Operational Excellence: Using Lean Six Sigma to Translate Customer Value through Global Supply Chains by James William Martin

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Operational Excellence: Using Lean Six Sigma to Translate Customer Value through Global Supply Chains
by James William Martin

Operational Excellence - Using Lean Six Sigma to Translate Customer Value through Global Supply Chains

Contents
Foreword………………………………………………………………………………………… xiii
Introduction………………………………………………………………………………………xv
About the Author………………………………………………………………………………xxi
Part 1 Adapting Strategies for Global
Competitiveness
1 Enhancing Global Competitiveness………………………………………………..3
Overview…………………………………………………………………………………………3
Current Trends in Operations Management………………………………………….4
How the Competitive Environment Transforms Operational Strategy………5
Developing Adapting Strategies to Enhance Operational Capability……….10
Linking Operational Strategy to Strategic Goals and Objectives…………….12
Global Metrics and Operational Maturity…………………………………………..15
Internal and External Benchmarking………………………………………………….22
Summary……………………………………………………………………………………….25
Suggested Reading…………………………………………………………………………..25
2 Organizational Change in a Competitive World…………………………….27
Overview……………………………………………………………………………………….27
What Is Organizational Change?……………………………………………………….29
Understanding Organizational Values………………………………………………..30
Building Organizational Capability……………………………………………………30
Managing Organizational Change……………………………………………………..32
Integrating Operational Initiatives……………………………………………………..32
Deploying Initiatives across an Organization…………………………………..33
Building High-Performance Teams………………………………………………..36
Deploying Continuous Improvement Teams……………………………………38
Deploying Lean Systems…………………………………………………………….. 40
Deploying Six Sigma Quality………………………………………………………. 42
Integrating and Fine-Tuning Initiatives…………………………………………..45
Deploying Design Excellence………………………………………………………. 46
Deploying Information Technology Excellence………………………………..49
Deploying Customer Excellence…………………………………………………….51
Summary……………………………………………………………………………………….53
Suggested Reading…………………………………………………………………………..55
3 Understanding the Voice of the Customer (VOC)……………………………57
Overview……………………………………………………………………………………….57
Marketing’s Influence on Internal Operations……………………………………..59
Important Marketing Activities…………………………………………………………59
Estimating New Product or Service Demand………………………………………61
Using Marketing Information to Estimate Sales…………………………………..63
Understanding Customer Needs and Value…………………………………………69
Market Segmentation………………………………………………………………………71
Measuring the VOC………………………………………………………………………..72
Translating the VOC Using Quality Function Deployment…………………..75
Exchanging Value in a Competitive World………………………………………… 77
Summary……………………………………………………………………………………….78
Suggested Readings…………………………………………………………………………80
Part 2 Translating Customer Value
Elements into Products, Services,
and Workflow Systems
4 Designing for Customer Value Using Design for Six Sigma
(DFSS)………………………………………………………………………………………83
Overview……………………………………………………………………………………….83
Major Objectives of the Design Process………………………………………………88
Concurrent Engineering Methods in Design……………………………………… 90
CE Benefits…………………………………………………………………………………….93
Ten Key Steps to Implement CE………………………………………………………..93
Applying Design for Manufacturing Methods……………………………………..95
Ten Key Steps to Implement DFM…………………………………………………….96
Key Tasks of the Design Process………………………………………………………..97
Concept Phase…………………………………………………………………………….98
Design Phase…………………………………………………………………………….100
Target Costing………………………………………………………………………….103
Prototype Phase…………………………………………………………………………105
Pilot Phase………………………………………………………………………………..106
Launch Phase……………………………………………………………………………107
How the Product Life Cycle Impacts the Design Process……………………..107
Risk Assessment…………………………………………………………………………….107
Design for Six Sigma (DFSS)………………………………………………………….. 110
