Quality Management, Six Sigma, and Lean Supply Chains

Total Quality Management (TQM)

Managing the entire organization so that it excels on all dimensions of products and services that are important to the customer.

Quality Specifications

Design quality - the inherent value the product in the marketplace and is thus a strategic decision for the firm.

Conformance quality

The degree to which the product or service design specifications are met.

Quality at the source

Making the person who does the work responsible for ensuring that specifications are met.

Costs of Quality (COQ)

The total costs associated with ensuring that products or services are of good quality.

Appraisal costs

Costs of the inspection, testing, and other tasks to ensure that the product or process is acceptable.

Prevention Costs

Sum of all the costs to prevent defects, such as the costs to identify the cause of the defect, to implement corrective actions, train personnel, or redesign a product or system.

Internal Failure Costs

Costs for defects incurred within the system: scrap, rework, repair.

External failure costs

Costs for defects that pass through the system, including customer warranty replacements, loss of customers or goodwill, handling complaints, and repair.

International Organization for Standardization (ISO)

Series of standards agreed upon by the International Organization for Standardization (ISO).

ISO 9000

Directs you to 'document what you do and then do as you documented.'

ISO 14000

Environmental management.

ISO 26000

Social responsibility issues.

1st Party Certification

A firm audits itself against ISO standards.

2nd Party Certification

A customer audits its supplier.

3rd Party Certification

A certifying agency serves as auditor.

ISO 9000 Quality Management Principles

Includes Customer Focus, Leadership, Involvement of People, Process Approach, Continual Improvement, Factual approach to decision making, and Mutually beneficial supplier relationships.

Inspection

Usually after the transformation or even the finished good; result: pass / fail.

Process Control

Monitor the transformation process for good quality outcomes.

Corrective Action

Fix or eliminate the current issue (or non-conformance) with the product.

Preventative Action

Perform countermeasures to prevent the issue in the future (by addressing the cause).

Six Sigma Quality

Philosophy and set of methods companies use to eliminate defects in their products and processes; seeks to reduce variation in the processes that lead to product defects.

Six Sigma

A statistical term to describe the quality goal of no more than 3.4 defects out of every million units.

Flowchart

a diagram of the sequence of operations (SIPOC supplier, input, process, output, customer)

Run chart

depict trends in data over time

Pareto chart

help to break down a problem into components

Checksheet

basic form to standardize data collection

Cause-and-effect diagram

show relationships between causes and problems

Opportunity flow diagram

used to separate value-added from non-value-added

Process control chart

used to assure that processes are in statistical control

DMAIC Methodology

Displays a horizontal flow chart showing Define, Measure, Analyze, Improve, Control

Define

identify customers and their priorities, a project suitable for Six Sigma efforts, and CTQs (critical-to-quality characteristics)

Measure

determine how to measure the process and how it is performing and identify the key internal processes that influence CTQs

Analyze

determine the most likely causes of defects and identify the key variables

Improve

identify means to remove the causes of defects, confirm the key variables, identify the maximum acceptance ranges of the key variables

Control

determine how to maintain the improvements and put tools in place to ensure that the key variables remain within maximum acceptance ranges

External Benchmarking

Looking outside the company to examine what excellent performers inside and outside the company's industry are doing in the way of quality.

Statistical Quality Control (SQC)

The quantitative aspects of quality management

Assignable variation

Variation that is caused by factors that can be identified and managed

Common variation

Variation that is inherent in the process itself

Process Capability

The ability of a process to consistently produce a good or deliver a service with a low probability of generating defects

Specification limits

range of variation that is considered acceptable by the designer or customer

Process control limits

range of variation that a process is able to maintain with a high degree of certainty

Statistical process control (SPC)

testing a random sample of output from a process to determine whether the process is producing items within a preselected range

Variables

characteristics that are measurable

Attributes

quality characteristics that are classified as either conforming or not conforming to specification.

Natural Variation

Variability that affects every production process to some degree and is to be expected.

Process Control with Variable Measurement

Utilizes X̄-Charts and R-Charts to monitor process performance.

Size of samples

Preferable to keep small.

