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Lean manufacturing & 6s


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Lean manufacturing and sixsigma supply chain concepts

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Lean manufacturing & 6s

  1. 1. CHAPTER 8 PROCESS MANAGEMENT: LEAN PRODUCTION & SIX SIGMA QUALITY ISSUES IN SUPPLY CHAIN MANAGEMENT Principles of Supply Chain Management: A Balanced Approach Prepared by INLINE Solutions pvt. Ltd.,
  2. 2. Learning Objectives <ul><li>You should be able to: </li></ul><ul><ul><li>List & discuss the major elements of lean production & Six Sigma quality. </li></ul></ul><ul><ul><li>Describe why lean production & Six Sigma quality are integral parts of SCM. </li></ul></ul><ul><ul><li>Discuss the Toyota Production System & its association with lean production. </li></ul></ul><ul><ul><li>Discuss the linkage between lean production & environmental protection. </li></ul></ul><ul><ul><li>Describe the historical developments of lean production & Six Sigma. </li></ul></ul><ul><ul><li>Describe & use the various tools of Six Sigma. </li></ul></ul><ul><ul><li>Understand the importance of statistical process control for improving quality. </li></ul></ul>
  3. 3. Chapter Eight Outline <ul><li>Introduction </li></ul><ul><li>Lean Production & the Toyota Production System </li></ul><ul><li>Lean Production & Supply Chain Management </li></ul><ul><li>The Elements of Lean Production </li></ul><ul><li>Lean Production & the Environment </li></ul><ul><li>The Origins of Six Sigma Quality </li></ul><ul><li>Six Sigma & Lean Production </li></ul><ul><li>Six Sigma & Supply Chain Management </li></ul><ul><li>The Elements of Six Sigma </li></ul><ul><li>The Statistical Tools of Six Sigma </li></ul>
  4. 4. Introduction <ul><li>In 1990s, supply chain management combined: </li></ul><ul><ul><li>Quick response (QR)- speed & flexibility </li></ul></ul><ul><ul><li>Efficient Consumer Response (ECR)- speed & flexibility </li></ul></ul><ul><ul><li>JIT – Continuous reduction of waste </li></ul></ul><ul><ul><li>Keiretsu Relationships- Including suppliers in JIT/TQM efforts </li></ul></ul><ul><li>These approaches have emerged as philosophies & practices known as Lean Production (or Lean Manufacturing ) & Six Sigma </li></ul>
  5. 5. Lean Production & the Toyota Production System <ul><li>JIT emphasizes: </li></ul><ul><ul><li>Reduction of waste </li></ul></ul><ul><ul><li>Continuous improvement </li></ul></ul><ul><ul><li>Synchronization of material flows within the organization </li></ul></ul><ul><ul><li>Channel integration- extending partnerships in the supply chain </li></ul></ul><ul><li>Stage 1 - Firm is internally focused & functions managed separately. </li></ul><ul><li>Stage 2 - Firm integrates efforts & resources among internal functions. </li></ul><ul><li>Stage 3 - Firm links suppliers/customers with firm’s processes. </li></ul><ul><li>Stage 4 - Firm broadens supply chain influence beyond immediate or first-tier suppliers & customers. </li></ul>
  6. 6. Lean Production & the Toyota Production System (cont.) <ul><li>Lean Production- operating philosophy of waste reduction & value enhancement & was originally created as Toyota Production System (TPS) by key Toyota executives </li></ul><ul><li>Early versions were based on Ford assembly plants & U.S. supermarket distribution systems </li></ul><ul><li>Key concepts incorporated in TPS : </li></ul><ul><ul><li>Muda - waste in all aspects of production </li></ul></ul><ul><ul><li>Kanban - signal card & part of JIT </li></ul></ul><ul><ul><li>SPC as part of TQM efforts </li></ul></ul><ul><ul><li>Poka-Yoke - error or mistake-proofing </li></ul></ul>
  7. 7. Lean Production & Supply Chain Management <ul><li>Supply chain management (SCM) seeks to incorporate Lean elements using: </li></ul><ul><ul><li>cross-training, </li></ul></ul><ul><ul><li>satisfying internal customer demand </li></ul></ul><ul><ul><li>quickly moving products in the production system </li></ul></ul><ul><ul><li>communicating demand forecasts & production schedules up the supply chain </li></ul></ul><ul><ul><li>optimizing inventory levels across the supply chain </li></ul></ul><ul><li>Channel integration- extending alliances to suppliers’ suppliers & customers’ customers </li></ul><ul><li>The silo effect works against channel integration </li></ul>
