Lean manufacturing & 6s

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Lean manufacturing and sixsigma supply chain concepts

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  • CHAPTER 8PROCESS MANAGEMENT: LEAN PRODUCTION & SIX SIGMA QUALITY ISSUES IN SUPPLY CHAIN MANAGEMENTPrinciples of Supply Chain Management: A Balanced Approach

    Prepared by INLINE Solutions pvt. Ltd.,

  • Learning ObjectivesYou 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.

  • Chapter Eight OutlineIntroductionLean Production & the Toyota Production SystemLean Production & Supply Chain ManagementThe Elements of Lean ProductionLean Production & the EnvironmentThe Origins of Six Sigma Quality Six Sigma & Lean ProductionSix Sigma & Supply Chain ManagementThe Elements of Six Sigma The Statistical Tools of Six Sigma

  • IntroductionIn 1990s, supply chain management combined: Quick response (QR)- speed & flexibility Efficient Consumer Response (ECR)- speed & flexibility JIT Continuous reduction of wasteKeiretsu Relationships- Including suppliers in JIT/TQM efforts

    These approaches have emerged as philosophies & practices known as Lean Production (or Lean Manufacturing) & Six Sigma

  • 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. Stage 2- Firm integrates efforts & resources among internal functions.Stage 3- Firm links suppliers/customers with firms processes. Stage 4- Firm broadens supply chain influence beyond immediate or first-tier suppliers & customers.

  • Lean Production & the Toyota Production System (cont.) Lean Production- 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:Muda- waste in all aspects of productionKanban- signal card & part of JITSPC as part of TQM effortsPoka-Yoke- error or mistake-proofing

  • Lean Production & Supply Chain ManagementSupply 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 chainoptimizing inventory levels across the supply chain Channel integration- extending alliances to suppliers suppliers & customers customers The silo effect works against channel integration

  • Lean Production & Supply Chain Management (Cont.)Stages of SCM Evolution (Table 8.1)

    1: Internal Focused2: Functional Integration3: Internal Integration4: External Integrationfunctional silos top-down managementinternal performance measures reactive, short-term planningno internal integrationinternal flow of goodsemphasis on cost reductionefficiencies gained by internal integrationintegration of flow in firmlean activities for goods & informationmeasurement of supplier performance & customer serviceintegration with suppliers & customersintegration explored w/ 2nd & 3rd tier suppliers & customers alliance development

  • The Elements of Lean ProductionThe Elements of Just-in-TimeWaste ReductionLean Supply Chain RelationshipsLean LayoutsInventory & Setup Time ReductionSmall Batch SchedulingContinuous ImprovementWorkforce Empowerment

  • The Elements of Lean Production (Cont.)Waste (Muda) ReductionFirms 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 (See Table 8.3)

  • The Elements of Lean Production (Cont.)Waste (Muda) Reduction (Cont.)

    The Seven Wastes (Table 8.3)

    WastesDescriptionOverproducingUnnecessary production to maintain high utilizationsWaitingExcess idle machine & operator & inventory wait timeTransportationExcess movement of materials & multiple handlingOver-processingNon-value adding manufacturing & other activitiesExcess InventoryStorage of excess inventoryExcess MovementUnnecessary movements of employeesScrap & ReworkScrap materials & rework due to poor quality

  • The Elements of Lean Production (Cont.)Waste (Muda) Reduction (Cont.)

    The Five-Ss (Table 8.4)

    Japanese S-TermEnglish TranslationEnglish S-Term Used1. SeiriOrganizationSort2. SeitonTidinessSet in order3. SeisoPuritySweep4. SeiketsuCleanlinessStandardize5. ShitsukeDisciplineSelf-discipline

  • The Elements of Lean Production (Cont.)Lean Supply Chain RelationshipsSuppliers & customers work to remove waste, reduce cost, & improve quality & customer service.

    JIT purchasing includes delivering smaller quantities, at right time, delivered to the right location, in the right quantities.

    Firms develop lean supply chain relationships with key customers. Mutual dependency & benefits occur among these partners.

  • The Elements of Lean Production (Cont.)Lean LayoutsMove people & materials when & where needed, ASAP.Lean layouts are very visual (lines of visibility are unobstructed) with operators at one processing center able to monitor work at another. Manufacturing cells Process similar parts or components saving duplication of equipment & labor Are often U-shaped to facilitate easier operator & material movements.

  • The Elements of Lean Production (Cont.)Inventory & Setup Time Reduction Excess inventory is a waste Reducing inventory levels causes production problemsOnce problems are detected, they can be solved.The end result is a smoother running organization with less inventory investment.

  • The Elements of Lean Production (Cont.)Inventory & Setup Time Reduction (cont.)*Relationship between Order Quantity, Lot Size, and Average Inventory (Figure 8.1)

  • JIT & Supply Chain Management (Cont.)Small Batch SchedulingSmall batch scheduling drives down costs by: Reducing purchased, WIP, & finished goods inventories Makes the firm more flexible to meet customer demand.

