Supply Chain and Operations Management Notes

Fundamentals of Supply Chain Management

• Operations Management:
  • Involves the design, execution, and control of operations turning resources into goods/services.
  • Aim: Efficiently convert materials and labor while controlling costs to maximize profits.

Manufacturing Strategies

• Crucial for aligning production with customer expectations and internal strengths.

• Types of strategies:

  • Make-to-Stock (MTS):

  • Products manufactured for stock based on demand forecasts (push system).

  • Challenges include accurate forecasting to avoid excess inventory or stockouts.

  • Common products: processed foods, textiles.

  • Make-to-Order (MTO):

  • Products customized to customer specifications, made after order (pull system).

  • Suitable for highly configurable and expensive products (e.g., aircraft).

  • Advantages include reduced risk of excess inventory.

  • Assemble-to-Order (ATO):

  • Basic parts produced and stocked, then assembled after order.

  • Hybrid of MTS and MTO, allows quick delivery with some customization.

  • Engineer-to-Order (ETO):

  • Components designed after order based on customer specifications.

  • High cost of poor quality, focusing on managing unique products and processes.

Total Cost of Manufacturing (TCM)

• Total cost encompasses all production costs, including:
  • Fixed and variable costs
  • Production and procurement activities
  • Warehousing and transportation

LEAN Manufacturing

• LEAN Philosophy:
  • Originated from Toyota Production System (TPS), focusing on waste reduction and value enhancement.
  • Emphasizes customer value through efficient resource use.
• Elements of LEAN:
  • Waste Reduction: Aim to eliminate wasted time, movement, and resources.
  • LEAN Layouts: Organize workflow for efficiency.
  • Respect for People: Involves all employees for shared responsibility in quality.
  • Continuous Improvement (Kaizen): Ongoing effort to improve products/processes.

The Seven Wastes in LEAN (DOWN TIME)

1. Defects: Errors not meeting acceptance.
2. Overproduction: Producing more than needed.
3. Waiting: Idle time between processes.
4. Non-Utilized Talent: Underusing employee competencies.
5. Transportation: Unnecessary movement of goods.
6. Inventory: Excess products not being processed.
7. Motion: Unnecessary movements by workers.
8. Extra-Processing: Unneeded steps in a process.

Six Sigma

• Definition: Quality management process aimed at reducing defects and variability.
• Goal: Achieve less than 3.4 defects per million opportunities (DPMO).
• Methodologies:
  • DMAIC: Define, Measure, Analyze, Improve, Control for improving existing processes.
  • DMADV: Define, Measure, Analyze, Design, Verify for creating new product designs.

Total Quality Management (TQM)

• Management philosophy promoting quality through all company operations.
• Key Principles:
  • Management commitment
  • Employee empowerment
  • Fact-based decision making
  • Continuous improvement
  • Customer focus

Voice of the Customer (VOC)

• Captures customer expectations and feedback to drive quality improvements.
• Gathering methods include interviews, surveys, and observation.

Cost of Quality (CoQ)

• Evaluates costs associated with preventing poor quality, categorized into:
  • Cost of Good Quality: Appraisal and Prevention.
  • Cost of Poor Quality: Internal and External Failure costs.

Statistical Tools for Quality Control

• Tools include:
  • Check Sheets
  • Cause and Effect Diagrams (Ishikawa)
  • Control Charts
  • Histograms
  • Pareto Analysis
  • Scatter Diagrams
  • Flow Diagrams (Stratification).

Integrating LEAN and Six Sigma

• Both aim for high quality, efficiency, and customer satisfaction.
• LEAN reduces waste while Six Sigma minimizes variation and defects.
• Effective implementations begin with LEAN methodologies followed by Six Sigma’s statistical approaches.