Transcript Week 2

Week 2
BUSN 6110
Spring 1, 2012
Supply Chain
Management
Supply Chain Management
• First appearance – Financial Times
• Importance → Inventory ~ 14% of GDP
→ GDP ~ $12 trillion
→ Warehousing/Trans ~ 9% of GDP
→ Rule of Thumb - $12 increase in sales to = $1
savings in Supply Chain
• 1982 Peter Drucker – last frontier
• Supply Chain problems can cause ≤ 11% drop in
stock price
• Customer perception of company
SCOR
Reference: www.supply-chain.org
End-to-End Supply Chain
Plan
Plan
Deliver
Source
Return
Return
Suppliers’
Supplier
Make
Deliver
Return
Supplier
Source
Return
Your Company
Internal or External
Make
Deliver
Return
Plan
Source
Make
Return
Deliver
Source
Return
Return
Customer
Internal or External
Customers’
Customer
SCOR reference model
•
Whether from Cow to Cone or from Rock to Ring SCOR is not limited by
organizational boundaries
Copyright © Supply Chain Council, 2008. All rights reserved
5
5
End-to-End Supply Chain
Components
Source
Make
Sub assemblies
Deliver
Supplier’s Supplier
Source
Make
Supplier
Manufacturer
Deliver
Source
Make
MP3 Company
Retailer
Deliver
Source
Consumer
Deliver
Customer
Source
Customer’s Customer
Process, arrow indicates material flow direction
Copyright © Supply Chain Council, 2008. All rights reserved
6
6
Supply Chain
“The global network used to deliver products
and services from raw materials to end
customers through an engineered flow of
information, physical distribution, and cash.”
APICS Dictionary
Supply Chain Uncertainty
 Forecasting, lead times, batch
ordering, price fluctuations, and
inflated orders contribute to
variability
 Inventory is a form of insurance
 Distorted information is one of the
main causes of uncertainty Bullwhip
effect
Information in the
Supply Chain
 Centralized coordination of
information flows
 Integration of transportation,
distribution, ordering, and production
 Direct access to domestic and global
transportation and distribution
channels
 Locating and tracking the movement of
every item in the supply chain - RFID
Bar Codes
 Computer readable codes attached to
items flowing through the supply chain
 Generates point-of-sale data which is
useful for determining sales trends,
ordering, production scheduling, and
deliver plans
1234
5678
IT Issues
 Increased benefits and sophistication come
with increased costs
 Efficient web sites do not necessarily mean
the rest of the supply chain will be as efficient
 Security problems are very real – camera
phones, cell phones, thumb drives
 Collaboration and trust are important
elements that may be new to business
relationships
Suppliers
 Purchased materials account for about half
of manufacturing costs
 Materials, parts, and service must be
delivered on time, of high quality, and low
cost
 Suppliers should be integrated into their
customers’ supply chains
 Partnerships should be established
 On-demand delivery (JIT) is a frequent
requirement - what is JIT and does it work?
Sourcing
 Relationship between customers and suppliers
focuses on collaboration and cooperation
 Outsourcing has become a long-term strategic
decision
 Organizations focus on core competencies
 Single-sourcing is
increasingly a part
How does
of supplier relations
single source
differ from sole
source?
Distribution
 The actual movement of products and
materials between locations
 Handling of materials and products at
receiving docks, storing products,
packaging, and shipping
 Often called logistics
 Driving force today
is speed
Distribution Centers
and Warehousing
 DCs are some of the largest business
facilities in the United States
 Trend is for more frequent orders in
smaller quantities
 Flow-through facilities and automated
material handling
 Final assembly and product
configuration (postponement) may be
done at the DC
Vendor-Managed Inventory
 Not a new concept – same process used by
bread deliveries to stores for decades
 Reduces need for warehousing
 Increased speed, reduced errors, and
improved service
 Onus is on the supplier to keep the shelves
full or assembly lines running
 variation of JIT
 Proctor&Gamble - Wal-Mart
 Home Depot
Transportation
Railroads
 95,000 - 150,000 miles in US
 Low cost, high-volume
 Improving flexibility
 intermodal service
 double stacking
Complaints: slow, inflexible, large loads
Advantages: large/bulky loads, intermodal
Trucking
 Most used mode in US -75% of total
freight (volume not total weight)
 Flexible, small loads
 Consolidation,
Internet load match sites
 Truck load (TL) vs. Less Than Truck Load
(LTL)
Air
 Lightweight, small items
 Quick, reliable, expensive (relatively
expensive depending on costs of not
getting item there)
 Major airlines and US Postal Service,
UPS, FedEx
Package Carriers
 UPS, US Postal Service, FedEx Ground
 Significant growth driven by
e-businesses and the move to smaller
shipments and consumer desire to have it
NOW
 Use several modes of transportation
 Innovative use of technologies in some
cases
 Online tracking – some better than others
Intermodal
 Combination of several modes of
transportation
 Most common are truck/rail/truck and
truck/water/rail/truck
 Enabled by the use of containers – the
development of the 20 and 40 foot
containers significantly changed the face
of shipping
Switching Milk
Cans from a
Farmer’s Buggy
to a Truck on a
Rural Road in
North Carolina,
1929
Early form of intermodal transport and cross docking
Water
 One of oldest means of transport
 Low-cost, high-volume, slow (relative)
 Security - sheer volume - millions of
containers annually
 Bulky, heavy and/or large items
 Standardized shipping containers improve
service
 The most common form of international
shipping
Pipelines
 Primarily for oil & refined oil products
 Slurry lines carry coal or kaolin
 High initial capital investment
 Low operating costs
 Can cross difficult terrain
Global Supply Chain
 Free trade & global opportunities
 Nations form trading groups
 No tariffs or duties
 Freely transport
goods across borders
 Security!!
Quality
Management
Quality is a measure of goodness that is
inherent to a product or service.
Bottom line: perspective has to be from the
Customer – fitness for use
What Is Quality?
 “The degree of excellence of a thing”
(Webster’s Dictionary)
 “The totality of features and
characteristics that satisfy needs” (ASQ)
 Fitness for use
 Quality of design
Quality
• Quality Management – not owned by any
functional area – cross functional
• Measure of goodness that is inherent to a
product or service
FedEx and Quality
• Digitally Assisted Dispatch System – communicate
with 30K couriers
• 1-10-100 rule
1 – if caught and fixed as soon as it occurs, it
costs a certain amount of time and money to fix
10 – if caught later in different department or
location = as much as 10X cost
100 – if mistake is caught by the customer =
as much as 100X to fix
Product Quality Dimensions
• Product Based – found in the product
attributes
• User Based – if customer satisfied
• Manufacturing Based – conform to specs
• Value Based – perceived as providing good
value for the price
Dimensions of Quality (Garvin)
1. Performance

