1. CHAPTER 8- PROCESS MANAGEMENT: JIT & TQM ISSUES IN SUPPLY CHAIN MANAGEMENT
Principles of Supply Chain Management:
A Balanced Approach
Prepared by Daniel A. Glaser-Segura, PhD

2. © 2005 Thomson Business and Professional Publishing
Learning Objectives
You should be able to:
Discuss the major elements of JIT & TQM.
Describe why JIT & TQM are integral parts of SCM.
List & describe the major elements of JIT & TQM.
Understand the importance of SPC & how to apply it to various processes.
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© Thomson Business and Professional Publishing

3. © 2005 Thomson Business and Professional Publishing
Chapter Eight Outline
JIT & Supply Chain Mgmt.
The Elements of JIT
Waste Reduction
JIT Partnerships
JIT Layouts
JIT Inventories
JIT Scheduling
Continuous Improvement
Workforce Commitment
JIT II
TQM & Supply Chain Mgmt.
The Elements of TQM
Focus on the customer
Workforce Involvement
Deming’s Way
Crosby’s Way
Juran’s Way
The Malcolm Baldridge National Quality Award
ISO 9000 Quality Standards
The Tools of TQM
Flow Diagrams
Check Sheets
Pareto Charts
Cause-&-Effect Diagrams
Statistical Process Control
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© Thomson Business and Professional Publishing

4. JIT & TQM are required throughout the supply chain!!!
Introduction
In 1990s, supply chain management combined:
Quick response (QR)- speed & flexibility
Efficient Consumer Response (ECR)- speed & flexibility
JIT – Continuous reduction of waste
Keiretsu Relationships- Including suppliers in JIT/TQM efforts
Quality is a necessary element and outcome of JIT to achieve low cost, high quality, & reduced lead times.
JIT & TQM are required throughout the supply chain!!!
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© Thomson Business and Professional Publishing

5. JIT & Supply Chain Management
JIT emphasizes:
Reduction of waste
Continuous improvement
Synchronization of material flows within the organization
Channel integration- extending partnerships in the supply chain
Stage 1- Firm is internally focused & functions managed separately. Silo effect is reactive & short-term goal oriented.
Stage 2- Firm integrates efforts & resources among internal functions.
Stage 3- Firm links suppliers/customers with firm’s processes.
Stage 4- Firm broadens supply chain influence beyond immediate or first-tier suppliers & customers.
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© Thomson Business and Professional Publishing

6. JIT & Supply Chain Management- Cont.
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© Thomson Business and Professional Publishing

7. JIT & Supply Chain Management- Cont.
The Elements of Just-in-Time
Waste Reduction
Firms reduce costs & add value by eliminating waste from the productive system.
Waste encompasses wait times, inventories, material & people movement, processing steps, variability, any other non-value-adding activity.
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© Thomson Business and Professional Publishing

8. JIT & Supply Chain Management- Cont.
The Elements of Just-in-Time
Just-in-Time Partnerships
Suppliers & customers work to remove waste, reduce cost, & improve quality & customer service.
JIT purchasing includes delivering smaller quantities, at right time, delivered to the right location, in the right quantities.
Firms develop JIT partnerships with key customers. Mutual dependency & benefits occur among JIT partnerships.
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© Thomson Business and Professional Publishing

9. JIT & Supply Chain Management- Cont.
The Elements of Just-in-Time
Just-in-Time Layouts
Move people & materials when & where needed, ASAP.
Group technology (work cells)- process similar parts or components saving duplication of equipment & labor
Work cells are often U-shaped to facilitate easier operator & material movements.
JIT layouts are very visual (lines of visibility are unobstructed) with operators at one processing center able to monitor work at another.
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© Thomson Business and Professional Publishing

10. JIT & Supply Chain Management- Cont.
The Elements of Just-in-Time
Just-in-Time Inventories
Reduction of inventory levels causes problems to surface in the organization.
Once problems are detected, they can be solved.
The end result is a smoother running organization with less inventory investment.
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© Thomson Business and Professional Publishing

