Supply Chain Chapter 8

Manufacturing Strategies

Aligned to production strategy, established to satisfy customer demand while balancing manufacturing costs and inventory levels

Philip Crosby

Coined phrase "quality is free" as defects are costly - Introduced concepts of zero defects and focus on prevention, not inspection Introduced 4 absolutes of quality 1. Definition of quality is conformance to requirements- do it right the first time 2. System of quality is prevention- take preventative action 3. Performance standard is zero defects- commit to eliminate defects 4. Measure quality is price of nonconformance- loss from poor materials and workmanship

Total Cost of Manufacturing (TCM)

Complete cost of producing and delivering products to our customer -Incorporates both fixed and variable costs used in manufacturing, storage, and delivery product

Continuous Flow

Consistent manufacturing of same product (gas, chemicals, laundry detergent, PC Boards)

7. Continuous Improvement

Continuous approach to reduce costs by eliminating waste and/or improving process, delivery, and quality

Operations Management Goals

Convert materials and labor into goods and services as efficiently and effectively as possible, while also controlling costs to max profits

Job Shop

Creates custom product for each customer (artist, craftsman)

DOWN TIME

Defects: anything that doesn't meet acceptance criteria Overproduction: production before it's needed, in excess of customer requirements Waiting: elapsed time between processes when no work is being done Non-utilized Talent: underutilizing people's talents, skills or knowledge Transportation: unnecessary movement of materials Inventory: excess products/ materials not being processed Motion: unnecessary movement of people Extra-Processing: unnecessary steps in process, redundancies between processes

Kaoru Ishikawa

Developed first tools used in quality management - cause and effect diagram, also called "ishikawa" or "fishbone" diagram

3. Inventory & Setup/Changeover Time Reduction

Excess inventory is waste, hides other problems -Reduce inventory levels that highlight production problems to be solved -End result is smoother running production process with less inventory investment

1. Waste Reduction

Firms reduce costs and add value by eliminating waste from production system -Encompasses wait times, inventories, material and people movement, processing steps, variability, ant other non value-adding activity

Make-to-stock (MTS)

Literally means to manufacture products for stock based on demand forecasts, push supply chain -Key issue is balancing inventory and demand, companies struggle to make correct product at correct time in correct quantities as forecasts are inaccurate at detailed specification level -Features economies of scale, large volumes, long production runs, low variety, and multiple distribution channels

Total Quality Management (TQM)

Management philosophy based on principle that every employee be committed to maintaining high standards of work quality in every aspect of company's operations

6. Workforce Commitment

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

Batch

Manufactures small quantity of item in single production run (milk and other processed food, clothing)

Engineer to Order (ETO)

Manufacturing process in which component is designed, engineers, and built to customer specifications only after order is received -Essence is building a unique product every time - Reputation for quality and innovation are key to success -Used when product are unique and extensively customized for specific needs of individual customers

Make-to-Order (MTO)

Manufacturing strategy that allow customers purchase custom products to specifications -only manufactures end product one customer places order, lead time for customer delivery is longer -Products are not produced until customer order is received

Six Sigma

Quality philosophy that emphasizes a commitment toward excellence, encompassing suppliers, employees, and customer

Operations Management

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

2. LEAN Layouts

Simplified manufacturing operations which moves people and materials when & where needed to achieve smooth product flow

Assembly Line

Standard products with limited number of variations moving through stages of production (cars, television, smart phones)

Changeover Time

Time taken to adapt and modify manufacturing equipment and systems to produce different product or new batch of same product

Setup Time

Time taken to prepare and format manufacturing equipment and systems for production

Acceptance Sampling

When shipment is received from supplier, statistically significant representative sample is taken and measured against quality acceptance standard

W. Edwards Deming

Widely considered father of TQM - creator of Plan-Do-Check-Act Model Developed 14 points to guide companies in quality improvement: -Cease dependence on inspect to improve quality - constantly improve production and service system -institute leadership -break down barriers between departments -put everyone to work to accomplish transformation

Joseph Juran

"fitness for use -developed concept of cost of quality 1. Quality Planning: develop products satisfy needs, managers set goals, priorities and compare results 2. Quality Control: Establish standards and measure performance, interpret difference and take action 3. Quality Improvement: identify projects for improvement, provide control to maintain improvement

TQM Key Principles

- Management Commitment - Employee Empowerment - Fact based decision making - Continuous Improvement - Customer focus

Three main foundational aspects of Six Sigma

1. Quality is defined by customer: customer expects performance, reliability, etc. 2. Use of Technical tools: statistical quality control 3. People involvement: structured methodology, has defined roles for participants

DMAIC Methodology

-Define Measure Analyze Improve Control: data driven quality strategy for improving products - Used when company wants to improve existing process

DMADV Methodology

-Define, Measure, Analyze, Design, Verify : data driven quality strategy for designing products & processes -Used when company wants to create new product design/process thats more predictable and defect free

5. LEAN Supply Chain Relationships

1. Eliminate waste 2. Customer focused to satisfy end customer demand 3. Moving products efficiently through system 4. Increase supply chain visibility 5. Optimize inventory levels

Lean Manufacturing Philosophy

1. Quick Response: rapid replenishment of customer's stock by supplier with direct access to data from customer's point of sale 2. Efficient Consumer Response (ECR): strategy to increase 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 needed 4. Keiretsu Relationships: cooperative coalitions with cross financial dependence involves companies throughout value chain, remaining independent but working closely together for mutual benefit

5 Pillars of Workplace Management & Org

1. Sort: keep only necessary items 2. Straighten: organize and arrange items to promote efficient workflow 3. Shine: clean work area so it's neat and tidy 4. Standardize: schedule regular cleaning and maintenance 5. Sustain: self discipline 6. Safety

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 (Kaizen)

Buyer's Risk

Buyer accepts shipment of poor-quality units because sample quality level did meet acceptance standard

Supplier's Risk

Buyer rejects shipment of good-quality units because sample quality level didn't meet acceptance standard

Assemble-to-Order (ATO)

Manufacturing strategy where final products are produced quickly as ordered by customers - requires main sub assemblies for product be completed and inventoried -POSTPONEMENT strategy: once order is received, product is assembled quickly and shipped to customer -Sub assemblies are made, stocked to forecast, but products are not assembled until customer order is received

Lean

Operating philosophy of waste reduction and value enhancement and was originally created as Toyota Production System (TPS) -is a CULTURE -Provides value for customers through use of most efficient resources possible

4. Small Batch Scheduling and Uniform Plant Loading

Production in small batches enables production to be synchronized with customer demand