Basic operating characteristics
2. Features

“Extra” items added to basic features
3. Reliability

Probability product will operate over time
Dimensions of Quality (Garvin)
4. Conformance

Meeting pre-established standards
5. Durability

Life span before replacement
6. Serviceability

Ease of getting repairs, speed & competence of repairs
Dimensions of Quality (Garvin)
7. Aesthetics

Look, feel, sound, smell or taste
8. Safety

Freedom from injury or harm
9. Other perceptions

Subjective perceptions based on brand name, advertising, etc
Service Quality
1. Time & Timeliness

Customer waiting time, completed on time
2. Completeness

Customer gets all they asked for
3. Courtesy

Treatment by employees
Service Quality
4. Consistency

Same level of service for all customers
5. Accessibility & Convenience

Ease of obtaining service
6. Accuracy

Performed right every time
7. Responsiveness

Reactions to unusual situations
Quality of Conformance
 Ensuring product or service
produced according to design
 Depends on




Design of production process
Performance of machinery
Materials
Training
Quality Philosophers
 Walter Shewhart – Statistical Process Control
 W. Edwards Deming
 Joseph Juran – strategic and planning based
 Armand Fiegenbaum – total quality control “entire
business must be involved in quality improvement”
Deming’s 14 Points
1.
2.
3.
4.
5.
Create constancy of purpose
Adopt philosophy of prevention
Cease mass inspection
Select a few suppliers based on quality
Constantly improve system and
workers
6. Institute worker training
Deming’s 14 Points
7. Instill leadership among supervisors
8. Eliminate fear among employees
9. Eliminate barriers between
departments
10. Eliminate slogans
11. Remove numerical quotas
Deming’s 14 Points
12. Enhance worker pride
13. Institute vigorous training and
education programs
14. Develop a commitment from top
management to implement these 13
points
The Deming Wheel
(or PDCA Cycle)
4. Act
1. Plan
Institutionalize
improvement;
continue the
cycle.
Identify the
problem and
develop the plan
for
improvement.
3. Study/Check
2. Do
Assess the plan; is it
working?
Implement the
plan on a test
basis.
Also known as the Shewart Cycle
Six Sigma
• Quality management program that measures
and improves the operational performance of
a company by identifying and correcting
defects in the company’s processes and
products
Six Sigma
Started By Motorola
•
•
•
•
•
Define
Measure
Analyze
Improve
Control
Made Famous by
General Electric
40% of GE executives’
bonuses tied to 6 sigma
implementation
Malcolm Baldrige National Quality
Award
• Category 3 – determine requirements,
expectations, preferences of customers and
markets
• Category 4 – what is important to the
customer and the company; how does
company improve
Total Quality Management
1.
2.
3.
4.
5.
6.
7.
8.
Customer defined quality
Top management leadership
Quality as a strategic issue
All employees responsible for quality
Continuous improvement
Shared problem solving
Statistical quality control
Training & education for all employees
Cost of Quality
 Cost of achieving good quality
Prevention
 Planning, Product design,
Process, Training, Information
Appraisal
 Inspection and testing,
Test equipment,
Operator
Cost of Quality
 Cost of poor quality
Internal failure costs
 Scrap, Rework, Process failure,
Process downtime, Pricedowngrading
External failure costs
 Customer complaints,
Product return,
Warranty, Product
liability, Lost sales
Cause-and-Effect Diagram
Measurement
Faulty
testing equipment
Human
Poor supervision
Incorrect specifications
Lack of concentration
Improper methods
Inaccurate
temperature
control
Environment
Out of adjustment
Tooling problems
Old / worn
Inadequate training
Quality
Problem
Defective from vendor
Not to specifications
Dust and Dirt
Machines
Materialhandling problems
Materials
Also known as Ishikawa Diagram or Fish Bone
Poor process design
