International Supply Chain Environment Analysis Kimball Bullington, Ph.D Professor Middle Tennessee State University

What is Six Sigma? A. Customer Focus – Focus on what is critical to customers B. Data Driven – Extensive use of statistical tools C. Robust Methodology – Tools plus implementation methods to make success more likely

What is Six Sigma? Key Concepts 1. Critical to Quality: What attributes are most important to the customer? (CTQ, CTC, CTD) 2. Defect: Failing to deliver what the customer wants / expects (DPMO) 3. Variation: The level of unpredictability the customer experiences

What is Six Sigma? Key Concepts 5. Process Capability: What your process can deliver – consistently 6. Stable Operations: Stable ops are predictable 7. Design for Six Sigma: Designing to meet customer needs and process capability in changing environments

What Types of Companies Can Benefit from Six Sigma? Companies that benefit from structured organizational improvement Companies that need to improve customer satisfaction All types of companies can benefit: Manufacturing Service Non-profit Educational

The environment of a change process affects the nature and success of a change program.

We would like to design the supply chain to be robust to changes in the environment.

Process Flow Inputs Transform Processes Outputs Feedback SuppliersOperationsCustomers

Process Flow Inputs Transform Processes Outputs Feedback SuppliersOperationsCustomers Environment

Process Flow Inputs Transform Processes Outputs Feedback SuppliersOperationsCustomers Environment

Supply Environment Analysis Tools Cause-and-Effect SWOT Supplier Category Trend Force Field Stakeholder Commitment Communication

Cause-and-Effect Diagram Effect MaterialsMethods MachinesManpower Environment Cause

Cause-and-Effect Diagrams Supplier Failure - Causes

Causes Environment Measures Materials Methods Machines Manpower

SWOT Analysis PositiveNegative InternalStrengthsWeaknesses ExternalOpportunitiesThreats

SWOT Analyses: Exercise Strengths What are the strengths of your supply organization? What are the strengths of your operations as a customer of supply? Weaknesses What are the weaknesses of your supply organization?

SWOT Analyses: Exercise Supply personnel Supply Management Processes Supply Management Technology Operations Environ Successful Supply

SWOT Analyses: Exercise Strengths What are the strengths of your supply organization? What are the strengths of your operations as a customer of supply? Weaknesses What are the weaknesses of your supply organization?

SWOT Analyses: Example Strengths Extensive experience with supply base Supplier performance history Procurement engineering ISO-quality process documentation

SWOT Analyses: Exercise Supply personnel Supply Management Processes Supply Management Technology Operations Environ Supply Failure

SWOT Analyses: Example Weaknesses Politically weak Lack of commitment to suppliers Tactically-focused Limited time for improvement activities Data is suspect Little visibility to sister-division data

SWOT Analyses: Exercise Strengths What positive developments have occurred? What are the untapped strengths of your suppliers? Weaknesses What are the weaknesses of your supply base? What are the weaknesses of your supporting functions?

SWOT Analyses: Example Opportunities Untapped intra-business unit leverage Consortia opportunities Supplier capabilities not used Opportunities for expanding business with a key good performer

SWOT Analyses: Example Threats Financially unstable suppliers Incapable suppliers Cost increases Poor performance in a key supplier (quality, cost, delivery, service, technology development) Logistics issues

Define Phase - Tools Project Charter Stakeholder Analysis Affinity Diagram SIPOC Voice of the Customer CT Tree Kano Model SWOT Analysis Cause-and-Effect Diagrams Supplier Segmentation Project Management

Critical 2: Special Situations Critical 1: Long-term Relationship Non-Critical 1: Contractual High Low High Risk Annual Spend Supply Base Categorization Non-Critical 2: Transactional

Critical 2: Special Situations Critical 1: Long-term Relationship Non-Critical 1: Contractual High Low High Risk Annual Spend Supply Base Categorization Non-Critical 2: Transactional Service-sensitive