    Small production batches are accomplished with the use of kanbans.

    Kanbans generate demand for parts at all stages of production creating a pull system.

  • JIT & Supply Chain Management (Cont.)Small Batch Scheduling (Cont.)Small Lot Size Increases Flexibility (Figure 8.2)

  • JIT & Supply Chain Management- Cont.Small Batch Scheduling (Cont.)A Kanban Pull System (Figure 8.3)

  • JIT & Supply Chain Management (Cont.)Small Batch Scheduling (Cont.)To determine the number of containers or kanban card sets: 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; andS = the safety stock factor, from 0 to 100 percent.

    # of containers =DT(1 + S)C

    2009 South-Western, a division of Cengage Learning

  • JIT & Supply Chain Management (Cont.)Continuous Improvement (Kaizen)Continuous approach to reduce process, delivery, & quality problems, such as machine breakdown problems, setup problems, & internal quality problems.

    Workforce CommitmentManagers must support Lean Production by providing subordinates with the skills, tools, time, & other necessary resources to identify problems & implement solutions.

  • Lean Production & the Environment Lean green practices: Reduce the cost of environmental management Lead to improved environmental performance. Increase the possibility that firms will adopt more advanced environmental managementCarbon-neutral- offsetting the carbon footprint of a firms operations

  • The Origins of Six Sigma QualitySix Sigma Near quality perfection (the statistical likelihood of non-defects 99.99966% of the time) Pioneered by Motorola in 1987 A statistics-based decision-making framework designed to make significant quality improvements in value-adding processes

  • The Origins of Six Sigma QualitySix Sigma Metrics (Table 8.5)Note: standard deviations include 1.5 sigma drift

    # of std devabove the mean% of defect-freeoutputDPMO269.15308,5372.584.13158,686393.3266,8073.597.7322,750499.386,2104.599.8651,350599.9772335.599.996832699.999663.4

  • Six Sigma & Lean Production Lean Six Sigma (Lean Six) Describes the melding of lean production and Six Sigma quality practices. Both use:High quality input materials, WIP, and finished goodsContinuous Improvement (Kaizen) Lean and Six Sigma use complementary tool sets and are not competing philosophies

  • Six Sigma & Supply Chain Management Process integration & communication lead to fewer negative chain reactions along the supply chain, such as greater levels of safety stock, lost time & less productivity

    Six Sigma is an enterprise and supply chain-wide philosophy, that emphasizes a commitment toward excellence & encompasses suppliers employees, and customers

  • Elements of Six SigmaCreate constancy of purpose to improve product & service.Adopt the new philosophy.Cease dependence on inspection to improve quality.End the practice of awarding business on the basis of price.Constantly improve the production & service system.Institute training on the job.

    Institute leadership. Drive out fear.Break down barriers between departments.Eliminate slogans & exhortations.Eliminate quotas.Remove barriers to pride of workmanship.Institute program of self-improvementPut everyone to work to accomplish the transformation Demings Way

  • Elements of Six Sigma (Cont.)Crosbys Way Four Absolutes of QualityThe definition of quality is conformance to requirementsThe system of quality is prevention.Performance standard is zero defects.The measure of quality is the price of nonconformance

  • Elements of Six Sigma (Cont.)Jurans WayQuality Planning- Identify internal/external customers & their needs, develop products that satisfy those needs. Mangers set goals, priorities, & compare resultsQuality Control- Determine what to control, establish standards of performance, measure performance, interpret the difference, & take actionQuality Improvement- Show need for improvement, identify projects for improvement, implement remedies, provide control to maintain improvement.

  • Elements of Six Sigma (Cont.)Objectives Stimulate firms to improveRecognize firms for quality achievements, Establish guidelines so that organizations can evaluate their improvement & provide guidance to others

    Categories MeasuredLeadershipStrategic planningCustomer & market focusInformation & analysisHuman resource focusProcess managementBusiness ResultsMalcolm Baldrige National Quality Award

  • Elements of Six Sigma (Cont.)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.

  • Elements of Six Sigma (Cont.)The DMAIC Improvement Cycle (Fig. 8.4)

  • Elements of Six Sigma (Cont.)Six Sigma Training Levels

    LevelsDescriptionYellow BeltBasic understanding of Six Sigma Methodology and tools in the DMAIC problem solving process. Team member on process improvement project.Green BeltA trained team member allowed to work on small, carefully defined Six Sigma projects, requiring less than a Black Belts full-time commitment. Black BeltThorough knowledge of Six Sigma philosophies and principles. Coaches successful project teams. Identifies projects and selects project team members.Master Black BeltA proven mastery of process variability reduction, waste reduction and growth principles and can effectively present training at all levels

    2009 South-Western, a division of Cengage Learning

  • Statistical Tools of Six SigmaFlow 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.