Ineffective quality
management
Deficiencies
in product design
Process
Hot House Quality
Lots of Hoopla and no follow
through
ISO 9000:2008
•
•
•
•
•
•
•
•
Customer focus
Leadership
Involvement of the people
Process approach
Systems approach to management
Continual process improvement – GAO
Factual approach to decision making
Mutually beneficial supplier relationships
Implications Of ISO 9000
 Truly international in scope
 Certification required by many foreign firms
 U.S. firms export more than
$150 billion annually to Europe
 Adopted by U.S. Navy,
DuPont, 3M, AT&T, and others
ISO Accreditation
 European registration
 3rd party registrar assesses quality program
 European Conformity (CE) mark authorized
 United States 3rd party registrars
 American National Standards Institute (ANSI)
 American Society for Quality (ASQ)
 Registrar Accreditation Board (RAB)
Product Development
Introduction
Product Development is a process which generates
concepts, designs, and plans to create services and
goods to meet customer needs.
1. Analyze market to assess need
2. Design product
3. Design process for making product
4. Develop plan to market product
5. Develop plan for full-scale production
6. Analyze financial feasibility
Increasing Importance of
Product Development
1. Customers demand greater product variety.
2. Customers are causing shorter product life cycles.
3. Improving technology is causing new products to
be introduced
4. The impact of increasing product variety and
shortening product life cycles is having a
multiplicative effect on the need for product
development.
5. Today, in order to be competitive, the firm may
have to produce many different products with a
life cycle of only five years or less. End of Life
issues
Product Design
Specifies materials
Determines dimensions &
tolerances
Defines appearance
Sets performance standards
Service Design
Specifies what the customer is to
experience
 Physical items
 Sensual benefits
 Psychological benefits
An Effective Design Process
 Matches product/service characteristics with
customer needs
 Meets customer requirements in simplest, most
cost-effective manner
 Reduces time to market - haste vs. speed to
market
 Minimizes revisions - quality designed into the
product
Stages in the Design Process
 Idea Generation — Product Concept - can you
create your own market? What role does the
voice of the customer play in idea generation?
 Feasibility Study — Performance Specifications
 Preliminary Design — Prototype - testing and
redesign
 Final Design — Final Design Specifications
 Process Planning — Manufacturing
Specifications - make to order/stock – assembly
line?
Idea Generation
 Suppliers, distributors, salespersons
 Trade journals and other published material
 Warranty claims, customer complaints,
failures
 Customer surveys, focus groups, interviews
 Field testing, trial users
 Research and development
More Idea Generators
 Perceptual Maps
 Visual comparison of
customer perceptions
 Benchmarking
 Comparing product/service
against best-in-class
 Reverse engineering
 Dismantling competitor’s product to
improve your own product
Perceptual Map of Breakfast Cereals
GOOD
TASTE
LOW
NUTRITION
HIGH
NUTRITION
BAD
TASTE
Perceptual Map of Breakfast Cereals
GOOD
TASTE
Cocoa Puffs
LOW
NUTRITION
HIGH
NUTRITION
Rice
Krispies
Cheerios
Wheaties
Shredded
Wheat
BAD
TASTE
© Russell and Taylor, Prentice Hall,
2004
Perceptual Map of Breakfast Cereals
GOOD
TASTE
How do I get here?
Cocoa Puffs
LOW
NUTRITION
HIGH
NUTRITION
Rice
Krispies
Cheerios
Wheaties
Shredded
Wheat
BAD
TASTE
© Russell and Taylor, Prentice Hall,
2004
Feasibility Study
 Market Analysis Market Segmentation
 Economic Analysis
 Technical / Strategic Analysis
 Performance Specifications
 Risk Analysis
Economic Analysis
• Can we produce it at a volume to make a
profit?
• If not, why produce?
• How many do we have to make to break
even?
Break Even Analysis
