Examples: - Oil Refining/Gasoline - Cement - Laundry Detergent - Chemicals
Basis for Comparison of Manufacturing Processes
▪ Manufacturing Costs ▪ Capital Investment (plant and inventory) ▪ Size of the Plant ▪ Technical Requirements ▪ Organizational Structure ▪ Flexibility of Production ▪ Types of Products Produced ▪ Material Handling Equipment (manual versus automated)
Batch Production
▪ Manufacturing of a small fixed quantity of an item in a single production run. ▪ Each individual item in the batch goes through one stage of the production process before the whole batch moves on to the next stage. ▪ Aims to achieve better use of equipment ▪ Produces good quality products more economically than manufacturing them individually ▪ Examples: - Bakeries - Textiles - Furniture - Pharmaceuticals
Mass Customization: Where Does It Work?
▪ Market Characteristics: ─ Sufficiently large customer segment that values "translatable variety" ─ Turbulent, dynamic market ─ Unpredictable demand - but not entirely unpredictable! ─ Little impact of regulation or other constraints (designer drugs?) ▪ Product/Process Characteristics: ─ Modular or adjustable product building blocks ─ Predictable components/functions interactions ─ Standardized process/skill building blocks ─ Reasonable lead times, steps, work content
Materials Requirements Planning (MRP) Interfaces
▪ Procurement has a key role in insuring all the components are obtained on time to make an end item ─ Key information requirement is the Bill of Materials (BOM) ▪ Particularly for more complex manufacturing (i.e., MTO, ETO) where large numbers of components or subassemblies are used to produce a final product ▪ Planning sometimes spans multiple manufacturing locations
Line Flow Production (aka, Mass Production)
▪ Product moves on an assembly line through various stages of production ▪ When one task is finished the next task must start immediately, therefore, time taken on each task must be the same ▪ For standardized products with a limited number of variations ▪ Examples: - Automobile Assembly - Cell Phones - Toilet Paper
The Role of Production in Business Business = Business is defined as the activity of providing goods and services involving various financial, commercial, and industrial aspects.
▪ Production is the transformation of raw materials, components, and operational inputs, into outputs that when distributed, meet the needs of customers. − Therefore, production plays a very important role in the overall business scenario as it basically deals with the manufacturing of the goods or services, which are in turn provided to the customer to fulfil their needs. - The plan for production has to be developed considering the following: The Five P's --- 1. Product(s) 2. Plant(s) 3. Processes 4. Programs 5. People
Primary Objectives of Lean Manufacturing
1. Produce only the products that customers want 2. Produce products only as quickly as customers want them 3. Produce products with perfect quality 4. Produce products in the minimum possible lead times 5. Produce products with features customers want and no others 6. Produce with no waste of resources and designate a purpose for every movement to leave zero idle inventory. 7. Produce products with methods that reinforce the occupational development of workers
Manufacturing Perspective
1. Volume is traditionally treated according to the principle of economies of scale ─ Average cost to produce product declines as manufacturing volume increases ─ Particularly important when high fixed costs are present 2. Variety involves frequent product runs and high repetition of small lot sizes ─ Processes that can rapidly switch production from one product to another while retaining efficiency are said to have economy of scope 3. Constraints interact with volume and variety to create realistic manufacturing plans ─ Capacity is how much can you produce in a given unit of time ─ Equipment; must consider how flexible it is ─ Is one particular piece a bottleneck? ─ Setup/Changeover considers how quickly can you change from one variety of product to another
Key Elements of Lean Manufacturing
1. Waste Reduction 2. Lean Supply Chain Relationships 3. Lean Layouts 4. Inventory & Setup Time Reduction 5. Small Batch Scheduling 6. Continuous Improvement 7. Workforce Empowerment
Manufacturing Perspective (continued)
4. Lead Time is the measure of elapsed time between release of a work (manufacturing) order to the shop floor and completion of all work on the product to achieve ready-to-ship status 5. Product Quality is the conformance to requirements (defined by the absence of defects) or fitness for use (measured by the degree of customer satisfaction with a product's characteristics and features). Quality can be defined through five principal approaches: 1) Transcendent quality is an ideal, a condition of excellence. 2) Product-based quality is based on a product attribute. 3) User-based quality is fitness for use. 4) Manufacturing-based quality is conformance to requirements. 5) Value-based quality is the degree of excellence at an acceptable price.
TCM -vs- Strategic Alternatives
As volume goes up . . . A. Manufacturing and Procurement costs per unit go down due to economies of scale. Generally-step function applies as more capital is required to produce. B. Inventory and Warehousing costs per unit go up. C. Transportation costs per unit go down, but level off at high volumes as the shipping container gets filled to capacity and another container must be used.
Assemble-to-Order (ATO)
Assemble-to-Order (ATO) is a manufacturing strategy where products ordered by customers are produced quickly and are customizable to a certain extent. ▪ Requires that the component parts are already manufactured but not yet assembled. Once an order is received, the parts are assembled quickly and sent to the customer. ▪ Impact on Logistics • Warehousing space needed for components • Significant inventory management of components • Typically uses premium transportation for finished product to the customer ATO is a hybrid strategy between a Make-to-Stock strategy where products are fully produced in advance, and the Make-to-Order strategy where products are manufactured once the order has been received. ▪ The ATO strategy attempts to combine the benefits of both strategies - getting products into customers' hands quickly while allowing for the product to be customizable.
