SCM ch. 7-11-12-13

What is quality?

"Quality is customer satisfaction," or "Quality is Fitness for Use.

POQ lot size to arrive in week t =

(Total gross requirement for P weeks, including week t) - (projected on-hand inventory balance at end of week t-1)

L4L lot size to arrive in week t =

(gross requirements for week t) - (projected on-hand inventory balance at end of week t-1)

intermediate plans (general levels)

- Aggregate planning - Usually 12 months

Bias errors

- Consistent mistakes too low or too high - Often result of neglecting or not accurately estimating patterns of demand such as trends, seasonal, or cyclical patterns

5 factors that dictate FOQ

- Equipment capacity limits - Quantity discount - Truckload capacity - Minimum purchase quantity - EOQ (Economic Order Quantity)

plans for sales & operations include:

- Informational inputs - Supply options - Planning strategies

3 forecasting methods

- Judgement (Sales force estimates, Executive opinions, Market Research, Delphi Method) - Causal - Time-series

5 characteristics of level approach - production rate - how is demand variability managed - good for make-to-_____? - How does it affect workforce - How does it affect inventory

- Keeps production rate constant - Demand variability dealt by inventory, backorders, overtime, slack time, subcontracting - Good for make-to-stock - Good for workforce stability - Bad for inventory buildup or stockouts

Long-term plans

- Long term capacity - Plant size and major machines - Usually 2-5 years (it can even stretch more than 5 years)

Short-term plans (detailed plans)

- Machine loading - Job assignments - 1-2 months

5 characteristics of chase approach - production rate - how is demand variability managed - good for make-to-_____? - How does it affect workforce - How does it affect inventory

- Production matches demand - Demand variability dealt by changing capacities, mostly by hiring/firing of workers - Good for make-to-order - Bad for employee morale - Good for minimizing inventory

MRP systems enable firms to do 4 things:

- Reduce inventory - Improve labour utilization - Improve facility utilization - Improve customer service

4 factors that influence Planning lead time (LT)

- Setup time - Processing time - Materials handling time between operations - Waiting time

What are control charts? What are they used for?

A graphical presentation of process data over time. Control Charts for variables are used to monitor the mean and variability of the process distribution

Histogram

A histogram divides up the range of possible values in a data set into classes or groups. For each group, a rectangle is constructed with a base length equal to the range of values in that specific group, and an area proportional to the number of observations falling into that group.

Mean absolute percentage error (MAPE)

A measurement that relates the forecast error to the level of demand expressed as a percentage - MAPE is more often used by businesses because it relates to the overall sample. - The forecast with the lowest MAPE value is the best method

Forecast

A prediction of future events used for planning purposes

Sampling size

A quantity of randomly selected observations of process outputs

inventory record

A record that shows an item's lot-size policy, lead time, and various time-phased data

Periodic order quantity (POQ)

A rule that allows a different order quantity for each order issued but tends to issue the order at predetermined time intervals. The order quantity equals the amount of the item needed to cover P weeks' worth of gross requirements.

Lot Sizing rules (Q=)

A rule that determines the timing and size of order quantities

Fixed order quantity (FOQ)

A rule that maintains the same order quantity each time an order is issued

Lot-for-lot (L4L)

A rule under which the lot size ordered covers the gross requirements of a single week - Thus P = 1, and the goal is to minimize inventory levels - The projected on-hand inventory combined with the new order will equal zero at the end of week t

mixed strategy

A strategy that considers and implements a full range of supply options

Chase strategy

A strategy that involves hiring and laying off employees to match the demand forecast over the planning horizon

level strategy

A strategy that keeps the workforce constant, but varies its utilization via overtime, undertime, and vacation planning to match the demand forecast

Manufacturing resource planning (MRP II)

A system that ties the basic MRP system to the company's financial system and to other core and supporting processesManufacturing resource planning (MRP II)

Capacity requirement planning (CRP)

A technique used for projecting time-phased capacity requirements for workstations; its purpose is to match the material requirements plan with the capacity of key processes

Quality engineering

An approach originated by Genichi Taguchi that involves combining engineering and statistical methods to reduce costs and improve quality by optimizing product design and manufacturing processes

Projected on-hand inventory

An estimate of the amount of inventory available each week after gross requirements have been satisfied

Planned order release

An indication of when an order for a specified quantity of an item is to be issued

component (dependant demand)

An item that goes through one or more operations to be transformed into or become part of one or more parents

product structure tree

Visual depiction of the requirements in a bill of materials, where all components are listed by levels.

