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Total quality management: managing the entire organization so that it excels on all dimensions
of products and services that are important to the customer. It has two fundamental operational
goals: careful design of the product or service 2) ensuring that the organization system can
consistently produce the design.
Malcom Baldrige national quality award: An award established by the U.S department of
commerce and given annually to companies that excel in quality.
Design quality: refers to the inherent value of the product in the marketplace and is thus a
strategic decision in a firm.
Conformance quality: refers to the degree to which the product or service design specifications
are met.
Quality at the source is frequently discussed in the context of conformance quality. This means
that the person who does the work takes the responsibility for making sure his or her output
meets specifications.
Dimensions of quality: Criteria by which quality is measured/
Cost of quality: expenditures related to achieving product or service quality such as the costs of
prevention, appraisal, internal failure, and external failure.
Six sigma refers to the philosophy and methods companies such as general electric and Motorola
use to eliminate defects in their products and processes. (A statistical term describe the quality
goal of no more than four defects out of every million units. Also refers to a quality improvement
philosophy and program).
DPMO(Defects per million opportunities) a metric used to describe the variability of a
process.
DOE(design of experiments): referred to as multivariate testing, is statistical methodology used
for determining the cause-and-effect relationship between process variables (Xs) and the output
variable (y).
DMAIC: an acronym for the define, measure, measure, analyze, improve. And control
improvement methodology followed by companies engaging in six six-sigma programs. Three
pieces : Unit, defect, opportunity.
PDCA cycle also called the Deming cycle or wheel, refers to the plan do check act cycle of
continuous improvement.
Continuous improvement the philosophy of continually seeking improvements in process
through the use of team efforts.
Kaizen Japanese term for continuous improvement.
Lean six sigma combines the implementation and quality control tools of six sigma with the
materials management concept of lean manufacturing with a focus o reducing cost by lowering
inventory to an absolute minimum.
Black belts, master black belts, green belts term used to describe different levels of personal
skills and responsibilities in six sigma programs.
Fail-safe or poka-yoke procedures: simple practices that prevent errors or provide feedback in
time for the worker to correct errors.
ISO 9000: formal standards used for quality used for quality certification, developed by the
international organization for standardization.
External benchmarking: looking outside the company to examine what excellent performers
inside and outside the companys industry are doing in the way of quality.
POWERPOINT
Cost of quality
Prevention Costs
Appraisal Costs
Failure Costs
Internal Failure Costs failures that occur before a product is sent to a customer.
Scrap, rework, retesting
External Failure Costs failures that occur after a product is sent to customer.
See that both the product and the process to make the product is designed to minimize
errors.
Dimensions of Quality
Performance
Features
Reliability
Serviceability
Aesthetics
Perception
Note: Oftentimes there are tradeoffs among these dimensions in a design!
Six-Sigma introduction
Represents a focus and desire to reduce any variation in the process to random variation
Measuring the effectiveness and efficiency of each step of the process (measured
as Defects per Million Operations, or DPMO)
Seeks reasons and reasons for reasons until root causes are determined.
Starts with sources of People, Machinery, Methods, and Materials, and expands
on them until root causes for errors are determined.
A measurement of quality; basically, how much do we get wrong out of a million possible
tries?
Define
Measure
Analyze
Improve
Control
Maintain improvement
Analytical tools for six sigma and continuous improvement
Flowcharts
Run charts
Pareto charts
Check sheets
Cause-of-effect diagrams
Opportunity flow diagram
Control charts
Process Capability
Broadly defined as the ability of a process to meet customer expectations (Bothe, 1997)
Customer expectations expressed as lower and upper specifications limits (LSL and USL)
Assignable Variation
Common Variation
Control Charts
We establish our Lower Control Limit and Upper Control Limit (UCL and LCL)
UCL and LCL are set +/- 3 standard deviations from average value, respectively.
Based on Normal distribution, we expect 99.7% of our sample averages to fall within
these limits.
A room is either ready or not. In other words, were answering a yes-no question
rather than measuring.
So, we use a p-chart.
