SCM301: Chapter 8 Process Management

Process Management

-Application of knowledge, skills, tools, techniques, and systems to define, visualize, measure, control, report, and improve processes with the goal to meet customer requirements efficiently. -Enables firms to achieve desired levels of customer service (low cost, quality, responsiveness). -Key elements: lean production (philosophy), six sigma (tools)

Components of Quality

-Design Quality: inherent value of the product in the marketplace, dimensions include performance, features, reliability, durability, serviceability, response, aesthetics, reputation. -Conformance quality: degree to which the product or service design specifications are met, primary focus of lean and six sigma.

DMAIC Cycle

Define, Measure, Analyze, Improve, Control. -Developed by General Electric as means of focusing effort on quality using a methodological approach. -Overall focus of he methodology is to understand and achieve what the customer wants.

History

In 1990's SCM combined: quick response (speed and flexibility), efficient consumer response (speed and flexibility), JIT continuous reduction of waste, keiretsu relationships-partnership arrangements. -Approaches have emerged as philosophies and practices known as Lean Production

Statistical Tools of Six Sigma

Variable Control Charts: x bar tracks central tendency of sample means, r chart tracks sample ranges. 1. Gather data when process is in control 2. Calculate the mean and range for each sample. 3. Calculate the overall mean and average range for all the samples. Use the x-means to calculate the upper and lower control limits. 4. Use the means and control limits to construct x bar and r control charts. 5. Collect samples over time and plot

Lean Layout

-Move people and materials when and where needed: enables flexibility in scheduling (chase), increases inventory turns/throughput. -Lean layouts are very visual 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. Organized by product families, often U-shaped to facilitate easier operator and material movements and visibility.

Lean Production

Operating philosophy of waste reduction and value enhancement of the Toyota Production System (TPS) and its entirety. -Waste reduction, lean supply chain relationships (channel integration), lean layouts (visual), inventory and setup time reductions, small batch scheduling, continuous improvement, workforce empowerment

Control Limits

We establish upper control limits (UCL) and lower control limits (LCL) with plus or minus 3 standard deviations.

Statistical Process Control

-Allows firms to: visually monitor process performance, compare the performance to desired levels or standards, take corrective action. -Firms: gather process performance data, create control charts to monitor process variability, monitor the process by collecting sample measurements of the process over time and plot on charts

DMAIC

-Define: identify customer and priorities, identify critical to quality characteristics (CTQs), identify projects suitable for six-sigma based on business objectives. -Measure: determine ht internal process that influence CTQs, determine how to measure the process and its performance, measure defeats currently generated. -Analyze: determine the most likely causes, understand why defects are generated by identifying key variables, understand how and why key variables identified cause process variation. -Improve: remove cause of defects, maximum acceptance ranges and a system for measuring deviations, modify process to stay within the identified acceptable ranges. -Control: determine how to maintain improvements, put tools in place to ensure that key variables remain within the acceptable ranges under the modified process

Malcolm Baldrige Award

-Established in 1987 to promote better quality management practices and improved quality results by American Industry. -Named after former secretary of commerce -Given to at most two companies in each of six categories: Manufacturing, service, small business, health care, educational, non-profit

Inventory and Setup Time Reduction

-Excess inventory is a waste. -Reducing inventory levels causes production problems. -Once problems are detected, they can be solved. -The end result is a smoother running organization with less inventory investment.

Six Sigma: Costs of Quality

-External Failure Costs: warranty costs, returns, customer complaints, recalls and lawsuits. -Internal Failure Costs: scrap and rework, re-inspection and retesting, defects before delivery. -Appraisal Costs: inspections (incoming, inprocess and final), audits -Prevention Costs: quality planning, supplier capability, quality improvement

Three Forms of ISO Certification

-First Party: firm audits itself against ISO 9000 standards -2nd Party: customer audits its supplier -Third: qualified national or international standards or certifying agency serves as auditor

ISO Standards

-ISO 9000: quality management, what the organization does to enhance customer satisfaction by meeting customer and applicable regulatory requirements and regulatory requirements and continually to improve its performance in this regard. -ISO 14000: environmental management, what the organization does to minimize the harmful effects on the environment caused by its activities, continually to improves its environmental performance

SPC

-Involves monitoring and eliminating variability using tools, knowledge, data. -All processes have variability. -1. Assignable causes: factors that can be clearly identified and managed, can be eliminated. 2. Natural/common causes: inherent to production process. In order to reduce variation due to common causes, the process must be changed.

Kanban System

-Kanban: pull production system, physical control system, composed of cards and containers. -Process: authorizes production and controls materials movement, work centers generate production orders for previous work centers, as parts are used empty containers with production authorization are returned to the work center. Production fills up container and is sent to the downstream work center.

