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Managing Risk in the Supply Chain
Kimball Bullington, Ph.D., P.E.Professor
Middle Tennessee State University
Kimball E. Bullington
Define Phase - Tools Project Charter Stakeholder
Analysis Affinity Diagram SIPOC Voice of the
Customer CT Tree
Kano Model SWOT Analysis Cause-and-Effect
Diagrams Supplier
Segmentation Project
Management
SWOT Analysis
Positive Negative
Internal Strengths Weaknesses
External Opportunities
Threats
SWOT Analyses: Exercise Strengths
What are the strengths of your supply organization?
What are the strengths of your operations as a customer of supply?
Weaknesses What are the weaknesses of your
supply organization?
Define Phase - Tools Project Charter Stakeholder
Analysis Affinity Diagram SIPOC Voice of the
Customer CT Tree
Kano Model SWOT Analysis Cause-and-
Effect Diagrams Supplier
Segmentation Project
Management
SWOT Analyses: ExerciseSupply personnel
Supply ManagementProcesses
Supply ManagementTechnology
Operations Environ
SuccessfulSupply
SWOT Analyses: Exercise Strengths
What are the strengths of your supply organization?
What are the strengths of your operations as a customer of supply?
Weaknesses What are the weaknesses of your
supply organization?
SWOT Analyses: Example Strengths
Extensive experience with supply base
Supplier performance history Procurement engineering ISO-quality process documentation
SWOT Analyses: ExerciseSupply personnel
Supply ManagementProcesses
Supply ManagementTechnology
Operations Environ
Supply Failure
SWOT Analyses: Example Weaknesses
Politically weak Lack of commitment to suppliers Tactically-focused Limited time for improvement
activities Data is suspect Little visibility to sister-division data
SWOT Analyses: Exercise Opportunities
What positive developments have occurred? What are the untapped strengths of your
suppliers? Weaknesses
What are the weaknesses of your supply base?
What are the weaknesses of your supporting functions?
SWOT Analyses: Example Opportunities
Untapped intra-business unit leverage Consortia opportunities Supplier capabilities not used Opportunities for expanding business
with a key good performer
SWOT Analyses: Example Threats
Financially unstable suppliers Incapable suppliers Cost increases Poor performance in a key supplier
(quality, cost, delivery, service, technology development)
Define Phase - Tools Project Charter Stakeholder
Analysis Affinity Diagram SIPOC Voice of the
Customer CT Tree
Kano Model SWOT Analysis Cause-and-Effect
Diagrams Supplier
Segmentation Project
Management
Critical 2: Special Situations
Critical 1:Long-term Relationship
Non-Critical 1:Contractual
High
Low High
Ris
k
Annual Spend
Supply Base Characterization
Non-Critical 2:Transactional
Critical 2: Special Situations
Critical 1:Long-term Relationship
Non-Critical 1:Contractual
High
Low High
Ris
k
Annual Spend
Supply Base Characterization
Non-Critical 2:Transactional
Consolidate
ConsolidateRisk reduce &Consolidate
Define Phase - Tools Project Charter Stakeholder
Analysis Affinity Diagram SIPOC Voice of the
Customer CT Tree
Kano Model SWOT Analysis Cause-and-Effect
Diagrams Supplier
Segmentation Project
Management
Define Outputs Once completed, the Define Phase
should answer the following questions:1) Who is the customer?2) What matters?3) What is the scope?4) What defect am I trying to reduce?5) What are the improvement targets?
The Measure Phase Purpose
To collect current performance of the process identified in the Define phase
This data is used to determine sources of variation and serve as a benchmark to validate improvements
Measurements Benefits of having good data need
to outweigh the costs of getting it
What does this measure do for the Project?
The Measure Phase Upon completion of the measure phase,
Project Teams will have: A plan for collecting data that specifies
the type of data needed and techniques for collecting the data
A validated measurement system that ensures the accuracy and consistency of the data collected
A sufficient data set for problem analysis
Measure - Key Concepts Measurement Variation
Exists naturally in any process and is the reason Six Sigma projects are undertaken
Data Data Collection Plan Measurement System Analysis
Ensures measurement techniques are reproducible and repeatable
Recording Measurements 3 stages
The output stage These tell how well customer needs are
being met Parts of the process
These are taken at critical points in the process
The input stage These evaluate contributions to the process
that are turned into value for the customer
Recording Measurements Output Stage
Shortages Line shutdowns Quality – discrepant material Material price variances Internal customer survey
Recording Measurements Parts of the process
Project milestones Supplier ship on time performance Supplier OTD Supplier internal throughput yield Supplier suggested cost reductions
Recording Measurements The input stage
Supplier base size % Buyers with degrees % of spend covered by LTC’s % of spend from reverse auction Supplier FMEA’s
FMEA(Failure Mode Effects Analysis)
Recognizes potential failure and the effects of that failure
Identifies actions that would reduce chance of failure
Documents the process
Determining Data Type What do we want to know?
Review materials developed during design phase
What characteristics do we need to learn more about?
Data Collection Plan
What data will be collected? Why is it needed? Who is responsible? How will it be collected? When will it be collected? Where will it be collected?
Measurement System Analysis After Data Collection Plan is
complete, it needs to be verified before actual data is collected
MSA is performed on a regular basis
MSA ends when a high level of confidence is reached that the date collected accurately depicts the variation in the process
Supplying Six Sigma
February 13, 2004Kimball Bullington, Ph.D.,
P.E.
