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  • Future Developments: What Should the Professional Supply Chain Manager Know about Six Sigma? - SCM | Supply Chain Resource Cooperative (SCRC) | North Carolina State University
    that of a virtual organization structure than any other A virtual organization is defined here as a temporary network of independents linked by integrated technology to share skills costs and access to one another s markets Rahman Bhattachryya 2002 In other words advances in technology have contributed to an increase in the outsourcing of both manufacturing and services Illustrative examples are plentiful For instance in the early 20th century Ford was the epitome of vertical integration The company made its own steel tires and parts and turned them into automobiles Throughout much of the last century many other companies were similarly interested in controlling their own destiny through vertical integration They were reluctant to use others as a resource Some companies were even focused on impossible objectives such as being world class at everything 17 Today however companies cannot afford to be second rate at anything Technology has decreased the effectiveness of many trade barriers For example at one time geographical barriers more effectively limited a customers access to the best products and services But thanks to advances in technology like the telephone today s customers are less likely to accept second best As a result researchers have suggested that vertical integration will be replaced by virtual integration 17 While these speculations may not come to fruition in the near future the simple fact that academics have made arguments of this type supports the notion that companies are increasing their dependence on outsourcing Of course along with outsourcing comes the need for evaluating the supplier Since disparate industries have distinctly different needs there are various standards upon which suppliers are evaluated For example the automotive industry s standards for supplier evaluation are different than the standards in the software industry These industries support governing bodies like the Automotive Industry Action Group AIAG and the Software Engineering Institute SEI Each organization employs industry specific techniques to evaluate the price quality and on time performance capabilities of suppliers Automotive Industry Action Group AIAG was founded in 1982 by a group of managers from Chrysler Ford and General Motors Their purpose was to provide an open forum where members cooperate in developing and promoting solutions that enhance the prosperity of the automotive industry Today AIAG s focus is to continuously improve business processes and practices involving trading partners throughout the supply chain http www aiag org Software Engineering Institute SEI was founded in 1984 by the U S Department of Defense DoD Their mission is to provide the technical leadership to advance the practice of software engineering so the DoD can acquire and sustain its software intensive systems with predictable and improved cost schedule and quality The institute s methods have been widely adopted Given the existence of the aforementioned organizations what supplier evaluation standard should a company use if it operates in the automotive industry and is outsourcing software that goes in its final product Just this one example of a complication shows the unlikelihood that one omnipotent standard for inter industry

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  • Case Studies: What Should the Professional Supply Chain Manager Know about Six Sigma? - SCM | Supply Chain Resource Cooperative (SCRC) | North Carolina State University
    they become a supplier they are regularly given report cards and rated on a gold silver or bronze status for meeting Boeing s expectations Russ Bunio vice president and general manager of supply management and procurement for BCAG says that suppliers who meet or exceed company standards are identified and recognized as preferred suppliers In turn they are rewarded by benefits such as selection preference reduced inspections industry recognition and additional business opportunities Only the very best are recognized publicly for their efforts and only a few suppliers can make it The best suppliers deliver products of flawless quality and maintain a perfect on time delivery schedule consistently introduce new technology provide Boeing with continual cost reductions work as an extension of BCAG s business and production systems and focus on teamwork risk sharing continuous improvements and win win attitudes Boeing has established a continuous cost improvement program CCIP which is designed to achieve 3 5 annual reductions in what BCAG pays for materials and parts This target could not be achieved if BCAG did not evaluate its suppliers on a continuous basis and reward the best practices The highest level of recognition is to be chosen as the supplier of the year which has a motivational intent Of the Seattle based company s 3 100 suppliers in 1999 only 116 were recognized for meeting or exceeding continuous cost improvement goals and just 13 were given supplier of the year recognition Boeing then uses a small fraction of the suppliers of the year as benchmarks against the other suppliers Only 0 5 of BCAG s suppliers were chosen recently as the hallmarks against which other suppliers are measured 22 top Top Suppliers BFG oodrich Aerospace Aerostructures Group Chula Vista Calif has been recognized for high performance in quality competitive pricing