  8. 8. Lean Production & Supply Chain Management (Cont.) Stages of SCM Evolution (Table 8.1) 1: Internal Focused 2: Functional Integration 3: Internal Integration 4: External Integration <ul><li>functional silos </li></ul><ul><li>top-down management </li></ul><ul><li>internal performance measures </li></ul><ul><li>reactive, short-term planning </li></ul><ul><li>no internal integration </li></ul><ul><li>internal flow of goods </li></ul><ul><li>emphasis on cost reduction </li></ul><ul><li>efficiencies gained by internal integration </li></ul><ul><li>integration of flow in firm </li></ul><ul><li>lean activities for goods & information </li></ul><ul><li>measurement of supplier performance & customer service </li></ul><ul><li>integration with suppliers & customers </li></ul><ul><li>integration explored w/ 2 nd & 3 rd tier suppliers & customers </li></ul><ul><li>alliance development </li></ul>
  9. 9. The Elements of Lean Production <ul><li>The Elements of Just-in-Time </li></ul><ul><ul><li>Waste Reduction </li></ul></ul><ul><ul><li>Lean Supply Chain Relationships </li></ul></ul><ul><ul><li>Lean Layouts </li></ul></ul><ul><ul><li>Inventory & Setup Time Reduction </li></ul></ul><ul><ul><li>Small Batch Scheduling </li></ul></ul><ul><ul><li>Continuous Improvement </li></ul></ul><ul><ul><li>Workforce Empowerment </li></ul></ul>
  10. 10. The Elements of Lean Production (Cont.) <ul><li>Waste ( Muda ) Reduction </li></ul><ul><ul><li>Firms reduce costs & add value by eliminating waste from the productive system. </li></ul></ul><ul><ul><li>Waste encompasses wait times, inventories, material & people movement, processing steps, variability, any other non-value-adding activity. </li></ul></ul><ul><ul><li>Taiichi Ohno described the seven wastes (See Table 8.3) </li></ul></ul>
  11. 11. The Elements of Lean Production (Cont.) <ul><li>Waste (Muda) Reduction (Cont.) </li></ul>The Seven Wastes (Table 8.3) Wastes Description Overproducing Unnecessary production to maintain high utilizations Waiting Excess idle machine & operator & inventory wait time Transportation Excess movement of materials & multiple handling Over-processing Non-value adding manufacturing & other activities Excess Inventory Storage of excess inventory Excess Movement Unnecessary movements of employees Scrap & Rework Scrap materials & rework due to poor quality
  12. 12. The Elements of Lean Production (Cont.) <ul><li>Waste (Muda) Reduction (Cont.) </li></ul>The Five-Ss (Table 8.4) Japanese S-Term English Translation English S-Term Used 1. Seiri Organization Sort 2. Seiton Tidiness Set in order 3. Seiso Purity Sweep 4. Seiketsu Cleanliness Standardize 5. Shitsuke Discipline Self-discipline
  13. 13. The Elements of Lean Production (Cont.) <ul><li>Lean Supply Chain Relationships </li></ul><ul><ul><li>Suppliers & customers work to remove waste, reduce cost, & improve quality & customer service. </li></ul></ul><ul><ul><li>JIT purchasing includes delivering smaller quantities, at right time , delivered to the right location , in the right quantities . </li></ul></ul><ul><ul><li>Firms develop lean supply chain relationships with key customers. Mutual dependency & benefits occur among these partners. </li></ul></ul>
  14. 14. The Elements of Lean Production (Cont.) <ul><li>Lean Layouts </li></ul><ul><ul><li>Move people & materials when & where needed, ASAP. </li></ul></ul><ul><ul><li>Lean layouts are very visual (lines of visibility are unobstructed) with operators at one processing center able to monitor work at another. </li></ul></ul><ul><ul><li>Manufacturing cells </li></ul></ul><ul><ul><ul><li>Process similar parts or components saving duplication of equipment & labor </li></ul></ul></ul><ul><ul><ul><li>Are often U-shaped to facilitate easier operator & material movements. </li></ul></ul></ul>
  15. 15. The Elements of Lean Production (Cont.) <ul><li>Inventory & Setup Time Reduction </li></ul><ul><ul><li>Excess inventory is a waste </li></ul></ul><ul><ul><li>Reducing inventory levels causes production problems </li></ul></ul><ul><ul><li>Once problems are detected, they can be solved. </li></ul></ul><ul><ul><li>The end result is a smoother running organization with less inventory investment. </li></ul></ul>
