Intro to Supply Chain Chapter 8 Rutgers

Manufacturing Strategies

Companies must develop a manufacturing strategy that suits the type of products they produce, their customer expectations, and their strengths 4 main strategies: 1. Make-to-Stock (MTS) 2. Assemble-to-Order (ATO) 3. Make-to-Order (MTO) 4. Engineer-to-Order (ETO)

The 5 Why's and How's Technique

-Questioning technique designed to drill down into the details of a problem or a solution to find the root cause and best corrective action -5 Why's: gets to the root cause of the problem -5 How's: develop the details of a root solution to the problem -Technique is usually in conjunction with the Cause and Effect Diagram

LEAN Supply Chain Relationship

-Suppliers and customers work together to remove waste, reduce costs, and improve quality and customer service -Just-in-Time purchasing includes delivering smaller quantities, at right time, delivered to right location -Firms develop LEAN supply chain relationships with key customers. Mutual benefits and dependency between partners

8 Types of Waste

1. Defects: anything that does not meet the acceptance criteria 2. Overproduction: production before its needed, or in excess of customer demand. Also applies to services 3. Waiting: time elapsed between processes when no work is being done 4. Non-utilized talent: not using people's full talent, skills, or knowledge. De-motivates workforce 5. Transportation: unnecessary movement of materials/products 6. Inventory: excess products/materials not being processed 7. Motion/Movement: unnecessary movement of people. Multiple hand offs 8. Extra-processing: unnecessary steps in a process. Redundancies between processes. More work/higher quality then required by consumers

Cost of Good Quality

Appraisal Costs: costs associated with the evaluation of purchased materials, processes, products, and services to ensure that they conform to specifications. They include: -Testing, evaluating, and inspecting the quality of incoming materials, process setups, and products -Quality assessment and approval of suppliers -Performing audits to confirm that the quality system is operating properly Prevention Costs: costs associated with the design, implementation , and maintenance of the quality management system. They are planned, and experienced before actual products or materials are acquired or produced -Establishment of specifications for incoming materials, processes, products and services -Creation of quality plans -Quality training, development, preparation, and maintenance of programs - Creation and maintenance of the quality system

Cost of Quality

Approach that supports a company's effort 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 cost of quality -Can be divided into 2 categories 1. Cost of Good Quality -Appraisal cost -Prevention cost 2. Cost of Poor Quality -Internal failure cost -External failure cost

Engineered-to-Stock

Component is designed, engineered, and built to specifications only after the order has been placed -Building a unique product every time -The cost of poor quality can be very high

Continuous Improvement

Continuous approach to reduce process, delivery, and quality problems, such as machine breakdowns, setup problems, and inter quality problems

Six Sigma

Enterprise and Supply Chain wide philosophy that emphasizes a commitment toward excellence, encompassing suppliers, employees, and customers. -Identification and reduction of defects -Seeks to improve the quality of process outputs by identifying and removing the causes of defects and minimizing variability in manufacturing and business processes -The goal is to attain less than 3.4 defects per million opportunities -Six Sigma is a structured and data driven approach to drive a near perfect quality goal -Originated by Motorola -Became famous when Jack Welch made it central to his business strategy at GE

Cost of Poor Quality

Internal Failure Costs: costs that occur when the product or service doesn't meet the designed quality standards and are identified BEFORE the product or service is delivered to the consumer. They include: -Defective product/material that cannot be used, sold, or repaired and the cost associated with correction of these defects -Unnecessary work or inventory resulting from errors -Activities required to establish the root causes of product or service failures External Failure Costs: costs that occur when the product or service that doesn't meet the designed quality standards aren't detected until AFTER the product/service is delivered to the customer: -Cost of handling and responding to customer complaints -Cost for failed products that must be repaired or services that are repeated -Costs for repair of returned products and products still in the field -Cost for handling and investigation of rejected or recalled products, including return transportation

