Ch5: Manufacturing
Perceived Quality
Based on customer's experience before, during, and after they purchase a product
Six Sigma Methodology- 2 Key Approaches
DMADV methodology DMAIC methodology
Waste Reduction 8 Wastes
DOWN TIME Defects Overproduction Waiting Non-utilized talent Transportation Inventory Motion/movement Extra processing
DMADV Methodology
Define Measure Analyze Design Verify Designing products/processes Used when company wants to *create a new product design or process* that is more predictable and defect free
DMAIC Methodology
Define Measure Analyze Improve Control Improving products/processes Used when company wants to *improve an existing business process* Most widely adopted six sigma methodology in use Defines the steps a six sigma practitioner typically follows during a project
Design for Manufacture
Design for assembly- minimize number of parts and on easing assembly processes Design for product serviceability- eases disassembly and reuse of product components Design for six sigma- evaluates consistency with which a good/service can be produced given capacities of processes used
Design for Logistical Interfaces
Design for logistics concept incorporates the requirements and framework for logistical support of the product in the early phases of product development Considers- what are we going to make? how are we going to make it? etc
Conformance
Does the product meet its specifications as designed
Waiting
Elapsed time between processes when no work is being done
Inventory
Excess products or materials not being processed
International Organization for Standardization (ISO)
Formed after World War II Management standards have been established by ISO in quality and environment
Manufacturing Perspective: Variety
Frequent product runs and high repetition of small lot sizes Processes that can rapidly switch production from one product of another while retaining efficiency have economies of scope
Line Flow
Has standard products with a limited number of variations moving on an assembly line through stages of production Typical assembly line production Limited product variety High volume ATO/MTS Short customer lead time
ISO Certified are Preferred by Procurement
Have to conform to an externally defined set of standards for quality and delivery of service Usually more open to sharing supply chain information Welcome building relationships with customers- formal processes for continual improvement of products Firms have to be re-certified every 3 years
Performance
How well the product performs in comparison to how it was designed to perform
Standards in ISO 14000 Series
ISO 14001- specification of environmental management systems ISO 14004- guideline standard ISO 14010-14015- environmental auditing and related activities ISO 14020-14024- environmental labeling ISO 14031-14032- environmental performance evaluation ISO 14040-14043- life cycle assessment ISO 14050- terms and definitions
Total Cost of Manufacturing
Includes procurement and production activities, inventory and warehousing activities, and transportation activities Generally expressed as "cost per unit" Procurement/production costs go down as volume goes up Inventory/warehousing costs go up as volume goes up Transportation costs go down as volume goes up, level at high volumes
Mass Customization
Individually customized products being produced at the low cost of standardized, mass produced goods Objective: increase variety for customer while realizing the cost advantages of high volume continuous and line flow processes On demand, to order, postponement Ex: dell, m&m's, reebok
Manufacturing Perspective: Constraints
Interact with volume and variety to create realistic manufacturing plans Capacity is how much you can produce in a given unit of time Equipment considers how flexible it is Bottleneck Setup/changeover considers how quickly you can change from one variety of product to another
ISO 14000
International Environment Standard Manage the environmental effect of their business practices How a company manages environment inside its facilities and immediate outside environment Analyze entire life cycle of a product from raw material to eventual disposal Do not mandate particular level of pollution, focus on awareness of processes and procedures that can effect environment Adhering to this does not release a company from national/local regulations regarding environment performance issues
ISO 9000
International Quality Standard Provides guidance/tools for companies who want to ensure their products/services consistently meet customer's requirements and that quality is improved Shows commitment to providing a higher level of customer satisfaction Shows existence of effective quality management system that satisfies rigors of an independent/external audit Boost organization's brand reputation, useful promotional tool, especially against competitor's who aren't certified
Reliability
Likelihood that the product will perform throughout its expected life
Manufacturing Contemporary Developments
Mass customization Lean systems Six sigma Requirements planning Design for manufacture Design for logistics
