Supply Chain Chapter 8

5 Why's and 5 How's are:

typically used in conjunction with the cause and effect diagram

Prevention costs

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

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.

Setup Time

The time taken prepare and format the manufacturing equipment and systems for production. -while setting up the equipment is a necessary function, if the set up time can be minimized, the difference will be more time available to produce.

Changeover time

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.

Scatter diagrams

The values of two variables plotted along two secs, to reveal ant correlation presented.

Set up time and changeover time reduction are both considered:

a waste as they are times when the equipment is not performing its intended function...producing product.

DMADV Methodology

- Define --> measure --> analyze --> design --> verify -A data-driven quality strategy for designing products and 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 -A data-driven quality strategy for improving products and 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 follows during a project.

Role of Supplier

LEAN build long-term supplier relationships. -partnerships with suppliers -improving prices quality -sharing info -the goal is to have the fewest number of high-quality suppliers possible without unnecessarily increasing risk.

Control Charts

Graph to study how a process changes over time. -allows firms to visually monitor process performance, compare the performance to deserved levels or standards, and take corrective action as necessary

Yellow Belt

Has a basic understanding of Six Sigma methodology and the tools in the DMAIC problem solving process. - a team member that reviews processes and process improvements in support of a six sigma process improvement project. -a person who has passed the green belt certification exam but has not yet complete a six sigma project.

Line process

Has standard products with a limited number or variations moving on an assembly line through stages of production.

Quality planning

Identify internal/external customers and needs. -develop products satisfying those needs. -managers set goals, priorities, and compare results

Analyze

Identify the cause of the problem -Why, when, and where do defects occur?

Improve

Implement and verify the solution. -how can we fix the process?

Keiretsu Relationships

Involves companies both upstream and downstream of a manufacturing process, remaining independent but working closely together for mutual benefit.

Small Batch Scheduling

LEAN Manufacturing attempts to reverse the bullwhip affect by using this. -smaller batches will facilitate producing at the same rate as customer demand. -production in small batches creates a smooth workload as production can be very synchronized with a customer demand, facilitating a pull system. -it increases flexibility allowing the company to respond to changes in customer demands more quickly. -throughout times in manufacturing go dow, and work-in-process inventory goes down, reducing costs and eliminating or minimizing waste in the system.

4 Major manufacturing strategies

- Make-to-stock (MTS) -Make-to-order (MTO) -Assemble-to-order (ATO) -Engineer-to-order (ETO)

Cause and effect diagram

-created by Karou Ishikawa -with this tool, the user can see all possible causes of a problem to help find the root cause.

VOC can be captured in a variety of ways:

-customer interviews -market surveys -focus groups -customer specifications -observation -warranty data -field reports -complaint logs

Internal failure costs include costs for:

-defective product or material that cannot be used, sold, or repaired, and the costs associated with correction of these defects. -unnecessary work or inventory resulting from errors. -activities required to establish the root causes of product or service failure.

Waste Caterogies (acronym "DOWN TIME")

-defects -overproduction -waiting -non-utilized talent -transportation -inventory -motion/movement -extra-processing

Problem with uniform plant loading

-demand exceeds capacity at points in the planning horizon. -matching the production plan to follow demand exactly can contribute to inefficiency and waste, including excess inventory or shortage of inventory.

Prevention costs include costs for:

-establishment of specification for incoming materials, processes, products, and services -creation of quality plans -development, preparations and maintenance of quality training -creation and maintenance of the quality system.

External failure costs include costs for:

-handling and responding to customer complaints -failed products that must be replaced or services that are repeated. -repair of returned products and products still in the field. -handling and investigation of rejected or recalled products, including return transportation costs.

Cost of bad quality

-internal failure costs -external failure costs

LEAN regularly results in:

-large cost reductions -improved quality -increased customer service

Key principles of TQM are:

-management commitment -employee empowerment -fact based decision making -continuous improvement -customer focus

As volume goes up....

-manufacturing and procurement costs go down due to economies of scale. Generally-step function applies as more capital is required to produce. -inventory and warehousing costs go up. -transportation costs go down, but level of at high volumes.

Manufacturing process characteristics

-project process -batch process -line process -continuous process

The combination of these concepts have merges as the philosophies and practices known as LEAN manufacturing:

-quick response -efficient consumer response (ECR) -Just-in-time (JIT) -Keiretsu relationships

LEAN green practices

-reduce the cost of environmental management -lead to improved environmental performance -increase the possibility that firms will adopt more advances environmental management.

