Intro to Supply Chain Management Chapter 8 Rutgers Taitt

Operations Management

Managing the process of converting resources into goods and services, in alignment with the company's business strategy, as efficiently and effectively as possible while also controlling costs

Manufacturing

Transform raw materials and components into a finished product, especially using large scale operations (mass production)

Manufacturing Management

Management of all the processes and resources involved in manufacturing

LEAN

operating philosophy of waste reduction and value enhancement

Six Sigma

Stat based, data driven methodology for identifying and removing the causes of defects and minimizing variability in manufacturing and business processes

Manufacturing Strategies

Vary depending on the product and customer requirements.

Make-To-Stock

manufacturing products for stock based on demand forecasts (Push System)

Main Challenge of Make to Stock

avoid having excess inventory, while still maintaining safety stock

Make-To-Order

Starts the manufacturing process only after a customers order is received

Pros and Cons of Make to Order

Pro: Allows customers to have more customization and relieves the excessive inventory problem

Cons: Created additional wait times for the customer, does not work for products that customers expect immediate availability

Assemble to Order

products are produced after customer orders and are more customizable.

Requires essential parts to be already manufactured, just not assembled yet

Example: Laptops

ATO is a hybrid strategy that attempts to combine the benefits of make to stock AND make to order

Engineer to Order

product is designed, engineered, and built to the customers specifications after receipt of order

- Each product is unique

2 overarching Types of Manufacturing Processes

Intermittent Processes & Repetitive Processes

Intermittent Processes

Used to produce many products with different processing requirements in lower volumes

Repetitive Processes

Used to produce one or a few standardized products in high volume

4 Specific types of manufacturing processes

Job Shop Production

Batch Production

Line Flow Production

Continuous Flow Production

Job Shop Production

Creates a custom product for each customer

Usually just 1 or a small number of items produced

Highly customizable

Examples: Architects, ship builders

Batch Production

Manufacturing a small fixed quantity of an item in a single production run

Each item in the batch goes through one stage of the process before the batch moves onto the next stage

Produces good quality products more economically than manufacturing them individually

Example: Bakeries, furniture

Line Flow Production

For standard products with little to no variation

product moves down assembly line through various stages of production

when one task is finished the next task starts immediately

Example: Cell phones, toilet paper, automobile assembly

Continuous Flow Production

High capital investment, usually dedicated to just one specific product

involves a series or processes through which raw materials flow

generally highly automated and runs 24/7

Examples: Oil/Gas

AI

capability of a machine to imitate intelligent human behavior and perform complex tasks similar to how humans solve problems

Machine Learning

subfield of AI, involves using computer systems that can learn and adapt without follow explicit instructions by using algorithms and statistical models to analyze and draw inferences from patterns in data

Predictive Maintenance

Data from sensors and machinery on factory floor is analyzed to understand how and when failures and breakdowns are likely to occur

Automation

using technology and machines to perform specific tasks without requiring humans to intervene

Smart manufacturing

using advanced, connected technologies to coordinate physical and digital processes within factories and across the supply chain, aiming to improve performance

Internet of Things (IoT)

A network of physical objected connected to the internet that can communicate with each other and the cloud. These objects are embedded with sensors, software, and other technologies, creating a vast network of interconnected decives that can collect and exchange data

IoT devices can be used in manufacturing to:

Monitor machine performance, detect equipment failures, and optimize production processes

IoT Risks and Challenges

Security and privacy risks

interoperability issues

Data Overload

Cost and Complexity

Regulatory and legal challenges

3D Printing

Additive manufacturing process in which a physical object is created from a digital design by printing thin layers of material in liquid or powdered plastic, metal, or cement and fusing the layers

3D Printing benefits

-limitless customization and incredibly intricate designs

-Less reliance on suppliers because they can be fabricated whenever and wherever

- produces less waste, and less need for storage

- requires no tools

- very fast

- Good with prototypes

Total Cost of Manufacturing (TCM)

Aggregate cost of producing and delivering products to your customers

TCM Includes

- Manufacturing and procurement activities

- Inventory and Warehousing activities

- Transportation activities

TCM is generally expressed as

Cost per unit

As volume goes up (TCM)

Manufacturing and procurement costs go down (Economies of scale)

Inventory and warehousing costs go up

Transportation costs go down (But level off as shipping container gets filled and another must be used)

First use of LEAN

Henry Fords mass production line and continuous assembly systems

Taichi Ohno and Shigeo Shingo

1940s, created the Toyota production system which built upon Fords production system

The term "LEAN" was coined by

John Krafcik in 1988

in the 1990s SCM combines

Quick Response

Efficient Consumer Response

Just In Time

Keiretsu Relationships

Quick Response

Rapid replenishment of customer stock by a supplier with direct access to data from customers point of sale

Efficient Consumer Response (ECR)

strategy to increase the level of services to consumers through close cooperation among retailers, wholesalers, and manufacturers.

