ECO Notes

ECO concepts

Execution functions include measuring and controlling the input/output activity, detailed scheduling, dispatching, supplier scheduling, and reporting anticipated delays from both the shop floor and from suppliers. This feedback from the execution functions allows for better planning. Execution and control processes allow the company to make decisions in real time and feed back the information for replanning in the short term and better planning in the long term.

Execution and control processes transform the detailed plan into products and services. The planning function communicates information to the execution function using S&OP production plan, MPS, MRP and CRP providing execution inputs: what to make, when to make it, scheduled completion time and the manufacturing standards. The execution outputs provide feedback to the planning function: order status, completed order, performance to standards, and notification of delays and problems. The execution process must be consistent with the basic business choices made by the organization.

a) Interfaces required

Production Activity Control (PAC) known also as Shop Floor Control (SFC) -> execution interfaces facilitate production activity control and these systems are known as manufacturing execution systems (MES). Product activity control is concerned with the execution of the material plans. It includes the shop floor scheduling as well as the supplier follow-up to ensure material availability.

Functions of PAC: delivering the work orders to the supervisor in the work center, day-to-day and hour-to-hour rescheduling of work on the shop floor, recognizing that an adequate solution can’t be implemented on the shop floor and feeding this info back to the planning staff so that MRP can be rescheduled

Information reported from the shop floor: quantities completed and work order used, operations complete and movement of parts between work centers, actual work center use, scrap numbers (process scrap related to start of work like setup and product scrap being the result of a mistake) and rework time, lot splits and rescheduled work, operator assigned, and any reason for interruption of the work

b) The business choices that impact the process

Layout design and types:

Functional (disconnected) characterized by locating machines to perform similar functions in the same area. The machines are clustered together. This leads operational departments with individual supervisors like the drilling department, the welding department, the assembly department
Job shop (disconnected) whereas functional is laid out around equipment, job shop is laid out based on the work. Work centers are laid out to facilitate the flow of a batch of parts. The flow may or may not be repetitive. One of the advantages of a job shop is that orders go only to the required work centers and do not have to pass through every work center. This type of layout is often cited as wrong way to manufacture in the current push toward lean manufacturing. However there are some valid reasons to choose this type of layout (the provide flexibility for the customer): making small batches for test marketing or early in the production of a product, when making a unique or low-volume product or a prototype.
Continuous flow design (flow layout) where there are 3 types: continuous flow (oil refinery), repetitive flow, batch flow.

Focused factory – plant in which entire manufacturing system is focused on a limited, concise, manageable set of products, technologies, volumes, and markets, precisely defined by the company’s competitive strategies

Additional type: Cellular manufacturing producing families of parts with single line or cell of machines operated by workers who work only with the cell. Space between machines is minimized, and parts are handed off directly to the next operator as they are produced.

Hybrid plant – where more than one type of layout is incorporated

c) Improvement initiatives that impact the execution process

Quality initiatives

Quality – conformance to requirements or fitness for use

Number one – transcendent quality is an ideal, a condition of excellence

Number two – product-based quality is based on product attributes

Number three – user-based quality is fitness for use

Number four – manufacturer-based quality is conformance to requirements

Number five – value-based quality is the degree of excellence at an acceptable price

Cause-and-effect analysis, TQM, Lean, Just-in-Time, continuous improvement

Quality at the source requires 100% acceptable quality to be delivered to the customer

Process initiatives

Move/transit time reduction, setup time reduction, lot size reduction, throughput and lead-time reduction, paperwork and transaction reduction,

Scheduling Production and Process Operations

The primary purpose of the schedule SFC/PAC is to satisfy priority plans

Scheduling approaches towards:

a) Product layout using rate-based scheduling also known as dedicated line indicating a make-to-stock strategy that is producing high-demand items based on forecasted requirements where queue, setup, wait and move times are typically negligible as a result of automation and streamlined flow (low-cost standardized commodities with high-volume) retail consumer goods e.g. canned food products

Note that lead-time is not a factor in the rate-based calculation. There is no need for work orders, start/finish dates, or detailed routings. The capacity is fixed, set to match the rate of flow, and thus detailed capacity planning is not necessary.

b) Process layout using individual work orders also known as functional or job shop layout (low-volume items with high variety such as specialized make-to-order or engineer-to-order products) e.g. tool and die shop or custom furniture shop. This environment is characterized by variety: many products, unique routings, and various lot sizes directed by production orders. Most appropriate for the make-to-order or engineer-to-order approaches. There is a greater need for detailed material and capacity plans, and hence, more detailed scheduling at the shop floor level.This environment tends to have large queues at each work center and the travel distance between departments leads to significant wait and move times. Basic info needed to schedule individual operations consists of: lead-time elements, sequence of operations for the routing file, production quantity and due date from individual work order. Routing includes operations to be performed and their sequence, work centers involved in manufacturing, setup and run times. Routings often include inspection operations, testing, and tooling information.

c) Project layout using the critical path method (CPM) of scheduling; the unique case of many one-piece or one-of-the-kind jobs; typical characteristics include: the work remain fixed in place and workers and machines move around it, a significant capital expenditure is required, cost justification is critical, capacity resources are generally allocated to work exclusively on the project for an extended time, or the full project duration, the work comprises a series of interdependent tasks performed consecutively, or sometimes concurrently and time elements are often best estimates, as opposed to firm engineering standards.

