Supply Chain Management (SCM) Practices - Essay Example

Supply Chain Management (SCM) is a processes improvement tool that promises to have much more staying power than transient business fads. SCM aims to satisfy customer needs efficiently through the planning, implementing and controlling of operations from the point-of-origin to the point-of consumption. (Agrawal, 2001). The best practices would embrace systems thinking and do away with the silo mentality of isolated departments in an organization, i.e., marketing, accounting, sales, etc.. The best emerging practice of SCM is a combination of Lean Manufacturing and Six Sigma statistical tools. Lean encompasses the various just-in-time approaches. (Bryan, 2002) These two methodologies are the best practice because they fit this framework: 1. Work is designed as a series of team tasks that immediately reveal problems. 2. Problems are investigated quickly and counter measures rapidly introduced. 3. Solutions are disseminated and adopted locally. 4. People at all levels of the organisational supply chain are taught to have empowerment, with the help of coaching, mentoring, and training. Lean Manufacturing (Toyota Production System) For many managers, lean manufacturing is something that looks great on paper and sounds wonderful in theory, but they want proof that it really works in their ever-changing manufacturing environment. ( Lau, 1996). Now two years into its lean journey, the Grand Rapids, Michigan-based Cascade Engineering (www.cascadeng.com), is trying to avoid the common mistake of just implementing lean on the shop floor. The 1,200-employee plastic components provider in the automotive, home and office, and container industries is implementing lean throughout its enterprise. One thing that becomes clear after you tour Cascade's facilities is that the company is striving to adopt lean as a way of life for the whole company, rather than just in the manufacturing plants. The company's leaders recognize that to reduce waste and create customer value, everyone has to actively take part in the process. Cascade's founder, chairman and CEO Fred P. Keller, sent a message about how important lean was for the company as a whole when he hired G.L. Brown as the company's director of lean manufacturing. Keller is making sure all of the necessary resources are available to make the gains of lean stick. "If this company wants to remain an active leader in the upcoming century, it is crucial that we eliminate waste and dedicate ourselves to becoming a lean enterprise," says Keller. (Klier, 1994, 18). To further demonstrate his dedication to the employees, Keller stressed that some job responsibilities may change but no employees will be laid off as a result of the company's lean initiatives. Their dedication to employees and their superior performance have not gone unnoticed. Cascade has been recognized nationwide for their commitment to people, most notably by recently winning a Ron Brown award and the Michigan Manufacturers Company of the year award. G. L. Brown knew that one of the hardest parts of lean was going to be creating the right environment for Cascade employees. (Lin, 1999) To ease the transition, Brown started a series of training and support sessions. With many years in operations management during his 34-year tenure at General Motors, Brown understood that the employees must have a firm grip on three crucial aspects before initiating the conversion to a lean enterprise: - everyone must understand why the company is dedicated to the lean philosophy and what's in it for them; - the employees must understand the system; - they must understand that there are a number of techniques in the toolbox to implement the system. Cascade's training consists of lean manufacturing orientation, eyes for waste and eyes for flow, takt time, standard worksheets, the 5-S processes, natural work groups, and value stream mapping as well as other aspects of the "lean enterprise system." Cascade also invites customers and suppliers to training events and kaizen events as they relate to their products. This has helped Cascade emphasize to employees that the value stream extends outside of Cascade. Rather than trying to immediately convert the entire multi-plant operation to the lean manufacturing strategy, Cascade adopted the less obtrusive method of implementing model cells. (Nobeoka, 2002) In each plant, the company has instituted a model cell concept to be used as a teaching and learning tool for employees to learn and try out the tools. A definite pattern is apparent when introducing each model cell. Initially Cascade implements 5-S, Total Productive Maintenance, and standard worksheets, then expands the learning by using other techniques. The labelling of all aspects of the equipment makes for easy maintenance and identification. (See Appendix A for Lean terminology) For example, when a rear hydraulic assembly is leaking, an operator calls maintenance to let them know exactly where they noticed a problem, eliminating guesswork and yielding shorter downtimes. Systematic checks are identified on the machine in red or yellow lettering identifying the necessary order. For instance, weekly check Step One would be written inside a box with red lettering. Model cells are paying off. Teams in adjacent cells are continuously improving their work areas without prompting, i.e. moving their equipment to resemble the model cell's set-up. Each model cell has shown that the employees as well as the company will benefit when the entire plant is using this lean enterprise system. (Haullachain, 1999) The company's Home and Office business unit, for example, produces a seat frame in their model cell, which has experienced an 85 percent reduction in scrap, a 75 percent reduction in downtime and 75 percent less motion for the operator. (Lee, C. 2004). The 5-S processes have helped the Cascade Engineering team members keep everything in its place. It is a visual management tool that aids the flow of product and information, through the application of standard practices. 