Just In Time (JIT)

inventory strategy to decrease waste by receiving materials only when and as needed

Keiretsu Relationships

companies along the supply chain remaining independent but working close together for mutual benefits

LEAN

Philosophy, not a toolbox of methods

Goal is to eliminate waste and minimize resources used

LEAN results in:

- Large cost reductions

- Improved Quality

- Increased customer service

Value

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

Value Added Process

Steps that shape a product/service

Non-Value Added process

steps that take time, resources, or space but do not shape the product

Non value added incidental waste vs pure waste

incidental is because its required due to current limitations, be it technology or laws etc.

Pure waste can be stopped and the customer would not even notice. it creates 0 value

Lean is composed of 3 components

LEAN manufacturing

Respect for people

total quality management

LEAN manufacturing

- Satisfy internal customer demand

- communicate forecasts and schedules up the supply chain

- quickly moving products in production system

- optimizing inventory levels across supply chain

- increase value, capabilities, and flexibility of workers through cross training

- extend collaboration beyong just 1st tier suppliers and customers to include 2nd and 3rd tier as well

Elements of LEAN manufacturing

Waste Reduction

LEAN layouts

Inventory, setup/changeover time reduction

Small batch scheduling & Uniform plant loading

LEAN supply chain relationships

workforce empowerment

continuous improvement

Waste Reduction

Waste ecompasses wait times, inventory, material and people movement, processing steps, variabiliy

Any non value adding activity

Waste Categories

Defects

Overproduction

waiting

non utilized talent

transportation

inventory

motion

extra procerssing

Reducing waste results in

reduced cycle times

greater throughput

better productivity

Improved quality

Reduced costs

LEAN Layout

move people and materials when and where needed and as soon as possible

- Richard dick and maurice mac Mcdonalds example (speedee service system)

Inventory

some is good, too much is a waste

Takes up space and increases carrying costs

Water level example

lowering the water levels shows the rocks that are the hidden problems you wouldnt have noticed

Setup Time

the time it takes to prepare manufacturing equipment for production

While not being used, WASTE

Because this is necessary, goal is to minimize not eliminate

Changeover time

time taken to adapt and modify manufacturing equipment to produce a different product

While not being used, WASTE

Because this is necessary, goal is to minimize not eliminate

Large Batch VS Small Batch

Large batches exacerbate bullwhip effect (Snake image in slides)

Small BAtch creates smooth workload as production can be synchronized with customer demand (Pull system)

- Increases flexibility

- Lowers throughput times

Uniform Plant Loading:

Planning up to capacity earlier to meet demand in later periods

- Also called front loading or leveling

- prevents needing to hire workers in high demand time or layoffs in lower demand times

LEAN supply chain relationships

relationships developed with key customers and key suppliers

- exchange information

- mutual dependency and benefits

- work together to remove waste, reduce costs, and improve quality and customer service

Workforce Commitment

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

- Managers create a culture where workers are encouraged to speak out

- Employees are cross trained for when machines break down or if other workers are absent

Continuous Improvement

a system involving every employee, making little changes regularly, anywhere changes can be made, to reduce process, deliver, and quality problems

Respect for People

Must exist for organization to be at its best

- LEAN involves flatter hierarchy

- workers are given more responsibility

- supply chain members work together in cross functional teams

Goal of Respect for people

use people more wisely, not reduce number of people

Role of workers

perform tasks and pursue company goals:

- Improve production process

- Correct quality problems

- Monitory quality

(Iceberg of ignorance, frontline workers know more)

Role of management

Create a cultural for LEAN to succeed

Includes: Atmosphere of cooperation, employee empowerment, and incentive systems to recognize and reward LEAN behavior

Role of Suppliers

LEAN involves building long term supplier relationships

- Partner with suppliers

- Improve process quality

- Share information

Goal of role of suppliers

have fewest high quality suppliers possible without unnecessarily increasing risk

Total Quality Management (TCM)

management philosophy based on the principle that employees must maintain high work standards in every aspect of a companies operations

Six Sigma is Integral to TCM

Key principles of Total Quality Management

- Management commitment

- employee Empowerment

- Fact based decision making

- continuous improvement

- Customer focus

Noted quality experts

W. Edwards Deming

Philip Crosby

Kaoru Ishikawa

W. Edwards Deming

Father of TCM

creator of Plan-Do-Check-Act model

Philip Crosby

coined the phrase "Quality is free" as defects are costly. Introduced concept of zero defects and focused on prevention, not inspection

