1. Week 2
BUSN 6110
Fall 2012

2. Syllabus
Class 1 (Aug 16): chap 1; chap 2, case study (Introduction, Strategy, Decision Making)
Class 2: (Aug 23):Chap 1/11/13 (Supply Chain), Chap 9 (Quality)
Class 3: (Aug 30): Supplemental readings (Take home exam) ;Processes and Technologies (Chap 6), Product and Service Design (Chap 3) ,Facility Planning (Chap 6A)
Class 4: (Sep 6): Project Management (Chap 10), Capacity and Aggregate Planning (Chap 4), Inventory Management (Chap 17)
Class 5: (Sep 13): Forecasting (supplemental reading), Reverse Logistics - Supplemental Readings (Reverse Logistics – need “The Forklifts Have Nothing To Do!” Available in the Lewis and Clark Bookstore)
Class 6: (Sep 20): Lean/Just in Time/TOC (supplemental reading and Chap 20); Supply Chain Security (supplemental reading), The Beer Game
Sep 27 – no class (Final Exam (take home given out – due by Oct 5)
Class 7: (Oct 4) Group presentations
Other requirements:
→visit Harley-Davidson Plant in Kansas City, or Boulevard Brewery in Kansas City, or The Roasterie Coffee Company in Kansas City or other operation activity and present as small groups to the class on Oct 4.

3. What in the world isn't logistics
or supply chain?

4. Supply Chain Management

5. Supply Chain Management/Ops Management
Finance
Acct’g
Marketing
Supply Chain Management/Ops Management
Info
Systems
Business
Admin
Business
Mgmt
Sales
Intl
Business

6. Supply Chain Management
First appearance – Financial Times
Importance -
→ Inventory ~ 14% of GDP
→ GDP ~ $12 trillion
→ Warehousing/Trans ~ 9% of GDP
→ Rule of Thumb - $12 increase in sales to = $1 savings in Supply Chain
1982 Peter Drucker – last frontier
Supply Chain problems can cause ≤ 11% drop in stock price
Customer perception of company

7. SCOR
Reference:

8. End-to-End Supply Chain
Supplier
Customer
Suppliers’ Supplier
Source
Internal or External
Your Company
Return
Deliver
Make
Plan
Customers’ Customer
SCOR reference model
Because SCOR is does not represent organizations, but rather activities, it is ‘boundaryless’. This is intentional. When you are considering how a supply-chain operates, you don’t want to ‘stop’ describing it when you must look at the activities of some participants. You can, in effect, look all the way from a grain of sand to a finished computer.
In looking at various ways to describe this, you can use an anecdote that SCOR looks from “Cow to Cone” for Ice Cream, or if you feel particularly humorous, “from Stump to Rump” for toilet paper. Different trainers use different anecdotes, but you need to get across to the audience that by using
Standard names
Standard interconnects
Boundaries only defined by process start/stop points
You have the ability to truly optimize the performance of very, very large systems, cutting waste, cycle time, and improving cash consumption.
This is a second unique feature of the SCOR model.
Whether from Cow to Cone or from Rock to Ring SCOR is not limited by organizational boundaries
Copyright © Supply Chain Council, All rights reserved 8

9. End-to-End Supply Chain
Customer’s Customer
Customer
MP3 Company
Supplier
Supplier’s Supplier
Sub assemblies
Manufacturer
Retailer
Consumer
Components
Source
Deliver
Make
Process, arrow indicates material flow direction
Source, Make, Deliver connections from suppliers to their customers. Note that the Retailer does not have a Make process as it is simply sourcing goods and delivering those to their customers. (If asked: yes, retail can do Make, for example preparing food, repackaging in the deli or meats departments or cutting wood in the lumber department).
Copyright © Supply Chain Council, All rights reserved 9

10. Supply Chain
“The global network used to deliver products and services from raw materials to end customers through an engineered flow of information, physical distribution, and cash.” APICS Dictionary, 13th Edition

11. Supply Chain Uncertainty
Forecasting, lead times, batch ordering, price fluctuations, and inflated orders contribute to variability
Inventory is a form of insurance
Distorted information is one of the main causes of uncertainty Bullwhip effect

12. Information in the Supply Chain
Centralized coordination of information flows
Integration of transportation, distribution, ordering, and production
Direct access to domestic and global transportation and distribution channels
Locating and tracking the movement of every item in the supply chain - RFID

13. Bar Codes
Computer readable codes attached to items flowing through the supply chain
Generates point-of-sale data which is useful for determining sales trends, ordering, production scheduling, and deliver plans

14. IT Issues
Increased benefits and sophistication come with increased costs
Efficient web sites do not necessarily mean the rest of the supply chain will be as efficient
Security problems are very real – camera phones, cell phones, thumb drives
Collaboration and trust are important elements that may be new to business relationships

15. Suppliers
Purchased materials account for about half of manufacturing costs
Materials, parts, and service must be delivered on time, of high quality, and low cost
Suppliers should be integrated into their customers’ supply chains
Partnerships should be established
On-demand delivery (JIT) is a frequent requirement - what is JIT and does it work?

