Chapter PROCESS MANAGEMENT: JIT & TQM LEARNING OBJECTIVES You should be able to:  List & discuss the major elements of lean production & Six Sigma quality  Describe why lean production & Six Sigma quality are integral parts of SCM  Discuss the Toyota Production System & its association with lean production  Discuss the linkage between lean production & environmental protection  Describe the historical developments of lean production & Six Sigma  Describe & use the various tools of Six Sigma  Understand the importance of statistical process control for improving quality MBA Nguyen Phi Hoang@2015_SCM CHAPTER OUTLINE • • • • • • • • • • Introduction Lean Production & the Toyota Production System Lean Thinking & Supply Chain Management The Elements of Lean Production Lean Systems & the Environment The Origins of Six Sigma Quality Comparing Six Sigma & Lean Six Sigma & Supply Chain Management The Elements of Six Sigma The Statistical Tools of Six Sigma MBA Nguyen Phi Hoang@2015_SCM Introduction In 1990s, supply chain management combined:  Quick response (QR) - speed & flexibility  Efficient Consumer Response (ECR) - speed & flexibility  JIT - Continuous reduction of waste  Keiretsu Relationships - Including suppliers in JIT/TQM efforts These approaches have emerged as philosophies & practices known as Lean Production (or Lean Manufacturing) & Six Sigma MBA Nguyen Phi Hoang@2015_SCM Lean Production & the Toyota Production System JIT emphasizes –  Reduction of waste  Continuous improvement  Synchronization of material flows within the organization  Channel integration- extending partnerships in the supply chain Stage 1- Firm is internally focused & functions managed separately Silo effect is reactive & short-term goal oriented Stage 2- Firm integrates efforts & resources among internal functions Stage 3- Firm links suppliers/customers with firm’s processes Stage 4- Firm broadens supply chain influence beyond immediate or first-tier suppliers & customers MBA Nguyen Phi Hoang@2015_SCM Lean Production & the Toyota Production System Lean Production (Continued) an operating philosophy of waste reduction & value enhancement & was originally created as Toyota Production System (TPS) by key Toyota executives  Early versions were based on Ford assembly plants & U.S supermarket distribution systems  Key concepts incorporated in TPS are – • Muda - waste in all aspects of production • Kanban - signal card & part of JIT • Statistical process control (SPC) as part of TQM efforts • Poka-Yoke - error or mistake-proofing MBA Nguyen Phi Hoang@2015_SCM  Lean Production & Supply Chain Management Supply chain management (SCM) seeks to incorporate Lean elements using –  cross-training,  satisfying internal customer demand  quickly moving products in the production system  communicating demand forecasts & production schedules up the supply chain  optimizing inventory levels across the supply chain  Channel integration - extending alliances to suppliers’ suppliers & customers’ customers  The silo effect works against channel integration MBA Nguyen Phi Hoang@2015_SCM Lean Production & Supply Chain Management Stages of SCM Evolution (Continued) 1: Internal Focused  functional silos  top-down management  internal performance measures  reactive, shortterm planning  no internal integration MBA Nguyen Phi Hoang@2015_SCM 2: Functional Integration  internal flow of goods  emphasis on cost reduction  efficiencies gained by internal integration 3: Internal Integration 4: External Integration  integration of flow in firm  lean activities for goods & information  measurement of supplier performance & customer service  integration with suppliers & customers  integration explored w/ 2nd & 3rd tier suppliers & customers  alliance development (Table 8.1) The Elements of Lean Production The Elements of Lean  Waste Reduction  Lean Supply Chain Relationships  Lean Layouts  Inventory & Setup Time Reduction  Small Batch Scheduling  Continuous Improvement  Workforce Commitment MBA Nguyen Phi Hoang@2015_SCM The Elements of Lean Production (Continued) Waste (Muda) Reduction  Firms reduce costs & add value by eliminating waste from the productive system  Waste encompasses wait times, inventories, material & people movement, processing steps, variability, any other non-value-adding activity  Taiichi Ohno described the seven wastes MBA Nguyen Phi Hoang@2015_SCM 10 Elements of Six Sigma (Continued) Malcolm Baldrige National Quality Award Objectives • Stimulate firms to improve • Recognize firms for quality achievements, • Establish guidelines so that organizations can evaluate their improvement & provide guidance to others MBA Nguyen Phi Hoang@2015_SCM Categories Measured Leadership Strategic planning Customer & market focus Information & analysis Human resource focus Process management Business Results 27 Elements of Six Sigma (Continued) ISO 9000 and ISO 14000 Families of Management Standards  International Organization for Standardization (ISO) located in Switzerland has > 155 member countries  ISO 9000 and 14000 govern quality and environmental certification standards of production, respectively  The ISO 9000 standards were adopted in the US by ANSI and ASQC MBA Nguyen Phi Hoang@2015_SCM 28 Elements of Six Sigma (Continued) The DMAIC Improvement Cycle Define Measure Analyze Improve Control MBA Nguyen Phi Hoang@2015_SCM (Fig 8.4) 29 Elements of Six Sigma (Continued) Six Sigma