What drives six sigma?

a close understanding of customer needs; the disciplined use of facts, data, and statistical analysis; and diligent attention to managing, improving, and reinventing business processes

Bill of materials (BOM)

a listing of all of the raw materials, parts, and subassemblies needed to produce one unit of an end product.

scheduled receipts (open orders)

are orders that have been placed but not yet completed

Draw 4 different demand patterns: Horizontal, trend, seasonal, cyclical

ch. 11 slide 6

Dependent vs independent demand

dependent: Demand for subassemblies, parts, or raw materials which are derived from the plan for production of finished goods - can be determined by calculation independent: Demand for the finished goods - can be forecasted

Inventory net requirements =

net requirements in period t = Gross Requirements in period t - Available Inventory in period t

Which 3 defects account for 75% of rejections on a Pareto diagram?

out-of-dimension, poor surface finish and loose joints

Quality trilogy

1. Quality planning: Process of preparing to meet quality goals. Involves understanding customer needs and developing product features. 2. Quality control: Process of meeting quality goals during operations. Control parameters. Measuring the deviation and taking action. 3. Quality improvement: Process for breaking through to unprecedented levels of performance. Identify areas of improvement and get the right people to bring about the change.

Which 3 principles are stressed for Total Quality Management?

1. Customer satisfaction 2. Employee involvement 3. Continuous improvement in performance

5 steps of the six sigma improvement model

1. Define: Determine the current process characteristics critical to customer satisfaction and identify any gaps 2. Measure: Quantify the work the process does that affects the gap 3. Analyze: Use data on measures to perform process analysis 4. Improve: Modify or redesign existing methods to meet the new performance objectives 5. Control: Monitor the process to make sure high performance levels are maintained

2 accomplishments of Kaoru Ishikawa

1. Developed problem-solving tools such as the cause-and-effect (fishbone) diagram. 2. Called the father of quality circles

2 accomplishments of Walter A. Shewhart (quality guru)

1. Developed statistical control process methods to distinguish between random and nonrandom variation in industrial processes to keep processes under control. 2, Developed the "plan-do-check-act" (PDCA) cycle that emphasizes the need for continuous improvement.

3 accomplishments of Genichi Taguchi

1. Emphasized the minimization of variation. 2. Concerned with the cost of quality to society. 3. Extended Juran's concept of external failure.

4 functions of sales & operations planning

1. Establishes production and capacity strategies (plant size, major machines 2. Establishes Planning for Production capacity to meet aggregate demand 3. Establishes schedules for individual products 4. Establishes detailed planning: e.g. job/machine assignment

3 priority sequencing rules

1. First-come, First-Served : The job or customer arriving at the workstation first has the highest priority under a First-Come, First-Served (FCFS) rule 2. Earliest Due Date : The job or customer with the Earliest Due Date (EDD) is the next one to be processed 3. Shortest Processing Time: The job or customer that requires the least amount of service or operations processing time is pulled out of the waiting line to be served first

Six objectives usually are considered during development of a plan:

1. Minimize Costs/Maximize Profits 2. Maximize Customer Service 3. Minimize Inventory Investment 4. Minimize Changes in Production Rates 5. Minimize Changes in Workforce Levels 6. Maximize Utilization of Plant and Equipment

4 step cycle of the Deming wheel

1. Plan: The team selects a process that needs improvement 2. Do: The team implements the plan and monitors progress 3. Check: The team analyzes the data collected during the do step to find out how closely the results correspond to the goals set in the plan step 4. Act: If the results are successful, the team documents the revised process so that it becomes the standard procedure for all who may use it

2 accomplishments of Philip Crosby

1. Preached that "quality is free." 2. Believed that an organization can reduce overall costs by improving the overall quality of its processes.

3 accomplishments of Armand Feigenbaum

1. Proposed the concept of "total quality control," making quality everyone's responsibility. 2. Stressed interdepartmental communication. 3. Emphasized careful measurement and report of quality costs

What are the elements of a control chart?

A control chart consists of the following: 1. A Centre Line (CL) drawn at the process mean value. 2. Lower and Upper Control Limits that indicate the threshold at which the process output is considered statistically unlikely.

6 cost considerations in aggregate planning

1. Regular Time cost: Regular-time wages & benefits 2. Overtime cost: Typically 150% of regular-time wages, exclusive of benefits 3. Subcontracting cost: Cost of paying for subcontractors 4. Hiring & Layoff cost: Cost of advertising vacancies, interviews, training... Cost of compensation pay, retaining remaining workers 5. Inventory holding cost: Cost of capital and storage costs, risk cost 6. Backorder and stockout cost: Cost of expediting past-due orders, costs of loss sales and loss of goodwill

2 performance measures for the quality of a schedule:

1. Throughput time (or flow time): The amount of time a customer or product spends in the service or manufacturing system - Flow time at a work station = Finish time - Arrival time 2. Past due (Minimize Past Due): The amount of time by which a job missed its due date

5 supply options

1. Workforce adjustment: Adjust workforce levels by hiring and laying off employees 2. Anticipation inventory: Stocking during low demand for peak periods 3. Workforce utilization: Might involve overtime and undertime. Do not build inventory due to slow down 4. Vacation schedules 5. Subcontractors: Can supply services, make components & subassemblies or assemble entire product

3 ways Run charts differ from control charts

1. do not show the control limits of the process. 2. simpler to produce 3. do not allow for the full range of analytic techniques supported by Control Charts.