Number of samples

Once chart set up, each sample compared to chart.

Frequency of samples

Tradeoff between cost of sampling and benefit of adjusting the system.

Control limits

Generally, use z = 3 (99.7% of samples are expected to fall within control limits).

x-charts

Monitor variance in 'central tendency' (or 'average' or 'mean').

Upper Control Limit (UCL)

Established when the standard deviation of the process population (σ) is known or not known.

Lower Control Limit (LCL)

Established when the standard deviation of the process population (σ) is known or not known.

√n

Standard deviation of sample means.

X̄̄

Average of sample means, or a target value set for the process (a.k.a. 'x double bar').

z

Number of standard deviations for a specific confidence level (z = 2.58 for 99 percent confidence or z = 3 for 99.7 percent confidence).

s

Standard deviation of the process distribution.

n

Sample size.

R-charts

Monitor variance in dispersion.

Range

Difference between the highest and lowest numbers in that sample.

R̄

Average of the measurement differences R for all samples.

m

Total number of samples.

Lean Production

Integrated activities designed to achieve high-volume production using minimal inventories.

Customer Value

Something for which the customer is willing to pay.

Waste

Anything that does not add value from the customer's perspective.

Waste Reduction

The optimization of the value-adding activities and elimination of non-value-adding activities that are part of the value stream.

Toyota Production System

Elimination of Waste (a.k.a. TIMWOOD) including Transportation, Inventory, Motion, Waiting, Over Processing, Over Production, and Defects.

Value Chain

Each step in the supply chain should create value; if an activity does not create value, it should be removed.

Value Stream

The value-adding and non-value-adding activities required to design, order, and provide a product from concept to launch, order to delivery, and raw materials to customers.

Value stream mapping (VSM)

A special type of flowcharting tool used to analyze where value is or is not being added as material flows through a process.

Kaizen

Japanese philosophy that focuses on continuous improvement, identifying specific short-term projects to implement change.

5s

Sort, Set in Order, Shine, Standardize, Sustain

Group Technology

Philosophy in which similar parts are grouped into families, and the processes required to make the parts are arranged in a specialized work cell.

Quality at the Source

Do it right the first time and, when something goes wrong, stop the process or assembly line immediately.

JIT Production

Producing what is needed when needed and nothing more; Anything over the minimum amount necessary is viewed as waste.

Level schedule

Pulls material into final assembly at a constant rate.

Freeze windows

The period of time during which the schedule is fixed, and no further changes are possible.

Backflush

Calculation of how many of each part were required to produce the actual quantity of finished products built.

Uniform plant loading

Smoothing the production flow to dampen schedule variation.

KANBAN

A signaling device used to control production or inventory (Pull System).

Kanban Squares

Marked spaces on the floor to identify where material should be stored (Colored golf Balls, or Container system).

k

Number of Kanban card sets.

D

Average number of units demanded over a given time period.

L

Lead time to replenish an order (in same time units as demand).

S

Safety stock expressed as a percentage of demand during lead time.

C

Container size.

Minimized Setup Times

Reductions in setup and changeover times are necessary to achieve a smooth flow.

Specialized plants

Small specialized plants rather than large vertically integrated manufacturing facilities.

Collaboration with suppliers

Important part of process, share projections with suppliers, Improved communication allows level production scheduling.

Build a Lean Supply Chain

Requires the plant layout to be designed to ensure balanced workflow with a minimum of work-in-process inventory.

Preventive maintenance

Periodic inspection and repair designed to keep equipment reliable.

Project

A series of related jobs, usually directed toward some major output and requiring a significant period of time to perform.

Project management

Planning, directing, and controlling resources (people, equipment, material) to meet the technical, cost, and time constraints of a project.

Pure Project

A self-contained team works full time on the project (Skunkworks).

Functional Project

Responsibility of the project lies within one functional division of the firm.

Matrix Project

a Blend of pure and functional project structure where people from different functional area works on the project, possibly only part time

Statement of Work (SOW)

A written description of the objectives to be achieved, brief statement of work to be done, and proposed schedule

Task

a further subdivision of a project - usually not longer than several months and performed by a single group or organization