SUPPLY CHAIN MANAGEMENT
A supply chain, logistics network, or supply network is a coordinated system of organizations, people, activities, information and resources involved in moving a product or service in physical or virtual manner from supplier to customer. Supply chain activities (aka value chains or life cycle processes) transform raw materials and components into a finished product that is delivered to the end customer. Supply chains link value chains
This supply chain begins with the extraction of raw material and includes several production links, for instance; component construction, assembly and merging before moving onto several layers of storage facilities of ever decreasing size and ever more remote geographical locations, and finally reaching the consumer.
DEMAND CHAIN
A demand chain is composed of the enterprises that sell a business's goods or services. For example, a demand chain may be composed of buyers who initiate the sales transaction, the resellers who sell the manufacturer's goods, and the manufacturer who creates the goods. Or a demand chain may be composed of the resellers who sell a manufacturer's goods, the manufacturer who makes the goods, and the distributors who supply the manufacturer's goods to the resellers.
TOTAL QUALITY MANAGEMENT
Total Quality Management may be defined as creating an organizational culture committed to the continuous improvement of skills, teamwork, process, product and service quality, and customer satisfaction. For achieving total quality, three things are
Essential:
1)Meeting customers’ requirements
2)Continuous improvement through management process
3)Involvement of all employees.
Objectives of TQM Philosophy
Meeting the customers’ requirements is the primary objective and the key to organizational survival and growth
The second objective is continuous improvement of quality
The third objective aims at developing the relationship of openness and trust among the employees at all levels in the organization.
Components Of Total Quality Management
1) Customer Orientation
2) Continuous Improvement
3) Employees’ Involvement
Benefits from TQM:
The following benefits can be derived from a sound TQM program
1) TQM brings quality consciousness in the enterprise which encourages production of quality products.
2) TQM helps in providing greater satisfaction to the customers by meeting their requirements.
3) It creates a good public image.
4) There is better use of materials, machines, capital, human resources etc.
5) Wastages are reduced to a minimum.
6) Employees are committed to higher quality and feel highly motivated.
IMPLEMENTATION OF TQM
W.E.Deming suggested Plan-Do-Check Act Cycle for the implementation of TQM in any organization. The steps in PDCA cycle are as follows:
1) Lay down policies and objectives of TQM.
2) Chalk out the methods to achieve TQM objectives.
3) Educate and train workers and managers to understand and meet the requirements of TQM.
4) Start the operation of TQM by introducing new product, machines, procedures, etc.
5) Observe results of operation and find out the causes of non-conformance to quality standards.
6) Analyze results and determine the consequences of non-conformance and place the report before the top management.
7) Prevent undesired effects in Quality improvement. Establish personal relationships with employees so that they can voice their concerns and ideas.
8) Suggest measures for improvement of methods and design in future.
SIX SIGMA QUALITY
• A philosophy and set of methods companies use to eliminate defects in their products and processes
• Seeks to reduce variation in the processes that lead to product defects
• The name, “six sigma” refers to the variation that exists within plus or minus three standard deviations of the process outputs
• Six Sigma allows managers to readily describe process performance using a common metric: Defects Per Million Opportunities (DPMO)
ISO 9000
ISO 9000 is a family of standards for quality management systems. ISO 9000 is maintained by ISO, the International Organization for Standardization and is administered by accreditation and certification bodies. For a manufacturer, some of the requirements in ISO 9001 (which is one of the standards in the ISO 9000 family) would include:
1. a set of procedures that cover all key processes in the business;
2. monitoring manufacturing processes to ensure they are producing quality product;
3. keeping proper records;
4. checking outgoing product for defects, with appropriate corrective action where necessary; and
5. regularly reviewing individual processes and the quality system itself for effectiveness.
6. facilitate continual improvement
ISO 9000 directs you to "document what you do and then do as you documented".
Three Forms of ISO Certification
• First party: A firm audits itself against ISO 9000 standards
• Second party: A customer audits its supplier
• Third party: A "qualified" national or international standards or certifying agency serves as auditor
Although the standards originated in manufacturing, they are now employed across a wide range of other types of organizations, including colleges and universities. A "product", in ISO vocabulary, can mean a physical object, or services, or software. In fact, according to ISO in 2004, "service sectors now account by far for the highest number of ISO 9001:2000 certificates - about 31% of the total"
MATERIAL REQUIREMENTS PLANNING
• Materials requirements planning (MRP) is a means for determining the number of parts, components, and materials needed to produce a product
• MRP provides time scheduling information specifying when each of the materials, parts, and components should be ordered or produced
• Dependent demand drives MRP
• MRP is a software system
The scope of MRP in manufacturing
All manufacturing organizations, whatever it is they produce, face the same daily practical problem - that customers want products to be available in a shorter time than it takes to make them. This means that some level of planning is required.