Governing the sequencing of activities is based on:

Prerequisites: must be performed before the activity under consideration, e.g. cement must be mixed before it is poured
Immediate successor: must be performed after the activity under consideration, e.g. cement is smoothed after it is poured
Concurrent activities: may be performed at the same time.

Done that a planner can answer the question about the earliest completion date, identification of the bottlenecks, and flexibility at non-bottlenecks

One of common project scheduling techniques is the critical path method (CPM, activity-on-arrow approach) identifying the constraining sequence of activities and describing the duration of activities to complete the project. Other possibilities for scheduling project include: CPM Networks (activity-on-node technique where node is activity and arrow is precedence), PERT (Program Evaluation and Review Technique) using optimistic, most likely, and pessimistic time estimates to accommodate uncertainties or Gantt Charts that are widely used and historically popular graphical representation of project tasks. Gantt charts typically display time along the x-axis and items such as resources or jobs along the y-axis

Regardless of the approach that is used, the schedule will define the following: tasks to be performed; sequence of tasks; start, duration and finish time of individual tasks and constraints or required resources

Scheduling Operations:

Backward scheduling: used where due dates are the driving force behind the schedule, producing items ahead of time is costly, MTS, finished goods inventory is built to a forecast and a forecast is a preset inventory target for a specific due date, customers will not take early shipments, contingency plans such as overtime can be utilized to prevent delays. MRP, CRP and operations scheduling usually use backward scheduling.

Backward scheduling = “Start at the last possible moment”

Forward scheduling: used when customer will accept early delivery of MTO or ETO products, operation start jobs as soon as they are received, when product costs < process costs (cost of finished goods inventory < cost of idle equipment/manpower), it is preferred to have slack time available before the due date (just in case), there are many schedule changes and reprioritizing of work (delays). Slack time will be latest start date – planned start date or (Due Date – Today’s Date) – Total Processing Time Left. Forward scheduling is used for delivery date estimations.

Forward scheduling = “Finish ASAP”

Backward and Forward scheduling combination in constraints based scheduling which focuses on the bottleneck resources. In this case the first operation scheduled is the bottleneck and it becomes the priority. All operations after the bottleneck are forward scheduled, all operations before the bottleneck are backward scheduled.

Which loading method to use?

Infinite loading where they are due-date driven and must take capacity adjustments to ensure on-time delivery, when practically extra capacity exists (overtime, weekends) so we have flexible capacity above our normal rated level. Also useful when we allow planners to observe underloads and overloads, then take corrective actions. This allows the planner to adjust for any imbalances by shifting loads to different work centers or different time buckets. Capacity requirements planning or infinite loading is based on the customer due date.
Finite loading when using APS (advanced planning and scheduling) systems and having a high degree of data accuracy. These systems calculate the exact capacity available and schedule only up to that amount. When practically no extra capacity exists as in an environment operating on continuous basis 24/7 for which is not possible to add shifts or overtime. Operations scheduling plan each operation to arrive at a completion date based on a finite capacity.
Environments that are assemble or make to order since they load work into the nearest time buckets available to complete work orders ASAP. Capacity is filled up to the limit for all booked orders, and each successive incoming order is scheduled further out

Managing Priorities of work (following priority rules used to manage the work in queue to optimize business performance) depending on what metric or metrics company values (reduce average lateness, reduced WIP, reduced cycle time, improved OTD). The priority of the job is the most important factor affecting the queue time at a work center. The queue time will be eliminated if the priority of the job is high enough to bypass all the other jobs waiting for the work center

a) Priority rules – simple

First Come, First Served (FCFS)

Common in lean environment with little or no WIP, also appropriate at work centers early in the production process when jobs are arriving in the order they are released

Earliest Due Date (EDD)
Shortest Processing Time (SPT)

b) Priority rules – calculated

Shortest Total Processing Time (STPT)
Fewest Operations (FO)
Slack Time (ST)
Slack Time/Number of Operations (ST/#OP) – where are 2 jobs with same slack, the one with more operations left should be given the priority due to greater np. of queues, waits, and moves that could cause delay
Critical Ratio (CR) being perhaps most effective priority rule since most behind schedule jobs will be processed first, then on-time orders, then those that are ahead of schedule

CR = (Time Available)/(Manufacturing Lead Time Left) = (Due Date – Today’s Date)/(Manufacturing Lead Time Left)

Load leveling involves spreading orders or re-scheduling operations so the work is distributed evenly and can be achieved

Other dysfunctional methods that should be avoided but often find their way into use in practice:

Customer complaint
Finance or management picks the highest value job
The work center operator picks a long-run job to elevate his or her piece rate
LCFS (last come, first served)

Management of Schedules:

Managing schedules to ensure on-time delivery by reducing lead-time via: Lot splitting , Operation overlapping, Interoperation time reduction, Expediting
Input/Output control chart elements (monitoring flow of work, capacity requirements and managing backlog):

4 rules of input/output control:

Never load in more than you expect out
Separate the planning and control of capacity from the planning and control of production
Place the due date on the order at the last possible moment
Capacity should be planned in the largest possible group of items

When loads exceeds available capacity there are four methods of making adjustments to resolve situation: alternative work centers, alternative routings, alternative operations, alternative operators. A good capacity management system can exist without a cost accounting system. However, without valid due dates and accountability for work on the floor, capacity management will be poor.