Total Costs = Total Revenues
(Volume x Price) =
(Fixed Costs + Variable Costs)
Profit = (Total Revenue –
Total Costs)
Fixed
Costs
B/E Point =
Sales Price – Variable Costs
Example
Fixed Costs = $2000
Variable Costs = $5/item
Sales Price = $10/item
Fixed
Costs
($2000)
B/E PT =
Sales Price ($10) – Variable
Costs ($5)
B/E point = ($2000/$5) 400 items
Risk Analysis
1. Identify the Hazards
2.Assess hazards to determine risks.
3.Develop controls and make risk decisions.
4.Implement controls.
5.Supervise and evaluate.
Preliminary Design
How will it look?
Create form & functional design
Build prototype
Test prototype
Revise prototype
Retest
Functional Design
(How the Product Performs)
 Reliability
 Probability product performs intended
function for specified length of time
 Maintainability
 Ease and/or cost or maintaining/repairing
product
System Availability
System Availability, SA =
MTBF
MTBF + MTTR
PROVIDER
MTBF (HR)
MTTR (HR)
A
B
C
60
36
24
4.0
2.0
1.0
System Availability
PROVIDER
MTBF (HR)
MTTR (HR)
A
B
C
60
36
24
4.0
2.0
1.0
SAA = 60 / (60 + 4) = .9375 or 93.75%
SAB = 36 / (36 + 2) = .9473 or 94.73%
SAC = 24 / (24 + 1) = .96 or 96%
Production Design
 Part of the preliminary design
phase
 Simplification
 Standardization
 Modularity
Final Design & Process Plans
 Produce detailed drawings & specifications
 Create workable instructions for
manufacture
 Select tooling & equipment
 Prepare job descriptions
 Determine operation & assembly order
 Program automated machines
Improving the Design Process
 Design teams
 Concurrent design
 Design for manufacture & assembly
 Design to prevent failures and ensure value
 Design for environment
 Measure design quality
 Utilize quality function deployment
 Design for robustness
 Engage in collaborative design
Design Teams
Preferred solution = cross functional teams
Marketing, manufacturing, engineering
Suppliers, dealers, customers
Lawyers, accountants, insurance
companies
Concurrent Design
 Improves quality of early design decisions
 Decentralized - suppliers complete
detailed design
 Incorporates production process
 Scheduling and management can be
complex as tasks are done in parallel
 include the customer in the process!!
Design for
Manufacture and Assembly
 Design a product for easy
& economical production
 Incorporate production
design early in the design phase
 Improves quality and reduces costs
 Shortens time to design and manufacture
 also known as Design for Six Sigma
Design for Six Sigma
• Define – the goals of the design activity
• Measure – customer input to determine what is
critical to quality from the customers’ perspective –
what are customer delighters? What aspects are
critical to quality?
• Analyze – innovative concepts for products and
services to create value for the customer
• Design – new processes, products, and services to
deliver customer value
• Verify – new systems perform as expected
DFM Guidelines
1. Minimize the number of parts, tools,
fasteners, and assemblies
2. Use standard parts and repeatable
processes
3. Modular design
4. Design for ease of assembly, minimal
handling
5. Allow for efficient testing and parts
replacement
Design for Assembly (DFA)
 Procedure for reducing number of parts
 Evaluate methods for assembly
 Determine assembly sequence
Design Review
 Failure Mode and Effects Analysis (FMEA)
A systematic approach for analyzing causes
& effects of failures
Prioritizes failures
Attempts to eliminate causes
Value Analysis
(Value Engineering)
Is there value added?
 Ratio of value / cost
 Assessment of value :
1. Can we do without it?
2. Does it do more than is required?
3. Does it cost more than it is worth?
4. Can something else do a better job
5. Can it be made by less costly method, tools,
material?
6. Can it be made cheaper, better or faster by
someone else?
Should we contract it out?
Design for Environment
 Design from recycled material