Companies need to control the types and quantities of materials they purchase, plan which products are to be produced and in what quantities and ensure that they are able to meet current and future customer demand, all at the lowest possible cost. Making a bad decision in any of these areas will lose the company money. A few examples are given below:
• If a company purchases insufficient quantities of an item used in manufacturing, or the wrong item, they may be unable to meet contracts to supply products by the agreed date.
• If a company purchases excessive quantities of an item, money is being wasted - the excess quantity ties up cash while it remains as stock and may never even be used at all. This is a particularly severe problem for food manufacturers and companies with very short product life cycles. However, some purchased items will have a minimum quantity that must be met, therefore, purchasing excess is necessary.
• Beginning production of an order at the wrong time can mean customer deadlines being missed.
MRP is used by many organizations as a tool to deal with these problems. The questions it provides answers for are: WHAT items are required, HOW MANY are required and WHEN are they required by. This applies to items that are bought in and to sub-assemblies that go into more complex items.
Work Center
• A work center is an area in a business in which productive resources are organized and work is completed
• Can be a single machine, a group of machines, or an area where a particular type of work is done
JOHNSON'S JOB SEQUENCING RULE:
Johnson's Rule is a technique that can be used to minimize the completion time for a group of jobs that are to be processed on two machines or at two successive work centers.
Objectives of Johnson's Rule
• To minimize the processing time for sequencing a group of jobs through two work centers.
• To minimize the total idle times on the machines.
• To minimize the flow time from the beginning of the first job until the finish of the last job
Conditions for the Johnson's Rule
In order for the technique to be used, several conditions must be satisfied:
• Job time(including setup and processing) must be known and constant for each job at each work centre.
• Job times must be independent of the job sequence.
• All jobs must follow the same two-setup work sequence.
• Job priorities cannot be used.
Steps Involved In Johnson's Rule
1. All jobs are to be listed, and the processing time of each machine is to be listed.
2. Select the job with the shortest processing time.
- If the shortest time lies on the first machine/work centre, the job is scheduled first.
- If the shortest time lies on the second machine/work centre, the job is scheduled at the end.
3. Once the job is scheduled, go to step 4.
4. Repeat steps2 and step3 to the remaining jobs, working towards the centre of the sequence.
Acceptance Sampling:
Single Sampling Plan
A simple goal
Determine
(1) how many units, n, to sample from a lot, and
(2) the maximum number of defective items, c, that can be found in the sample before the lot is rejected
¬ Acceptable Quality Level (AQL)
– Max. acceptable percentage of defectives defined by producer
¬ The a (Producer’s risk)
– The probability of rejecting a good lot
¬ Lot Tolerance Percent Defective (LTPD)
– Percentage of defectives that defines consumer’s rejection point
¬ The b (Consumer’s risk)
– The probability of accepting a bad lot
Operating Characteristic Curve
The OCC brings the concepts of producer’s risk, consumer’s risk, sample size, and maximum defects allowed together
PURCHASING PROCESS
Purchasing is the formal process of buying goods and services.
The Purchasing Process can vary from one organization to another but there are some key elements that are common throughout
The process usually starts with a 'Demand' or requirement – this could be for a physical part (inventory) or a service. A requisition is generated, which details the requirements (in some cases providing a requirements speciation) which actions the procurement department. An RFP or RFQ is then raised (request for proposal or Request for quotation). Suppliers send their quotations in response to the RFQ And a review is undertaken where the best offer (typically based on price, availability and Quality) is given the purchase order.
Purchase orders can be of various types including –
* Standard - A one time buy
* Planned - Planned PO is an agreement on a specific item an approximate date
* Blanket PO is an agreement on specific terms and conditions - date and quantity and amount are not specified
Purchase Orders are normally accompanied by Terms and Conditions which form the contractual agreement of the Transaction.
The Supplier then delivers the products/service and the customer records the delivery (in some cases this goes through a Goods Inspection Process.
An invoice is sent by the supplier which is cross-checked with the Purchase Order and Document which specifying that the goods received. The payment is made and transferred to GL.
ECONOMIC ORDER QUANTITY
Economic order quantity (also known as the Wilson EOQ Model or simply the EOQ Model) is a model that defines the optimal quantity to order that minimizes total variable costs required to order and hold inventory.