  16. 16. The Elements of Lean Production (Cont.) <ul><li>Inventory & Setup Time Reduction (cont.) </li></ul>Relationship between Order Quantity, Lot Size, and Average Inventory (Figure 8.1) When order quantity/lot size Q = 100, avg. inventory = 50; when Q is reduced to 50, avg. inventory falls to 25. 100 50 avg. inventory for Q=100 avg. inventory for Q=50 Time 25
  17. 17. JIT & Supply Chain Management (Cont.) <ul><li>Small Batch Scheduling </li></ul><ul><ul><li>Small batch scheduling drives down costs by: </li></ul></ul><ul><ul><ul><li>Reducing purchased, WIP, & finished goods inventories </li></ul></ul></ul><ul><ul><ul><li>Makes the firm more flexible to meet customer demand. </li></ul></ul></ul><ul><ul><li>Small production batches are accomplished with the use of kanbans. </li></ul></ul><ul><ul><li>Kanbans generate demand for parts at all stages of production creating a “pull” system. </li></ul></ul>
  18. 18. JIT & Supply Chain Management (Cont.) <ul><li>Small Batch Scheduling (Cont.) </li></ul>Small Lot Size Increases Flexibility (Figure 8.2) AAAAAAAA-----BBBBBBBB ------CCCCCCCC----- 3 product changes Long setup times AAA BBB CCC DDD AAA BBB CCC DDD AAA 9 product changes Time Large Lot Size Approach Small Lot Size Approach Short setup times
  19. 19. JIT & Supply Chain Management- Cont. <ul><li>Small Batch Scheduling (Cont.) </li></ul>A Kanban Pull System (Figure 8.3) Work cell A Mfg. Cell B Mfg. Cell A Movement of matl. into Work cell B creates a movement kanban to Work cell A Movement of finished component to assembly line creates a production kanban to Work cell B Movement of matl. to input area of Work cell B creates a production kanban to Work cell A Movement of matl. into Work cell A creates a movement kanban to the external supplier External supplies Input area Output area Final assembly line
  20. 20. JIT & Supply Chain Management (Cont.) <ul><li>Small Batch Scheduling (Cont.) </li></ul><ul><li>To determine the number of containers or kanban card sets: </li></ul>Where: D = the demand rate of the assembly line; T = the time for a container to make an entire circuit through the system, from being filled, moving, being emptied, and returning to be filled again; C = the container size, in number of parts; and S = the safety stock factor, from 0 to 100 percent. # of containers = DT(1 + S) C
  21. 21. JIT & Supply Chain Management (Cont.) <ul><li>Continuous Improvement ( Kaizen ) </li></ul><ul><ul><li>Continuous approach to reduce process, delivery, & quality problems, such as machine breakdown problems, setup problems, & internal quality problems. </li></ul></ul><ul><li>Workforce Commitment </li></ul><ul><ul><li>Managers must support Lean Production by providing subordinates with the skills, tools, time, & other necessary resources to identify problems & implement solutions. </li></ul></ul>
  22. 22. Lean Production & the Environment <ul><li>Lean green practices: </li></ul><ul><ul><li>Reduce the cost of environmental management </li></ul></ul><ul><ul><li>Lead to improved environmental performance. </li></ul></ul><ul><ul><li>Increase the possibility that firms will adopt more advanced environmental management </li></ul></ul><ul><li>Carbon-neutral - offsetting the carbon footprint of a firm’s operations </li></ul>
  23. 23. The Origins of Six Sigma Quality <ul><li>Six Sigma </li></ul><ul><li>Near quality perfection (the statistical likelihood of non-defects 99.99966% of the time) </li></ul><ul><li>Pioneered by Motorola in 1987 </li></ul><ul><li>A statistics-based decision-making framework designed to make significant quality improvements in value-adding processes </li></ul>
  24. 24. The Origins of Six Sigma Quality Six Sigma Metrics (Table 8.5) Note: standard deviations include 1.5 sigma “drift” # of std dev above the mean % of defect-free output DPMO 2 69.15 308,537 2.5 84.13 158,686 3 93.32 66,807 3.5 97.73 22,750 4 99.38 6,210 4.5 99.865 1,350 5 99.977 233 5.5 99.9968 32 6 99.99966 3.4
  25. 25. Six Sigma & Lean Production <ul><li>Lean Six Sigma ( Lean Six ) </li></ul><ul><li>Describes the melding of lean production and Six Sigma quality practices. </li></ul><ul><li>Both use: </li></ul><ul><ul><li>High quality input materials, WIP, and finished goods </li></ul></ul><ul><ul><li>Continuous Improvement (Kaizen) </li></ul></ul><ul><li>Lean and Six Sigma use complementary tool sets and are not competing philosophies </li></ul>