Critical 2: Special Situations Critical 1: Long-term Relationship Non-Critical 1: Contractual Price, inventory & contract sensitive High Low High Risk Annual Spend Supply Base Categorization Non-Critical 2: Transactional

Critical 2: Special Situations Quality, Risk, Financial, Inventory Issues Critical 1: Long-term Relationship Non-Critical 1: Contractual High Low High Risk Annual Spend Supply Base Categorization Non-Critical 2: Transactional

Critical 2: Special Situations Critical 1: Long-term Relationship Communication, Design, Quality, etc. Non-Critical 1: Contractual High Low High Risk Annual Spend Supply Base Categorization Non-Critical 2: Transactional

Critical 2: Special Situations Critical 1: Long-term Relationship Non-Critical 1: Contractual High Low High Risk Annual Spend Supply Base Categorization Non-Critical 2: Transactional Consolidate Risk reduce & Consolidate

Trend Analysis Intense Competition Globalization Customer Sophistication Mass Customization Virtual Integration

Trend Analysis Network Rationalization Outsourcing Electronic Channels Dominant Organizations Constant Change

What are the trends in your environment? Supply chain? Commodity? Supplier? Project?

Force Field Analysis Transformation Processes Environmental Forces Balanced – improvement stalled

Force Field Analysis Transformation Processes Restraining Forces Reduced– improvement progresses

Cause-and-Effect Diagram Failure MaterialsMethods MachinesManpower Environment Cause

Force Field Analysis Transformation Processes Driving Forces Increased – improvement progresses

Cause-and-Effect Diagram Success MaterialsMethods MachinesManpower Environment Cause

Force Field Analysis Target Forces Largest impact Easiest to change Most economical to change Politically acceptable to change Mix of driving and restraining forces

Force Field Analysis Driving Forces Economic Globalization Time Compression Rising Customer Expectations Process Management Supply Chain Integration Technological Innovation

Force Field Analysis Restraining Forces Management Commitment Distrust Low Morale Communication Failures Inadequate Resources Stakeholder Commitment

Stakeholder Analysis People or Groups Level of Commitment BuyMfgEng Enthusiastic Support Help it work Compliant HesitantX Indifferent UncooperativeX Opposed HostileX

Stakeholder Commitment Management Buyers Engineers (ours) Engineers (theirs) Manufacturing Supervision Supplier Production Planners

Process Flow Inputs Transform Processes Outputs Feedback SuppliersOperationsCustomers

Process Flow Inputs Transform Processes Outputs Feedback SuppliersOperationsCustomers

Process Flow Inputs Transform Processes Outputs Feedback SuppliersOperationsCustomers

Process Flow Inputs Transform Processes Outputs Feedback SuppliersOperationsCustomers Environment

Process Flow Inputs Transform Processes Outputs Feedback SuppliersOperationsCustomers Environment

Control Phase Communication Model Transmit (Encode) Receive (Decode) Feedback Noise

Communication Improvement Encoding / Decoding Problems Language skills Cultural differences Physical limitations Technical knowledge Technical language differences

Communication Improvement Encoding / Decoding Solutions Training Improved specs Face-to-face meetings Standardized communication Simplified communication Feedback

Communication Improvement Noise Problems Auditory Psychological Physical distractions Workload

Communication Improvement Noise Problems Increase signal! Repetition Simplified communication Standardized communication Proximity

Conclusion Supply Environment Analysis is an important process in organizational change. A Six Sigma company should be especially interested in Supply Environment Analysis. Six Sigma Tools are helpful in analyzing the environment and preparing responses to environmental forces.

References Books: Six Sigma Pocket Guide (Rath & Strong’s) The Future of Purchasing and Supply (Carter, et al ISM) Supplier Strategies (Goldfield) Implementing Six Sigma (Breyfogle) Competitive Advantage (Porter) By What Method (Sink) The Six Sigma Way Team Fieldbook (Pande, Neuman, Cavanagh) The Supply Management Environment (Fawcett, ISM) Supplier Strategies (Goldfeld)