Authorizing and Reporting Activities for Push Systems

Authorizing Activities

The authorizing activities transform the detailed priority plans into work for operations to perform and this is typically communicated by work orders, shop packets, and dispatching priorities in a push production system. Authorization of the order release is based on planned orders in the MRP output, current priorities, availability of resources and loads.

Shop packet – most common type of documentation that is provided to the production group containing engineering drawings, routing details, pick lists, tooling requirements, move tickets (doc to authorize or record movement of a job from one work center to another), shipping documentation

You can resolve capacity shortages by increasing capacity or reduce load

Increasing capacity being a short-term solution include overtime, temporary help, reassignment of individuals from other work cells and renting or leasing additional equipment

Reducing load by alternative routings, subcontracting, lot splitting, and rescheduling releases or reprioritizing orders

Executing Activities

Including staging, kitting, dispatching for materials and work assignment, expediting or de-expediting (to maintain priorities), and activity reporting for tooling, equipment and work centers

Issuing resource in a push system:

Staging – pulling material for an order from inventory before the material is required
Kitting –process of constructing kits – pulling components of a parent item from stock in preparation for moving them to a production area
Dispatching – the task of priority management determined through a series of rules, involves selecting and sequencing of available jobs to be run at individual work centers in priority sequence as well as the assignment of those jobs to workers
Work assignment
Expediting/de-expediting
Activity reporting

Priority Rules determining the ranking of jobs for the dispatch list:

First come, first served
Earliest job due date
Earliest operation due date
Shortest process time

Secondary rules are applicable when there are 2 orders with identical top priority: fewest operation or least amount of slack time

Reporting Activities

Production reporting captures information on the activities performed, resources applied and outputs or job status.

In functional layout with order control reporting on: order releases (planned date to actual), material issues and returns, operation start and completion date to plan, order moves, scrap and rework costs, order close-out, time and attendance

In product layout with flow control reporting on time and attendance, production units completed, scrap and rework costs (reporting in a process flow environment with long production runs may take place on an exception basis feedback provided only when the output rate falls below an acceptable level)

In fixed layout with project control reporting on percentage complete, on-time and milestone status, budget variances and contract administration, emphasis is on reporting the status of activities on the critical path

Providing traceability involves a unique identifier that allows for tracking each part which is important with regard to liability and problems associated with recalling a product, it is required for all companies in order to be ISO – compliant, achieved by assigning ID to every lot or batch that is produced or procured.

Authorizing and Reporting Activities for Pull Systems

Here authorizing and reporting activities are typically simpler comparing to push production systems

Authorizing Activities

When connected production flow then production schedule is the authorization for all production activities

When disconnected production flow we use for authorization: Kanban signal (physical or electronic, cards, lights, monitoring through the internet, replenishing when inventory reaches certain level): move type authorizing movement of materials or production type authorizing production activities. We can also use visual reorder point systems or two-bin systems for authorization

Brand-name kanbans -> what product needs to be built and when does it need to be built. When we receive a free brand-name Kanban, we are authorized to immediately build another identical item.

Or generic kanbans -> answering the question of when; it authorizes manufacturing to build the product immediately (doesn’t answer the question what items to produce, normally this info comes from assembly schedule or production order, most efficient in situation when product variety is high, volumes are low, or demand is unstable as in ATO env.)

Kanban ceiling can be used to determine the amount of time (or other UOM) or material that one work center is allowed to get ahead of another, also possibly could represent entire operation to limit number of jobs one work center can complete in advance of customer need; always aiming to keep it simple, visual and consistent

Two-card Kanban system where rules are: use one card per container, return move card immediately, leave the production card at the supply point

One-card Kanban systems: no production card, an empty space in the designed outbound stock point confirms the operator’s authorization to obtain an empty standard container and fill it with the correct number of required parts

Kanban rules are:

Never exceed a kanban ceiling, follow FIFO, never pass on a known defect, reduce kanbans to expose problems, the customer pulls material from the supplier, only active material is allowed at the workstation

Kanban prerequisites: pull rule, repetitive usage, very few items, very small lot sizes, very short lead-times, very few rejects, excellent material planning, excellent capacity planning, appropriate Kanban levels

The greater the number of Kanban cards in the system, the larger the inventory

Volume and mix consideration for Kanban are: repetition of process must be the norm, generic Kanban handles volume/mix changes (more effective in a high-volume setting), system automatically reacts to mix considerations

Executing Activities

Rules associated with establishing kanbans for raw materials/finished goods:

Determine actual production lead-time to produce parts
Analyze average demand over lead-time of supplier/customer for parts
Identify anomalies or outliers with demand
Discuss safety stock with suppliers/customers
Establish the quantity per container
Ensure that the supplier/customer agrees with the set Kanban rules

WIP Rules are:

Select the process or sub-process to implement the Kanban control process
Determine the Kanban locations amongst the operations
Determine the Kanban size

Calculating number of kanbans (for RM and FG incl. SS): (safety stock + demand * lead time)/container capacity

Or in different demand patterns for WiP (stable safety factor 1 to 1.1; variable safety factor 1.2 to 1.4)

= (demand * lead time * safety factor)/container capacity

General calculation of the number of Kanban cards is:

y = [(D)(L)(1 + alpha)]/a

where

y = Number of kanban cards

D = Demand per unit of time

L = Lead Time

a = Container capacity

alpha = Safety stock as % of (demand * LT)

if (example)

Usage is 120 per week, Lead Time is 1 week, Container size is 10 units and Safety stock is 0 then

y = [(120) * (1) * (1 + 0)]/10 = 120/10 = 12

‘One less at the time’ concept used to reduce number of kanbans in the loop, lot sizes, setup times etc. to uncover hidden problems and generate motivation to solve it. Reduction is permanently introduced when an issue is identified and process improvement is implemented.