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  • Expected Costs and Benefits: What Should the Professional Supply Chain Manager Know about Six Sigma? - SCM | Supply Chain Resource Cooperative (SCRC) | North Carolina State University
    conform to the firm s requirements not only on the first delivery but on every delivery as long as the relationship lasts This conformance saves the time and money associated with counting items at the receiving dock and inspecting items for quality It therefore provides vendors with the ability to deliver directly to the manufacturing floor Quality is particularly important in a JIT system because the system is so tightly run If a vendor ships a batch of substandard parts it is likely the buyer will run out of materials before a corrected order can be received thus causing a backlog The assurance of quality minimizes the chance that defective material will initiate such a negative chain reaction In addition vendors who assure quality reduce the time and expense associated with returning materials 19 Fair price Vendors offering a fair price provide the benefit of cost reduction to the buying firm while also providing themselves with a fair profit A mutually beneficial price allows suppliers to remain profitable and continue business Firms that earn extremely low profit margins relative to their competitors are likely to either cut corners on quality or to exit the relationship There are also other benefits related to price If buyers and suppliers share pricing information whereby the elements of both company s profit margins are revealed both can reap benefits Engineers in the buying firm can assist suppliers by making cost driving processes more efficient Likewise engineers in the supplying firm can assist buyers by developing a lower cost design 19 Familiarity Selecting responsive vendors results in benefits when issues arise If a supplier knows a buyer s order has the level of expertise necessary to resolve its particular issues and is responsible for the buyer s account there will be a quick follow through and response to problems In addition buyers that know who to call and how to contact them may save time when time is of extreme importance 19 Technical capabilities Vendors offering exceptional technical capabilities provide firms with the ability to continuously improve their products in terms of quality and performance Selecting firms that are technology leaders rather than followers translates into the ability for the buying firm to be a leader in technology In addition firms that lead in technical capabilities are more likely to continually improve their products and equipment 19 Financial and business stability Selecting firms with financial and business stability increases the likelihood that the partnership will survive through tough times Firms that are financially stable are likely to offer long term relationships quality products and development services 19 Each of the above qualities provides particular benefits to a buyer Although it may be difficult or impossible to find a supplier who is the best in every category the key is to find suppliers that are the best at providing the benefits that are most important to the buying firm Therefore buying firms are likely to realize a mixture of the above benefits depending on their priorities

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  • Implementation Issues: What Should the Professional Supply Chain Manager Know about Six Sigma? - SCM | Supply Chain Resource Cooperative (SCRC) | North Carolina State University
    are usually the first ones trained in an organization and are often senior managers connected to various business units These champions need to be fully committed to successfully implementing Six Sigma Typically their role involves guiding others in the process acting as a mentor and facilitating the process Master Black Belts receive the highest level of training and assume the roles of teachers and mentors The Master Black Belts are usually responsible for managing multiple projects and delivering results Black Belts usually have a fairly extensive level of training and guide improvement projects More specifically the Black Belts will create facilitate train and direct teams using an analytical approach Green Belts are specialized project leaders that work in daily operations throughout an organization to incorporate quality tools and language Finally Financial Analysts act as third parties to quantify the bottom line results However this entire infrastructure is worthless if the proper training is not supplied to the organization 12 top Training In general training should focus on demonstrating to employees how the tools available can be utilized to help support the Six Sigma methodology This is best demonstrated by providing the employee with introductory training followed by the assignment of a practical application One of the pitfalls that must be avoided is allowing employees to follow their intuition instead of the Six Sigma process This is one aspect that should be emphasized during training to help avoid potential issues Usually Champions and Executives receive one to four days of training Green Belt training varies widely but focuses mostly on the various tools that should be used to track day to day process improvements Training for Black Belts is similar to that of Green Belts and usually takes place over a four month period though actual duration of training is only about four weeks Black Belts are also trained on how to train others how to effectively mentor and how to develop effective teams Usually the most effective programs are not viewed as training programs but rather as new business strategies Firms also find that it is usually best to train most people to a Green Belt level and then select potential Black Belt candidates from that pool This strategy minimizes the number of people that are trained as Black Belts and then are unable to perform at that level 12 top Project Selection and Execution The final area that is critical to firms desiring to maximize their ability to use Six Sigma is project selection and execution Projects should focus on core processes that have been identified by Champions or Master Black Belts These projects should be connected to strategic and annual operating plans they should be recognized as important to the firm they typically ought to have a scope that can be completed within three to six months and they must be approved and supported by management The project should also be able to achieve breakthrough performance in terms of both the process and the bottom line As part