16. Sourcing How does single source differ from sole source?
Relationship between customers and suppliers focuses on collaboration and cooperation
Outsourcing has become a long-term strategic decision
Organizations focus on core competencies
Single-sourcing is increasingly a part of supplier relations
Barriers
How does
single source
differ from sole
source?

18. Sourcing and Suppliers
Supplier Selection
Selection Evaluation
Supplier Certification
Sourcing and Ethics

19. Distribution
The actual movement of products and materials between locations
Handling of materials and products at receiving docks, storing products, packaging, and shipping
Often called logistics
Driving force today is speed

20. Distribution Centers and Warehousing
DCs are some of the largest business facilities in the United States
Trend is for more frequent orders in smaller quantities
Flow-through facilities and automated material handling
Final assembly and product configuration (postponement) may be done at the DC

21. Transportation

22. Railroads 95,000 - 150,000 miles in US Low cost, high-volume
Improving flexibility
intermodal service
double stacking
Complaints: slow, inflexible, large loads
Advantages: large/bulky loads, intermodal

23. Trucking
Most used mode in US -75% of total freight (volume not total weight)
Flexible, small loads
Consolidation, Internet load match sites
Truck load (TL) vs. Less Than Truck Load (LTL)

24. Air Lightweight, small items
Quick, reliable, expensive (relatively expensive depending on costs of not getting item there)
Major airlines and US Postal Service, UPS, FedEx

25. Package Carriers UPS, US Postal Service, FedEx Ground
Significant growth driven by e-businesses and the move to smaller shipments and consumer desire to have it NOW
Use several modes of transportation
Innovative use of technologies in some cases
Online tracking – some better than others

26. Intermodal Combination of several modes of transportation
Most common are truck/rail/truck and truck/water/rail/truck
Enabled by the use of containers – the development of the 20 and 40 foot containers significantly changed the face of shipping

28. Switching Milk Cans from a Farmer’s Buggy to a Truck on a Rural Road in North Carolina, 1929
Early form of intermodal transport and cross docking

29. Water One of oldest means of transport
Low-cost, high-volume, slow (relative)
Security - sheer volume - millions of containers annually
Bulky, heavy and/or large items
Standardized shipping containers improve service
The most common form of international shipping

30. Pipelines Primarily for oil & refined oil products
Slurry lines carry coal or kaolin
High initial capital investment
Low operating costs
Can cross difficult terrain

31. Global Supply Chain Free trade & global opportunities
Nations form trading groups
No tariffs or duties
Freely transport goods across borders
Security!!

32. Quality Management Quality is a measure of goodness that is
inherent to a product or service.
Bottom line: perspective has to be from the
Customer – fitness for use

33. What Is Quality?
“The degree of excellence of a thing” (Webster’s Dictionary)
“The totality of features and characteristics that satisfy needs” (ASQ)
Fitness for use
Quality of design

34. Quality
Quality Management – not owned by any functional area – cross functional
Measure of goodness that is inherent to a product or service

35. FedEx and Quality
Digitally Assisted Dispatch System – communicate with 30K couriers
rule  1 – if caught and fixed as soon as it occurs, it costs a certain amount of time and money to fix  10 – if caught later in different department or location = as much as 10X cost  100 – if mistake is caught by the customer = as much as 100X to fix

36. Product Quality Dimensions
Product Based – found in the product attributes
User Based – if customer satisfied
Manufacturing Based – conform to specs
Value Based – perceived as providing good value for the price

37. Dimensions of Quality (Garvin)
Performance
Basic operating characteristics
Features
“Extra” items added to basic features
Reliability
Probability product will operate over time

38. Dimensions of Quality (Garvin)
Conformance
Meeting pre-established standards
Durability
Life span before replacement
Serviceability
Ease of getting repairs, speed & competence of repairs

39. Dimensions of Quality (Garvin)
Aesthetics
Look, feel, sound, smell or taste
Safety
Freedom from injury or harm
Other perceptions
Subjective perceptions based on brand name, advertising, etc

40. Service Quality Time & Timeliness Completeness Courtesy
Customer waiting time, completed on time
Completeness
Customer gets all they asked for
Courtesy
Treatment by employees

41. Service Quality Consistency Accessibility & Convenience Accuracy
Same level of service for all customers
Accessibility & Convenience
Ease of obtaining service
Accuracy
Performed right every time
Responsiveness
Reactions to unusual situations