    2009 South-Western, a division of Cengage Learning

  • Statistical Tools of Six Sigma (Cont.)Process Map for Customer Flow at a Restaurant (Figure 8.5)

  • Statistical Tools of Six Sigma (Cont.)Check Sheet for a Restaurant (Fig. 8.6)

    ProblemMTuWThFSaSuTot%Totlong wait////////////////////////////////////////////////4834.0cold food/////////96.3wrong food///////////////////1913.5bad server////////////////////////2417.0bad table////////85.7room temp///////////////1510.6No parking//////////////149.9other////42.9Totals1714231334337141100

    2009 South-Western, a division of Cengage Learning

  • Statistical Tools of Six Sigma (Cont.)Pareto Chart for Restaurant Problems (Fig. 8.7)

    Chart2

    long wait48

    bad server24

    wrong food19

    room temp.15

    no parking14

    cold food9

    bad table8

    Other4

    Sheet1

    ProblemMon.Tues.Wed.Thurs.Fri.Sat.Sun.Totals

    long wait////////////////////////////////////////////////48

    bad server////////////////////////24

    wrong food///////////////////19

    room temp.///////////////15

    no parking//////////////14

    cold food/////////9

    bad table////////8

    Other////4

    Totals2618311442437181

    Sheet1

    0

    0

    0

    0

    0

    0

    0

    0

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    Sheet3

  • Statistical Tools of Six Sigma (Cont.)*Cause-and-Effect Diagram for the Long Wait Problem (Fig. 8.8)

    2009 South-Western, a division of Cengage Learning

  • Statistical Tools of Six Sigma (Cont.)Statistical Process Control- Allows firms to:visually monitor process performancecompare the performance to desired levels or standardstake corrective action Firms:gather process performance datacreate control charts to monitor process variabilitythen collect sample measurements of the process over time and plot on charts.

    2009 South-Western, a division of Cengage Learning

  • Statistical Tools of Six Sigma (Cont.)Statistical Process Control (Cont.) Natural variations: expected and random (cant 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.

  • Statistical Tools of Six Sigma (Cont.)Statistical Process Control (Cont.)

    Variable Control Charts (2 types):x-bar chart: tracks central tendency of sample meansR-chart: tracks sample rangesSteps: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.Collect samples over time and plot.

    2009 South-Western, a division of Cengage Learning

  • Statistical Tools of Six Sigma (Cont.)Statistical Process Control (Cont.)

    2009 South-Western, a division of Cengage Learning

  • Statistical Tools of Six Sigma (Cont.)Statistical Process Control (Cont.) chart for the Hayley Girl Soup Co. (Figure 8.9)

    2009 South-Western, a division of Cengage Learning

    Chart2

    1

    hours

    ounces

    Sheet1

    Hour1234R

    11212.211.711.611.880.6

    211.511.711.612.311.780.8

    311.912.212.11212.050.3

    412.111.812.111.711.930.4

    512.212.311.711.912.030.6

    612.111.912.312.212.130.4

    71211.711.612.111.850.5

    81212.112.212.312.150.3

    911.811.9121211.930.2

    1012.111.911.811.711.880.3

    1112.11212.111.912.030.2

    1211.911.911.711.811.830.2

    13121211.812.111.980.3

    1412.111.91211.711.930.4

    15121211.711.211.730.8

    1612.1121211.9120.2

    1712.112.21211.912.050.3

    1812.21211.711.811.930.5

    191212.112.31212.10.3

    201212.211.91212.030.3

    2111.911.812.11211.950.3

    2212.111.811.91211.950.3

    2312.11211.911.911.980.2

    241212.311.712120.6

    MEANS11.980.39

    Sheet1

    4

    Hour

    Ounces

    xbar chart

    Sheet2

    Sheet3

    MBD000552D1.unknown

  • Statistical Tools of Six Sigma (Cont.)Process CapabilityThe current process variation & future changes can be monitored using a process capability index, Cpk. Cpk is the ratio of the desired process variation to the actual process variation. The process must be under control (only natural variations)Cpk = 1.0 - process is capable of producing within the control limits 99.73 percent of the time. Cpk > 1.0 - even fewer defects. Cpk < 1.0 - process may be incapable of producing within control limits.

    Cpk=Smallest difference between UCL or LCL & center line3

    2009 South-Western, a division of Cengage Learning

  • Statistical Tools of Six Sigma (Cont.)Acceptance SamplingWhen 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.

    Producers risk- A buyer rejects a shipment of good quality units because the sample quality level did not meet standards (type-I error).

    Consumers risk- Buyer accepts a shipment of poor-quality units because the sample falsely provides a positive answer (type-II error).