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  • Associated Technologies: What Should the Professional Supply Chain Manager Know about Six Sigma? - SCM | Supply Chain Resource Cooperative (SCRC) | North Carolina State University
    illustrate how a process should be implemented top A histogram used in the analysis phase is a graphical way to summarize the distribution of a continuous set of data 8 This tool is useful for helping you to visualize the way data points are spread out and the frequency with which an event occurs in a set of observations 8 top A Pareto chart also used in the analysis phase is best used to evaluate data It is named after a famous Italian economist Vilfredo Pareto who showed that 80 of the world s wealth was owned by just 20 of the population This tool alerts Six Sigma teams to such instances of disparity It is a graphical way to capture the relative significance of how sets of data differ and allows for functions such as ranking problems by their degree of frequency or severity and comparing the number of problems that arise in various areas of operations 8 The chart can also aid in evaluating the before and after effects of a change that was made to a process top A process summary worksheet is an analysis tool that functions as a sort of roll up of the process map by identifying which steps in the process add value and which ones do not 8 Those steps that are determined to be non value adding are further categorized top A cause effect diagram used in the analysis phase is aimed at identifying a number of possible root causes that could lead to problems in a process 8 These diagrams are a valuable resource to turn to when problems arise in a process and must be resolved top The scatter diagram another tool used in the analysis phase is a plot of multiple data points used for illustrating the relationship between two variables After ideas have been identified in the cause effect diagram the scatter diagram uses the available data to test those ideas Patterns of data points can validate theories the team has about root causation and cause effect relationships 8 top An affinity diagram is used in the improve phase and is the result of a creative brainstorming session in which a group gathers and organizes ideas These ideas are then used to structure and analyze a complicated process or problem 8 top The run chart and control chart are used in the control phase After the histogram and Pareto chart capture a snapshot of the process the run chart acts like a camcorder showing how some aspect of the process changes over time 8 top Then a control chart takes the data from the run chart and establishes what are known as the upper and lower control limits Control limits are defined as the expected limits of variation above and below the average of the data 8 If a data point falls outside of the range of the control limits there is a problem that needs to be addressed top Examples of SPC Programs One example of

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  • Performance Measurements and Metrics: What Should the Professional Supply Chain Manager Know about S - SCM | Supply Chain Resource Cooperative (SCRC) | North Carolina State University
    are plotted on a control chart along with a target for the project and a world class benchmark 5 Brainstorming The methods that can be used to develop these evaluation tools can vary greatly One of the more common methods used to develop metrics is to understand the problem statement and then brainstorm potential metrics During the brainstorming process it should always be kept in mind that metrics should be based on what needs to be measured in order to improve the process and that they should always add value in understanding a process They should not be developed simply because they can be tracked with current measurement systems Once a list of potential metrics has been developed each one is then evaluated on how effective it would be at helping to achieve better performance Once the most effective metrics have been selected the list is then reviewed with senior management to ensure that they are compatible with the overall strategy of the business 6 top Balanced Scorecard A popular method for developing metrics is known as the balanced scorecard approach This approach ensures that the project meets both customer needs and business needs The balanced scorecard approach takes into account both financial and non financial metrics The approach also includes lagging and leading measures in four areas financial customer internal processes and employee learning and growth Lagging measures are defined as those measures that are made at the end of the project while leading measures are defined as those measures that are made to help achieve the objectives and are measured upstream of the event Typically the metrics developed from this approach come about through the brainstorming method described earlier The downside to this method is that it tends to have little success in creating sound metrics that have a balance between leading and lagging measures 6 top Four Perspectives Approach A variation of the balanced score card approach is known as the four perspectives approach This approach directs team members to focus on four questions Financial Perspective What financial objectives must we accomplish to ensure the success of our project Customer Perspective By working on this project what customer objectives will be met Internal Perspective To achieve our customer objectives which process will have to be worked on Learning Perspective To achieve our project goals how must our team learn and innovate Once the team has utilized these questions to direct their brainstorming the objectives that the project must meet should become apparent These objectives should then be mapped in a strategy map that covers all of the projects and perspectives of the organization 6 Once this strategy map has been developed the team can then finally brainstorm metrics for each objective while maintaining a balance between lagging and leading metrics This approach assures that the team selects metrics that are aligned with the strategy 6 Generally metrics should meet the following criteria 6 Involve leadership Since management sets the strategy for the company they must ensure that