5-S sets the stage for all continuous improvement activities and is considered a prerequisite for implementing and supporting flow manufacturing and the other elements of the lean enterprise. (Linge, 1991). Using colour-coded tape; Cascade has been able to keep the operations organized and efficient. Within the seven plants located in Grand Rapids, each has used different techniques of the lean enterprise system to make their product groups more successful. Kanbans have appeared in a few of the Grand Rapids facilities. The furniture plant instituted a kanban with Pellicle, a supplier of the fabric used on the chair frame. The first kanban was started between Noble Polymers, a member of the Cascade family, and the acoustics plant across the street. This success prompted Noble Polymers to initiate a system with Solvay Polymers. (Lee, Y., 2003) A manual system of replenishment is based on consumption, while an automated system is being developed. In the non-manufacturing aspect of business, an administrative kaizen was done on the payroll process, from employees ringing in to paycheque issuance. (Roth, 2004) This process resulted in the elimination of lost and missing cheques and a 40 percent reduction in cheque errors. (Watanabe, 2000, 307). Six Sigma The goal of Six Sigma is to increase profits by eliminating variability, defects and waste that undermine customer loyalty. Six Sigma can be understood/perceived at three levels: Metric: 3.4 Defects Per Million Opportunities. (See Appendix B for Six Sigma Terminology) DPMO allows you to take complexity of product/process into account. Rule of thumb is to consider at least three opportunities for a physical part/component - one for form, one for fit and one for function, in absence of better considerations. (Nichols, 2003) In addition, you want to be Six Sigma in the Critical to Quality characteristics and not the whole unit/characteristics. Methodology: DMAIC/DFSS structured problem solving roadmap and tools. Philosophy: Reduce variation in your business and take customer-focused, data driven decisions. (Chung, 1999, 299). Six Sigma is a methodology that provides businesses with the tools to improve the capability of their business processes. This increase in performance and decrease in process variation leads to defect reduction and vast improvement in profits, employee morale and quality of product. (Nataraajan, 1991). Six Sigma is a rigorous and a systematic methodology that utilizes information (management by facts) and statistical analysis to measure and improve a company's operational performance, practices and systems by identifying and preventing 'defects' in manufacturing and service-related processes in order to anticipate and exceed expectations of all stakeholders to accomplish effectiveness. (Smith, 1997) What makes six sigma effective A New Type of Top Level Support: Past GE CEO Jack Welch is quoted for telling employees that if they wanted to get promoted, they'd better be Black Belts. Universal cost oriented metrics and the new level of competition that Six Sigma provides easily acquires top level support. Some argue that the only new addition that Six Sigma provides is the way top management is treating it. What's really important is that CEOs are seriously supporting large improvement projects run by highly trained business super stars. (Bullinger, 1994) Problem Solving and Team Leading Super Stars: Executive Champion, Deployment Champions, Project Champions, Master Black Belts, Black Belts, and Green Belts. (Gilbert, 2000) Training Like Never Before: Much more training for all involved. The training is heavily statistical, project management, and problem solving oriented. Training costs of approximately $15,000-$25,000 per Black Belt are well justified by the savings per project. New Metrics: Use of metrics unlike anything ever used before. These metrics not only tie in customer Critical to Quality (CTQ) needs with what is measured by the company, but they also allow processes within the company to be compared with each other using a single scale called DPMO. Much Better Use of Teams: Very efficient use of highly trained, cross-functional, and empowered teams to locate and make improvements. Black Belts are also trained team efficiency experts. (Zank, 2003). A New Level of Process Comparison: The use of opportunity divisible defect metrics (DPMO) allows comparisons from division to division, department to department, process to process, etc. within the company. A New Corporate Attitude / Culture: Implementation of Six Sigma creates a new environment that naturally promotes the creation of continuous improvement efforts. A Closer Look at Old Metrics: PDCA becomes a more detail oriented DMAIC and all those Quality tools that never get used are thrown out. If we don't need them, why spend time learning how to use them. (Goland, 1998). There are two ways to increase profits: One is to provide breakthroughs in product or service; the other is to reduce mistakes. Six Sigma is about virtually eliminating all types of mistakes, waste, and rework. To do this, a focused structure is implemented as follows: 1. The CEO adopts Six Sigma publicly through a company wide training effort and assigns someone from top management to be the 'Executive Champion'. 