42. Quality of Conformance
Ensuring product or service produced according to design
Depends on
Design of production process
Performance of machinery
Materials
Training

43. Quality Philosophers Walter Shewhart – Statistical Process Control
W. Edwards Deming
Joseph Juran – strategic and planning based
Armand Fiegenbaum – total quality control “entire business must be involved in quality improvement”

44. Deming’s 14 Points Create constancy of purpose
Adopt philosophy of prevention
Cease mass inspection
Select a few suppliers based on quality
Constantly improve system and workers
Institute worker training

45. Deming’s 14 Points Instill leadership among supervisors
Eliminate fear among employees
Eliminate barriers between departments
Eliminate slogans
Remove numerical quotas

46. Deming’s 14 Points Enhance worker pride
Institute vigorous training and education programs
Develop a commitment from top management to implement these 13 points

47. The Deming Wheel (or PDCA Cycle)
1. Plan
Identify the problem and develop the plan for improvement.
2. Do
Implement the plan on a test basis.
3. Study/Check
Assess the plan; is it working?
4. Act
Institutionalize improvement; continue the cycle.
Also known as the Shewart Cycle

48. Six Sigma
Quality management program that measures and improves the operational performance of a company by identifying and correcting defects in the company’s processes and products

49. Six Sigma Started By Motorola
Define
Measure
Analyze
Improve
Control
Made Famous by
General Electric
40% of GE executives’
bonuses tied to 6 sigma
implementation

50. Malcolm Baldrige National Quality Award
Category 3 – determine requirements, expectations, preferences of customers and markets
Category 4 – what is important to the customer and the company; how does company improve

51. Total Quality Management
Customer defined quality
Top management leadership
Quality as a strategic issue
All employees responsible for quality
Continuous improvement
Shared problem solving
Statistical quality control
Training & education for all employees

52. Cost of Quality Cost of achieving good quality Prevention
Planning, Product design, Process, Training, Information
Appraisal
Inspection and testing, Test equipment, Operator
Cost of achieving good quality
Prevention
quality planning, product design
process, training
information
Appraisal
inspection & testing
test equipment
operator
Cost of poor quality
Internal failure costs
scrap, rework
process failure & downtime
downgrading products
External failure costs
customer complaints
returns, warranty
product liability, lost sales 18

53. Cost of Quality Cost of poor quality Internal failure costs
Scrap, Rework, Process failure, Process downtime, Price-downgrading
External failure costs
Customer complaints, Product return, Warranty, Product liability, Lost sales
Cost of achieving good quality
Prevention
quality planning, product design
process, training
information
Appraisal
inspection & testing
test equipment
operator
Cost of poor quality
Internal failure costs
scrap, rework
process failure & downtime
downgrading products
External failure costs
customer complaints
returns, warranty
product liability, lost sales 18

54. Cause-and-Effect Diagram
Quality
Problem
Out of adjustment
Tooling problems
Old / worn
Machines
Faulty
testing equipment
Incorrect specifications
Improper methods
Measurement
Poor supervision
Lack of concentration
Inadequate training
Human
Deficiencies
in product design
Ineffective quality
management
Poor process design
Process
Inaccurate
temperature
control
Dust and Dirt
Environment
Defective from vendor
Not to specifications
Material-
handling problems
Materials
Also known as Ishikawa Diagram or Fish Bone

55. Lots of Hoopla and no follow through
Hot House Quality
Lots of Hoopla and no follow through

56. ISO 9000:2008 Customer focus Leadership Involvement of the people
Process approach
Systems approach to management
Continual process improvement – GAO
Factual approach to decision making
Mutually beneficial supplier relationships

57. Implications Of ISO 9000 Truly international in scope
Certification required by many foreign firms
U.S. firms export more than $150 billion annually to Europe
Adopted by U.S. Navy, DuPont, 3M, AT&T, and others

58. ISO Accreditation 3rd party registrar assesses quality program
European registration
3rd party registrar assesses quality program
European Conformity (CE) mark authorized
United States 3rd party registrars
American National Standards Institute (ANSI)
American Society for Quality (ASQ)
Registrar Accreditation Board (RAB)

59. Next week
Product development
Process development

60. Product Development

61. Introduction
Product Development is a process which generates concepts, designs, and plans to create services and goods to meet customer needs.
1. Analyze market to assess need
2. Design product
3. Design process for making product
4. Develop plan to market product
5. Develop plan for full-scale production
6. Analyze financial feasibility

62. Increasing Importance of Product Development
Customers demand greater product variety.
Customers are causing shorter product life cycles.
Improving technology is causing new products to be introduced
The impact of increasing product variety and shortening product life cycles is having a multiplicative effect on the need for product development.
Today, in order to be competitive, the firm may have to produce many different products with a life cycle of only five years or less. End of Life issues