Manufacturing Perspective: Brand Power
Measure of customer preference based on reputation, product quality, and supply chain capabilities
Manufacturing Perspectives: Lead Time
Measure of elapsed time between release of a work order to the shop floor and completion of work on the product to achieve ready-to-ship status
Mass Customization Product/Process Characteristics
Modular or adjustable product building blocks- need to be able to stop manufacturing at a logical place to be able to customize Predictable components/functions interactions Standardized process/skill blocks Reasonable lead times, steps, work content Boeing waits until customer order placed to manufacture in order to customize
Manufacturing Strategies
Must develop a strategy that suits the types of products they product, customer's expectations, and their strengths Vary significantly depending on product/customer requirements Essential for establishing/maintaining effective supply chain
Materials Requirements Planning (MRP) Interfaces
Procurement has key role in ensuring all the components are obtained on time to make an end item Bill of materials is key More complex for manufacturing where large numbers of sub-components or sub assemblies are used to produce final product Planning can span multiple manufacturing locations
Business
Activity of providing goods/services involving financial, commercial, and industrial aspects
Durability
Actual life expectancy of the product
Make to Order (MTO)
Allows customers to purchase products that are customized to their specifications Only manufactures end product once customer places order Creates additional wait time for customer to receive the product but more flexible customization Relieves the problems of excessive inventory common in MTS strategy Appropriate for highly configured products, computer servers, aircraft, ocean vessels, bridges, or products very expensive to keep in inventory
Primary Objectives of Lean System
Produce only products that customers want- MTO, inventory is waste Produce products only as quickly as customers want them Produce products in perfect quality Produce in minimum possible lead times Produce produts with features customers want and no others Prouce with no waste of labor, materials, or equipment- designate a purpose for every movement to leave zero idle inventory Produce with methods that reinforce the occupational development of workers
Six Sigma Quality Level
Produces defect free product 99.99966% of the time 3.4 defects per million
Role of Production in Business
Product- performance, quality, reliability Plant- future demand, health/safety, productivity of equipment Processes- available capacity, available skills, type of production Programs- purchasing patterns, cash flow, need for storage People- wages/salaries, safety/training, working conditions
Overproduction
Production before it's needed or in excess of customer requirements Providing a service that isn't needed
Assemble to Order (ATO)
Products ordered by customers are produced quickly and are customizable to a certain extent Basic parts for product are already manufactured but not yet assembled Order received, parts assembled quickly, sent to customer Hybrid between make to stock (produced fully in advance) and make to order (manufactured once order received) - combines benefits of both strategies, quickly to customer and also customized
Benefits of Mass Customization
Profits- focus shifts from price to benefits, option to charge a premium while still retailing below price of custom product Lower costs- allows customer to receive customized product at competitive price, good value for money Inventory- no extra inventory accumulation, reduce inventory costs and spoilage Market exploitation- companies form close relationships with suppliers, distributors, and customers, lead customers provide good sources of new ideas
Just in Time (JIT) Interfaces
Purchased materials/components arrive at manufacturing/assembly point just at the right time they are required for transformation process Raw material and WIP inventory minimized Demand for materials depends on finalized production schedule Close cooperation with suppliers is essential Lot sizes are low as one unit
Benefits of Lead Systems
Reduce waste by greater than 80% Reduce production costs greater than 50% Reduce manufacturing cycle time greater than 50% Reduce labor greater than 50% Reduce inventory greater than 80% Increase capacity greater than 50% Increase quality,profits, flexibility, strategic focus, cash flow
Logistical Interfaces
Resources must be procured, positioned, and coordinated as needed to support manufacturing strategy selected 4 approaches: Just in time (JIT) Materials requirements planning (MRP) Design for manufacture (DFM) Design for logistics (DFL)
Stakeholders in Manufacturing
Sales and marketing Design/development Finance Quality All departments contradict each other and it creates conflicts
Manufacturing
To make or process a raw material into a finished product by means of a large sale industrial operation Mass production Entire process of converting the raw material into finished goods Includes machines used, personnel involved, inventory handling, warehousing, etc