2. The Executive Champion assigns Deployment Champions and Master Black Belts (also called Project Champions) from the next highest levels of management. The Master Black Belts oversee Six Sigma Projects. Master Black Belts are usually consultants for new initiatives. They pick the projects and people, and teach, coach, and monitor them. Improvement projects usually last between four and six months. The Master Black Belts assign the Black Belts and Green Belts to help lead and contribute to the projects. (Kroll, 2004) 3. The Black Belts are problem solving super stars that do the real work of improving processes via the projects and oversee Green Belts that take data and assist the Black Belts. Black Belts are trained for four weeks in both management and technical skills. The average Black Belt is said to save the company $150,000 to $175,000 per project. Master Black Belts and Black Belts are the only team members that work full time on the projects. Integrating Lean with Six Sigma The lead-time is the amount of time taken between the entry of work into a process (which may consist of many activities) to the time the work exits the process. In procurement the Things in Process are the number of requisitions, in product development the number of Projects In Process, and in manufacturing the amount of Work In Process. Lean contains a well-defined set of tools that are used to control and then reduce the number of Things in Process, thus eliminating the non-value add cost driven by those Things in Process. (Swamidaas, 1993). The Pull/Kanban system puts a cap on the number of things in process, thus putting a cap on the lead-time. Lean also contains tools to reduce the quantity of things in process including setup reduction, total productive maintenance, 5S, etc. For example, setup reduction allows the reduction of the time spent on producing a quantity of any given offering or product, reducing lead-time without reducing the completion rate. ( The Lean methodology has a bias for action, leveraging Kaizen to rapidly improve processes and drive results. (Stamm, 1991) Why should Lean be important to Six Sigma professionals Whereas Six Sigma is most closely associated with defects and quality, Lean is linked to speed, efficiency, and waste. Lean provides tools to reduce lead-time of any process and eliminate non-value add cost. Six Sigma does not contain any tools to control lead time (e.g., Pull systems), or tools specific to the reduction of lead time (e.g., setup reduction). Since companies must become more responsive to changing customer needs, faster lead times are essential in all endeavours. Lean is an important complement to Six Sigma and fits well within the Six Sigma DMAIC process. Additionally, the Lean Kaizen approach is a great method that can be used to accelerate the rate of improvements. You need to improve quality so you can achieve maximum speed, and you need to do the things that allow maximum speed in order to reach the highest sigma levels of quality. In other words, you need both Lean (speed) and Six Sigma (quality) principles and tools to drive improvements in ROIC and achieve the best competitive position. (Epps, 1994) Can you provide an example of how Lean coupled with Six Sigma would help address a transactional process issue A manufacturing process issue The processes of all companies and organizations must: Become faster and more responsive to customers; achieve Six Sigma capability; and operate at world-class cost. Only the combination of Six Sigma and Lean can fulfil all three goals. In any process, Lean Six Sigma creates a value stream map of the process identifying value add and non-value add costs, and captures the Voice of the customer to define the customer Critical To Quality issues. Projects within the process are then prioritized based on the delay time they inject. This prioritization process inevitably pinpoints activities with high defect rates (Six Sigma tools) or long setups, downtime (Lean tools). In manufacturing, a further benefit results from a reduction in working capital and capital expenditure. We have found over the last 15 years that these methods apply in virtually every kind of process from healthcare to financial services to energy to manufacturing. (Goland, 1998) What role can Lean play in a company that has already started implementing Six Sigma Lean will add another dimension of improvement in process speed and reductions of non-value add cost. Further, by accelerating process speed, Lean provides faster feedback and more cycles of learning enhancing the power