Medium-range forecasting (length, what gets forecasted?)

3 months to 2 years Sales/production planning

Long-range forecasting (length, what gets forecasted?)

> 2 years New product planning

Enterprise process

A company-wide process that cuts across functional areas, business units, geographic regions, and product lines

What is Six Sigma

A comprehensive and flexible system for achieving, sustaining, and maximizing business success by minimizing defects and variability in processes - It relies heavily on the principles and tools of TQM

Action notice

A computer-generated memo alerting planners about releasing new orders and adjusting the due dates of scheduled receipts

Benchmarking

A continuous, systematic procedure that measures a firm's products, services, and processes against those of industry leaders. Companies use benchmarking to understand better how outstanding companies do things so that they can improve their own operations

Is it possible to eliminate all forecast errors?

No

Parent (dependent demand)

Any product that is manufactured from one or more components

Assignable causes of variation

Any variation causing factors that can be identified and eliminated

External Failure costs

Arise when a defect is discovered after the customer receives the service or product (Warranty)

Executive opinion qualitative method: Characteristics, strengths, and weaknesses

C: a group of managers meet and come up with a new forecast S: Good for strategic or new-product forecasting W: One person's opinion can dominate the forecast

Delphi Method qualitative method: Characteristics, strengths, and weaknesses

C: seeks to develop a consensus among a group of experts S: Excellent for forecasting long-term product demand, technological (something?) W: time consuming to develop

Market research qualitative method: Characteristics, strengths, and weaknesses

C: uses surveys & interviews to identify customer preferences S: Good determinant of customer preferences W: it can be difficult to develop a good questionnaire

Check-sheet/checklist

Check Sheets are simple documents that are used for collecting data in real-time. A Check Sheet is typically a blank form that is designed for the quick, easy and efficient recording of the desired information, which can be either quantitative or qualitative. When the information is quantitative, the check sheet is called a Tally Sheet.

6 data analysis tools

Checklists Histograms and Bar Charts Pareto Charts Scatter Diagrams Cause-and-Effect Diagrams Graphs

3 types of benchmarking

Competitive benchmarking Functional benchmarking Internal benchmarking

3 ways Joseph Juran categorized the cost of quality

Cost of prevention Cost of detection/appraisal Cost of failure

Prevention costs

Costs associated with preventing defects before they happen

Appraisal costs

Costs incurred in assessing and inspecting the level of quality attained by the operating system

TQM emphasis on processes such as (name 3) for systematically improving quality

Customer satisfaction Employee involvement Continuous improvement

Quality at source

Defects are caught and corrected where they were created

What was the main philosophy of Joseph Juran

Emphasized the importance of producing quality products through an approach focused on quality planning, control, and improvement.

What knowledge is needed in order to develop the Pareto Diagram for a specific process?

Frequency, Relative Frequency, Cumulative Frequency and Percentage Frequency

Scheduling can be implemented using the following 3 methods:

Gantt chart, Employee schedules, and Job Sequencing

Ishikawa Diagram/Fishbone diagram

Helps in identifying root causes of the quality failure. (Helps in the diagnostic journey.) Ishikawa Diagram is also called Cause-and-Effect Diagram

Supportive culture

Inclusion & motivation of all employees in product quality enhancement

What are teams and what are the 3 types?

Individuals/small groups are mutually accountable for success - Problem solving teams: quality circles - Special purpose teams: tackling key issues -Self managing team: major portion of production handled by group

Enterprise resource planning systems

Large, integrated information systems that support many enterprise processes and data storage needs

4 M's of an Ishikawa diagram

Machine, Manpower, Method, Material

Deming wheel

Most firms actively engaged in continuous improvement train their work teams to use the Deming Wheel, which uses a plan-do-check-act cycle for problem solving

planned receipts

Orders that are not yet released to the shop or supplier

4 costs of quality

Prevention costs, appraisal costs, internal failure costs, external failure costs

Two dimensions for achieving customer satisfaction:

Product features and Freedom from deficiencies.