What is Waste? "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." - Shoichiro Toyoda President, Toyota
Consuming more resources than are necessary to produce the goods, or service, that the customer wants ▪ Pure Waste: Actions that could be stopped without affecting the customer ▪ Incidental Waste: Actions that need to be done based on how the current system operates but do not add value
What is Lean Manufacturing? A philosophy, focused on the customer, that emphasizes the minimization of all resources used in production.
It involves: ▪ Identifying and eliminating non-value-adding activities in design, production, and supply chain management. ▪ A set of principles and practices to reduce cost through the relentless removal of waste, and through the simplification of all manufacturing and support processes. ▪ The use of increasingly automated machines to produce volumes of products in potentially enormous variety. ▪ Teams of multiskilled workers at all levels of the organization
What is Six Sigma? A quality management process focused on improving process outputs by identifying and removing the causes of defects (errors) and minimizing variability in manufacturing and business processes.
It involves: ▪ A set of concepts and practices that key on reducing variability in processes and reducing deficiencies in the product. ▪ A statistical approach for solving problems, and the use of technical tools to decrease process variation and improve product quality. ▪ Process improvement initiatives striving for six sigma level performance, i.e., producing less than 3.4 defects for every one million opportunities.
Make-to-Order (MTO)
Make-to-Order (MTO) is a manufacturing strategy that typically allows customers to purchase products that are customized to their specifications. * This is a pull system. ▪ The MTO strategy only manufactures the end product once the customer places the order, creating additional wait time for the consumer to receive the product but allowing for more flexible customization. ▪ Impact on Logistics • Reduced warehousing space needed • Limited inventory management • Typically uses premium transportation for finished product to the customer The MTO strategy relieves the problems of excessive inventory that is common with the traditional Make-to-Stock strategy. ▪ MTO is not appropriate for all types of products. It is appropriate for highly configured products such as computer servers, aircraft, ocean vessels, bridges, automobiles, or products that are very expensive to keep in inventory.
Manufacturing Strategies
Make-to-Stock (MTS) Make-to-Order (MTO) Assemble-to-Order (ATO) Engineer-to-Order (ETO) What are the implications to customer lead time with each of these manufacturing strategies?
Make-to-Stock (MTS)
Make-to-Stock (MTS) - literally means to manufacture products for stock based on demand forecasts. * This is a push system. ▪ Most daily necessities such as foods, sundries, and textiles are MTS-type products. ▪ Impact on Logistics • Significant warehousing space needed • Extensive inventory management • Typically uses standard transportation throughout the supply chain ▪ Since accuracy of the forecasts will prevent excess inventory and opportunity loss due to stockout, the critical issue is how to forecast demands accurately. One issue of MTS is to avoid having excess inventory. ▪ Companies today that operate with an MTS model struggle to make the correct product at the correct time in the correct quantities.
What are the Key Dimensions of Product Quality? - Performance - Reliability - Durability - Conformance - Features - Aesthetics - Serviceability - Perceived Quality
Performance: How well the product performs in comparison to how it was designed to perform Reliability: Likelihood that the product will perform throughout its expected life Durability: The actual life expectancy of the product Conformance: Does the product meet its specifications as designed Features: What different functions or tasks can the product perform Aesthetics: Is the styling, color, workmanship pleasing to the customer Serviceability: What is the ease of fixing or repairing the product if it fails Perceived Quality: Based on customer's experience before, during and after they purchase a product
ISO Standards - Environment (continued)
Standards in the ISO 14000 series are: ▪ ISO 14001 - Specification of Environmental Management Systems ▪ ISO 14004 - Guideline Standard ▪ ISO 14010 - 14015 - Auditing and Related Activities ▪ ISO 14020 - 14024 - Labeling ▪ ISO 14031 - 14032 - Performance Evaluation ▪ ISO 14040 - 14043 - Life Cycle Assessment ▪ ISO 14050 - Terms and Definitions
ISO Standards - Quality and Environment
The International Organization for Standards (ISO) was formed after World War II The ISO 9000 — International Quality Standard ▪ First published in 1987 ▪ A family of various aspects of quality management and contains some of ISO's best known standards. ▪ The standards provide guidance and tools for companies and organizations who want to ensure that their products and services consistently meet customer's requirements, and that quality is consistently improved. ─ Shows commitment to providing a high level of customer satisfaction ─ Demonstrates the existence of an effective quality management system that satisfies the rigors of an independent, external audit ─ Can boost your organization's brand reputation and be a useful promotional tool, especially when going up against competitors who aren't certified.