Benefits of LEAN waste reduction

-reduced cycle times -greater throughput -better productivity -improved quality -reduced costs (all of these can improve customer satisfaction and provide the company with a competitive advantage)

Malcolm Baldige National Quality Award Objectives

-stimulate firms to improve -recognize firms for quality achievement -establish guidelines so that organizations can evaluate their improvement and provide guidance to others.

Appraisal costs include costs for:

-testing, evaluating, and impacting the faulty of incoming materials, process setups, and products, against agreed upon specifications. -quality assessment and approval of suppliers. -performing audits to confirm that the quality systems is operating property.

the goal of LEAN is:

-the elimination of waste and the minimization of the amount of all resources used in the operation of a company. -LEAN is standard in many industries

Six Sigma Training and Certification Levels

-yellow belt -green belt -brown belt -black belt -master black belt

3 foundational aspects of Six Sigma

1. Quality is defined by the customer 2. use of technical tools 3. people involvement

W. Edwards Deming's 14 points:

1. create constancy of purpose to improve product and service. 2. adopt the new philosophy 3. cease dependence on inspection to improve quality 4. end the practice of awarding business on the basis of price 5. constantly improve the production and service system 6. institute training on the job 7. institute leadership 8. drive out fear 9. break down barriers between departments 10. eliminate slogans and exhortations 11. eliminate quotas 12. remove barriers to pride of workmanship 13. institute program of self-improvement 14. put everyone to work to accomplish the transformation.

Malcom Baldige National Quality Award Categories Measured:

1. leadership 2. strategic planning 3. customer and market focus 4. information and analysis 5. human resource focus 6. process management 7. business results

Phillip Crosby's 4 absolutes of quality

1. quality is conformance to requirements 2. the system of quality is prevention 3. performance standard is zero defects 4. the measure of quality is the price of nonconformance.

The components of LEAN manufacturing:

1. waste reduction 2. LEAN layouts 3. inventory, setup time & changeover time reduction 4. small batch scheduling and uniform plant loading 5. LEAN supply chain relationships 6. workforce empowerment 7. continuous improvement

Six Sigma

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

Histograms

A graphical display where the data is grouped into ranges.

Total Quality Management (TQM)

A management philosophy based on the principle that every employee must be committed to maintaining high standards of work in every aspect of a company's operations. - a combination of quality and management tools which are designed to increase business and reduce losses resulting from wasteful practices.

Make-to-order (MTO)

A manufacturing strategy in which manufacturing starts only after a customer's order is received. -this strategy relieves the problems of excessive inventory that is common with the make-to-stock strategy.

Engineer-to-order (ETO)

A manufacturing strategy in which the product is designed, engineered, and built to the customer's specification after receipt of the order. -it is a more dramatic evolution of MTO strategy - in this world, the cost of poor quality can be very high.

Assemble-to-order (ATO)

A manufacturing strategy where products ordered by customers are produced quickly and are customizable to a certain extent. -It is a hybrid strategy attempting to combine the benefits of both MTS and MTO strategies, getting products into customers' hands quickly while allowing for some customization to take place.

LEAN manufacturing

A natural fit within the discipline of supply chain management as all of the LEAN goals and objectives help to facilities an efficient and effective supply chain. -satisfying internal customer demand -communicating demand forecasts and production schedules up the supply chain -quickly moving products in the production system -optimizing inventory levels across the supply chain -increasing the value, capabilities, and flexibility of the workforce through cross-training -extending collaboration and alliances beyond just 1st tier suppliers and customers to include 2nd and 3rd tier suppliers and customers as well.

The 5 How's Technique

A questioning technique for drilling down into the details of a potential solution to a known problem. -it is designed to bring clarity and reinforcement to a solution and arrive the root solution (best). -a useful method of brainstorming resolutions to the root causes and developing action items to resolve the problem. -think of this activity as being halfway up a ladder, with 5 steps above it and 5 below. You go up the ladder by asking "why" and down it by asking "how"

The 5 Why's Technique

A questioning technique for identifying the root cause of a problem. -by repeatedly asking the question "why", you can peel away the layers pf symptoms which can lead to the root cause of a problem. -at this point you understand the root cause and can see where a change is needed. -used in the "analyze" phase of the Six Sigma DMAIC method.