Overview of the Five DFSS Phases………………………………………………. 111
Identify………………………………………………………………………………..113
Design…………………………………………………………………………………113
Optimize…………………………………………………………………………….. 117
Validate……………………………………………………………………………….120
Incorporate…………………………………………………………………………..121
Design Standards for Global Competitiveness……………………………………121
Impact of Mass Customization on Design…………………………………………123
Outsourcing Design Workflows……………………………………………………….124
Summary……………………………………………………………………………………..125
Suggested Reading…………………………………………………………………………126
5 Using Lean Methods to Design for Process Excellence…………………..127
Overview……………………………………………………………………………………..127
Designing Process Workflows………………………………………………………….136
Workflow Modeling……………………………………………………………………….138
Simulation……………………………………………………………………………………141
Queuing Analysis………………………………………………………………………….146
Linear Programming…………………………………………………………………….. 153
Process Failure-Mode-and-Effects-Analysis (PFMEA)………………………… 157
How to Improve the Work Environment………………………………………….. 157
How to Develop High-Performance Work Teams……………………………… 159
How to Simplify and Standardize Work…………………………………………… 161
How to Develop an Effective Training Program…………………………………164
Summary……………………………………………………………………………………..165
Suggested Reading…………………………………………………………………………166
6 Making Value Flow through a Process…………………………………………167
Overview……………………………………………………………………………………..167
What Is a Lean System?………………………………………………………………….169
Mapping and Analyzing Customer Value………………………………………….172
Balancing Flow through the System…………………………………………………. 174
Improving Operational Efficiency…………………………………………………….177
Summary……………………………………………………………………………………..187
Suggested Reading…………………………………………………………………………190
7 Measuring and Improving Productivity……………………………………….191
Overview…………………………………………………………………………………….. 191
Creating Shareholder Value…………………………………………………………….194
Aligning Performance Metrics with Strategic Objectives……………………..196
How to Improve Productivity………………………………………………………….198
Aligning Operational Improvements with Strategy……………………………..209
Summary……………………………………………………………………………………..216
Suggested Reading…………………………………………………………………………217
Part 3 Op erations Planning, Management,
and Control
8 Capturing Customer Demand…………………………………………………….221
Overview……………………………………………………………………………………..221
What Is Demand Management?………………………………………………………225
How to Build Quantitative Forecasting Models………………………………….236
Time Series Models………………………………………………………………………..237
Trend Plot…………………………………………………………………………………….241
Decomposition Models…………………………………………………………………..242
Moving Average Models…………………………………………………………………245
Simple Exponential Smoothing……………………………………………………….245
Double Exponential Smoothing (Holt’s Method)……………………………….247
Triple Exponential Smoothing (Winter’s Method)………………………………247
Autoregressive Integrated Moving Average (ARIMA) Models, or
Box-Jenkins Methodology………………………………………………………………248
Regression Models…………………………………………………………………………253
Summary……………………………………………………………………………………..267
Suggested Reading……………………………………………………………………….. 268
9 Expanding Global Capacity……………………………………………………….269
Overview……………………………………………………………………………………..269
How to Plan Capacity Based on System Forecasts………………………………277
Creating Virtual Capacity……………………………………………………………….278
How to Improve Capacity Utilization……………………………………………….282
Managing Capacity with Insourcing and Outsourcing………………………. 284
Summary……………………………………………………………………………………..290
Suggested Reading…………………………………………………………………………291
10 Using Hybrid Decentralization to Increase Productivity……………….293
Overview……………………………………………………………………………………..293
Applying Hybrid Decentralization to Facility Location……………………….295
How to Locate Facilities across the World…………………………………………296
Facility Location Using Simple Rating Methods…………………………………298
Facility Location Using Linear Programming…………………………………… 300
Facility Location Using Regression Models……………………………………….303
Managing Facility Location Risk……………………………………………………. 306
How to Manage Facilities to Ensure Availability………………………………. 308