Copyright 2004, Kimball E. Bullington
Learning Six SigmaObjectives Learn how the breakthrough strategies
can be applied to supply. Learn which Six Sigma tools are most
useful to supply. Learn the terminology of Six Sigma so
you can supply to a Six Sigma company.
Identify additional resources for more in-depth application of Six Sigma.
Define – Process Flow
InputsTransformProcesses Outputs
Feedback
Suppliers Operations Customers
Environment
Define - Process Flow
InputsTransformProcesses Outputs
Feedback
Defining Six Sigma If these criteria are met then:
Identify the customers involved, both internal and external to the function.
Find out what the customer’s CT’s are (Critical to Quality, Critical to Delivery, Critical to Cost, etc).
Define the project scope and goals.
Map the process to be improved.
CT Tree
Low
Cost
Product
Efficient Design
Process Control
Material Control
Supplier Input
VOC
Accurate SpecsControl PlanTraining
Capable Process
Communication
Buying
Inv. Control
Defining Six SigmaCharter – Boundaries
Commodity Supplier Project Are we there yet?
Defining Six Sigma Supply Defining Priority
Pareto Diagrams Prioritization Matrix
Defining Risk – FMEA Defining Commitment
Commitment Scale Involvement Matrix
Defining Capability – Process Sigma
DMADV Project CharterProject Title:
Opportunity Statement: Project Leader:
Team Members / Roles:
Business Case:
Goal Statement (milestones, success
criteria, deliverables):Stakeholders:
Project Scope / Boundaries:
Plan Plan Date Actual Date
Define
Measure
Analyze
Design
Verify
Stakeholder AnalysisPeople or Groups
Level of Commitment Buy Mfg EngEnthusiastic Support
Help it work
Compliant
Hesitant X
Indifferent
Uncooperative X
Opposed
Hostile X
SIPOC ExampleSuppliers Inputs Processes Outputs Customer
s
Ops Mgt Supplier Perf.
SupplierEvaluation
Survey Ops Mgt
Buyers Complaint
Rating system
Buyers
Engrg. Tech Reqts
Improved Supplier Perform.
Engineering
Mfg. Rating system
Commit. to suppliers
Mfg.
Suppliers Supplier Complaint
Suppliers
CT - Cost Tree
Low
Cost
Product
Efficient Design
Process Control
Material Control
Supplier Input
VOC
Accurate SpecsControl PlanTraining
Capable Process
Communication
Buying
Inv. Control
Analyzing Six SigmaNominal Group Technique
Advantages Combines brainstorming with affinity Eliminates (or reduces) tendency for
one person to dominate brainstorming
Gives everyone time for private idea generation
Cause-and-Effect Diagrams Supplier Failure - Causes
People
Materials
Equipment
Processes
Environment
Measurement
FireEarthquake
Mat'l price increase
Bankruptcy
Illness
Turnover
Process upset Commodity allocation
Bad specs
Inaccurate PO
New employees
New source
IncompetenceIncapable equip
Lack of PM
FraudLawsuit
Tornado
Flood
StrikeStrikeBusiness down
Business up
Different standards
Cause-and-Effect Diagram
Effect
MaterialsMethods
EquipmentPeople
Environment
Cause
Cause
Cause
Cause
Cause
CauseCause
Cause
CauseCause
Cause
Cause
Analyzing Six Sigma Capability Analysis - establishing
current performance level Graphical Analysis - a visual indication
of performance using graphs Root Cause Analysis – developing a
hypothesis about the causes of variation
Root Cause Verification – verifying that the planned action will generate the desired improvement
SWOT Analyses: Exercise
Strengths What are the strengths of your supply
organization? What are the strengths of your
operations / engineering as a customer of supply?
Weaknesses What are the weaknesses of your
supply organization?
SWOT Analysis: Exercise
Supply personnel
Supply ManagementProcesses
Supply ManagementTechnology
Operations Environ
SuccessfulSupply
SWOT Analysis: Exercise
Supply personnel
Supply ManagementProcesses
Supply ManagementTechnology
Operations Environ
Supply Failure
Stakeholder AnalysisPeople or Groups
Level of Commitment Buy Mfg EngEnthusiastic Support
Help it work
Compliant
Hesitant X
Indifferent
Uncooperative X
Opposed
Hostile X
CT Tree
Low
Cost
Product
Efficient Design
Process Control
Material Control
Supplier Input
VOC
Accurate SpecsControl PlanTraining
Capable Process
Communication
Buying
Inv. Control
DMAIC Project CharterProject Title:
Opportunity Statement: Project Leader:
Team Members / Roles:
Business Case:
Goal Statement (milestones, success
criteria, deliverables):Stakeholders:
Project Scope / Boundaries:
Plan Plan Date Actual Date
Define
Measure
Analyze
Improve
Control
Conclusion DMAIC can be helpful in the
strategy development process. The tools of Define are most helpful,
followed by Control. Training in the tools of Define and
Control is not difficult. Actual implementation in the supply
chain requires significant investment.
References
Books: Six Sigma Pocket Guide (Rath & Strong’s) The Black Belt Memory Jogger (GOAL / QPC) Six Sigma (Harry and Schroeder) Implementing Six Sigma (Breyfogle) The Six Sigma Way Team Fieldbook (Pande, Neuman,
Cavanagh) The Vision of Six Sigma: A roadmap for breakthrough
(Harry) Supplier Strategies (Goldfeld)Web sites: www.isixsigma.com www.ge.com/sixsigma