Reporting Activities

Minimal as reporting activities related to a disconnected flow within a pull system e.g. backflashing or point-of-use storage or ship-to-WIP process(assuming all processes are working correctly and high level of data integrity is needed in order for backflushing to work satisfactorily). Reporting only on staffing, the actual output, scrap and any unplanned activities. Work-in-process inventory tracking is eliminated since inventory is reduced and standardized. In a ship-to-WIP process, traditional receiving, inspection and stocking are bypassed and the product is delivered to the point of use. This eliminates significant cost in the operation as many steps are eliminated which add no value.

Advantages of point-of-use storage in pull system:

Materials are readily accessible to users
Material handling is reduced or eliminated
Central storage costs are reduced
Material is accessible at all times

Controlling Resources

Objective of inventory storage is to optimize use of space to make it more effective. The basic issues are use of centralized vs distributed storage and staging, and the technologies used. Storage capacity for a part must account for max receipt quantity + the on-hand quantity at the time of receipt

Inventory storage examples:

Warehouse used to store material but the storage time does not add value therefore the activity should be minimized and eliminated whenever possible
Point-of-use where inventory is kept in specified locations on a plant floor near the workstation using it providing easier access to materials and increased inventory visibility (keeping inventory low + tight control of inventory records)
Central Storage contains all inventory in one central location where: control is easier, inventory accuracy is easier to maintain, specified storage can be used, safety stock can be reduced
Point of manufacture where inventory is delivered directly to the work cell using the material in the proper sequence. This greatly reduces material handling time and allows for effective material storage with little wait time

Storage Area organization methods:

Fixed location using predetermined fixed locations per item. Advantage is the fact that items are always in the same strategically located place so the storeroom personnel can quickly find it. Main disadvantage is that the bin or cube can be underutilized. In fact, it is not uncommon for a storage location to be only 50% utilized with a fixed location system.
Random Location refers to areas where products are not stored in fixed locations. Advantage is improved cube utilization but it requires accurate and up-to-date information on item location and the availability of empty storage space so items and be put away and retrieved efficiently.
Zone location, by breaking down your storage locations into zones, you can direct picking, putaway or replenishment to or from specific areas of your warehouse. Since zone logic only designates an area, you will need to combine this with some other type of logic to determine exact location within the zone. Advantage is that it allows for isolation of SKU according to various characteristics and for flexibility in moving items from one zone to another but stock location information must be updated constantly.

Other Storage Area Organization Methods:

FIFO First in, first out directs picking from the oldest inventory first
LIFO Last in, first out directs picking from the newest inventory (e.g. distribution of perishable goods domestically and overseas using LIFO for its overseas customers because of longer in-transit times and FIFO for its domestic customers)
Location sequence defines a flow through the warehouse and assigns a sequence number to each location. In order picking, this is used to sequence picks to flow through the warehouse. When putting goods away, you would look for the first location in the sequence in which product would fit
Quantity or UOM allows picking from different locations of the same item based on the quantity or UOM ordered. For example, pick qty< 25 units directly from primary picking location while qty> 25 units is picked from reserve storage locations.
Fewest locationsis used primarily for productivity. Pick-from-fewest logic uses qty info to determine the least number of locations needed to pick the entire pick qty. Put-to-fewest logic attempts to direct putaway to the fewest number of locations needed to stock the entire qty. This generally results in poor space utilization. The pick-from-fewest logic leaves small quantities of an item scattered over the warehouse, and the put-to-fewest logic ignores small and partially used locations
Nearest location also called proximity picking/putaway. You always need to verify that it is picking the shortest route and not actual nearest location.

It is common to combine multiple logic methods to determine best location. You may change the logic based on current workload: during busy periods you may choose logic that optimizes productivity, while during slower periods you could switch to logic that optimizes space utilization.

Case study: to speed up order filling process decision made by XYZ company based on ABC analysis to arrange fixed locations close to the point of usefor 20% of products for which there are 80% of orders. For rest of products random location method is used. Management decided to allow for 100% of the space needed for one week’s worth of product movement for the fixed-location SKUs and one year’s worth of product movement for random location SKUs

Automated Storage and Retrieval System (ASRS) is a system of rows of racks, each row having a dedicated robotic mechanism that moves vertically and horizontally along the rack, picking and putting away loads of product. With ASRS a material handler enters an item number and a desired qty and the computer directs the appropriate robot to store or retrieve the item

Goal is to reduce transportation costs by receiving and shipping smaller and more frequent lots, which is more efficient. That would reduce handling damage, excess or obsolete inventory due to bad timing, quality and communication problems resulting from excess inventory

Transportation methods related to JIT philosophy:

Freight consolidation
Local final assembly operations involving completing final assembly in the warehouse where the distance between supplier and customer works against sync due to transportation time
Local warehouse improving supplier and customer transportation process and only in operation until the complete supplier-customer system becomes aligned to an acceptable level
Milk runs is a regular route for pickup of loads from several suppliers
Mixed loads helping to offset the overall transportation costs within the organization
Repetitive schedule is a regular, repeating pattern of operations needed to achieve the maximum benefit of the JIT philosophy

Containerization is a shipment method in which commodities are placed in containers.