  26. 26. Six Sigma & Supply Chain Management <ul><li>Process integration & communication lead to fewer negative chain reactions along the supply chain, such as greater levels of safety stock, lost time & less productivity </li></ul><ul><li>Six Sigma is an enterprise and supply chain-wide philosophy, that emphasizes a commitment toward excellence & encompasses suppliers employees, and customers </li></ul>
  27. 27. Elements of Six Sigma <ul><li>Create constancy of purpose to improve product & service. </li></ul><ul><li>Adopt the new philosophy. </li></ul><ul><li>Cease dependence on inspection to improve quality. </li></ul><ul><li>End the practice of awarding business on the basis of price. </li></ul><ul><li>Constantly improve the production & service system. </li></ul><ul><li>Institute training on the job. </li></ul><ul><li>Institute leadership. </li></ul><ul><li>Drive out fear. </li></ul><ul><li>Break down barriers between departments. </li></ul><ul><li>Eliminate slogans & exhortations. </li></ul><ul><li>Eliminate quotas. </li></ul><ul><li>Remove barriers to pride of workmanship. </li></ul><ul><li>Institute program of self-improvement </li></ul><ul><li>Put everyone to work to accomplish the transformation </li></ul>Deming’s Way
  28. 28. Elements of Six Sigma (Cont.) <ul><li>Crosby’s Way </li></ul><ul><ul><li>Four Absolutes of Quality </li></ul></ul><ul><ul><li>The definition of quality is conformance to requirements </li></ul></ul><ul><ul><li>The system of quality is prevention. </li></ul></ul><ul><ul><li>Performance standard is zero defects. </li></ul></ul><ul><ul><li>The measure of quality is the price of nonconformance </li></ul></ul>
  29. 29. Elements of Six Sigma (Cont.) <ul><li>Juran’s Way </li></ul><ul><li>Quality Planning- Identify internal/external customers & their needs, develop products that satisfy those needs. Mangers set goals, priorities, & compare results </li></ul><ul><li>Quality Control- Determine what to control, establish standards of performance, measure performance, interpret the difference, & take action </li></ul><ul><li>Quality Improvement- Show need for improvement, identify projects for improvement, implement remedies, provide control to maintain improvement. </li></ul>
  30. 30. Elements of Six Sigma (Cont.) <ul><li>Objectives </li></ul><ul><li>Stimulate firms to improve </li></ul><ul><li>Recognize firms for quality achievements, </li></ul><ul><li>Establish guidelines so that organizations can evaluate their improvement & provide guidance to others </li></ul><ul><li>Categories Measured </li></ul><ul><li>Leadership </li></ul><ul><li>Strategic planning </li></ul><ul><li>Customer & market focus </li></ul><ul><li>Information & analysis </li></ul><ul><li>Human resource focus </li></ul><ul><li>Process management </li></ul><ul><li>Business Results </li></ul>Malcolm Baldrige National Quality Award
  31. 31. Elements of Six Sigma (Cont.) <ul><li>ISO 9000 and ISO 14000 Families of Management Standards </li></ul><ul><li>International Organization for Standardization (ISO) located in Switzerland has > 155 member countries. </li></ul><ul><li>ISO 9000 and 14000 govern quality and environmental certification standards of production, respectively. </li></ul><ul><li>The ISO 9000 standards were adopted in the US by ANSI and ASQC. </li></ul>
  32. 32. Elements of Six Sigma (Cont.) <ul><li>The DMAIC Improvement Cycle </li></ul><ul><li>(Fig. 8.4) </li></ul>Define Measure Analyze Improve Control
  33. 33. Elements of Six Sigma (Cont.) <ul><li>Six Sigma Training Levels </li></ul>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
  34. 34. Statistical Tools of Six Sigma <ul><li>Flow Diagrams- Annotated boxes representing process to show the flow of products or customers. </li></ul><ul><li>Check Sheets- to determine frequencies for specific problems. </li></ul><ul><li>Pareto Charts- for presenting data in an organized fashion, indicating process problems from most to least severe. </li></ul><ul><li>Cause-and-Effect Diagrams (Fishbone or Ishikawa diagrams)- used to aid in brainstorming & isolating the causes of a problem. </li></ul>
  35. 35. Statistical Tools of Six Sigma (Cont.) Process Map for Customer Flow at a Restaurant (Figure 8.5)
  36. 36. Statistical Tools of Six Sigma (Cont.) Check Sheet for a Restaurant (Fig. 8.6) Problem M Tu W Th F Sa Su Tot %Tot long wait ////// ///// //////// ////// ///////// ////////// //// 48 34.0 cold food // / / /// // 9 6.3 wrong food ///// // / // ///// /// / 19 13.5 bad server ////// /// ///// / ////// // / 24 17.0 bad table / // / /// / 8 5.7 room temp // /// ///// ///// 15 10.6 No parking // ///// /////// 14 9.9 other / // / 4 2.9 Totals 17 14 23 13 34 33 7 141 100
