CHAPTER 8 PROCESS MANAGEMENT JIT TQM ISSUES IN

CHAPTER 8 - PROCESS MANAGEMENT: JIT & TQM ISSUES IN SUPPLY CHAIN MANAGEMENT Principles of Supply Chain Management: A Balanced Approach Prepared by Daniel A. Glaser-Segura, Ph. D

Learning Objectives You should be able to: – – Discuss the major elements of JIT & TQM. Describe why JIT & TQM are integral parts of SCM. List & describe the major elements of JIT & TQM. Understand the importance of SPC & how to apply it to various processes. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 2

Chapter Eight Outline JIT & Supply Chain Mgmt. The Elements of JIT Waste Reduction JIT Partnerships JIT Layouts JIT Inventories JIT Scheduling Continuous Improvement Workforce Commitment JIT II TQM & Supply Chain Mgmt. The Elements of TQM Focus on the customer Workforce Involvement Deming’s Way Crosby’s Way Juran’s Way The Malcolm Baldridge National Quality Award ISO 9000 Quality Standards The Tools of TQM Flow Diagrams Check Sheets Pareto Charts Cause-&-Effect Diagrams Statistical Process Control Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 3

Introduction In 1990 s, 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 Quality is a necessary element and outcome of JIT to achieve low cost, high quality, & reduced lead times. JIT & TQM are required throughout the supply chain!!! Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 4

JIT & Supply Chain Management 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. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 5

JIT & Supply Chain Management- Cont. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 6

JIT & Supply Chain Management. Cont. The Elements of Just-in-Time – Waste 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-valueadding activity. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 7

JIT & Supply Chain Management. Cont. The Elements of Just-in-Time – Just-in-Time Partnerships – Suppliers & 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 JIT partnerships with key customers. Mutual dependency & benefits occur among JIT partnerships. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 8

JIT & Supply Chain Management. Cont. The Elements of Just-in-Time – Just-in-Time Layouts – Move people & materials when & where needed, ASAP. – Group technology (work cells)- process similar parts or components saving duplication of equipment & labor – Work cells are often U-shaped to facilitate easier operator & material movements. – JIT layouts are very visual (lines of visibility are unobstructed) with operators at one processing center able to monitor work at another. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 9

JIT & Supply Chain Management. Cont. The Elements of Just-in-Time – Just-in-Time Inventories – Reduction of inventory levels causes problems to surface in the organization. – Once problems are detected, they can be solved. – The end result is a smoother running organization with less inventory investment. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 10

JIT & Supply Chain Management. Cont. The Elements of Just-in-Time – Just-in-Time Scheduling – Small 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 a Japanese word for card. Although for JIT use, Kanban has come to mean a signal to order or release material in the production system. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 11

JIT & Supply Chain Management. Cont. The Elements of Just-in-Time Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 12

JIT & Supply Chain Management. Cont. The Elements of Just-in-Time – Continuous Improvement (Kaizen) – Continuous approach to reduce process, delivery, & quality problems, such as machine breakdown problems, setup problems, & internal quality problems. – Workforce Commitment – Managers must support JIT by providing subordinates with the skill, tools, time, & other necessary resources to identify problems & implement solutions. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 13

JIT & Supply Chain Management. Cont. The Elements of Just-in-Time – Just-in-Time II – An extension of supplier partnerships & vendor-managed inventories. – A supplier’s employee is housed in the purchasing department of the buyer’s organization, acting as both buyer & supplier representative. This employee monitors inventory levels, places purchase orders, & participates on product design & value analysis teams. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 14

TQM & Supply Chain Management TQM is an enterprise-wide philosophy, encompassing suppliers & customers. The Elements of Total Quality Management – Focus on the Customer – “Meeting customer expectations” applies to external as well as to internal suppliers & customers. – Workforce Involvement – Top management commitment. New role as facilitator. – Employee Empowerment- Think “out of the box”. – Teamwork is the quality circle concept Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 15