Typically ________ is implemented first, then _______

LEAN then Six Sigma

Total Quality Management

Management philosophy based on the principal that every employee must be committed to maintaining high standards of work in every aspect of a company's operations, focused on meeting customer needs and organizational objectives -Combo of quality and management tools designed to increase business and reduce losses resulting from wasteful practices -When integrated, Six Sigma is an integral part of TQM Key principles: -Management commitment -Employee Empowerment -Fact based decision making -Continuous improvement -Customer focus

Workforce Commitment

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

Make-to-Stock

Means to manufacture products for a stock based on demand forecasts, which is a push system -The main issue is to avoid having excess stock

LEAN Layouts

Move people and materials when and where needed, and ASAP -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 -Often U shaped to facilitate easier operator and materials movement

Malcolm Baldridge National Quality Award

Objectives: -Stimulate firms to improve -Recognize firms for their quality achievements -Establish guidelines so that organizations can evaluate their improvements and provide guidelines to others Categories measured: -Leadership -Strategic Planning -Customer and market focus -Info and analysis -HR focus -Process management -Business results

LEAN

Operating philosophy of waste reduction and value enhancement and was originally created by Toyota executives

Uniform Plant Loading (Level-Loading the Plan)

Problem: -Demand exceeds capacity at points in the planning horizon and matching the production plan to follow demand exactly can contribute to inefficiency and waste Solution: Uniform Plant Loading (front-loading or leveling the plan) -Planning up to capacity in earlier time periods to meet demand in later time periods -Production schedule is frozen in the up front time period (ie month) and better help plan production

Assemble-to-Order

Products ordered by customers are produced quickly and are customizable to a certain extent -Requires that the basic parts are already manufactured but not yet assembled -Once an order is received, the parts are already manufactured but not yet assembled -A hybrid between MTS where products are fully produced in advance and MTO where products are manufactured once the order has been received -Attempts to combine the benefits of both: product into consumers hands quickly and customization

Operation Management

Refers to the design, execution, and control of the operations that convert resources into desired goods and services, aligned with the company's business strategy

Voice of Customer

Term used in business to describe the in-depth process of capturing internal and external customers' stated and unstated expectations, preferences, likes, and dislikes -TQM is all about meeting or exceeding customer expectations, so capturing internal and external VOC is essential for TQM to be successful

Small Batch Scheduling and Uniform Plant Loading Background Information

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 setup or changeover time influences the scheduling of large batches -Large batches can exacerbate the Bull Whip Effect as production in large batches creates an uneven workload ---Production is not synchronized with customer demand making a pull system impossible ---Throughput times in manufacturing go up and work-in-progress inventory goes up, creating more waste in the system

Make-to-Order

Typically allows customer to purchase a product customized for and by them -Only manufactures the end product once the customer places the order, increases the wait time, but allows for more flexible customization -Relieves the problem of excess inventory that is common with MTS

Value

Value is the inherent worth of a product as judged by the customer, and reflected in its selling price and market demand

Acceptance Sampling

When a shipment is received from a supplier, a statistically significant representative sample is taken and measured against the quality acceptance standards -The entire shipment is expected to have the same quality as the sample Less time consuming but results in errors: -Suppliers risk: buyer rejects a shipment of a good quality unit becase the same quality level did not meet the acceptance standard ---TYPE I ERROR -Buyer Risk: buyer accepts a shipment of poor quality goods because the sample falsely provides a positive result against the acceptance standard ---TYPE II ERROR

Total Quality Gurus

-W. Edwards Deming: widely considered the father of TQM. Creator of Plan, Do, Check, Act model -Philip Crosby: coined the phrase "quality is free" (also title of his book) as defects are costly. He introduced the concepts of zero defects and focus on prevention and not inspection -Joseph Juran: defined quality as "fitness for use." He developed the concept of the cost of quality -Kaoru Ishikawa: developed one of the first tools in quality management process, the cause and effect diagram, which is also called the "Ishikawa" or "fishbone" diagram

Six Sigma Training and Certification Levels

-Yellow Belt: has a basic understanding of Six Sigma methodology and the tools in the DMAIC problem solving process -Green Belt: Six Sigma trained individual that can work as a team member on complex projects and also lead small teams -Brown Belt: Six Sigma green belt who has passed the Black Belt certification exam but has yet to complete their second Six Sigma project -Black Belt: full time quality pro who has thorough knowledge of Six Sigma philosophies and principles and processes techniques and managerial process improvement/innovation skills -Master Black Belt: a career path, has successfully led 10 or more teams through complex Six Sigma projects