  37. 37. Statistical Tools of Six Sigma (Cont.) Pareto Chart for Restaurant Problems (Fig. 8.7)
  38. 38. Statistical Tools of Six Sigma (Cont.) Cause-and-Effect Diagram for the Long Wait Problem (Fig. 8.8) Poor hiring practices Cooking delays LONG WAIT Washing machine breaks Credit card scanner breaks New automated cooking bays Run out of food Late deliveries Needs frequent maintenance Not enough tables Inadequate waiting area Too much overbooking Preference to VIPs Can’t find customers No system for food or drink pickup Understaffed shifts High turnover Untrained servers, cooks No supervision Methods Manpower Machinery Material
  39. 39. Statistical Tools of Six Sigma (Cont.) <ul><li>Statistical Process Control- </li></ul><ul><li>Allows firms to: </li></ul><ul><ul><li>visually monitor process performance </li></ul></ul><ul><ul><li>compare the performance to desired levels or standards </li></ul></ul><ul><ul><li>take corrective action </li></ul></ul><ul><li>Firms: </li></ul><ul><ul><li>gather process performance data </li></ul></ul><ul><ul><li>create control charts to monitor process variability </li></ul></ul><ul><ul><li>then collect sample measurements of the process over time and plot on charts. </li></ul></ul>
  40. 40. Statistical Tools of Six Sigma (Cont.) <ul><li>Statistical Process Control ( Cont.) </li></ul><ul><li>Natural variations : </li></ul><ul><li>expected and random (can’t control) </li></ul><ul><li>Assignable variations: </li></ul><ul><li>have a specific cause (can control) </li></ul><ul><li>Variable data: </li></ul><ul><li>continuous, (e.g., weight) </li></ul><ul><li>Attribute data: </li></ul><ul><li>indicate some attribute such as color & satisfaction, or beauty. </li></ul>
  41. 41. Statistical Tools of Six Sigma (Cont.) <ul><li>Statistical Process Control ( Cont.) </li></ul><ul><li>Variable Control Charts (2 types): </li></ul><ul><ul><li>x-bar chart: tracks central tendency of sample means </li></ul></ul><ul><ul><li>R-chart: tracks sample ranges </li></ul></ul><ul><li>Steps: </li></ul><ul><li>Gather data when the process is in control. </li></ul><ul><li>Calculate the mean & the range for each sample. </li></ul><ul><li>Calculate the overall mean and average range of all the samples. Use the x-means to calculate the upper & lower control limits. </li></ul><ul><li>Use the means & control limits to construct x-bar and R control charts. </li></ul><ul><li>Collect samples over time and plot. </li></ul>
  42. 42. Statistical Tools of Six Sigma (Cont.) <ul><li>Statistical Process Control ( Cont.) </li></ul>= = UCL = + A 2 LCL = - A 2 UCL R = D 4 LCL R = D 3
  43. 43. Statistical Tools of Six Sigma (Cont.) <ul><li>Statistical Process Control ( Cont.) </li></ul>chart for the Hayley Girl Soup Co. (Figure 8.9 )
  44. 44. Statistical Tools of Six Sigma (Cont.) <ul><li>Process Capability </li></ul><ul><li>The current process variation & future changes can be monitored using a process capability index , C pk . </li></ul><ul><li>C pk is the ratio of the desired process variation to the actual process variation. </li></ul><ul><li>The process must be under control (only natural variations) </li></ul><ul><li>C pk = 1.0 - process is capable of producing within the control limits 99.73 percent of the time. </li></ul><ul><li>C pk > 1.0 - even fewer defects. </li></ul><ul><li>C pk < 1.0 - process may be incapable of producing within control limits. </li></ul>C pk = Smallest difference between UCL or LCL & center line 3 σ
  45. 45. Statistical Tools of Six Sigma (Cont.) <ul><li>Acceptance Sampling </li></ul><ul><li>When shipments are received from suppliers, samples are taken and measured against the quality acceptance standard. Shipment is assumed to have the same quality. </li></ul><ul><li>Sampling is less time-consuming than testing every unit but can result in errors. </li></ul><ul><li>Producer’s risk- A buyer rejects a shipment of good quality units because the sample quality level did not meet standards ( type-I error ). </li></ul><ul><li>Consumer’s risk- Buyer accepts a shipment of poor-quality units because the sample falsely provides a positive answer ( type-II error ) . </li></ul>