of Six Sigma tools. (Straf, 2003) For example, an L18 Design of Experiment might require about 100 separate runs to optimize parameters and minimize variation. Reducing the lead-time by 80% will allow the fractional factorial design to be completed five times faster. In addition, the Lean Kaizen approach allows Black Belts to implement rapid improvements whenever possible. (Rishel, 1997) The following is a fictitious scenario from www.isixsigma.com illustrating how six sigma can be applied to a health care setting: Hy Sedrate, director of quality for St. Recover in the Longrun Hospital, has been worried about his organization's future, and more specifically about his own future. St. Recover has been acquired, through a series of complex arrangements, by Santa Cura Hospitals, a large regional organization made up of some two dozen hospitals and clinics. Sedrate has learned to manage quality systems at St. Recover, but only through the prowess of his SPC team, which works nonstop to analyze data in the hospital. Sedrate knows that he will not be promoted to the larger organization without a dramatic demonstration of quality improvement in his organization. And the alternative is grim, since there are apparently plenty of other quality directors in the same position within the Santa Cura system. After walking around the hospital and musing on the possibilities, Hy Sedrate determines that a highly visible project that he is capable of supervising lies in the number of medications that are either incomplete or inaccurate when they are delivered from the pharmacy. "Prescription drugs are always in the news," he figures, "so everyone will notice our improvement." With that confidence, he arranges for the pharmacists to gather data relating to missed medications. Hy Sedrate knows that he will have plenty of data in this area, since the pharmacy has been collecting data for the Joint Commission on Healthcare Accreditation. He decides that the data should be considered as attributes data, since he will be measuring nonconforming items, defined as those medications that fail to be delivered on time. Further, he believes that an np-chart is the appropriate way to analyze the data, since in effect he will be examining the number of deliveries with mistakes. He develops the following chart, based on the data provided by the pharmacists: When he sees the chart, Hy Sedrate is somewhat disappointed, since the system seems to be in control. "I was hoping to see lots of out-of-control points so we could eliminate special causes," he mutters to himself, deciding that this np-chart gives him nothing dramatic with which to enhance his portfolio in the hospital. He's so worried about what he can do that he finds himself losing sleep at night. Is his anxiety merited Hy Sedrate's high blood pressure is pointless, since the pharmacy process gives him plenty of opportunities to improve quality. The point is not just to identify out-of-control conditions, but to improve the process. The np-chart reflects that the process is now generating an average of 10.2 non-conformities per week. With the use of brainstorming, cause-and-effect analysis, Pareto diagrams, and other problem solving and data analysis tools, Hy Sedrate's improvement team can identify ways to reduce the number of missed prescriptions even further. Quality improvement is not simply data gathering, but analyzing data and organizing it in order to determine ways to improve the process. The Plan-Do-Study-Act cycle focuses on continuously examining processes in order to bring them to even greater levels of predictability. (Cleary, 2005, http://www.isixsigma.com/library/content/c030115a.asp). The Mayo Clinic's Supply Chain In the past two years, the Mayo Clinic faced a financial crisis. For over a century, wealthy patients travelled to rural Minnesota in the mid-western United States seeking innovative medical treatment. This trend came to a halt after September 11 when the Department of Homeland Security curbed visas. Patients could not wait the lengthy time it took to get a visa, so they opted for European healthcare facilities instead. The largest group of patients had come from the Middle East and from Saudi Arabia and Dubai in particular. Insurance companies that placed reimbursement limits on healthcare costs covered Mayo Clinic's domestic patients. The international patients paid in cash. The cash-only base disappeared overnight. Mayo Clinic did two things. The first was to set up a facility in Dubai to diagnose cardiovascular disease. If surgery were warranted, the advance notice would work with the visa time frame. Mayo physicians would also fly out to these patients. The second major response was in laboratory medicine. Most of the Clinic's labs are for outside patients seeking to verify a diagnosis. The Clinic's labs produce over 12 million of these labs results per year. Because of the high volume, FedEx agreed to initiate a major air hub in the middle of a tiny cornfield town. The laboratory receiving area is housed next to the FedEx hangar at the nearby airport. Within two years, Mayo recovered from the September 11 setback. As an aside, FedEx perfected their own SCM, so that they founded the FedEx Center for Supply Chain Management: Fogelman College of Business and Economics at the