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. -work closely with the black belt team leader to assist with data collection and analysis.

Efficient Consumer Response (ECR)

A strategy to increase the level of services to consumers through close cooperation among retailers, wholesalers, and manufacturers.

Cost of quality

An approach that supports a company's efforts to determine the level of resources necessary to prevent poor quality and to evaluate the quality of the company's products and services. -any cost that would not have occurred if quality was perfect, contributes to this. -helps a company determine the benefits and savings generated by potential process improvements.

LEAN

An operating philosophy of waste reduction and value enhancement. -It was originally created as the Toyota Production System (TPS) by key Toyota executives.

Appraisal Costs

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

Phillip Crosby

Coined the phrase "quality is free" as defects are costly. -He introduced the concepts of zero defects, and the focus on prevention not inspection. -demonstrated what a powerful tool the cost of quality could be to raise awareness of the importance of quality. -referred to the cost of quality as the "price of nonconformance" and argued that organizations choose to pay for poor quality.

Manufacturing Strategies

Companies must develop a manufacturing strategy that suits the types of products that they produce, their customer expectations and their strengths. -these can vary significantly depending on the product and/or the customer requirements. -developing one of these that suits a company's strengths in essential for establishing and maintaining an effective supply chain.

Continuous Improvement

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

Role of Management

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

Project Process

Creates a custom product for each customer. High customization. -also known as Job Shop

Batch process

Manufactures a small quantity of an item in a single production run.

Make-to-stock (MTS)

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

Respect for People

Must exists for all people for an organization to be at its best. -flatter hierarchy than traditional organizations -ordinary workers given greater responsibility -supply chain members work together in cross functional teams.

External failure costs

Occur when the product or service doe snot meet the designed quality standards, but is not directed until after the product or service is delivered to the customer.

Internal Failure Costs

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

Carbon-Neutral

Offsetting the carbon footprint of a firm's operation.

Role of Workers

Perform tasks and actively pursuing company goals. -improve production problems -correct quality problems -monitor quality -work in teams

Non-Value Added Process

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

Overproduction

Production before it is needed, or in excess of customer requirements. -providing a service that is not needed.

Operations Management

Refers to managing the process to convert resources into goods and services, in alignment with the company's business strategy as efficiently and effectively as possible, while also controlling costs. -the nature of how it is carried out varies by company and depends on the nature of the products or services in the portfolio.

Standardize

Seiketsu -schedule regular cleaning and maintenance

Shine

Seiso -clean the work area so it is neat and tidy.

Straighten

Seiton -organize and arrange items to promote an efficient workflow

Flow diagram

Sequence of movements or actions of people or things involved in a complex system or activity.

Sustain

Shitsuke -stick to the rules. Maintain and review the standards.

Quality improvement

Show the need for improvement -identify projects for improvement -implement remedies -provide control to maintain improvement.

Sort

Siri -keep only necessary items in the workplace, eliminate the rest.

Inventory, Setup Time, & Changeover Time Reduction

Some inventory may be necessary, but excess inventory is a waste. -excess inventory takes up space, and costs money to hold, maintain, protect, secure, and insure. -it ties up financial capital which could be used for other aspects of the business. -reducing inventory can free up capital and reduce holding costs. -there is less likelihood of waste being created by obsolescent, expiry, spoilage, or damage with lower inventory levels.

Manufacturing

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. -involves the entire process of converting the raw materials or the components into a finished goods item. -it includes the machines used, the personnel involved, inventory handling, warehousing, etc.

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.

The Seven Tools of Quality Control

Used by workers to identify and correct quality problems. (statistical tools) 1. check sheets 2. histograms 3. pareto analysis 4. cause & effect diagrams 5. flow diagram 6. control charts 7. scatter diagrams

Cause and effect diagram

Used to aid in brainstorming and isolating the causes of a problem.

Continuous Process

Used to manufacture such items as gasoline, laundry detergent and chemicals. -inflexible process -high capital investment

Intermittent Process

Used to produce a large variety of products with different processing requirements in lower volumes.

Repetitive Process

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

W. Edwards Deming

Widely considered the father of TQM. The creator of the Plan-Do-Check-Act model. -stressed management;s responsibility for faulty. -he developed 14 points to guide companies in quality improvement.