Summary……………………………………………………………………………………..309
Suggested Reading…………………………………………………………………………310
11 Integrating Demand and Supply through Sales and Operations
Planning………………………………………………………………………………….311
Overview…………………………………………………………………………………….. 311
How the S&OP Team Integrates Strategy with Operations………………….313
Key Success Characteristics of a Successful S&OP Process………………….. 314
Key Activities of the S&OP Team…………………………………………………… 318
Summary……………………………………………………………………………………..323
Suggested Reading…………………………………………………………………………324
12 Lean Scheduling Methods………………………………………………………….325
Overview……………………………………………………………………………………..325
Operations Scheduling…………………………………………………………………..327
Scheduling Algorithms…………………………………………………………………..332
Using Pull Scheduling to Increase Flow…………………………………………….339
Summary……………………………………………………………………………………..345
Suggested Reading……………………………………………………………………….. 346
13 Dynamic MRPII………………………………………………………………………347
Overview……………………………………………………………………………………..347
MRPII and Bill-of-Material (BOM) Relationship………………………………351
How an MRPII System Functions……………………………………………………353
Creating a Pull System Using Hybrid MRPII and Kanban…………………..357
Quick Response Methods to Support Hybrid MRPII………………………… 360
Summary……………………………………………………………………………………..361
Suggested Reading…………………………………………………………………………362
14 Strategic Inventory Management………………………………………………..363
Overview……………………………………………………………………………………..363
Measuring Inventory Value……………………………………………………………. 366
Why Is Inventory Useful?……………………………………………………………….367
Developing Models to Systematically Reduce Inventory………………………369
Cycle-Counting Systems…………………………………………………………………378
Excess and Obsolete Inventory Management……………………………………..382
Unnecessary Product and Component Proliferation……………………………386
Summary……………………………………………………………………………………..388
Suggested Reading…………………………………………………………………………389
Part 4 Collecting, Analyzing, and Sharing
Information across a Global Supp ly Chain
15 Agile Project Management and Workflow Design…………………………393
Overview……………………………………………………………………………………..393
Business Process Management Suite (BPMS)……………………………………..395
Business Process Management (BPM)………………………………………………398
Business Process Modeling and Analyses (BPMA)………………………………399
Business Intelligence (BI)………………………………………………………………..401
Business Activity Monitoring (BAM)……………………………………………….401
Enterprise Application Integration (EAI)…………………………………………..403
Workflow Management (WM)………………………………………………………. 404
Agile Project Management (APM)………………………………………………….. 404
Summary……………………………………………………………………………………..407
Suggested Reading…………………………………………………………………………407
16 Integrating Six Sigma Methods with Operational Strategy…………… 409
Overview……………………………………………………………………………………. 409
Deploying the Six Sigma Improvement Model…………………………………..412
Define Phase: Basic Tools……………………………………………………………….418
SIPOC…………………………………………………………………………………….419
Project Charter………………………………………………………………………….419
Quality Improvement Team………………………………………………………..424
Measurement Phase: Basic Tools………………………………………………………425
Measurement Systems Analysis (MSA)………………………………………….425
Capability………………………………………………………………………………..427
Cause-and-Effect (C&E) Diagram and Matrix………………………………431
Data Collection Activities…………………………………………………………..432
Statistical Sampling……………………………………………………………………433
Analyze Phase: Basic Quality Tools………………………………………………….436
Process Maps…………………………………………………………………………….436
Histograms……………………………………………………………………………….437
Pareto Charts……………………………………………………………………………439
Box Plots………………………………………………………………………………… 440
Scatter Plots……………………………………………………………………………..441
Time Series Plots……………………………………………………………………….441
Analyze Phase: Advanced Quality Tools………………………………………….. 443
Hypothesis Testing…………………………………………………………………… 443
Statistical Risk………………………………………………………………………… 443
Distribution Fitting (Normality)………………………………………………… 446
Tests of Means and Medians……………………………………………………….447
Tests of Proportions…………………………………………………………………..447
Contingency Tables………………………………………………………………….. 448