University of Memphis. The Future of SCM Traditionally, manufacturing has been implementing supply chain management. Other industries are beginning to see the applications for their processes. Healthcare is responding to the huge influx of baby boomers seeking healthcare services. Governments and insurers are limiting reimbursements to these providers. Regulations also require these organisations to provide service even with no prospect of payment. The near future will find SCM combined with Lean Six Sigma practices. (Tersine, 2004) Toyota developed Lean Manufacturing and Motorola and GE developed Six Sigma practices. Lean process improvement methodologies seek to remove nine types of waste in a process while six sigma seeks to eliminate or reduce defects to 3.4 per million opportunities. The airline and the healthcare industries are two that must have zero tolerance for defects. (Crumbley, 2004) Lean production serves as a bulldozer of obvious waste while six sigma practices serve as a microscope for the remaining components, of the processes providing a value add, in need of reducing variability. (Cook, 2001) SCM and Lean overlap with their just-in-time emphasis and small-to-no batches. Employees will be free agents rather than salaried. Departments will give way to project teams that disband upon completion. Still there will be challenges in implementing SCM: . . . An exchange can't wring huge efficiencies out of all elements of the supply chain; in fact, it can have no impact at all on some of them, such as the physical flow of goods. An electronics manufacturer in California, for example, must maintain surplus inventory because otherwise the company wouldn't be able to fulfil unanticipated orders until the components for them arrived; those from Taiwan, for instance, may take several weeks to cross the Pacific and clear customs. At best, the improved information flow or collaboration that an exchange offers may eliminate the three to five days ordinarily spent planning, negotiating, and documenting transactions. (Agrawal & Pak, 2001, p. 22) Conclusion To remain competitive, companies are seeking to maximise profits by streamlining their processes along the supply chain. (Ciscel, 2005). Methodologies such as the combined Lean Six Sigma espouse just-in-time production. Tools such as ergonomics, contingency planning, and technology are helping to reduce lead times from raw material to finished product in the customer's hand. One company, the Mayo Clinic aided by FedEx, implemented SCM successfully to overcome a major challenge after September 11. The future of SCM is promising, especially with emerging best practices being used in all industries. Appendix A LEAN TERMINOLOGY (From http://www.agility-inc.com/) ABNORMALITY MANAGEMENT - The ability to see and respond to an abnormality (any violation of standard operations) in a timely manner. ANDON - A signal to a line stop. Typically, a cord or light mounted on a machine or line to indicate a potential problem or work stoppage; an example of jidoka. See Jidoka. AUTONOMATION - English translation of Jidoka. Imparting human intelligence to a machine so that it automatically stops when a problem arises. In other words, the automatic control of defects. It includes the practice of stopping machines when some deviation or variance is detected. The detection and stoppage can be effected by either a worker or a machine. Detection schemes include contact, altogether, and action step methods. Mistake-proofing (See poka yoke) as a quality control technique is a subset of autonomation. Autonomation can also be employed for other, non-quality, purposes. BALANCED PLANT - A plant where all available capacity is balanced exactly to market demand. BOTTLENECK - Any resource whose capacity is equal to, or less than the demand placed on it. CHAKU-CHAKU LINE - Meaning load-load in Japanese, this describes a work cell where machines off-load parts automatically so that operators can take a piece directly from one machine to the next without waiting. CHANGE AGENT - A person whose demonstrated mission is to be the catalytic force which moves firms and value streams from the now or current state, e.g. batch and queue, to the future or ideal state: lean manufacturing. One who leads cultural change in an organization. CELL(ULAR) MANUFACTURING - The arrangement of people, machines, materials and methods such that processing steps are adjacent and in sequential order so that parts can be processed one at a time ( or in some cases in a consistent small batch that is maintained through the process sequence). Typically, in a U-shaped configuration where operators remain within the cell and materials are presented to them from outside of the cell. The purpose of a cell is to achieve and maintain efficient continuous flow. CONSTRAINT - Anything that limits a system from achieving higher performance or throughput. CONTINUAL IMPROVEMENT - The commitment to creating a better product, work environment and business, every day. CONTINUOUS FLOW - In its purest form, continuous flow means that items are processed and moved directly to the next process one piece at a time. Each processing step completes its work just before the next process needs the item, and the transfer batch size is one. Also known as one piece flow and "make