Training Levels Levels Description Yellow Belt Basic understanding of Six Sigma Methodology and tools in the DMAIC problem solving process Team member on process improvement project Green Belt A trained team member allowed to work on small, carefully defined Six Sigma projects, requiring less than a Black Belt’s full-time commitment Black Belt Thorough knowledge of Six Sigma philosophies and principles Coaches successful project teams Identifies projects and selects project team members Master Black Belt A proven mastery of process variability reduction, waste reduction and growth principles and can effectively present training at all levels MBA Nguyen Phi Hoang@2015_SCM 30 Statistical Tools of Six Sigma  Flow Diagrams - Annotated boxes representing process to show the flow of products or customers  Check Sheets - to determine frequencies for specific problems  Pareto Charts - for presenting data in an organized fashion, indicating process problems from most to least severe  Cause and Effect Diagrams (Fishbone or Ishikawa diagrams) - used to aid in brainstorming & isolating the causes of a problem MBA Nguyen Phi Hoang@2015_SCM 31 Statistical Tools of Six Sigma (Continued) Process Map for Customer Flow at a Restaurant MBA Nguyen Phi Hoang@2015_SCM (Figure 8.5) 32 Statistical Tools of Six Sigma (Continued) Check Sheet for a Restaurant Problem M Tu W Th F Sa Su Tot %Tot long wait ////// ///// //////// ////// //////// / ////////// //// 48 34.0 // / / /// // 6.3 cold food wrong food ///// // / // ///// /// / 19 13.5 bad server ////// /// ///// / ////// // / 24 17.0 / // / /// / 5.7 ///// ///// 15 10.6 ///// /////// 14 9.9 / 2.9 141 100 bad table room temp // No parking // other Totals MBA Nguyen Phi Hoang@2015_SCM 17 / // 14 23 /// 13 34 (Figure 8.6) 33 33 Statistical Tools of Six Sigma (Continued) Pareto Chart for Restaurant Problems 60 50 40 30 20 10 Series1 MBA Nguyen Phi Hoang@2015_SCM long wait bad server wrong food 48 24 19 room no temp parking 15 (Figure 8.7) 14 cold food bad table Other 34 Statistical Tools of Six Sigma (Continued) Cause and Effect Diagram for the Long Wait Problem Material Run out of food Machinery Washing machine breaks Not enough tables Late deliveries Needs frequent maintenance Cooking delays Inadequate waiting area Credit card scanner breaks New automated cooking bays LONG WAIT Too much overbooking Untrained servers, cooks Preference to VIPs Can’t find customers No supervision No system for food or drink pickup Methods MBA Nguyen Phi Hoang@2015_SCM Understaffed shifts High turnover Poor hiring practices Manpower (Figure 8.8) 35 Statistical Tools of Six Sigma (Continued) Statistical Process Control  Allows firms to –  visually monitor process performance  compare the performance to desired levels or standards  take corrective action  Firms –  gather process performance data  create control charts to monitor process variability  then collect sample measurements of the process over time and plot on charts MBA Nguyen Phi Hoang@2015_SCM 36 Statistical Tools of Six Sigma (Continued) Statistical Process Control Natural variations  expected and random (can’t control) Assignable variations  have a specific cause (can control) Variable data  continuous, (e.g., weight) Attribute data  indicate some attribute such as color & satisfaction, or beauty MBA Nguyen Phi Hoang@2015_SCM 37 Statistical Tools of Six Sigma (Continued) Statistical Process Control Variable Control Charts (2 types):  x-bar chart tracks central tendency of sample means  R-chart tracks sample ranges Steps – Gather data when the process is in control Calculate the mean & the range for each sample Calculate the overall mean and average range of all the samples Use the x-means to calculate the upper & lower control limits Use the means & control limits to construct x-bar and R control charts MBA Nguyen Phi Hoang@2015_SCM 38 Statistical Tools of Six Sigma (Continued) Formula’s k k x x UCL LCL MBA Nguyen Phi Hoang@2015_SCM i 1 = x x i R k R = i 1 i k = x + A2 R UCLR = D4 R = x - A2 R LCLR = D3 R 39 Statistical Tools of Six Sigma (Continued) Statistical Process Control x chart for the Hayley Girl Soup Co MBA Nguyen Phi Hoang@2015_SCM (Figure 8.9) 40 Statistical Tools of Six Sigma (Continued) Acceptance Sampling  When shipments are received from suppliers, samples are taken and measured against the quality acceptance standard Shipment is assumed to have the same quality  Sampling is less time-consuming than testing every unit but can result in errors Producer’s risk- A buyer rejects a shipment of good quality units because the sample quality level did not meet standards (type I error) Consumer’s risk- Buyer accepts a shipment of poor-quality units because the sample falsely provides a positive answer (type II error) 41 MBA Nguyen Phi Hoang@2015_SCM ... the mean % of defect-free output DPMO 69.15 3 08, 537 2.5 84 .13 1 58, 686 93.32 66 ,80 7 3.5 97.73 22,750 99. 38 6,210 4.5 99 .86 5 1,350 99.977 233 5.5 99.99 68 32 99.99966 3.4 Note: standard deviations... Statistical process control (SPC) as part of TQM efforts • Poka-Yoke - error or mistake-proofing MBA Nguyen Phi Hoang@2015_SCM  Lean Production & Supply Chain Management Supply chain management. .. Information & analysis Human resource focus Process management Business Results 27 Elements of Six Sigma (Continued) ISO 9000 and ISO 14000 Families of Management Standards  International Organization