ISQA 479 MRP Quality Control

Materials Requirements Planning Bill of Material List of all parts necessary to make ONE BofM X Order = GROSS Req’mts Subtract Inventory Subtract On Order NET Req’mts Net Req’mts = Exception Report What to BUY, What to MAKE Offset NR by Lead Time: WHEN to Order

MRP Concepts  Multiple Parents  Multiple Uses of One Part in BofM  System Nervousness  Exception Reports

MRP Concepts  Lot-Sizing Techniques  Lot-for Lot  EOQ/EPQ  Periodic Order Quantity  Fixed Interval, Variable Quantity  EOQ/Avg Use  Fixed Order Quantity  Variable Interval, Fixed Quantity Standard Package Quantities Price Break Levels EOQ

Quality  How would you define ‘Quality’?

Quality Definitions  Manufacturing-Based - Philip Crosby  “Quality means conformance to requirements”  Value-Based - Feigenbaum  “Quality means best for certain customer conditions. These conditions are (a) the actual use, and (b) the selling price of the product”

Philip Crosby Quality is Free, pp Quality has much in common with sex. Everyone is for it (under certain conditions, of course). Everyone feels they understand it (even though they wouldn’t want to explain it). Everyone thinks execution is only a matter of following natural inclinations. (After all, we do get along somehow). And, of course most people feel that all problems in these areas are caused by other people. (If only they would take time to do things right).

Quality Definitions  Customer-Based - Juran  “Quality is fitness for use”  Customer-Based - AT&T  Quality is meeting customer expectations.”

Quality  Is Quality Free?  Can We Achieve 100% Quality?

Shingo  Difference Between Errors and Defects  Errors Cause Defects  Defects Occur Because of Errors  Three Types of Inspection  Self-Inspection  Successive Checks - Next Person  Source Inspection (Check for Errors that WILL cause Defects  Identify Errors, Fail Safe the Process

Control Charts  Processes Have Natural Variation  Fundamental Question:  Natural Variation or Process Change?  That is what Statistical Process Control is All About  Key Assumptions:  Sample is RANDOMLY selected  Defects are randomly distributed throughout the lot

Sampling  For Defects (What is Quality of Lot?)  For Conformance to Specification (No More Than X% Defective)

Control Chart Types  Attribute Charts (things counted)  P-chart: Proportion Defective  C-chart: Number of Defects  Focus is on PRODUCT output  Variable Charts  X-chart: Sample Means  R-chart: Range Means  Focus in on PROCESS, itself

Control Chart Problem Indicators  One Data Point Outside Control Limit  Two Data Points in Zone Three  Five Consecutive Data Points on One Side of the Mean  Trend - Five Successive Points in a Trend  Erratic Behavior  Sudden Change in Behavior

ISQA 479 Strategic Alliances Procurement and Outsourcing

Strategic Planning  Mission Statement  Vision Statement  Strategies  Long-Term Action Plan  Commits Organizational Resources  Creates Competitive Advantage  Performance Measures

Characteristics of Supplier Alliances  Operational  Strategic  3rd Party Alliances

Criticality Grid: Managerial Objectives High Patent Look Ahead Strategic Alliances M Prop Tech A R K E Market Driven Market Driven T Min Admin Cost Supply Continuity Ind Std Automate Operational Alliance Commodity Low Low High INTERNAL Volume, Importance Volume, Pervasive

Supplier Relationships  Risk and Numbers of Suppliers  Industry Standard  Custom  Supplier Performance  Managing Supplier Relationships  Interdependencies  Motivation  Reward Power  Punishment Power

Supplier Relationship Goals  Long-term  Collaborative  Early Supplier Involvement  Growth Capabilities  Create Competitive Advantage

Make/Buy  Products Never Make  Products Always Make  In Between Products

Make/Buy  Industry Standards, Proprietary Products and Make/Buy  Procurement from Suppliers  Procurement by Manufacture  Fluid Decision  Revisit at Regular Intervals  As Economic Conditions Change  As Internal Conditions Change  Always Maintain Internal Capability

Reasons to Make  Quantities Too Small  Quality Too Critical  Timing Too Critical  Trade Secrets (for a time)  Cheaper  Keep Crew Busy  Avoid Sole Source (perhaps)  Union Shop

Reasons to Buy  Quantities Too Large  Supplier Quality Acceptable  Have Sufficient Lead Time  Lack of Necessary Competencies  Lack of Capacity  Cheaper  Reciprocity

Outsourcing  Strategic Decision  Activity is Not Core Competency  Will, In Future Completely Depend on Suppliers  Will No Longer Maintain Internal Capability

Outsourcing Strategies  When to Consider Outsourcing? Why?  Outsourcing Risks  Risk Mitigation Strategies

Smith Group Case

Chapter 8, Question 1 Logistics Strategy  Internal Logistics Expertise  Acquire Logistics Company  Internal Strategy, External Suppliers  3PL Strategy

Chapter 8, Question 3  Quick Response  Continuous Replenishment  VMI

Chapter 8, Question 6  Why did VMI at Spartan Fail?  How Should it Work?