Containerization characteristics are container quantity, containers per layer, quantity per layer, container type, length/width/height, tare weight, part weight, bar code identification

Dunnage is material used to protect product during shipping, can be container itself. There are disposable and returnable dunnages.

Manufacturing Environment and Inventory

Inventory levels based on overall sales plan and market strategy of the organization, understanding of customer buying patterns, competitive and economic environment.

Project Manufacturing – components typically purchased or manufactured on order-by-order basis, or with lot-for-lot ordering technique, without needing any unusual safety stock. Cycle counting not performed on customer order parts because there is no ongoing issue or receipt activity to cause inventory inaccuracies. Level of control required is minimal as components or raw materials can be procured without affecting the overall lead-time.

Job-Shop Manufacturing (e.g. welding manufactures, large-motor manufactures) –from inventory perspective more similar to project environment than batch process manufacturing where repeated orders are expected and job shops will stock long-lead-time components or basic raw materials purchased in larger lot sizes than required to obtain price break. Minimal level of control focusing on long-lead-time components.

Batch Manufacturing (e.g. pharmaceuticals, medium-size motor manufacturing) requiring from days to weeks to produce an order where marketing lead-time is usually a function of backlog (thus production cycle times may be considerably less than elapsed time from order receipt to order shipment). Using MPS and MRP where production of orders is less then cumulative lead time meaning components need to be stocked. It is critical that the raw materials and components are verified through the ABC process of inventory control. Additionally, due to potential fluctuations in demand it is imperative to manage safety stock. Batch quantities can be reduced by reducing the fixed cost of ordering (purchasing) or setup cost for manufacturing parts.

Line or Repetitive Manufacturing(e.g. transfer line dedicated to one part with one or few minor variations) typically requires minutes to days to produce an order where machining and assembly lines are used in repetitive manufacturing. From inventory and control perspective similar to batch manufacturers at the product and family levels. It is critical that the raw materials and components are verified through the ABC process of inventory control and it is imperative to manage safety stock due to potential fluctuations of demand.

Continuous Process Manufacturing typically requires from minutes to hours to produce an order, depending on backlog and order size. Lines may be dedicated to a single product or configured for changeover within product family or line. There may be a logical production sequence to minimize the effect of changes such as progressive color, formula, or dimension change. This affect scheduling and inventory timing. Importance in increased on packaging materials (primary complexity difference extending no. of FG) and finishing goods warehousing controlling packaging supplies from an ordering and inventory perspective as well as storage space for FG. Continuous processing is similar to line or repetitive manufacturing from control perspective as demand is generated for product with a lead-time of hours to minutes. It is critical that the raw materials and components are verified through the ABC process of inventory control and it is imperative to manage safety stock due to potential fluctuations of demand.

ETO typically stock certain number of parts or raw materials, the balance of assemblies and parts are designed and/or manufactured only when order is received

MTO typically stock raw materials such as steel and electrical components that can be used to fabricate parts and assemblies upon customer order

ATO use stocked parts and assemblies in addition to assemblies that are ordered on very short notice from suppliers. This type of environment typically has too many possible combinations of assemblies to make it feasible to stock final assemblies. Automotive assembly plants configure and assemble cars and trucks after customer order, with some vehicles made to forecast in order to level production schedules and provide dealer inventory

MTS companies typically respond to customer orders in less than the cumulative lead-time for the FG. Parts are either stocked or ordered specially for batch production runs. FG inventory becomes a significant percentage of the company’s inventory.

Determining inventory level is depending on changes in lead-time, safety stock requirements, and change in on-hand balance

Targeted inventory level of WIP is directly related to the lead-time for FG. Most effective way to reduce WIP inventory is reducing queue times (WIP inventory is a function of manufacturing lead time and the major element of lead time is queue time). When actual lead times exceed planned lead times, planned lead times must be decreased/not increased (when lead times are growing, queues grow. To reduce queues, delaying the issuing of extra work into the queues is accomplished by reducing the planned lead time and consequently delaying the planned release dates. With the shorter queues, work will flow more quickly)

Quality Waste and Continuous Improvement

Quality is conformance to requirements or fitness for use

Quality can be defined through five principal approaches:

Transcendent quality is an ideal, a condition of excellence
Product-based quality is based on a product attribute
User-based quality is fitness for use
Manufacturing-based quality is conformance to requirements
Value-based quality is the degree of excellence at an acceptable price

Quality has two major components/dimensions:

Quality of conformance – quality is defined by the absence of defects, and
Quality of design – quality is measured by the degree of customer satisfaction with a product’s characteristics and features

CTQ – Critical to Quality characteristics that affect customer satisfaction

2 basic approaches to preventing defects: inspect items to identify defective units, improve designs and processes to reduce the chance of producing defective units

go/no-gauge representing item inside/outside specification

5 Quality improvement initiatives (+1):

PDCA (Plan-do-check-act) Deming circle

Most popular continuous improvement model

Plan – data gathering about the current quality issues facing the organization, for prioritization of issues used Pareto analysis

Do – implementation of a proposed solution or countermeasure to a quality issue

Check – verifies the success of the implemented countermeasures; if positive then cycle moves to Act phase (if not then go back to Plan)

Act – incorporating the quality improvement into the standard operation system by updating standard operating procedures and employees training programs

TQM Total Quality Management

Key principle is customer satisfaction thus supportive of transcendent quality and user-based quality,

Second principle is total involvement of all employees in the improvement of process performance.