Kaoru Ishikawa

- Developed one of the first tools in quality management process, the Cause and Effect Diagram, also called the "Ishikawa" or" Fishbone" diagram

- Father of quality circles

- he was a proponent of continuous customer service (customer service even after customer receives product)

W. Edwards Demings 14 points to guide companies in quality improvement

1. Create constancy of purpose to improve product and service

2. Adopt the new philosophy

3. Cease dependence on inspections to improve quality

4. End the practice of awarding business based on price

5. Constantly improve the production and service system

6. Institute training on the job

7. Institute leadership

8. Drive out fear

9. Break down barriers between departments

10. Eliminate slogans and exhortations

11. Eliminate quotas

12. Remove barriers to pride of workmanship

13. Institute program of self improvement

14. Put everyone to work to accomplish the transformation

Philip Crosby's 4 absolutes of quality

1. Quality is conformance to requirements

2. The system of quality is prevention

3. Performance standard is zero defects

4. Measure of quality is the price of nonconformance

Ishikawas "Fishbone" diagram, also known as cause and effect diagram

Users can see all possible causes of a problem to help find root cause

Voice of the Customer (VOC)

Business term used to describe the process of capturing internal, and external customers expectations, preferences, likes, and dislikes

Voice of the customer (VOC) can be captured in various ways, including:

Customer Interviews

Market Surveys

Focus Groups

Customer Specifications

Observation

warranty data

Field Reports

Complaint Logs

Cost of Quality

An approach that supports a companys efforts to determine the level of resources necessary to prevent poor quality and to evaluate the quality of the companys products and services

- Any cost that wouldnt have occurred if the quality was perfect contributes to Cost of Quality

- helps companys determine benefits and savings generated by potential process improvements

2 Types of Cost of Quality

- Cost of Good Quality (Appraisal and prevention costs)

- Cost of Poor Quality (Internal and External failure costs)

Appraisal Costs

associated with evaluating purchased materials, processes, products, and services to ensure they conform to specifications

Appraisal costs include costs for:

- Testing, evaluating, and inspecting the quality of incoming materials, process setups, and products against agreed upon specifications

- Quality assessment and approval of suppliers

- Performing audits to confirm quality system is operating correctly

Prevention Costs

Related to quality management systems design, implementation, and maintenance. They are planned and experienced before products or materials are acquired or produced

Prevention costs include costs for:

- Establishment of specifications for incoming materials, processes, products, and services

- creation of quality plans

- development, preparation, and maintenance of quality training

- creation and maintenance of the quality system

Internal Failure Costs

Occur when the product or service doesnt meet the designed quality standards and are identified BEFORE the product is delivered to the customer

Internal Failure Costs include costs for:

- Defective products or materials that cannot be used, sold, or repaired, and the costs associated with correcting these defects

- Unnecessary work or inventory resulting from errors

- Activities required to establish the root causes of product or service failures

External Failure costs

occur when the product or service doesnt meet the designed quality standards, but only detected AFTER the product is delivered to customer

External Failure costs include costs for:

- Handling and responding to customer complaints

- failed products that must be replaced or services that are repeated

- repair of returned products and products still in the field

- handling and investigating rejected or recalled products, including return transportation costs

Six Sigma

Quality Management Process

- Focuses on improving quality of process outputs by identifying and removing the cause of defects and minimizing variability in manufacturing and business processes

- Structured and data driven approach to drive a near perfect quality goal (Zero Defects)

Goal of Six Sigma

attain less than 3.4 defects per million opportunities (DPMO)

Originator of Six Sigma

Motorola in 1980s

Six Sigma became famous when

Jack Welch made it central to his business strategy at General Electric in 1995

3 Foundational aspects of Six Sigma

1. Quality is defined by the customer

2. The use of Technical Tools

3. People Involvement

Key aspects of Quality for customer:

Reliability

Good functionality

Durability

Good Design

Good after sale service

Value for money

Consistency

Use of Technical Tools

Provides statistical approach to solving any problem and thereby improving the quality level of the product and the company

- concerned with solving and permanently fixing quality problems

- all employees should be trained to use the seven tools of quality control

Root Cause Analysis (RCA)

a collective term that describes a wide range of approaches, tools, and techniques used to uncover causes of problems

Seven Tools of Quality Control

1. Check Sheets

2. Histograms

3. Pareto Analysis

4. Cause & Effect Diagrams

5. Flow Diagram

6. Control Charts

7. Scatter Diagrams