11. JIT & Supply Chain Management- Cont.
The Elements of Just-in-Time
Just-in-Time Scheduling
Small batch scheduling drives down costs by:
Reducing purchased, WIP, & finished goods inventories
Makes the firm more flexible to meet customer demand.
Small production batches are accomplished with the use of kanbans a Japanese word for card. Although for JIT use, Kanban has come to mean a signal to order or release material in the production system.
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© Thomson Business and Professional Publishing

12. JIT & Supply Chain Management- Cont.
The Elements of Just-in-Time
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© Thomson Business and Professional Publishing

13. JIT & Supply Chain Management- Cont.
The Elements of Just-in-Time
Continuous Improvement (Kaizen)
Continuous approach to reduce process, delivery, & quality problems, such as machine breakdown problems, setup problems, & internal quality problems.
Workforce Commitment
Managers must support JIT by providing subordinates with the skill, tools, time, & other necessary resources to identify problems & implement solutions.
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© Thomson Business and Professional Publishing

14. JIT & Supply Chain Management- Cont.
The Elements of Just-in-Time
Just-in-Time II
An extension of supplier partnerships & vendor-managed inventories.
A supplier’s employee is housed in the purchasing department of the buyer’s organization, acting as both buyer & supplier representative. This employee monitors inventory levels, places purchase orders, & participates on product design & value analysis teams.
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© Thomson Business and Professional Publishing

15. TQM & Supply Chain Management
TQM is an enterprise-wide philosophy, encompassing suppliers & customers.
The Elements of Total Quality Management
Focus on the Customer
“Meeting customer expectations” applies to external as well as to internal suppliers & customers.
Workforce Involvement
Top management commitment. New role as facilitator.
Employee Empowerment- Think “out of the box”.
Teamwork is the quality circle concept
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© Thomson Business and Professional Publishing

16. TQM & Supply Chain Management-Cont.
The Elements of Total Quality Management
Deming’s Way
Create constancy of purpose to improve product & service.
Adopt the new philosophy.
Cease dependence on inspection to improve quality.
End the practice of awarding business on the basis of price.
Constantly improve the production & service system.
Institute training on the job.
Institute leadership.
Drive out fear.
Break down barriers between departments.
Eliminate slogans & exhortations.
Eliminate quotas.
Remove barriers to pride of workmanship.
Institute program of self-improvement
Put everyone to work to accomplish the transformation
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© Thomson Business and Professional Publishing

17. TQM & Supply Chain Management-Cont.
The Elements of Total Quality Management
Crosby’s Way-
Four Absolutes of Quality
The definition of quality is conformance to requirements
The system of quality is prevention.
Performance standard is zero defects.
The measure of quality is the price of nonconformance
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© Thomson Business and Professional Publishing

18. TQM & Supply Chain Management-Cont.
The Elements of Total Quality Management
Juran’s Way
Quality Planning- Identify internal/external customers & their needs, develop products that satisfy those needs. Mangers set goals, priorities, & compare results
Quality Control- Determine what to control, establish standards of performance, measure performance, interpret the difference, & take action
Quality Improvement- Show need for improvement, identify projects for improvement, implement remedies, provide control to maintain improvement.
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© Thomson Business and Professional Publishing

19. TQM & Supply Chain Management-Cont.
The Elements of Total Quality Management
Malcolm Baldrige National Quality Award-
Objectives
Stimulate firms to improve
Recognize firms for quality achievements,
Establish guidelines so that organizations can evaluate their improvement & provide guidance to others
Categories Measured
Leadership
Strategic planning
Customer & market focus
Information & analysis
Human resource focus
Process management
Business Results
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© Thomson Business and Professional Publishing