7 Tools for Quality Control

1. Check Sheets: used to determine frequencies of specific problems 2. Cause and Effect Diagram: aid in finding the cause of the problem 3. Control Charts: monitor process performance 4. Histograms 5. Pareto Analysis: indicating process problems from most severe to least 6. Scatter Diagram 7. Stratification (AKA Flow Diagrams)

2 Key Methodologies in Six Sigma

1. DMADV: Design, Measure, Analyze, Design, Verify -A data driven quality strategy for designing products and processes -Creating a new product design or process that is more defect free 2. DMAIC: Define, Measure, Analyze, Improve, Control -A data driven quality strategy for improving products and processes -To improve existing business process -Most widely used and recognized Six Sigma methodology in use

4 Manufacturing Process

1. Job shop: creates custom product for each consumer. High customization -ETO/MTO 2. Batch: manufactures small quantities of an item in a single production run -MTO/ATO 3. Line flows: standard product with limited number of variations moving on assembly line through stages of production -MTS/ATO 4. Continuous flows: used to manufacture item like: gasoline, laundry detergent, chemicals. Inflexible, high investment -MTS

3 Elements of LEAN

1. LEAN Manufacturing 2. Total Quality Management 3. Respect for People

3 Main Foundational Aspects to Six Sigma

1. Quality is defined by the customer: it is vital to provide what the customer wants to achieve customer satisfaction 2. Use of technical tools: such as statistical quality tools and the 7 tools of quality 3. People involvement: six sigma follows a structured methodology and has defined roles for participants -Company must involve all of its employees in the Six Sigma process -All employees are responsible to identify quality problems -Have well-defined roles with measurable objectives

LEAN is a combination of what 4 SCM terms?

1. Quick response: rapid replenishment of a customer's stock by a supplier with direct access to data from the customer's point of sale 2. Efficient consumer response (ECR): strategy to increase the level of services to consumers through close cooperation among retailers, wholesalers and manufacturers 3. Just-in-time: inventory strategy to decrease waste by receiving materials only when in the production process and thereby reducing inventory costs 4. Keiretsu relationships: companies both up and down stream of a manufacturing process, remaining independent but working together for mutual benefits

5 S's of the Visual Workplace

1. Sort: keep only necessary items in the workplace. Eliminate the rest 2. Straighten: organize and arrange items to promote an efficient work flow 3. Shine: clean and tidy work space 4. Standardize: schedule regular cleaning and maintenance 5. Sustain: stick to the rules. Maintain and review the standards

7 Elements 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

Inventory, Setup Time, and Changeover Time Reduction

Inventory: -Some inventory may be necessary, but excess inventory is a waste -Traditional approach to inventory is the push method (MTS), but the problem with this is that the excess inventory covers up underlying problems -Pull approach: ---Each stage in the supply chain requests quantities as needed from the previous stage ---No excess inventory generated ---Reducing inventory can also uncover production problems Setup time and Changeover time: -Both are considered a waste because they are times when the equipment is not producing product -Setup time: time taken to prepare and format the manufacturing equipment and systems for production -Changeover time: time taken to adapt and modify the manufacturing equipment and systems to produce a different product or a new batch of the same product -Both are non-value added operations and should be minimized

Small Batch Scheduling

LEAN manufacturing attempts to reverse the negative effects of large batches through small batch scheduling -smaller batches facilitates producing at the same rate as customer demand, facilitating a pull system -Increases flexibility, allowing the company to respond to changes in customer demand more quickly -Throughput times in manufacturing go down and work-in-progress inventory goes down, reduces costs and eliminating waste in the system -Get product to the customer more quickly -Shortens manufacturing lead time and the actual time it takes to produce the product, however the setup time must be low Small batch scheduling can be facilitated through the use of Kan bans -Signal or card in Japanese used for communication (eg: visual signal) between work stations -Authorizes production or the movement of materials to the next work station