Fixing process-based issues is the responsibility of management.

JIT Just-in-Time

Based on elimination of waste and continuous improvement of productivity

Lean production or Lean Manufacturing

Emphasizing the minimization of the amount of all the resources used in various activities of the enterprise. It involves identifying and eliminating non-value-adding activities in design, production, supply chain management, and dealing with customers. While JIT is limited to the manufacturing function, Lean aims to reduce waste in the entire enterprise.

Six Sigma quality by Motorola

Statistically based philosophy that aims to reduce process variability and consequently improve product-based quality which is very supportive of the manufacturing-based quality approach. It compares the variability of a product characteristics to the design specifications for the product. When Six Sigma is achieved, the distance between the product average and either of the two design specifications, or tolerances, is +/- 3 sigma, for a tolerance range of six standard deviations.

It uses DMAIC step-by-step improvement process: Define (identifying potential improvement processes), Measure (current variability of a process), Analyze (identifying critical process variables), Improve (series of experiments to determine the optimum setting for variables that minimize output variation), Control (incorporating the improvement into the standard operation system by updating standard operating procedures and employees training programs).

In statistical terms, a process that achieves Six Sigma quality will generate just 3,4 defects per one million opportunities (DPMO)

A3 Process

which is a tool of the Toyota Production System (name comes from the size of a paper needed to produce the two-page report). Originally used to summarize kaizen activities evolved to structured problem-solving process. Steps are based on PDCA cycle, serve as an effective communication tool and made up of up to 7 sections: background, objectives, current condition or status, casual analysis, target state, implementation plan, future action or follow-up

Quality Management Systems QMS are formal systems that ensure that all factors affecting an organization’s products and services are under control. An organization can choose to define its own quality management system or it can utilize a quality management system standard like ISO9000 or good manufacturing practices GMP. When supplier is certified as quality supplier his products will not need inspection.

ISO9000 quality system standard is the most popular quality management standard in the world with 8 critical quality principles: Customer Focus, Leadership, Involvement of people, Process approach, System approach to management, Continual improvement, Factual approach to decision making, mutually beneficial supplier relationships.

Good manufacturing practices is quality system standard that is specific to the pharmaceutical and food manufacturing industries.

To measure process variability design engineers need to determine target specification, lower and upper tolerance. Causes of variation fall into two major categories: assignable (sporadic/special cause) variation (specific reason for variation occurring) and random (common/chronic/chance cause) variation. When no change of system graph with time (shape, position) -> process has common cause variation present, if it changes then both random and assignable causes are present in the system. Since any variation is a waste of making defects organizations introduce statistical quality control techniques (SQC) that are mathematically based methods that can be utilized to ensure a higher degree of conformance to specifications. It includes Acceptance sampling and Statistical Process Control techniques.

Acceptance sampling attempt to increase the quality of conformance by inspecting product: a small but representative sample of process output is selected and measured for conformance to specification. If the quality of the sample is considered acceptable, the entire population is classified as useable product. When business applications require higher quality levels then would typically not rely upon acceptance sampling (as sometimes unreliable and costly) but on statistical process control that allow for detection of assignable cause variation by measuring and comparing against previously determined control limits. These limits are based upon the normally occurring variation (sigma) of the process that is due to common cause variability only. When a sample’s variation exceeds a control limit, an assignable cause variation can be detected. When assignable variation is present in a system, the output distribution is unstable and unpredictable. Being in statistical control means that the process is performing within normallimits of (random) variation.

Elimination of non-value-adding activities

Setup reduction using a set of setup reduction techniques referred to as SMED single minute change of dies where economically feasible methods should be implemented converting internal tasks (accomplished when machine is not operating) to external tasks (accomplished when machine is producing product). Other examples (to reduce setup) are videotaping, setup practice sessions

Lot size reduction challenging current lot sizes at non-bottleneck operations and SMED. Small lot manufacturing will increase quality so the number of defective parts will be reduced (overproduction causes quality defects)

Lead-time reduction: setup reduction, lot size reductions, 5S

5S technique

Paperwork and transaction reduction e.g. Barcode readers, Radio frequency identification (RFID) tags, backflushing