20. TQM & Supply Chain Management-Cont.
The Elements of Total Quality Management
ISO 9000 Quality Standards
Quality Management Principles
Customer focus
Leadership
Involvement of people
Process approach
System approach to management
Continual improvement
Factual approach to decision making
Mutually beneficial supplier relationships
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© Thomson Business and Professional Publishing

21. © 2005 Thomson Business and Professional Publishing
The Tools of TQM
Flow Diagrams- Annotated boxes representing process to show the flow of products or customers.
Check Sheets- to determine frequencies for specific problems.
Pareto Charts- for presenting data in an organized fashion, indicating process problems from most to least severe.
Cause-and-Effect Diagrams (Fishbone or Ishikawa diagrams) used to aid in brainstorming and isolating the causes of a problem.
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© Thomson Business and Professional Publishing

22. © 2005 Thomson Business and Professional Publishing
The Tools of TQM- Cont.
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© Thomson Business and Professional Publishing

23. © 2005 Thomson Business and Professional Publishing
The Tools of TQM- Cont.
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© Thomson Business and Professional Publishing

24. © 2005 Thomson Business and Professional Publishing
The Tools of TQM- Cont.
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© Thomson Business and Professional Publishing

25. © 2005 Thomson Business and Professional Publishing
The Tools of TQM- Cont.
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© Thomson Business and Professional Publishing

26. © 2005 Thomson Business and Professional Publishing
The Tools of TQM- Cont.
Statistical Process Control (SPC)-
Allows firms to visually monitor process performance, compare the performance to desired levels or standards, and take corrective steps quickly before process variability gets out of control and damages products, services, and customers
Firms gather process performance data, create control charts to monitor process variability, then collect sample measurements of the process over time.
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© Thomson Business and Professional Publishing

27. © 2005 Thomson Business and Professional Publishing
The Tools of TQM- Cont.
Statistical Process Control (SPC) Cont.-
Variations- in process are either natural variation or assignable variations.
Natural variation is random environmental noise that is expected.
Assignable variations can be traced to a specific cause & fixed.
Samples- Sample measures are either variable or attribute data.
Variable data are continuous, such as weight, time, and length.
Attribute data indicate the presence of some attribute such as color, satisfaction, workability, or beauty.
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© Thomson Business and Professional Publishing

28. © 2005 Thomson Business and Professional Publishing
The Tools of TQM- Cont.
Variable Control Charts- Two types of control charts to measure variable process data:
x-chart is used to track the central tendency of the sample means.
R-chart is used to track sample ranges.
Gather data if the process is already in control.
Calculate the mean and the range for each sample.
Calculate the overall mean of all the samples and the average range of all the samples. Use the x means to calculate the upper and lower control limits.
Use the means and control limits to construct control charts.
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© Thomson Business and Professional Publishing

29. © 2005 Thomson Business and Professional Publishing
The Tools of TQM- Cont.
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© Thomson Business and Professional Publishing

30. The Tools of TQM- Cont.
Process Capability
The current process variation & future changes can be monitored using a process capability index, or Cpk.
Cpk is the ratio of the desired process variation to the actual process variation.
The process must be under control (only natural variations)
A Cpk of 1.0- process is capable of producing within the control limits percent of the time.
A Cpk greater than 1.0- even fewer defects.
Cpk of less than 1.0- process may be incapable of producing within control limits.
Cpk=
Smallest difference between UCL or LCL and center line 3σ
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© Thomson Business and Professional Publishing

31. © 2005 Thomson Business and Professional Publishing
The Tools of TQM- Cont.
Acceptance Sampling
When shipments of product are received from suppliers customers, samples can be taken & measured against some quality acceptance standard.
Sampling is less time-consuming than testing every unit to determine the overall quality of a shipment.
Producer’s risk-
A buyer rejects a shipment of good quality units because the sample quality level did not meet standards (type-I error).
Consumer’s risk-
Buyer accepts a shipment of poor-quality units because the sample falsely provides a positive answer (type-II error).
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© Thomson Business and Professional Publishing