Variable data

continuous -exp: weight

Natural variations

expected and random (can't control)

Six Sigma focuses on:

improving the quality of prices outputs by identifying and removing the causes of defects (errors) and minimizing variability in manufacturing and business processes.

Attribute data

indicates some attribute such as color and satisfaction, or beauty.

Lean + Six Sigma =

speed and accuracy

Six Sigma is a:

structured and data-driven approach to drive a near-perfect quality goal. -exp: "zero defects"

Check Sheets

used to determine frequencies for specific problems.

The Pull System

-traditional approach -pull approach

2 key methodologies of Six Sigma

- DMADV methodology - DMAIC methodology

Kanban

-Means "signal" or "card" in Japanese and is used for communication (exp: visual signal) between workstations. -Authorize production or the movement of materials to the next workstation. -could be facilitated through the use of a computer software program. (exp: ERP system)

Quality gurus of TQM

-W. Edwards Deming -Phillip Crosby -Joseph Juran -Kaoru Ishikawa

Two broad categories of manufacturing processes:

-intermittent process -repetitive process

TCM includes:

1. manufacturing and procurement activities 2. inventory and warehousing activities 3. transportation activities

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 of skills. -leads the Six sigma project team and problem-solving efforts. -mentored by a master black belt. -identifies projects and selects project team members.

Brown belt

A six sigma green belt who had passed the black belt certification exam but has not yet completed their second six sigma project.

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.

Defects

Anything that does not meet the acceptance criteria.

Waiting

Elapsed time between processes when no work is being done.

Master Black Belt

Is a career path. -has successfully led ten or more teams through complex six sigma projects.

Implementing LEAN and Six Sigma

LEAN and Six Sigma are complementary principles with significant overlap. -They are frequently implemented together but the two initiatives approach their common purpose from somewhat different angles. -the most successful implementations being with LEAN, followed by the more typical Six Sigma statistical tools uses to resolve process problems.

Workforce Commitment

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

Measure

Map out the current process. -What is the frequency of defects?

Value added process

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

Goal of Six Sigma

To attain less than 3.4 Defects Per Million Opportunities (DPMO)

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.

Large batches can:

exacerbate the bullwhip effect as production in large batches creates an uneven workload. -production is not synchronized with customer demand, making a pull system impossible. -throughout times in manufacturing go up, and work-in-process inventory goes up, creating more waste in the system.

Assignable variations

have a specific cause (can control)

Control

maintain the solution -how can we make the process stay fixed?

The 5 S's were:

originally Japanese words relating to industrial housekeeping.

2 types of cost of quality

-cost of good quality -cost of bad quality

Pareto analysis

For preserving data in an organized fashion, indicating process problems from most to least severe.

Quality is defined by the customer

-Customers expect performance, reliability, competitive prices, on-time delivery, good service, clear and correct transaction processing and more. -It is vital to provide what the customers need to achieve customer satisfaction.

Pull Approach

-Each stage in the supply chain requests quantities needed from the previous stage. -No excess inventory is generated. -Reducing inventory levels can also uncover production problems.

LEAN Supply Chain Relationships

-Firms develop lean supply chain relationships with key customers and key suppliers. -in an ideal one, both customers and suppliers get connected in ways that allow them to easily exchange info, demand data, and the visibility of status. -mutual dependency and benefits occur among these partners. -suppliers and customers work to remove waste, reduce cost, and improve quality and customer service.

Components of LEAN

-LEAN manufacturing -Total Quality Management -Respect for People

Goal of LEAN vs Six Sigma:

-LEAN's goal is to eliminate waste and minimize the amount of all resources used in the operation of a company. Does this by using less technical tools such as value steam mapping, LEAN layouts, continuous improvement, and respect for people. -Six Sigma focuses on the elimination of defects and the reduction of variations. Does this by using technical tools such as root cause analysis, statistical process, and DMAIC.

LEAN layouts

-Move people and materials when and where needed, and as soon as possible. -Are very visual (lines of visibility are unobstructed) with operators at one processing center able to monitor work at another. -Manufacturing cells: process similar parts or components saving duplication of equipment and labor, & are often U-shaped to facility easier operator and material movements.

Uniform Plant Loading

-Planning up to capacity in earlier time periods to meet demand in later time periods. -also called "front-loading" the plan or "leveling" the plan. -production schedule is frozen in the up-front time period (exp: month) -helps suppliers better plan production.