Equal Variance Tests………………………………………………………………….450
One-Way Analysis of Variance (ANOVA) Tests……………………………..451
Multi-Vari Charts………………………………………………………………………452
Correlation……………………………………………………………………………….452
Simple Linear Regression……………………………………………………………453
Improve Phase: Advanced Quality Tools…………………………………………..454
Full Factorial Designs………………………………………………………………..457
2k Experimental Designs…………………………………………………………….457
Fractional Factorial Designs………………………………………………………. 460
Response Surface Designs…………………………………………………………..461
Control Phase: Basic Quality Tools…………………………………………………..462
Control Charts………………………………………………………………………….463
Quality Control Plan……………………………………………………………….. 464
Summary……………………………………………………………………………………..465
Suggested Reading…………………………………………………………………………467
17 Identifying Productivity Opportunities with Operational
Assessments……………………………………………………………………………..469
Overview……………………………………………………………………………………..469
Aligning Operational Assessments with Strategy………………………………..472
Preparing for an Operational Assessment…………………………………………..473
Conducting an Operational Assessment……………………………………………475
Analyzing the Assessment Findings………………………………………………….477
Project Deployment and Execution…………………………………………………..483
Summary……………………………………………………………………………………..485
Suggested Reading…………………………………………………………………………490
18 Executing Projects with Multicultural Teams……………………………….491
Overview……………………………………………………………………………………..491
Building Globally Diverse Teams…………………………………………………….493
Project Planning……………………………………………………………………………498
Estimating the Critical Path Using PERT…………………………………………498
Project Management………………………………………………………………………505
Managing Project Risk…………………………………………………………………. 506
Summary……………………………………………………………………………………. 506
Suggested Reading…………………………………………………………………………508
Part 5 Global Supp ly-Chain Management
Integration and Control
19 Value Integration through Global Supply Chains………………………….511
Overview…………………………………………………………………………………….. 511
Value Integration across the Global Supply Chain………………………………513
Several Important Supply-Chain Functions……………………………………….520
Important Financial and Operational Metrics……………………………………523
E-Supply-Chain Evolution………………………………………………………………527
Common Process Breakdowns in Supply Chains………………………………..531
Summary……………………………………………………………………………………..533
Suggested Reading…………………………………………………………………………534
20 Increasing Organizational Competitiveness through
Standardization………………………………………………………………………..535
Overview……………………………………………………………………………………..535
Supply-Chain Operations Reference (SCOR) Model…………………………..536
The International Standards Organization (ISO)………………………………..539
Financial Accounting Standards…………………………………………………….. 540
Sarbanes–Oxley Act of 2002…………………………………………………………..541
Occupational Safety and Health Administration (OSHA)…………………..541
Food and Drug Administration (FDA)……………………………………………. 542
Automotive Industry Action Group (AIAG)…………………………………….. 543
Planning Phase………………………………………………………………………… 544
Product Design Phase………………………………………………………………..545
Process Design Phase…………………………………………………………………545
Product and Process Validation Phase…………………………………………. 546
Production Phase, Feedback, and Assessment……………………………….. 546
Malcolm Baldrige Award………………………………………………………………. 546
Creating Metric Dashboards……………………………………………………………548
Implementing Effective Process Controls…………………………………………..550
Summary…………………………………………………………………………………….. 551
Suggested Reading…………………………………………………………………………552
Conclusion………………………………………………………………………………………553
Appendix I Competitive Solutions………………………………………………..559
Appendix II 110 Key Concepts………………………………………………………561
Appendix III Figures and Tables……………………………………………………..569
Appendix IV Crystal Ball and Other Simulation Software…………………585
Overview……………………………………………………………………………………..585
Process Workflow Modeling……………………………………………………………586
Excel-Based Versions………………………………………………………………………588
Glossary………………………………………………………………………………………….591
Index………………………………………………………………………………………………615

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