Chapter 8 - Process Management - SCM
1910s
Henry Ford's mass production line was a first breakthrough by using continuous assembly and flow systems that made parts find their way into finished products.
Six Sigma
Identifies root problems using quality control tools (Process Capability, DMAIC, Statistical Quality).
Continuous Improvement (Kaizen)
Emphasis on quality and continuous improvement.
Inventory Waste
Excess products or materials not being processed
Natural Variations
Expected and random variations (can't control)
Waste (Muda) Reduction
Firms reduce costs and add value by eliminating waste from the productive system.
LEAN Six Sigma Step 4
Identify and implement system improvements (Value Stream Mapping (VSM))
Simplicity
The simpler the solution the better.
Seiton
Tidiness
Motion Waste
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.
Assignable variations
Variations that have a specific cause (can control)
Visibility
Visible problems identified and solved.
JIT Purchasing
includes delivering smaller quantities, at right time, delivered to the right location, in the right quantities.
Six Sigma
seeks to improve the quality of process outputs by identifying and removing the causes of defects (errors) and minimizing variability in manufacturing and business processes.
1990
the term "LEAN Manufacturing" first appeared in the book "The Machine That Changed The World"
1979
Six Sigma started at Motorola
1995
Six Sigma used by Jack Welch at GE
Five-S's
Seiri, Seiton, Seiso, Seiketsu, Shitsuke
Standardize (Seiketsu)
Set standards for a consistently organized workplace
Classical View of Quality
"99% Good" (3.8 Sigma)
Total Quality Management
An integrated organizational effort to improve quality at every level: Quality Gurus, Voice of the Customer, Costs of Quality, Quality Tools, ISO 9000
Six Sigma Step 3
Analyze. Identify the cause of the problem. Why, when and where do defects occur?
Manufacturing cells
Are often U-shaped to facilitate easier operator and material movements.
LEAN Layouts
Are very visual (lines of visibility are unobstructed) with operators at one processing center able to monitor work at another
Set in Order (Seiton)
Arrange items to promote efficient workflow.
Yellow Belt
Basic understanding of Six Sigma Methodology and tools in the DMAIC problem solving process. Team member on process improvement project.
LEAN Six Sigma Step 3
Develop key financial and operational metrics.
Value
anything for which the customer is willing to pay
LEAN
often results in: (1) Large cost reductions, (2) Improved quality, (3) Increased customer service.
Value Added Process
A process step that transforms or shapes a product or service which is eventually sold to a customer.
Defects
Anything that does not meet the acceptance criteria.
LEAN Six Sigma Step 1
Jointly define value.
Sort (Seiri)
Keep only necessary items in the workplace.
Six Sigma Step 2
Measure. Map out the current process. What is the frequency of defects?
LEAN Layouts
Move people and materials when and where needed, and as soon as possible.
Broad View
Of supply chain members - decisions made for success of entire SC. Responsible for adding value.
Seiri
Organization
Overproduction
Production before it is needed, or in excess of customer requirements. Providing a service that is not needed.
Acceptance Sampling
When shipments are received from suppliers, samples are taken and measured against the quality acceptance standard. Shipment is assumed to have the same quality.
Variable Control Charts
X-bar chart, R-chart
Non-Value Added Process
a process step that take time, resources, or space, but do not add value to the product or service.
Six Sigma
a structured and data-driven approach to drive such a near-perfect quality goal, i.e., "Zero Defects"
Flow Diagrams
annotated boxes representing process to show the flow of products or customers.
LEAN Supply Chain Relationships
developed with key customers. Mutual dependency and benefits occur among these partners.
Waste
encompasses wait times, inventories, material and people movement, processing steps, variability, any other non-value-adding activity.
Channel Integration
extending alliances to suppliers' suppliers and customers' customers
LEAN
focuses on eliminating wastes and improving efficiency
Six Sigma
focuses on reducing defects and variations
Pareto Charts
for presenting data in an organized fashion, indicating process problems from most to least severe.
Kanbans
generate demand for parts at all stages of production creating a "pull" system
LEAN
is a culture
Goal of Six Sigma
to attain less than 3.4 Defects Per Million Opportunities (DPMO)
Check Sheets
to determine frequencies for specific problems.
X-bar chart
tracks central tendency of sample means.
R-chart
tracks sample ranges.
Cause and Effect Diagrams (Fishbone or Ishikawa diagrams)
used to aid in brainstorming and isolating the causes of a problem.
Six Sigma Training Levels
(1) Yellow Belt, (2) Green Belt, (3) Black Belt, (4) Master Black Belt
People Involvement
(1) All employees responsible to identify quality problems. (2) All employees trained to use technical tools.