one, move one". CYCLE TIME - The time it takes an operator to complete one full repetition of work. Globally, it is the time it takes before the cycle repeats itself. See Operator Cycle Time, Machine Cycle Time. 3Ds - Dirty, dangerous, difficult. DEFECT - process outputs that do not function properly or do not meet accepted standards or expectations. Often defects are those items that fall outside the tolerance or specification limits. DEMAND PULL - A methodology which predicates production based solely on customer demand ELECTRONIC KANBAN - A software system designed to automate many of the manual process associated with releasing or creating a kanban order ELEMENTAL TIME - Time allotted to a specific operational step, within standard work. ERROR - The execution of a prohibited action, the failure to correctly perform a required action or the misinterpretation of information essential to the correct execution of an action. ERROR-PROOFING - designing a potential failure or cause of failure out of a product or process EXTERNAL SET-UP - Elements of tooling set-up or machine changeover that can be performed safely while the machine is still running or in motion. FIVE S (5S) - The primary conditioning discipline for kaizen, the five Ss are defined as: Seiri, to sort, segregate and discard. Seiton, to identify, arrange and set in order. Seiso, to clean, shine, sanitize and inspect daily. Seiketsu, to standardize and revisit frequently, and Shitsuke, to motivate to sustain. FIVE WHYS - Taiichi Ohno's practice of asking "why" five times in order to uncover the root cause of a problem so that effective countermeasures can be developed and implemented FLOW: the progressive achievement of tasks along the value stream FLOW MANUFACTURING - a methodology that pulls items from suppliers through a synchronized manufacturing process to the end product GEMBA - The real place or the specific place, usually to mean the shop floor and other areas where work is done or value is created. GLOBAL PRODUCTION SYSTEM - An expansion of the Toyota Production System, this is a strategy to enable lean manufacturing using kaizen methodology. HANEDASHI - A device that allows a machine to automatically unload a part without waiting for an operator. HEIJUNKA - See Production Smoothing; Keeping total manufacturing volume as constant as possible by creating a build sequence that is determined by SKU average demand. HOSHIN KANRI - a strategic planning approach that focuses resources on the critical initiatives necessary to accomplish the business objectives of the firm INTERNAL SET-UP - Elements of tooling set-up or machine changeover that is performed while the machine is not in motion. INVENTORY - Usually the highest cost category, inventory is all raw materials, purchased parts, work-in-progress and finished goods that are not yet sold to a customer. JIDOKA - See autonomation. Japanese term for transferring human intelligence to a machine. It means developing processes with both high capability and containment (of defects, if necessary). JUST IN TIME (JIT) - Manufacturing what is needed, when it is needed, and in the quantity it is needed. KAIKAKU - Radical improvement, usually in a business process, that affects the future value stream. KAIZEN (NOUN) - A combination of two Japanese words Kai (change) and Zen (good, for the better). Usually defined as "continuous improvement." KAIZEN EVENT (VERB) - A time-sensitive, rapid-deployment methodology that employs a focused, team-based approach to small but non-ending incremental improvements. KANBAN - Visual signal. Typically a small card, sign or signboard, an instruction to produce or supply something. A re-order card or other method of triggering the pull system, based on actual usage of material. A central element to JIT system. There are two types; production and withdrawal. It should be located for use at the point of manufacturing. LEAD TIME - The amount of time required to produce a single product, from the time of customer order to shipping. LEAN MANUFACTURING - Using the minimum amount of total resources - man, materials, money, machines, etc. - to produce a product and deliver it on time. MACHINE AUTOMATIC TIME - The time is takes for a machine to produce one unit, exclusive of loading and unloading. MACHINE CYCLE TIME - The time it takes for a machine to produce one unit, including the time it takes to load and unload. MUDA - Waste or any activity that adds to cost without adding to value of the product. MURA - Variation or fluctuation in work, process quality, cost and delivery. A lean system seeks to reduce mura through heijunka. MURI - means, difficult to do, unreasonableness; demand exceeds capacity. NAGARA SYSTEM - Accomplishing two or more activities with one motion and at the same time. NON-VALUE ADDED - Any activity that absorbs or consumes resources (e.g. material, time, equipment, people, paper, space) without creating value. Same as muda. ONE-TOUCH EXCHANGE OF DIES - The reduction of die set-up activities down to a single step. ONE-PIECE FLOW - A manufacturing philosophy or concept which supports the movement of product from one workstation to the next, one piece at a time, without allowing inventory to build up in between. OPERATOR CYCLE TIME - The time it takes for a person to complete a predetermined