Outline of Previous Lecture Lecture 13Chapter 8- Process Management PART 1 Lean and Six Sigma in the Supply ChainCurrent Lecture Lecture 13SCM 3301 1st EditionOutline of Previous Lecture Lecture 13Chapter 8- Process Management PART 1 Lean and Six Sigma in the Supply ChainProcess Management: Three Key Viewpoints- Lean (Toyota Production System)o Requires a specific management perspectiveo Easily grasped by most people in an organizationo Establishes a culture of continuous improvement- Six Sigmao Includes statistical tools used to address specific problemso Utilizes individuals trained in process improvement techniques- Theory of Constraints (TOC)o Methodology that defines where improvement beginsComplimentary & CoexistingThree Key Lean Perspectives- Workforce Commitment (Empowerment)o Process owners are responsible for improvement NOT process Improvement experts- Process Improvemento Process design causes most organizational problems NOT bad workers- Waste Reduction- Customer Focuso Value Added- Direct Transformation of Inputs -> Outputso Non-Value Added [The Seven Wastes] Walking, moving things, looking for tools, making errors, rework, making more or less than is neededBasic Elements of Lean- Visual Management (5S Program)o Process steps are visually obvious1SCM 3301 1st Editiono There is a place for everything and everything has a placeo It becomes easier to do the right thing than make a mistake- Continuous Improvement- River and Rockso Inventory “buffer stock” hides problemso Reducing inventory makes problems visibleo Visible problems are an opportunity to eliminate a root causeCurrent Lecture Lecture 13Functional Layout: A Sandwich and Salad ShopRaw MaterialsOvenShippingVegetable DepartmentMeat DepartmentLettuce DepartmentBread Department- Necessitateso Large Batcheso Overproductiono Coordinationo Transportationo Communicationo Quality Losso Damageo Scheduling Optimizationo Long Throughput TimeCellular Layout: A Sandwich and Salad Shop- Distance time movement, want to minimize movementShippingVegetablesLettuceOvenRaw MaterialsBreadMeatShippingMeat Vegetables2SCM 3301 1st EditionLettuceRaw Materials- U-Shaped Layout- Allowso Small Batch Sizeso Pull Productiono Minimal Transportationo Quality Visibilityo Minimal Managemento Short Throughput Times- Requireso Duplicate work stationso Setup Reductiono Cross-trainingDriving Lean to the Supply ChainLean Supply Chain Relationships- Lean requires purchasing products in smaller batch quantitieso Suppliers must learn to produce in smaller batch quantities and more frequent shipments- Lean requires producing in smaller batch quantitieso Customers must learn to utilize smaller batch quantities and more frequent shipments- Lean Supplier NetworksThe Origins of Six Sigma Quality- Statistical Probability of an Error: < 0.0005%o <3.4 ppmo- Goal: Reducing Variation in ProcessesSix Sigma Improvement Cycle- Defineo Define the goals and scope of the improvement- Measureo Collect data and evaluate process performance- Analyzeo Develop and test theorieso Identify cause and effect- Improveo Develop and implement solutions3SCM 3301 1st Edition- Controlo Monitor the process to sustain improvementElements of Six Sigma- Edwards Deming: 14 Points for Management- Joseph Juran: Quality Control Handbook- Philip Crosby: Quality if Free (Zero Defects)- Malcolm Baldrige National Quality Award- ISO 9000Statistical Tools of Six Sigma (from the textbook)- Flow Diagrams/Process Maps- Check Sheets- Pareto Charts- Cause and Effect Diagrams- Statistical Process ControlAcceptance SamplingProducer’s Risk- A buyer rejects a shipment of good quality units because the sample quality level did not meet standards (Type 1 Error)Consumer’s Risk- Buyer accepts a shipment of poor-quality units because the sample falsely provides a positive answer (Type 11