TQM & Supply Chain Management-Cont. The Elements of Total Quality Management Deming’s Way 1. Create constancy of purpose to improve product & service. 2. Adopt the new philosophy. 3. Cease dependence on inspection to improve quality. 4. End the practice of awarding business on the basis of price. 5. Constantly improve the production & service system. 6. Institute training on the job. 7. Institute leadership. 8. Drive out fear. 9. Break down barriers between departments. 10. Eliminate slogans & exhortations. 11. Eliminate quotas. 12. Remove barriers to pride of workmanship. 13. Institute program of selfimprovement 14. Put everyone to work to accomplish the transformation Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 16

TQM & Supply Chain Management-Cont. The Elements of Total Quality Management – Crosby’s Way– 1. 2. 3. 4. Four Absolutes of Quality The definition of quality is conformance to requirements The system of quality is prevention. Performance standard is zero defects. The measure of quality is the price of nonconformance Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 17

TQM & Supply Chain Management-Cont. The Elements of Total Quality Management – Juran’s Way – Quality Planning- Identify internal/external customers & their needs, develop products that satisfy those needs. Mangers set goals, priorities, & compare results – Quality Control- Determine what to control, establish standards of performance, measure performance, interpret the difference, & take action – Quality Improvement- Show need for improvement, identify projects for improvement, implement remedies, provide control to maintain improvement. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 18

TQM & Supply Chain Management-Cont. The Elements of Total Quality Management 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 Categories Measured 1. Leadership 2. Strategic planning 3. Customer & market focus 4. Information & analysis 5. Human resource focus 6. Process management 7. Business Results Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 19

TQM & Supply Chain Management-Cont. The Elements of Total Quality Management ISO 9000 Quality Standards Quality Management Principles 1. Customer focus 2. Leadership 3. Involvement of people 4. Process approach 5. System approach to management 6. Continual improvement 7. Factual approach to decision making 8. Mutually beneficial supplier relationships Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 20

The Tools of TQM 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 and isolating the causes of a problem. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 21

The Tools of TQM- Cont. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 22

The Tools of TQM- Cont. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 23

The Tools of TQM- Cont. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 24

The Tools of TQM- Cont. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 25

The Tools of TQM- Cont. Statistical Process Control (SPC)Allows firms to visually monitor process performance, compare the performance to desired levels or standards, and take corrective steps quickly before process variability gets out of control and damages products, services, and customers Firms gather process performance data, create control charts to monitor process variability, then collect sample measurements of the process over time. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 26

The Tools of TQM- Cont. Statistical Process Control (SPC) Cont. Variations- in process are either natural variation or assignable variations. – Natural variation is random environmental noise that is expected. – Assignable variations can be traced to a specific cause & fixed. Samples- Sample measures are either variable or attribute data. – Variable data are continuous, such as weight, time, and length. – Attribute data indicate the presence of some attribute such as color, satisfaction, workability, or beauty. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 27

The Tools of TQM- Cont. Variable Control Charts- Two types of control charts to measure variable process data: – x-chart is used to track the central tendency of the sample means. – R-chart is used to track sample ranges. 1. Gather data if the process is already in control. 2. Calculate the mean and the range for each sample. 3. Calculate the overall mean of all the samples and the average range of all the samples. Use the x means to calculate the upper and lower control limits. 4. Use the means and control limits to construct control charts. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 28

The Tools of TQM- Cont. Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 29

The Tools of TQM- Cont. Process Capability • The current process variation & future changes can be monitored using a process capability index, or Cpk. • Cpk is the ratio of the desired process variation to the actual process variation. • The process must be under control (only natural variations) • A Cpk of 1. 0 - process is capable of producing within the control limits 99. 73 percent of the time. • A Cpk greater than 1. 0 - even fewer defects. • Cpk of less than 1. 0 - process may be incapable of producing within control limits. Smallest difference between UCL or LCL and center line Cpk= 3σ Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 30

The Tools of TQM- Cont. Acceptance Sampling • When shipments of product are received from suppliers customers, samples can be taken & measured against some quality acceptance standard. • Sampling is less time-consuming than testing every unit to determine the overall quality of a shipment. 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). Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan. © 2005 Thomson Business and Professional Publishing 31