sequence of operations, inclusive of loading and unloading, exclusive of time spent waiting. PACEMAKER - A technique for pacing a process to takt time. POLICY DEPLOYMENT - Matching the strategic business goals of an organization to its available resources. Communicating those goals throughout the organization and linking everyone to the same objectives. POKA YOKE - A Japanese word for mistake proofing, literally translated means, "to avoid inadvertent errors". An inexpensive poka yoke device prevents or eliminates the possibility of a human error from affecting a machine or process; prevents operator mistakes or errors from becoming defects. POINT KAIZEN - An improvement activity focused directly on a single workstation, performed quickly by two or three specialists. Typically follows a full-blown kaizen event. POINT OF PRODUCTION (POP) - A methodology which emphasizes the movement of materials to the point of consumption PROCESS CAPACITY TABLE - A chart primarily used in a machining environment that compares machine load to available capacity. PRODUCTION SMOOTHING - A method of production scheduling that, over a period of time, takes the fluctuation of customer demand out of manufacturing. "Produce every part, every day". PULL - To produce an item only when the customer asks for it. Typically, the customer withdraws the item and we "plug the gap" created thereby. PUSH - To produce an item irrespective of actual demand; creates the muda of overproduction, among others. QUALITY AT THE SOURCE - A method of quality analysis that emphasizes prevention over detection QUALITY FUNCTION DEPLOYMENT - A methodology in which a cross-functional team reaches consensus about final product specifications, in accord with the wishes of the customer. SENSEI - A revered master or teacher, literally, "one who has gone before". SET-UP REDUCTION - Reducing the amount of downtime during changeover from the last good piece to the first good piece of the next order. Typically, in anything less than 10 minutes. AKA "Single-digit set-up." Also known as SINGLE-MINUTE EXCHANGE OF DIES (SMED) SHIHAN - A master teacher, a sensei's sensei Lit. "teacher of teachers" SIX SIGMA - structured process improvement program for achieving virtually zero defects (3.4 parts per million) in manufacturing and business processes SPAGHETTI CHART - map of the path taken by a product as it travels down the value stream in a mass production organization STANDARD OPERATIONS - The best combination of people and machines utilizing the minimum amount of labor, space, inventory and equipment. STANDARD WORK - Pre-determined sequence of tasks for the best way to get the job done in the amount of time available (within takt time) while ensuring the job is done right the first time, every time. STANDARD WORK COMBINATION SHEET - A document showing the sequence of production steps assigned to a single operator. It is used to illustrate the best combination of worker and machine. STANDARD WORK LAYOUT - A diagram of a work station or cell showing how standard work is accomplished. STANDARD WORK IN PROCESS (WIP) - Minimum material required to complete one cycle of operator work without delay. STOP-THE-LINE AUTHORITY - Whenever abnormalities occur, workers have power to stop the process and prevent the defect or variation from being passed along. See Andon. SUB-OPTIMIZATION - Optimizing each piece of equipment; keeping all machines running, no matter the cost or consequence. Typically this inflates the number-one cost of production: material. SUPERMARKET - A controlled amount of items that are sorted, made ready for presentation and usage, usually located near a line-side upstream process. It is used to make customer requirements visible and to schedule production at an upstream process in order to improve flow and better control levels of WIP. TAKT TIME - The pace of production synchronized with the rate of sales. It is calculated based upon the total net daily operating time divided by the total daily rate of sales. THROUGHPUT - The rate at which the entire system generates money. TIME-BASED STRATEGY - Organizing business objectives around economy-of-time principles. TOTAL EMPLOYEE INVOLVEMENT (TEI) - building a culture and practice of involvement and responsibility in every person in the organization TOTAL PRODUCTIVE MAINTENANCE (TPM) - An integrated set of activities aimed at maximizing equipment effectiveness by involving everyone in all departments at all levels, typically, through small group activities. TPM usually entails implementing the 5S system, measuring the six big losses, prioritizing problems, and applying problem solving with the goal of achieving zero breakdowns. TOYOTA PRODUCTION SYSTEM - Based on some of the first principles of Henry Ford, this describes the philosophies of one of the world's most successful companies. The foundation of TPS is production smoothing, the concepts which support it are just-in-time and jidoka. VALUE ADDED - Any activity that transforms a product or service to meet the customer need. VALUE ANALYSIS - Evaluating the total lead-time and value-added time to identify the percentage spent in value added activities. VALUE STREAM MAP (or Value Chain Map) - A visual picture of how material and information flows from suppliers, through the enterprise, to the