Seven Tools of Quality Control:
(1) Cause and Effect Diagrams (aka root cause analysis), (2) Flowcharts, (3) Checklists, (4) Control Charts, (5) Scatter Diagrams, (6) Pareto Analysis, (7) Histograms
Philip Corsby
(1) Coined phrase "quality is free" as defects are costly. (2) Introduced concept of zero defects. (3) Focus on prevention and not inspection.
Edwards Deming
(1) Considered the "father" of TQM. (2) Stressed management's responsibility for quality. (3) Developed "14 Points" to guide companies in quality improvement.
Kanban
(1) Contains information passed between stations. (2) Authorizes production or the movement of materials to the next workstation. (3) "Signal" or "Card"
Role of Management
(1) Create cultural change needed for LEAN to succeed. (2) Provide atmosphere of cooperation. (3) Empower workers to take action based on their ideas. (4) Develop incentive system for lean behaviors.
LEAN Incorporation Techniques
(1) Cross-training, (2) Satisfying internal customer demand, (3) Quickly moving products in the production system, (4) Communicating demand forecasts and production schedules up the supply chain, (5) Optimizing inventory levels across the supply chain, (6) Channel integration
Eight Wastes ("DOWN TIME")
(1) Defects, (2) Overproduction, (3) Waiting, (4) Non-Utilized Talent, (5) Transportation, (6) Inventory, (7) Motion, (8) Extra-Processing
Six Sigma Steps
(1) Define, (2) Measure, (3) Analyze, (4) Improve, (5) Control
Joseph Juran
(1) Defined Quality as "fitness for use" (2) Developed Concept of cost of quality
Pull Approach
(1) Each stage in the supply chain requests quantities needed from the previous stage. (2) No excess inventory generated. (3) Reduced inventory exposes problems.
LEAN Guidelines
(1) Elimination of Waste (Muda), (2) A Broad View, (3) Simplicity, (4) Continuous Improvement (Kaizen), (5) Visibility, (6) Flexibility
Inventory and Setup Time Reduction
(1) Excess inventory is a waste. (2) Reducing inventory levels can create production problems. (3) Once problems are detected, they can be solved. (4) The end result is a smoother running organization with less inventory investment.
Respect for People
(1) Flatter hierarchy than traditional organizations. (2) Ordinary workers given great responsibility. (3) Supply chain members work together in cross functional teams. (4) Respect for all people must exist for an organization to be its best
Worker Duties
(1) Improve production process, (2) monitor quality, (3) correct quality problems
LEAN Six Sigma Steps
(1) Jointly define value. (2) Conduct supply chain capability analysis. (3) Conduct supply chain capability analysis. (4) Identify and implement system improvements (Value Stream Mapping (VSM))
LEAN Six Sigma Impact on Suppliers
(1) Lower costs due to efficient systems. (2) Shorter lead times. (3) Lower safety stock.
LEAN Six Sigma Impact on Logistics
(1) Optimization models to select routes. (2) Warehouse design changes reduce waste.
Uniform Plant Loading:
(1) Production schedule frozen for month. (2) Also called "leveling" (3) Helps suppliers better plan production.
LEAN Six Sigma Impact on Operations
(1) Proper cycle time calculation ensures production according to customer demand. (2) Uniform work flow. (3) Pull production.
Benefits of Reducing Waste
(1) Reduced cycle times, (2) Greater throughput, (3) Better productivity, (4) Improved quality, (5) Reduced costs, (6) improve customer satisfaction and the company's competitive advantage
Benefits of Small Lot Production
(1) Reduces inventory and excess processing. (2) Increases flexibility. (3) Responds to customer demands more quickly. (4) Shortens manufacturing lead time. (5) Setup time must be low.
Technical Tools
(1) Statistical quality control. (2) Seven tools of quality.
Traditional Approach
(1) Supply chains work as "push" systems. (2) Inventory carried to cover up problems.
Four Absolutes of Quality
(1) The definition of 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.
Aspects of Six Sigma
(1) Use of technical tools, (2) People Involvement
Elements of LEAN Manufacturing
(1) Waste Reduction, (2) LEAN Supply Chain Relationships, (3) LEAN Layouts, (4) Inventory and Setup Time Reduction, (5) Small Batch Scheduling, (6) Continuous Improvement, (7) Workforce Empowerment
Producer's Risk
A buyer rejects a shipment of good quality units because the sample quality level did not meet standards (type I error)
LEAN Manufacturing
A coordinated system producing the exact products desired, delivered in the right quantities, where needed, and Just-in-Time (JIT). (1) The Pull System. (2) Visual Signals. (3) Small Lot Production. (4) Uniform Plant Loading.
Master Black Belt
A proven mastery of process variability reduction, waste reduction and growth principles and can effectively present training at all levels
Green Belt
A trained team member allowed to work on small, carefully defined Six Sigma projects, requiring less than a Black Belt's full-time commitment.