People involvement

-Six Sigma follows a structured methodology. -It is important that all Six Sigma team members are assigned specific well-designed Six Sigma "roles" with measurable objectives. -A company must involve all its employees in the Six Sigma program, and provide opportunities and incentives for employees to focus their talents and ability to satisfy customers. -All employees are responsible to identify quality problems.

The 5 S's

-Sort (Seiri) -Straighten (Seiton) -Shine (Seiso) -Standardize (Seiketsu) -Sustain (Shitsuke)

Use of technical tools

-Statistical quality control. Six Sigmas provides a statistical approach for solving any problem and thereby improves the quality level of the product as well as the company. -All employees should be trained to use the seven tools of quality. -Six Sigma is concerned with the permanent fix to quality problems and seeks to identify and correct the root cause of the problem.

What do you see analogy?

-The water represents inventory, when the water level is high, you don't see the rocks beneath the water, so you may not know that they are there. -inventory can hid the underlying problems, but they are still there and can potentially create major issues in the supply chain. -lowering inventory will help to expose the problems. Once the problems are detected, they can be solved. The end result will be a smoother running supply chain with less inventory investment.

Acceptance Sampling

-When a shipment is received from a supplier, a statistically significant representation 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. -sampling is less time-consuming than testing every unit but can result in errors. (supplier's risk and buyer's risk)

Cost of good quality

-appraisal costs -prevention costs

Define

Define the problem -What is the customers expectation of the process?

Joseph Juran

Defined quality as "fitness for use". -He developed the concept of cost of quality. -quality planning, quality control, and quality improvement

Quality control

Determine what to control -establish standards of performance. -measure performance, interpret the difference, take action

Karou Ishkikawa

Developed one of the first tools in TQM, the cause and effect diagram, which is also called the "Ishikawa" or "fishbone" diagram. -also known as founder of quality circles and helped bring this concept into the mainstream. -he was a proponent of continuous customer service, meaning that a customer should continue receiving the product.

Inventory

Excess products or materials not being processed.

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, any other non-value-adding activity

Traditional Approach

Supply chains work as "push" systems, and inventory is carried to cover up problems.

Voice of the Customer (VOC)

Term used in business to describe the in depth process of capturing internal and external customers expectations, preferences, likes, and dislikes. -this data is used to identify the quality attribute needed for a process or product.

Buyer's risk

The buyer accepts a shipment of poor quality units because the sample factor provides a positive result against the acceptance standard. -type 2 error

Supplier's risk

The buyer rejects a shipment of good quality units because the sample quantity level did not meet the acceptance standard. -type 1 error

Total Cost of Manufacturing

The complete cost of producing and delivering products to your customers. -it incorporates both fixed and variable costs used in manufacturing, storage, and delivery of the product. -generally expressed as cost per unit.

Six Sigma History

The concept of Six Sigma was originated by Motorola. -Motorola developed the concept in the 1980's, created the methodology, and copyrighted it as well. -Motorola has documented > $16 billion in savings as a result of Six Sigma. -Thousands of companies globally have adopted Six Sigma: this is a direct result of many of America's leaders openly praising the benefits of Six Sigma. -Became famous when Jack Welch made it central to his successful business strategy at General Electric in 1995: reported $200MM in savings in the first year of implementation (1996) alone.

The Role of Workers, Management, and Suppliers

The goal is NOT to reduce the number or people in an organization, it is to use people resources more wisely.

Small Batch Scheduling and Uniform Plant Loading

The ideal schedule is to produce every product as quickly as possible and at the same rate as customer demand. -in the real world material availability, labor availability, and set or changeover time influences the scheduling of large batches.

Value

The inherent worth of a product as judged by the customer, and reflected in its selling prices and market demand. -it is any activity that increases the market, form, or function of the product/service. -things for which the customer is willing to pay.

Manufacturing Management

The management of all the processes which are involved in manufacturing.

Small batch scheduling can be facilitated through the use of...

kanbans

Both setup time and changeover time are:

non-value added operations and should be minimized as much as possible.

Manufacturing process

part of any manufacturing strategy involves developing one of these that can create the exact product that has been designed. -many have certain characteristics in common

LEAN is not a tool box of methods, ideas, or methodologies, it is:

philosophy/culture

After waste is removed:

processes are more streamlined, resulting in more satisfied customers. You'll also save your organization time and money.

Before waste is removed:

processes are often scattered, which can negatively effect your customers