Available Inventory (Projected on hand in period t ) =

Projected on hand at the start of period t + Scheduled receipts in period t - Safety stock in period t

Common causes of variation

Purely random sources of variation inherent in a process and generally considered unavoidable and a cost that must be borne by the process

2 types of forecasting models:

Qualitative (technological) methods: Forecasts generated subjectively by the forecaster Quantitative (statistical) methods: Forecasts generated through mathematical modelling

Joseph Juran defined product quality as "fitness for use" as viewed by the customer in which 5 aspects?

Quality of design Quality of conformance Availability Safety Field use

Freedom from deficencies

Refers to quality of conformance. Higher conformance means fewer complaints and increased customer satisfaction. (This is related to free from defects.)

Product features

Refers to quality of design. Examples in manufacturing industry: Performance, Reliability, Durability, Ease of use, Esthetics etc. Examples in service industry: Accuracy, Timeliness, Friendliness and courtesy, Knowledge of server etc.

Internal Failure costs

Result from defects that are discovered during production of services or products - Yield Losses (scrap) - Rework Costs

Rotating schedule vs. fixed schedule for scheduling employees

Rotating: A schedule that rotates employees through a series of workdays or hours Fixed: A schedule that calls for each employee to work the same days and hours each week

What is the difference between a run chart and a control chart?

Run chart: Measurement against progression of time. Control chart: Add Upper Control Limit and Lower Control Limit to the run chart.

Scatter diagram

Scatter Diagrams are used to present measurements of two or more related variables. A Scatter Diagram does not specify dependent or independent variables. Either type of variable can be plotted on either axis. Scatter Diagrams represent the association (not causation) between two variables.

What are potential variables to be used as quality characteristics?

Service or product characteristics that can be measured, such as weight, length, volume, or time

What are potential attributes to be used as quality characteristics?

Service or product characteristics that can be quickly counted for acceptable performance

4 tools for systematically improving quality

Six sigma (6) Quality function deployment (QFD) Benchmarking Data analysis

Sampling plan

Specifies a sample size, time between successive samples and decision rules that determine when action should be taken

Quality circles

Teams of workers and supervisors that meet regularly to address work-related problems involving quality and productivity. Developed by Kaoru Ishikawa at University of Tokyo. Became immediately popular in Japan as well as USA. Lockheed Missiles and Space Division was the leader in implementing Quality circles in USA in 1973 (after their visit to Japan to study the same). Typically small day-to-day problems are given to quality circles. Since workers are most familiar with the routine tasks, they are asked to identify, analyze and solve quality problems in the routine processes.

advantages and disadvantages of linear regression

The advantage of this regression model is that it can forecast demand well into the future while time series models project demand just one period ahead The disadvantage of the model is that it is not adaptive

Statistical process control

The application of statistical techniques to determine whether a process conforms to the product or service design

Dependent demand

The demand for an item that occurs because the quantity required varies with the production plans for other items held in the firm's inventory

Forecast error formula

The difference found by subtracting the forecast from actual demand for a given period (Et = Dt - Ft)

How can you determine which forecast method is best?

The forecast that gives the lowest mean-squared error (MSE)

Sampling (for variation of outputs)

The most thorough approach to inspection is to inspect each product or service at each stage of the process for quality

Continuous improvement

The philosophy of continually seeking ways to improve processes based on a Japanese concept called kaizen

Pareto Diagram

The purpose of the Pareto Diagram is to highlight the most important set of factors among a typically large amount of causes for a problem.

Quality loss function

The rationale that a service or product that barely conforms to the specifications is more like a defective service or product than a perfect one Quality loss function is optimum (zero) when the product's quality measure is exactly on the target measure

Time series

The repeated observations of demand for a service or product in their order of occurrence

gross requirements

The total demand derived from all parent production plans

Why are data analysis tools useful?

They can uncover operations requiring improvement and the extent of remedial action needed

How does the timeline work in MRP?

Time line that you see is that start of every week. If it says end of week two, that means it should show beginning of week 3.

Master production schedule

Time-phased plan specifying timing and quantity of production for each end item.

Quality attributes

To detect variations in output, employees or their equipment must be able to measure quality characteristics

Random errors

Unpredictable factors cause forecast to deviate from the actual demand

Gantt Chart

Used as a tool to monitor the progress of work and to view the load on workstations. The chart takes two basic forms: (1) the job or activity progress chart, and (2) the workstation chart.

R-chart (range chart)

Used to monitor changes in process variability.

x-chart

Used to monitor changes in the sample mean - To see whether the process is generating output, on average, consistent with a target value set by management for the process or whether its current performance, with respect to the average of the performance measure, is consistent with past performance. - If the standard deviation of the process is known, we can place UCL and LCL at "z" standard deviations from the mean at the desired confidence level.

Short-range forecasting (length, what gets forecasted?)

Usually < 3 months Job scheduling, worker assignments