Statistical Process Control
Allows firms to: Visually monitor process performance, Compare the performance to desired levels or standards, Take corrective action
Consumer's Risk
Buyer accepts a shipment of poor-quality units because the sample falsely provides a positive answer (type II error)
Shine (Seiso)
Clean the work area so it is neat and tidy.
Seiketsu
Cleanliness
LEAN Six Sigma Step 2
Conduct supply chain capability analysis.
Continuous Improvement (Kaizen)
Continuous approach to reduce process, delivery, and quality problems, such as machine breakdown problems, setup problems, and internal quality problems.
Variable data
Continuous data, (e.g., Weight)
Six Sigma Step 5
Control. Maintain the solution. How can we make the process stay fixed?
Prevention Cost
Cost incurred in the process of preventing poor quality. Includes costs of preparing and implementing a quality plan.
Appraisal Costs
Costs incurred in the process of uncovering defects. Includes testing, evaluating, and inspecting quality.
Internal Failure Costs
Costs of defects before they reach the customer. include scrap, rework, and material losses.
External Failure Costs
Costs of failure at customer site. Includes returns, repairs, and recalls.
14 Points
Create constancy of purpose to improve product and service. Adopt the new philosophy. Cease dependence on inspection to improve quality. End the practice of awarding business on the basis of price. Constantly improve the production and service system. Institute training on the job. Institute leadership. Drive out fear. Break down barriers between departments. Eliminate slogans and exhortations. Eliminate quotas. Remove barriers to pride of workmanship. Institute program of self-improvement. Put everyone to work to accomplish the transformation.
LEAN
Creates customer value through efficient use of resources.
Six Sigma Step 1
Define. Define the problem. What is the customers' expectation of the process?
Shitsuke
Discipline
Small Batch Scheduling
Drives down costs using kanbans
Flexibility
Easily switch from one product to another using flexible workers that perform different tasks.
Waiting
Elapsed time between processes when no work is being done.
Elimination of Waste (Muda)
Eliminate all non-value adding activities.
1990s
Quick response (QR), Efficient Consumer Response (ECR), Just-in-Time (JIT), Keiretsu Relationships
Six Sigma Step 4
Improve. Implement and verify the solution. How can we fix the process?
Keiretsu Relationships
Including suppliers in JIT/TQM efforts
LEAN & Six Sigma
Increases speed and accuracy
Attribute data
Indicate some attribute such as color and satisfaction, or beauty.
Elements of LEAN
LEAN Manufacturing, Total Quality Management (TQM), and respect for people.
Role of Supplier
LEAN builds long-term supplier relationships: Partner with suppliers. Improve process quality. Information sharing. Goal to have single-source suppliers.
Small Batch Scheduling
Makes the firm more flexible to meet customer demand
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
Small Batch Scheduling
Reducing purchased, WIP, and finished goods inventories
Cost of Quality
Prevention Cost, Appraisal Costs, Internal Failure Costs, External Failure Costs
Manufacturing cells
Process similar parts or components saving duplication of equipment and labor.
Seiso
Purity
Five-S's
Sort, Set in Order, Shine, Standardize, Sustain
Sustain (Shitsuke)
Stick to the rules. Maintain and review standards.
LEAN Supply Chain Relationships
Suppliers and customers work to remove waste, reduce cost, and improve quality and customer service.
1940s
Taichii Ohno and Shigeo Shingo created the Toyota Production System (TPS), which incorporated Ford's production system and other techniques to form the basis of what is now known as LEAN.
Black Belt
Thorough knowledge of Six Sigma philosophies and principles. Coaches successful project teams. Identifies projects and selects project team members.
Non-Utilized Talent
Underutilizing people's talents, skills or knowledge. De-motivating the workforce by not asking for input or recognizing success
Transportation Waste
Unnecessary movement of materials or products
Six Sigma
is a quality management process.
Six Sigma
is an enterprise and supply chain-wide philosophy, that emphasizes a commitment toward excellence and encompasses suppliers, employees, and customers
LEAN
is an operating philosophy of waste reduction and value enhancement and was originally created as the Toyota Production System (TPS) by key Toyota executives.
LEAN
is standard in many industries
Value
is the inherent worth of a product as judged by the customer and reflected in its selling price and market demand.
Just-in-Time (JIT)
led to continuous reduction of waste
Efficient Consumer Response (ECR)
led to increased speed and flexibility
Quick response (QR)
led to increased speed and flexibility
Sampling
less time-consuming than testing every unit but can result in errors.
Quality
meeting or exceeding customer expectations
Role of Workers
perform different tasks and actively pursue company goals. Work in teams (quality circles).
After Waste Removal
processes are more streamlined, resulting in more satisfied customers. You'll also save your organization time and money.
Before Waste Removal
processes are often scattered, which can negatively affect your customers.
LEAN
provides value for customers through the use of the most efficient resources possible