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

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

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

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© 2005 Thomson Business and Professional Publishing
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 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.
© 2005 Thomson Business and Professional Publishing
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 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.
© 2005 Thomson Business and Professional Publishing
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 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.
© 2005 Thomson Business and Professional Publishing
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 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.
© 2005 Thomson Business and Professional Publishing
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 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.
© 2005 Thomson Business and Professional Publishing
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 JIT & Supply Chain Management-
Cont.
The Elements of Just-in-Time

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© 2005 Thomson Business and Professional Publishing
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 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.
© 2005 Thomson Business and Professional Publishing
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 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.
© 2005 Thomson Business and Professional Publishing
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 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.
© 2005 Thomson Business and Professional Publishing
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 TQM & Supply Chain Management-Cont.
The Elements of Total Quality Management
Deming’s Way
1. Create constancy of purpose to 8. Drive out fear.
improve product & service. 9. Break down barriers between
2. Adopt the new philosophy. departments.
3. Cease dependence on inspection 10.Eliminate slogans &
to improve quality.
exhortations.
4. End the practice of awarding
business on the basis of price. 11.Eliminate quotas.
5. Constantly improve the production 12.Remove barriers to pride of
& service system. workmanship.
6. Institute training on the job. 13.Institute program of self-
7. Institute leadership. improvement
14.Put everyone to work to
accomplish the transformation
Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© 2005 Thomson Business and Professional Publishing
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TQM & Supply Chain Management-Cont.

The Elements of Total Quality Management

– Crosby’s Way-
– Four Absolutes of Quality
1. The definition of quality is conformance to requirements
2. The system of quality is prevention.
3. Performance standard is zero defects.
4. The measure of quality is the price of nonconformance

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

The Elements of Total Quality Management

Malcolm Baldrige National Quality Award-
Objectives Categories Measured
• Stimulate firms to improve 1. Leadership
• Recognize firms for quality 2. Strategic planning
achievements,
• Establish guidelines so that 3. Customer & market focus
organizations can evaluate 4. Information & analysis
their improvement & provide
guidance to others 5. Human resource focus
6. Process management
7. Business Results

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

The Elements of Total Quality Management

ISO 9000 Quality Standards
Quality Management Principles
1. Customer focus
2. Leadership
3. Involvement of people
4. Process approach
5. System approach to management
6. Continual improvement
7. Factual approach to decision making
8. Mutually beneficial supplier relationships

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

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

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

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

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© 2005 Thomson Business and Professional Publishing
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 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.
© 2005 Thomson Business and Professional Publishing
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 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.
© 2005 Thomson Business and Professional Publishing
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 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.
1. Gather data if the process is already in control.
2. Calculate the mean and the range for each sample.
3. 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.
4. Use the means and control limits to construct control charts.

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

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© 2005 Thomson Business and Professional Publishing
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 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
99.73 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.
Smallest difference between UCL or LCL and center line
Cpk=
3σ

Principles of Supply Chain Management: A Balanced Approach by Wisner, Leong, and Tan.
© 2005 Thomson Business and Professional Publishing
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 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.
© 2005 Thomson Business and Professional Publishing
31