 Use materials which can be recycled
 Design for ease of repair
 Minimize packaging
 Minimize material & energy
used during manufacture,
consumption & disposal
 green laws in Europe -
Design for Robustness
 Product can fail due to poor design quality
 Products subjected to many conditions
 Robust design studies
Controllable factors - under designer’s
control
Uncontrollable factors - from user or
environment
 Designs products for consistent performance
A Well-Designed
Service System is
 Consistent with firm’s strategic focus
 Customer friendly
 Easy to sustain
 Effectively linked between front & back
office
 Cost effective
 Visible to customer
CHAPTER 8
Process Selection affects the
outcome – in production or
sports:
91
What is Process Selection?
• Series of decisions that includes
technical/engineering issues and volume/scale
issues
• Technical/engineering: basic methods that
produce a good or service
• Scale: how many or how much to produce;
how many to serve at a time
• Trade off analysis between capacity and costs
92
Why process selection is critical
• Dell – from make/assemble to order in Texas
to make/assemble to stock off shore
• Does this work?
• Break even analysis may depend on process
costs
• Which process gives the lowest costs –
assumption?
93
The Point of Indifference
Comparing Two Processes
• What is it?
• Who cares?
• How do you calculate it?
94
Comparing Two Processes
• Process A
• Fixed = $2000
• Variable = $5/item
• Process B
• Fixed = $11000
• Variable = $2/item
Comparing the Processes
FixedA + (VarA)x = FixedB + (VarB)x
2000 + 5x = 11,000 + 2x
3x = 9000
X = 3000
So what?
Trade off analysis
• Customer demanded quantity drives the trade
off analysis and decision process
• Example:
→ retail stocks at Christmas 2008 and 2009
season - goal save money by stocking less
→ At what point do you lose sales due to
lower stockage levels?
97
Process Design/Selection/Capacity
• Have to be simultaneous operations – some
texts suggest sequential steps
• Decision process has to be customer based
→ what should it be?
→ how many should be produced/how many
are we capable of producing?
→ how should it be produced?
98
Process Strategy - Defines
•
•
•
•
Capital intensity
Process flexibility
Vertical integration
Customer involvement
99
Goal of Process Design
• Reduce lead time for product to the customer
• Is it best to be the first to market and establish
the market?
• Or, be the follower and let someone else do
the R&D/design/risk?
100
Problems with Managing Large, Unfocused
Operations
• Growing facilities add more levels of
management and make coordination and
control difficult.
• New products are added to the facility as
customers demand greater product variety.
• Hidden overhead costs increase as managers
add staff to deal with increased complexity.
101
Process Planning
 Make-or-buy decisions
 Process selection
 Specific equipment selection
 Process plans
 Process analysis
102
Make-or-Buy Decisions
1.
2.
3.
4.
5.
6.
Cost
Capacity
Quality
Speed
Reliability
Expertise
What about
Proprietary Information?
Barrier to Make-or-Buy?
103
Rationale for Off Shore to Low Country Source
100.00%
94.00%
90.00%
80.00%
70.00%
60.00%
50.00%
37.00%
40.00%
27.00%
30.00%
23.00%
22.00%
21.00%
20.00%
20.00%
10.00%
0.00%
$ Savings procured
goods
Penetration to new
market
inventory redux
inc customer service
access new
technology
Source: Aberdeen Research,
“Low-Cost Country Sourcing Success Strategies: Maximizing and
Sustaining the Next Big Supply Savings Opportunity,” Jun 2005
reduced cycle time
log cost reductions
104
Process Plans
 Blueprints
 Bill of material Flat or multiple layers part or assembly
 Assembly chart /
product structure diagram
 Operations process chart - list of
operations involved in assembly
 Routing sheet - sequence of events
105
Process Analysis
 The systematic examination of all aspects
of a process to improve its operation