Lean Manufacturing Principles
The defining principle of Lean Manufacturing is the elimination of "waste" ▪ Waste is defined as anything that does not add value for the customer *Lean Principles: - Define Value from the Customer's Perspective, - Identify and Map the Value System, - Reduce Waste and Improve Flow, - Pull from the Customer, - Pursue Perfection
Facility Layout Strategy
The physical arrangement of all resources within a facility. ▪ Facility layout has a significant impact on performance, especially production costs, time, and flexibility. ▪ Poor facility layouts are one of the most significant contributors to inefficiency and increased production cost. ▪ Different layouts lend themselves to producing different types of products, and it is important to match product designs with appropriate layouts. ▪ There are four distinct layout strategies: ✓ Fixed Position Layout ✓ Product Layout ✓ Process Layout ✓ Cellular Layout
Manufacturing (aka Production)
To process or make raw materials or components into a 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, the inventory of raw materials and components, planning for production, warehousing, etc. Manufacturing Management is the management of all of those processes which are involved in manufacturing.
Work versus Waste Focus on Non-Value Added Incidental Watse AND Non-Value Added Pure Waste for Improvement
Value-Added Activities: ▪ Transform or shape material or information ▪ Customer wants it and is willing to pay for it ▪ Done right the first time Non-Value Added Incidental Waste: ▪ No value created but: ✓ required by current thinking ✓ required by process limitations ✓ required by current technology ✓ required by current regulations Non-Value Added Pure Waste: ▪ Consumes resources but creates no value for the customer ▪ Could be stopped and it would be invisible to the customer
Mass Customization - Benefits - Profits - Lower Costs - Inventory - Market Exploitation
▪ Profits: By providing tailored products to meet particular needs, focus shifts from price to benefits. While it is possible to manufacture at a mass-produced price, you have the option to charge a premium while still retailing below the price of a custom product ▪ Lower Costs: Mass customization allows the ordinary person to acquire a product that has been produced to meet their own needs yet at a competitive price - providing exceptional value for money. ▪ Inventory: As the concept of mass customization is for heterogeneous market, there is no extra inventory accumulation. Only required inventory is ordered in order to make customized goods, which helps in reducing inventory cost and spoilage. ▪ Market Exploitation: Lead customers will provide a rich source of new ideas that can be exploited with other customers or with new prospects. Companies will forge close relationships with their suppliers, distributors and customer as they return again for further unique products.
Just-in-time (JIT) Interfaces
▪ Purchased materials and components arrive at the manufacturing or assembly point just at the time they are required for the transformation process ▪ Raw material and work in process inventories are minimized ▪ Demand for materials is dependent on the finalized production schedule ▪ Close cooperation with suppliers is essential ▪ Lot sizes can be as low as one unit
Product Layout Manufacturing Process = Line Flow Production, Continuous Flow Production Manufacturing Strategies = ATO / MTS
▪ Resources are arranged in sequence to enable efficient production of the product. ▪ Work is divided into a series of standardized tasks, permitting specialization of both labor and equipment. ▪ Used to achieve a smooth and rapid flow of large volumes of goods and customer orders ▪ Planning and scheduling are relatively straight-forward. ▪ Best suited for producing a high volume of one or a very few similar products.
Logistical Interfaces with Manufacturing
▪ Resources must be procured, positioned, and coordinated as needed to support the manufacturing strategy selected ▪ Four approaches to achieve this are: ─ Just-in-Time (JIT) ─ Materials Requirements Planning (MRP) ─ Design for Manufacture (DFM) ─ Design for Logistics (DFL)
Six Sigma Quality Concepts Cp: 2.00, 1.67, 1.33, 1.00, 0.67 Std. Dev.: 6.0, 5.0, 4.0, 3.0, 2.0 ppm: 3.4, 233, 6210, 66800, 308540
▪ Six Sigma approach is to identify sources of variability and then systematically reduce them. Get to the "root cause" ▪ The Six Sigma goal is to achieve a process standard deviation that is six times smaller than the range of outputs allowed by the product's design specification ✓ Three sigma quality level ─ Produces defect free product 99.74 percent of the time ─ 66,807 defects per million parts produced ✓ Six sigma quality level ─ Produces defect free product 99.99966 percent of the time ─ 3.4 defects per million parts produced
ISO Certified Suppliers ISO certified suppliers are preferred by procurement departments
▪ They have to conform to an externally defined set of standards for quality and delivery of service ▪ They are usually more open to sharing supply chain information ▪ They welcome building relationships with their customers - They have formal processes in place for continual improvement of their products, services, and processes - They are easier for procurement to initially qualify and periodically audit - Certification is done by an external register agency - Firms have to be re-certified every three years
Fixed Position Layout Manufacturing Process = Job Shop Production Manufacturing Strategies = ETO / MTO
▪ Used when a product cannot be moved during production. Instead, processes are moved to the product. ▪ The fixed nature of the layout creates a challenge in the timing and sequencing of different tasks ▪ Best suited for producing large products such as: » Ships » Airplanes » Spacecraft » Buildings and Houses
Manufacturing
▪ What do the following stakeholders want/expect from manufacturing? ─ Sales & Marketing ─ Design/Development ─ Finance ─ Quality ▪ As head of manufacturing what is critical for you and how will you balance the needs of the different stakeholders?