Underlying assumptions
1. the monthly (annual) demand for the item is known, deterministic and constant
2. the lead time is known and constant
3. the receipt of the order occurs in a single instant and immediately after ordering it
4. quantity discounts are not calculated as part of the model
5. the setup cost is constant
Formula: √(2*annual demand*ordering cost)/(unit price*inventory carrying charges as %)
JIT
Just In Time (JIT) is an inventory strategy implemented to improve the return on investment of a business by reducing in-process inventory and its associated costs. The process is driven by a series of signals, or Kanban, that tell production processes when to make the next part. Kanban are usually 'tickets' but can be simple visual signals, such as the presence or absence of a part on a shelf. When implemented correctly, JIT can lead to dramatic improvements in a manufacturing organization's return on investment, quality, and efficiency.
KAIZEN
Japanese for "change for the better" or "improvement"; the English translation is "continuous improvement" or "continual improvement". The concept is closely associated with the Toyota Production System and related to various quality-control systems, including methods of W. Edwards Deming.
Kaizen is a daily activity whose purpose goes beyond improvement. It is also a process that, when done correctly, humanizes the workplace, eliminates overly hard work (both mental and physical), and teaches people how to perform experiments using the scientific method and how to learn to spot and eliminate waste in business processes.
Kaizen must operate with three principles in place: process and results (not results-only); systemic thinking (i.e. big picture, not solely the narrow view); and non-judgmental, non-blaming (because blaming is wasteful).
People at all levels of an organization participate in kaizen, from the [CEO] down, as well as external stakeholders when applicable. The format for kaizen can be individual, suggestion system, small group, or large group. In Toyota it is usually a local improvement within a workstation or local area and involves a small group in improving their own work environment and productivity.
Whilst Kaizen (in Toyota) usually deliver small improvements the culture of continual small improvements and standardization yields large results in a form of compound productivity improvement. Hence the English translation of Kaizen can be: "continuous improvement", or "continual improvement."
The "zen" in Kaizen emphasizes the learn-by-doing aspect of improving production. This philosophy differs from the "command-and-control" improvement programs of the mid-twentieth century. Kaizen methodology includes making changes and monitoring results, then adjusting. Large-scale pre-planning and extensive project scheduling are replaced by smaller experiments, which can be rapidly adapted as new improvements are suggested.
AUTOMATION:
Currently, for manufacturing companies, the purpose of automation has shifted from increasing productivity and reducing costs, to broader issues, such as increasing quality and flexibility in the manufacturing process.
The old focus on using automation simply to increase productivity and reduce costs was seen to be short-sighted, because it is also necessary to provide a skilled workforce who can make repairs and manage the machinery. Moreover, the initial costs of automation were high and often could not be recovered by the time entirely new manufacturing processes replaced the old. (Japan's "robot junkyards" were once world famous in the manufacturing industry.)
Automation is now often applied primarily to increase quality in the manufacturing process, where automation can increase quality substantially. For example, automobile and truck pistons used to be installed into engines manually. This is rapidly being transitioned to automated machine installation, because the error rate for manual installment was around 1-1.5%, but has been reduced to 0.00001% with automation. Hazardous operations, such as oil refining, the manufacturing of industrial chemicals, and all forms of metal working, were always early contenders for automation.
Another major shift in automation is the increased emphasis on flexibility and convertibility in the manufacturing process. Manufacturers are increasingly demanding the ability to easily switch from manufacturing Product A to manufacturing Product B without having to completely rebuild the production lines.
Green Productivity
Green Productivity (GP) is a strategy for simultaneously enhancing productivity and environmental performance for overall socio-economic development that leads to sustained improvement in the quality of human life. It is the combined application of appropriate productivity and environmental management tools, techniques and technologies that reduce the environmental impact of an organization's activities, products and services while enhancing profitability and competitive advantage.
Green productivity is a dynamic strategy to harmonize economic growth and environmental protection for sustainable development. It offers small and medium businesses a way to achieve a competitive advantage by doing better with less. It is thus a practical strategy to increase productivity and protect the environment simultaneously.
Traditional methods of pollution control were not cost-effective. The concept of green productivity assures profitability and resource productivity. Businesses and communities get multiple returns in the form of bottom-line savings, value added products and services, and environmental protection.
Having a good green productivity programme -
• increases profitability
• improves health and safety
• makes quality products
• promotes environmental protection
• ensures regulatory compliance
• enhances company image
• raises morale
• leads to sustainable development
Green productivity uses a set of management tools, techniques and technologies to encourage innovation and a continuous cycle of productivity gains. The result is competitive enterprises, preservation of the natural resources, and a better quality of life.
A typical comprehensive green productivity programme has three levels of implementation:
• Management Systems and Programmes, using ISO 14001/EMS, Total Productive Maintenance, Total Quality Management etc.
• Green Productivity Techniques, using 3Rs, Housekeeping/5S, Resource Conservation, Product Improvement etc.
• Green Productivity Tools, using Eco-Mapping, Benchmarking, Control Charts and Check lists etc.
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