Faster
More efficient
Less costly
More responsive
 Basic tools
 Process flowchart
 Process diagrams
 Process maps
106
Operations Process Chart
Part name
Crevice Tool
Part No.
52074
Usage
Hand-Vac
Assembly No. 520
Oper. No. Description
Dept.
Machine/Tools
Time
10
Pour in plastic bits
041
Injection molding
2 min
20
Insert mold
041
#076
2 min
30
Check settings
& start machine
041
113, 67, 650
20 min
40
Collect parts & lay flat
051
Plastics finishing
10 min
50
Remove & clean mold
042
Parts washer
15 min
60
Break off rough edges
051
Plastics finishing
10 min
107
Process Analysis – What processes feed other
processes?
108
Process Flowchart
Description
of
process
1
Unload apples from truck
2
Move to inspection station
3
Weigh, inspect, sort
4
Move to storage
5
Wait until needed
6
Move to peeler
7
Apples peeled and cored
15
8
Soak in water until needed
20
9
Place in conveyor
5
10
Move to mixing area
11
Weigh, inspect, sort
Page 1 0f 3
Total
Distance
(feet)
Location: Graves Mountain
Process: Apple Sauce
Time
(min)
Operation
Transport
Inspect
Delay
Storage
Step
Date: 9-30-02
Analyst: TLR
20
100 ft
30
50 ft
360
20 ft
20 ft
30
480
190 ft
109
Principles for Redesigning Processes
•
•
•
•
•
Walk the Process!
Remove waste, simplify, consolidate
Link processes to create value
Let the swiftest and most capable
execute
Capture information digitally, data mine,
and use information to improve
operations
110
Principles for Redesigning Processes
•
•
•
•
•
Provide visibility through information
about process status
Fit the process with sensors and
feedback loops
Add analytic capabilities
Connect, collect and create knowledge
around the process
Personalize the process
111
Techniques for Generating Innovative Ideas




Vary entry point to a problem
Draw analogies
Change your perspective
Use attribute brainstorming
112
RFID
•
•
•
•
Active Tags
Always on
Battery powered
Can be read from up to
300 ft
• US Army
• Savi Tags
•
•
•
•
•
•
•
Passive Tags
Small
Must be activated
May be turned off
England
California
Rolex
113
114
115
Robotics
 Programmable manipulators
 Follow specified path
 Better than humans with respect to
 Hostile environments
 Long hours
 Consistency
 Adoption has been slowed by ineffective
integration and adaptation of systems
 Welding at Harley Davidson Plant
Questions?
116