INSEAD Library

Includes bibliographical references and index and glossary

Digitized

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 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 2 Organizational Change in a Competitive World................................................27 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 OPERATIONS 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 SandOP Team Integrates Strategy with Operations......................... 313 Key Success Characteristics of a Successful SandOP Process....................... 314 Key Activities of the SandOP 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 SUPPLY 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 (CandE) 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 SUPPLY-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 Sarbanes­Oxley 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