Shows percentage of nonconforming items
Construct by counting number of defective items and dividing by the total number of
items inspected.
Chapter fifteen
Supply chain management: the strategic coordination of the supply chain for the purpose of
integrating supply and demand management.
Logistics: the part of a supply chain involved with the forward and reverse flow of goods,
services, cash, and information.
Purchasing cycle: series of steps that begin with a request for purchase and end with notification
of shipment received in satisfactory condition.
Centralized purchasing: purchasing is handles by one special department
Decentralized purchasing: Individual departments or separate locations handle their own
purchasing requirements.
E-business: the use of electronic technology to facilitate business transactions.
Vendor Analysis: Evaluating the sources of supply in terms of price, quality, reputation, and
service.
Strategic partnering: two or more business organizations that have complementary products or
services join so that each may realize a strategic benefit.
Inventory Velocity: the speed at which goods move through a supply chain.
Bullwhip effect: inventory oscillations become progressively larger looking backward through
the supply chain.
Vendor-managed inventory: Vendors monitor goods and replenish retail inventories when
supplies are low.
Order fulfillment: the processes involved in responding to customer orders.
Logistics: the movement of materials, services, cash, and information in a supply chain.
Traffic management: overseeing the shipment of incoming and outgoing goods.
Radio frequency Identification: a technology that uses radio waves to identify objects, such as
goods in supply chains.
Third-party logistics: the outsourcing of logistics management.
Strategic sourcing: analyzing the procurement process to lower costs by reducing waste and
non-value-added activities, increase profits, reduce risks, and improve supplier performance.
Information velocity: the speed at which information is communicated in a supply chain.
Supply chain visibility: a major trading partner can connect to its supply chain to access data in
real time.
Event management: the ability to detect and respond to unplanned events.
Fill rate: the percentage of demand filled from stock on hand.
Reverse logistics: the process of transporting returned items.
Gatekeeping: Screening returned goods to prevent incorrect acceptance of goods.
Avoidance: Finding ways to minimize the number of items that are returned.
Closed-loop supply chain: A manufacturer controls both the forward and reverse shipment of
product
Cross-docking: a technique whereby goods arriving at a warehouse from a supplier are unloaded
from the suppliers truck and loaded onto outbound trucks, thereby avoiding warehouse storage.
Delayed differentiation: Production of standard components and subassemblies, which are held
until late in the process to add differentiating features.
Disintermediation: reducing one or more steps in a supply chain by cutting out one or more
intermediaries.
PowerPoint
Supply Management
Example:
Strategic Issues
Setting up the supply chain who are we partnering with, what will they supply to us, how
much can we manufacture with this supply chain, how are we going to coordinate the supply
chain, etc.
Tactical Issues
Making large-scale decisions within the supply chain forecasting demand, procuring parts
within the supply chain, where to store inventory, delivering goods on time.
Operating Issues
Having too much demand is the same thing as having too little supply
The good news: We know a lot about SCM under demand uncertainty
Cross-docking
Transfer goods from incoming trucks at receiving docks directly to outgoing trucks at
shipping docks
Disruptions happen
Common causes
Strikes
Terrorism
Having too much demand is the same thing as having too little supply
Multiple sourcing
Improved forecasts
The good news: We know a lot about SCM under demand uncertainty
The Bad News
The conventional wisdom for demand uncertainty does not always hold for supply
uncertainty.
Examples:
Risk Pooling
Inventory Placement
Inventory Placement
If demand is uncertain:
Innovations in SCM
Strategic options
Many suppliers
Few suppliers
Keiretsu network
Vertical integration
Virtual company
Order synchronization
Order batching
Retailers required to purchase in integer multiples of some batch size, e.g. case
quantities, pallet quantities, full truck load, etc.
Customers order on the same cycle, e.g. first of the month, every Monday, etc.
Shortage gaming
Shortage Gaming
If supplier production is less than orders, orders are rationed, i.e. retailers are put
on allocation
To secure a better allocation, the retailers inflate their orders, i.e. order more than they
need.
Information sharing
Reduce minimum batch sizes smaller and more frequent replenishments (EDI)