Quality Improvement Tools

Scatter diagram being a graphical technique to analyze the relationship between two variables (testing dependency of two variables)
Check sheet which is a simple data recording device aiming to collect raw data about the process over a period of time e.g. checkmark in the sheet to represent the occurrence of an event (used in PDCA)
Pareto chart (used in PDCA)
Cause-and-effect diagram/Ishikawa diagram/fishbone diagram (representing causes gathered in categories machine, manpower, method, material; sometimes also environment, measurement)
Flowchart that is drawn to better understand processes (used in act phase PDCA to document new improved process)
Histogram representing frequency distribution of current variability of a process that lets people see patterns that are difficult to see in a simple table of numbers (used in check phase of PDCA)
Control chart which is a graphic comparison of process performance data with predetermined computed control limits aiming to detect assignable causes of variation in the process (used in plan phase of PDCA helping to identify the appropriate improvement tactics)
Affinity diagram is TQM tool whereby employees working in silence generate ideas (brainstorming) and later categorize these ideas
Tree diagram (used in do phase in PDCA as it represents various tasks and subtasks to achieve the goal)

Used to analyze a situation in increasing detail; the full range of tasks to be accomplished to achieve a primary goal and supporting subgoal may be illustrated

In TOC diagram relating effects to underlying causes

Process decision program chart (extended form of the tree diagram) which is a technique to show alternative paths to achieving given goals, applications include preparing contingency plans and maintaining project schedules
Arrow diagram being a technique to determine the relationships and precedence of different activities and the time estimate for project completion (same as PERT or CPM used in managing projects)
Interrelationship diagram (extended version of cause-and-effect diagram) is a technique used to define how factors relate to one another. Complex multivariable problems or desired outcomes can be displayed with their interrelated factors
Prioritization matrix which is a special type of matrix used to show the priorities of items by applying criteria and weighting factors to each item

For the completed matrix, the correct order of attach would be:

Most impact, easiest to do
Least impact, easiest to do
Significant impact, relatively easy to do
Least impact, hardest to do
Matrix chart a graphical technique used to analyze the relationship between two related groups of ideas e.g. selection of best supplier given the weights of each factor
5 Why’s/Root cause analysis
FMEA Failure Mode Effect Analysis is a procedure for the identification and analysis of potential failure modes in a system and the effects of each failure on the system. The result of a successful FMEA study is to eliminate or reduce the severity or likelihood of failures starting with the most severe

Evaluating Quality Management Process

Variability in a normal distribution is measured by the Greek symbol sigma σ which represents one standard deviation for the mean.Statistically the vast majority of variation (99,73%) falls within +/- 3 sigma of the process mean or average.When the process is completely lacking assignable cause variation, the process is said to be in a state of statistical control. All Statistical process control charts include statistically calculated control limits. They are referred to as the upper control limit (UCL) and the lower control limit (LCL) that are established at +/- 3 standard deviations from the average.Data can be classified as being either variables data or attribute data. Variables data is a characteristics that can be measured and can take only one value, whereas attribute data is any characteristics that can only take on discrete values.It can be product or process characteristic to be measured that represent an operating parameter influencing the quality of the end product. For the purposes of creating SPC charts, process samples must be taken at regular intervals where units within the subgroup have the greatest chance of being alike and the units between subgroups have the greatest chance of being different.

Types of control charts (depends upon the type of data being charted):

X-bar chartwith subgroup averages
Range (R) chart used to analyze the dispersion of the quality characteristics around the process average
P-chart attribute control chart being the percent nonconforming
C-chart attribute control chart being the count nonconforming

A control chart detects out-of-control situations by comparing the data derived from the process against predictions of the normal distribution. When the data pattern is not consistent with the normal curve probabilities, the presence of an assignable cause variation is flagged for root cause analysis.

Process capabilityis ability, based upon statistical tests, to achieve measurable quality results (stays within +/- 3σ). The smaller the capability the better. When the process is centered around the design aim, and follows a normal distribution, it would achieve a 99,73% quality level.

Process capability ratios:

Capability ratio C_p = Specification range/Process capability = (USL – LSL)/6σ

Where USL = upper specification limit or upper tolerance

LSL = lower specification limit or lower tolerance; USL doesn’t equal UCL and LSL doesn’t equal LCL

Clearly, for higher quality levels, large values of capability ratios greater than one are desirable

Capability index C_pk takes a minimum based on capability ratio

Used when the output of a process is not centered around the design aim; it takes the minimum

Six-sigma is statistically based philosophy aiming to reduce process variability and subsequently improve product-based quality. The foundation of six-sigma quality compares the variability of a product characteristics as measured by one standard deviation or sigma to the design specifications for the product. When six-sigma is achieved, the distance between the product average and either or the two design specifications, or tolerances, is six standard deviations. When the process is centered to the design target specification, six-sigma quality achieves defect levels of 0.002 parts per million defective. Should an assignable cause of variation materialize, causing the process output to shift by up to 1,5 standard deviation, quality levels of 3,4 ppm defective are still achieved. While this is happening, the SPC chart should have detected this sporadic event and a root cause analysis has hopefully pinpointed the source of the problem.

Monitoring Supplier Performance

The most desirable initial attribute of suppliers of companies that adopt JIT is consistent quality, not on-time delivery because the most common cause of unreliable delivery is poor quality.

Supplier Assessment – measuring capability in terms of the volumes, quality, or problem-solving capability, or service delivery etc. The assessment process will identify the capabilities and will direct actions towards the achievement of the appropriate standards.

Supplier Audit – will measure the ongoing ability of the supplier to do what has been agreed to be done (measuring the compliance with the agreed standards and specifications). Audits will give us the confidence that the appropriate actions are continuing to be carried out and maintained.