Standards in ISO 9000 Series
2008- set requirements of quality management system, replaced with ISO 9001:2915 updated version 2005- covers basic concepts and language 2009- focuses on how to make a quality management system more efficient/effective 2011- sets out guidance on internal/external audits of quality management systems
Waste
Anything that doesn't add value to customer
Defects
Anything that doesn't meet the acceptance criteria
Six Sigma Quality Concepts
Approach to identify sources of variability and then systematically reduce them- get to root of cause Goal is to achieve a process standard deviation that is 6 times smaller than the range of outputs allowed by the product's design specification
Disadvantages of Mass Customization
Communication- getting information from customers is hard Logistics- distributing right product to right customer at the right time at reasonable price is very difficult Process- production must be flexible Costs- increase in material and manufacturing costs
Engineer to Order (ETO)
Component is designed, engineered, and built to specifications only after order is received Dramatic evolution of MTO *Build a unique product every time* Cost of poor quality is very high- warranty and cost to reqork to replace an item has negative effects on profit margins, quality is essential throughout the entire process
Job Shop
Creates a custom product for each customer High customization Very high product variety Very low volume ETO/MTO Very long customer lead time
Choice of Strategy Determines which Performance Cycles the customer Experiences
Customer delivery cycle- MTS Manufacturing cycle- ATO Procurement cycle- MTO Product design- ETO
Manufacturing Processes
Job shop Batch Line flow Continuous flow
Types of Manufacturing Strategies
Make to stock Assemble to order Make to order Engineer to order
Manufacturing Management
Management of all the processes which are involved in manufacturing Conversion of raw material to finished product Management of personnel, raw materials, planning for production, etc
Make to Stock (MTS)
Manufacture products for stock based on demand forecasts Push system Must forecast accurately to prevent excess inventory and opportunity loss due to stockout Forecasted demand can be determined from past data Need certain amount of excess inventory without having too much excess Daily necessities, processed foods, sundries, and textiles are MTS products
Batch
Manufactures a small quantity of an item in a single production run High product variety Low volume ETO/MTO/ATO Long customer lead time
8 Dimensions of Product Quality
Performance Reliability Durability Conformance Features Aesthetics Serviceability Perceived quality
Lean Systems
Philosophy focused on customer Elimination of waste Emphasizes minimization of the amount of all resources (including time) used in operation of a company Need to figure out what doesn't add value
Total Quality Management
Philosophy focused on meeting customer expectations with respect to all needs, across company functions, and recognizing all customers, both internal and external Total organization-wide activity versus a technical task
Aesthetics
Styling, color, workmanship pleasing to the customer
Mass Customization Market Characteristics
Sufficiently large customer segment that values "translatable variety"- market has to want customization Turbulent, dynamic market Unpredictable demand (sort of) Little impact of regulation or other constraints
Total Quality Management Basic Conceptual Elements
Top management commitment and support Maintaining a customer focus in product, service, and process performance Integrated operations within and between organizations Commitment to continuous improvement
Manufacturing Perspective: Volume
Traditionally treated according to the principle of economy of scale Average cost to produce product declines as manufacturing volume increases Important when high fixed costs are present
Production
Transformation of raw materials and operational inputs and outputs that, when distributed, meet the needs of customers
Non-Utilized Talent
Under utilizing people's talents, skills, or knowledge Demotivating workforce by not asking for input or recognizing success
Transportation
Unnecessary movement of materials or products
Motion/Movement
Unnecessary movement of people Multiple hands off
Extra Processing
Unnecessary steps in process Redundancies between processes More work or higher quality than required by customer
Continuous Flow
Used to manufacture such items as gasoline, laundry detergent, and chemicals Inflexible processes High capital investment Pipeline- flows without stopping Very limited product variety Very high volume MTS Very short customer lead time
Elements of Lean Production
Waste reduction Lean supply chain relationships Lean layouts Inventory and set up time reduction Small batch scheduling Continuous improvement Workforce empowerment
Features
What different functions or tasks can the product perform
Serviceability
What is the ease of fixing/repairing the product if it fails