customer. It includes calculations of total cycle time and value-added time. Typically written for the current state of the value chain and the future, to indicate where the business is going. VISUAL CONTROLS - Creating standards in the workplace that make it obvious if anything is out of order and by displaying the status of an activity so every employee can see it and take appropriate action. VISUAL MANAGEMENT - System enabling anyone to quickly spot abnormalities in the workplace, regardless of their knowledge of the process, i.e. manage by exception. WORK-IN-PROCESS (WIP) - Items waiting between operation steps to be processed. WORK SEQUENCE - The correct steps the operator takes, in the order in which they should be taken. See Standard Work. Appendix B Six Sigma Terminology Six Sigma the name itself is a bit complex, and so are many other words surrounding this process and training! If you're ready to make sense of key Six Sigma terminology and acronyms, look no further than this Six Sigma Dictionary. Balanced Scorecard: A one page tool for translating an organization's strategy into operating terms. It has four columns: Vision, Current Initiatives, Business Processes, and Business Results. Business Improvement Campaign: A leadership initiative to improve the big Ys that determine an organization's success. Six Sigma Business Improvement Campaign elements include scorecards, Team Charters, improvement teams, and integrated business reviews. DMADV: The most popular Six Sigma framework used within DFSS projects. It is an acronym for Define requirements, Measure performance, Analyze relationships, Design solutions, Verify functionality. DMAIC: The Six Sigma problem-solving framework for improving business processes. It is an acronym for Define opportunity, Measure performance, Analyze opportunity, Improve performance, and Control performance. Design for Six Sigma (DFSS) A proactive approach to building Six Sigma performance into the up front design of a new product, service or process. Lean Six Sigma : A business improvement framework that integrates the Six Sigma methodology with the cost reduction benefits of the Lean Production approach. Lean production techniques are included as part of the Motorola University Black Belt program. MINITAB: A software package used to implement Six Sigma and other quality initiatives. It provides data analysis and graphical data presentations and offers many statistical procedures, ranging from simple to advanced. Sigma level: A metric that counts defects per million opportunities (or DPMO). A metric of Six Sigma equates to 3.4 DPMO. Six Sigma: Invented by Motorola, Inc. in 1986 as a metric for measuring defects and improving quality. Since then, it has evolved to a robust business improvement methodology that focuses an organization on customer requirements, process alignment, analytical rigor and timely execution. For more about this process, please visit the What is Six Sigma page. Six Sigma Black Belt: A Six Sigma expert highly skilled in the application of rigorous statistical tools and methodologies to drive business process improvement. Six Sigma Certification: A confirmation of an person's capabilities with respect to successfully leading and supporting Six Sigma project teams. It entails learning the appropriate skills, passing a written proficiency test, and displaying competency in a real-world environment. Achieving Six Sigma certification is a way to demonstrate your energy and intent to be a leader within the quality profession. Six Sigma Champion: The Champion typically has day-to-day responsibility for the business process being improved and their role is to ensure the Six Sigma project team has the resources required to successfully execute the project. Six Sigma Consultant: A company or individual with experience and expertise in Six Sigma business improvement implementations who is hired for a limited time to advise and facilitate Six Sigma implementation. Six Sigma Consulting: A service provided to organizations to help improve business processes, services, and/or products using the Six Sigma methodology. Guidance may be provided on specific topics or on strategic planning for Six Sigma implementations. Six Sigma Green Belt: A Six Sigma practitioner trained in the methodology and tools to need to work effectively on a process improvement team. Green Belts may act as team members under the direction of a Black Belt or may lead their own less complex, high impact projects. Six Sigma Leadership Principles: A set of guiding principles required to help leadership identify the best way to drive results and support teams. The four principles are Align, Mobilize, Accelerate, and Govern. Six Sigma Master Black Belt: A Black Belt achieves "Master" status after demonstrating experience and impact over some period of time. Master Black Belts address the most complex process improvement projects and provide coaching and training to Black Belts and Green Belts. Six Sigma Quality: A level of quality that represents only 3.4 defects per million opportunities. Six Sigma Software: A computer program that provides data analysis, project management, resource management and reporting functionality for Six Sigma projects and overall implementations. 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