Appraisal costs are those costs associated with inspecting (appraising) the products. These would include all the inspections which occur throughout the receiving, manufacturing, and shipping process.

Evaluating Performance of Production Operations

3 definitions of inventory accuracy are accounting (least accurate, normally 85% of accuracy is good enough), planning and absolute count. Only a formal cycle counting procedure can ensure over 95% inventory accuracy (high-value items are counted more frequently). Currently today’s cost of direct labor is less than 10% of total cost while material is accountable for 2/3 even ¾ of tot cost

5 Component of realistic inventory cycle counting program that would result in a continuous, self-correcting inventory accuracy management:

Inventory segmentation (ABC classification based on value, demand, frequency and criticality

A 10%/75% value weekly or monthly count; B 50%/20% value monthly or quarterly count; C 40%/5% value quarterly or semiannual count; focus on A items)

Random counting schedule
Team approach
Cause identification and resolution
Measurement and communication (statistical process charts help to identify, track and report improvements to inventory accuracy)

The critical path method CPM improved approach for inventory management that seeks to create the most effective path by identifying those sub-elements that, if not completed in the required time sequence, become bottlenecks that establish the actual or critical time lines.

Measuring of production operations:

Efficiency of operations = standard hours of work/hours actually worked * 100% (to calculate efficiency of continuous or batch process the actuals are divided by standard produced over time or average cycle time)
Productivity: single-factor (units produced per machine hour, labor hour etc.) , multiple-factor (developing a weighted average of the resources required), aggregate productivity measurements (sum up the attributes for a group and indicate what can be expected on average)

Cost-Volume-Profit analysis (CVP) helps management analyze the interrelationships between fixed costs, variable costs, volume, price and profits. CVP helps prepare a flexible budget that allows management to identify the costs at different levels of production. It begins with contribution margin calculation (revenue – variable expenses) and is useful when making decisions about increasing the sales of one product over another.

The criteria for measuring operational flexibility are product volume and product mix

Improving operations

UN Global Compact provides both a policy platform and a practical framework for companies committed to sustainability and responsible business practices in the areas of human rights, labour, environmental and anticorruption.

Material Safety Data Sheet MSDS/Safety Data Sheet SDS is developed by many countries for the individual classification and labeling requirements defining hazards, classifying hazards, and communicating hazard information. More international system intended to replace the country specific classification, labelling standards and symbols is Global Harmonized System of Classifications and Labelling of Chemicals (GHS)

Local changes involve (affecting an operation, a workstation, cell, dept.) lean production, TQM, Six Sigma

Network changes (more than local change, affecting local operation and its immediate customers and suppliers) would involve lean thinking, logistics management, TQM, Six Sigma, supply chain management, and information sharing

Global change include environmentally responsible business, managing or reducing the ecological footprint, the triple bottom line, and the total cost of ownership

Design techniques:

Continuous improvement
Design of Experiments (DOE) used to evaluate the effects of controlled changes to production processes on the output variables.
Visual management techniques are the central element of lean production and can be used in design and redesign of work areas e.g. Standard work, 5S system, and visual control

Theory of Constraints

4 types of plants in TOC:

I-Plant: Materials flow in a sequence such as in an assembly line, here slowest operation becomes a constraint
A-Plant: for many sub-assemblies to converge to build a final assembly, here the primary challenge is to synchronize the feeder production lines so that each supplies the final assembly point at the right time
V-Plant: the general flow within the factory is that is uses a single raw material to produce many final products, key task is balancing the raw material demand for all production lines
T-Plant: the general flow is like that of an I-Plant which then splits into many assemblies (one line for components/sub-assemblies that can be combined into many different end products based on customer’s order). T-Plants face same issues as A-Plants and V-Plants

Total Productive Maintenancegives employees a sense of responsibility and awareness of the equipment they use and cuts down on abuse and misuse of equipment. Maintenance encompasses both breakdown maintenance and preventive maintenance. The company’s maintenance organization is the champion of the TPM effort – they sponsor the activity, drive the metrics, set the responsibility, and work to train operators. Operators are first line of maintenance and the goal of production managers is to find a balance between preventive maintenance and breakdown maintenance that will minimize the company’s overall maintenance costs. Ideally, preventive maintenance will take place just before failure occurs in order to maximize the time that equipment is in use between scheduled maintenance activities. Among the main benefits of TPM is that employees gain a more complete understanding of the functioning of the system.

Reliability – Centered Maintenance RCMis an approach to the maintenance tasks that is predicated on the analysis of ongoing machine performance, an assessment of future workloads and an understanding of what the maintenance task schedule should be. Using a tool called the Failure Mode Effects and Criticality Analysis (FMECA), the organization identifies the operating environment for a machine. Working through the FMECA document, the specific maintenance activities for the machine can be grouped based on when they could, and should, be accomplished during the machine life cycle. Coupled with a program such as TPM, RCM will enable everyone, even financial planners who have to forecast tool replacement or machine replacement for capital budget, to have a clearer picture of equipment operating cost.

Quick Response Manufacturingis for companies which achieve time-based capabilities resulting in reduction of lead-times and quicker satisfaction of customer. It is based on: less of/system simplification, as one/system integration, same as/standardization, at once/parallel activities, watch it/variance control, better than/automation, more of/excess resources