Process Management: Quality

-Meeting or exceeding customer requirements now and in the future -Quality Standards: international organization for standardization, ISO 9000, ISO 14000 -Quality awards: Baldrige awards, Juran

Continuous Improvement (Kaizen)

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

R Chart

-One of two control charts for variables. -Shows sample ranges over time: difference between smallest and largest values in inspection sample. -Monitors variability in process

Why Process Management?

-Output of SCM is customer service: low cost/efficiency, quality, responsiveness. -Firms must adopt initiatives to deliver customer service: emphasize speed, innovation, cooperation, quality, cost effectiveness.

The Seven Wastes

-Overproduction -Waiting Time -Unnecessary Transportation -Excess Processing -Too much inventory -Unnecessary motion -Defects

Six Sigma Quality Defined

-Philosophy and set of methods companies use to eliminate defects in their products and processes -Seeks to reduce variation in the processes that lead to product defects -Name refers to variation that exists within +/- three standard deviations of the process outputs

Improvement Steps

-Product mix (demand): reschedule, supplier development to reduce lead times, internal quick changeovers (setup reduction), buffer inventory, standardize, modularize, sales and ops planning (forecasting) -Parts&Materials (supply): reschedule, coordinate with suppliers, bugger inventories, back up suppliers or internal capabilities. -Machine Breakdowns (supply): preventative maintenance schedules, fast corrective action (training, parts supply), re-route alternative suppliers or internal capabilities. -Labor (supply): cross train, extra capacity

X bar Chart

-Second control chart for variables -Shows sample means over time -Monitors process average

Six Sigma

-Set of statistical tools to measure. -Meeting, or exceeding, customer requirements now and in the future. -"On target with minimum variance" -Quality at the source: person who does the work takes responsibility for making sure the output meets specifications

Lean Supply Chain Relationships

-Suppliers and customers work to remove waste, reduce cost, and improve quality and customer service. -Lean Thinking includes delivering smaller quantities, more frequently to point of use. -firms develop lean supply chain relationships with key customers. Mutual dependency and benefits occur among these partners. -Locate production or warehousing facilities close to key customers.

Types of Control Charts

-Variable (continuous): usually measured by the mean and standard deviation, x bar and r chart applications. -Attribute (go or no-go information): defective ranges refers to the acceptability of product across a range of characteristics, p and c chart application

Questioning Process of Data Analysis

1. Is variability of the process in control? analyze the R chart, is estimate of sigma "valid"? 2. Is the level of the process in statistical control? analyze x bar chart, is mean of the process consistent over time? 3. Can the existing control limits be used to monitor future process output? 4. Can we live with the variation that remains? 5. Can we live with the level that remains? How do we decide? Who do we ask?: customers, upper management

Six Sigma: Training Levels

1. Master black belt: champion, oversee/guide projects. 2. Black belt: coach and supporter, project leader 3. Green belt: leads project to success 4. Yellow belt: analyze and implement improvement

Six Major Sources of Variation

1. People 2. Machines 3. Materials 4. Methods 5. Measurement 6. Environment

PDCA Cycle

Continuous Improvement Methodology 1. Plan a change aimed at improvement 2. Execute the change 3. Study the results; did it work? 4. Institutionalize the change or abandon. REPEAT

Factors to be Considered in Determining Standard or Custom

Labor, machinery, inventory capacity, design, location.

Six Sigma and Lean Production Combination

Lean Six Sigma (LSS) -Use high quality input materials, WIP, finished goods, and continuous improvement. -USe Complementary tool sets and are not competing philosophies -Distinct practices but very commonly utilized together in organizations

Control Charts

Managerial took used to analyze whether a process is "in control" or "out of control"

Workforce Commitment

Managers must support lean production by providing subordinates with the skills, tools, time, and other necessary resources to identify problems and implement solutions.

Total Quality Management

Managing the entire organization so that it excels on all dimensions of products and services that are important to the customer. -Near quality perfection (the statistical likelihood of non-defects 99.99966% of the time). -Pioneered by Motorola in 1987 -Statistics based decision making framework designed to make significant quality improvements in value added processes

Lean Production and Supply Chain Management

SCM incorporate Lean element using -Cross Training -Satisfying internal customer demand -Quickly moving products in production system -Communicating demand forecasts and production schedules up the supply chain -Optimizing inventory levels across the supply chain

Lean Production: Waste Reduction

The 5Ss of Waste Reduction 1. Sort (organize) 2. Set in order (tidiness) 3. Sweep (shine/purity:cleaning) 4. Standardize (cleanliness- simplify processes). 5. Self-discipline (sustain/maintain) Can be employed in any service or manufacturing form by doing a "waste hunt"