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  • Definitions: What Should the Professional Supply Chain Manager Know about Six Sigma? - SCM | Supply Chain Resource Cooperative (SCRC) | North Carolina State University
    reaches the level of six sigma it is often said to have zero variation and therefore zero defects 2 Critical to Quality CTQ s The performance target Six Sigma does not refer to individual products as wholes Instead it refers to critical to quality characteristics CTQ s CTQ s are defined as the key measurable characteristics of a product or process whose performance standards or specification limits must be met in order to satisfy the customer 1 In a simple product such as a screwdriver there may be only two or three CTQ s However complicated products such as electronics or personal computers could have thousands The distinction between a product and the CTQ s within a product is important because it allows for comparisons between different products or processes based upon complexity In general a component has at least three opportunities for defects form fit and function 2 Because of the distinction between products and CTQ s it is more appropriate to say that that the average opportunity for nonconformance within a product is six sigma rather than stating that the product itself is six sigma 1 top Methodologies The Six Sigma methodology is implemented using two sub methodologies DMAIC and DMADV DMAIC is an acronym that stands for define measure analyze improve and control This process is usually implemented when a product or process is already in place but not meeting customer specifications DMADV stands for define measure analyze design verify and is used when a new product or process needs to be implemented or when the current process has already been optimized using DMAIC DMADV is also known as DFSS which stands for Design for Six Sigma Six Sigma Black Belts and Green Belts normally perform these implementations 2 Companies operating at the three sigma level that

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  • Background: What Should the Professional Supply Chain Manager Know about Six Sigma? - SCM | Supply Chain Resource Cooperative (SCRC) | North Carolina State University
    to be defective and repaired during production often had other defects that Motorola missed and were found by the customer during the early use of the product In contrast products where defects were not found and corrected rarely failed during early use by the customer 1 Smith s findings sparked an internal debate at Motorola The problem of failure in early use could be attacked in two different ways by detecting and fixing defects or by preventing defects in the first place through improving manufacturing controls and product design An internal study concluded that detecting and fixing defects could only get Motorola to four sigma which is just slightly ahead of the average American company Motorola decided to pursue the latter strategy improving manufacturing controls and product design This began Motorola s quest to improve quality while simultaneously reducing production time and costs 1 In 1984 Mikel Harry a senior staff engineer in Motorola s Government Electronics Group GEG authored a plan for improving product design and reducing production time and costs within the division This plan was called the Yellow Brick Road to Six Sigma Harry formed a team of engineers from within GEG to experiment with problem solving through statistical analysis The methodologies developed by this team enabled the organization to show drastic improvements GEG was able to design and produce products faster and at lower cost With these results in mind Harry formulated a methodology for implementing Six Sigma throughout the company This methodology was documented in a paper titled The Strategic Vision for Accelerating Six Sigma Within Motorola 1 Six Sigma was first applied at Motorola during the development of the Bandit pager The pager was given this name because it borrowed ideas from other products currently on the market The project took approximately 18 months

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