Module 4_Session 6.pptx_Operations Management

Inventory Management &
Quality Methodologies
Module 4

1. Over Production
Some organizations produce things even before their requirement pops up, wasting time and
resources in manufacturing. Furthermore, some teams overestimate the requirements and
manufacture unnecessarily large units of products. As a result, the demand doesn't meet the
manufacturer's expectations, leading to overproduction. The goods produced are useless, so the
resources and efforts they put into manufacturing also go waste. Some of the common reasons
behind overproduction are:
• Zero strategies in manufacturing units
• Inaccurate forecast and demand expectations
• Unclear consumer requirements
• Not keeping track of production routines
These are the common causes of overproduction that makes up for a significant waste in a project.
Example - Real-life examples of overproduction include printing unnecessary
documents when you have the option to keep information on the computer system

2. Defects
• Not paying enough attention to the flaws during the production process leads to
multiple defects that only result in a flawed end product. No client or consumer
would accept defective products, so it is clear that you have wasted all your time,
effort, resources, and capital. Some of the common reasons behind defects are:
• Poor quality control
• Lack of clarity during requirement gathering
• Improper functioning of the machinery or tools involved
• These and multiple other factors lead to increased defects in the end product, a
significant type of waste.
• Example: Common defects you might face are misleading information on the charts or reports shared across the
project team. Another example can be wrong labels on the containers or basically any other mistake that can lead to
flawed actions.

3. Waiting
• Waiting for resources or putting human efforts on hold is all about the waiting
waste. You may not consider, but all this wait costs the company additional
expenses, and it will reduce the project value significantly. In simple words,
waiting is the opposite of overproduction, where the organization puts the
project on hold and doesn’t have enough to offer to its clients. The reasons
behind waiting are:
• Poor communication among teams
• Idle equipment which nobody needs
• Delayed setups or lack of control over the processes
• Apart from this, the factor leading to waiting includes unplanned downtime.
• Example: As the name suggests, waiting is when the client has to wait for the
service delivery or if one team waits as the other sends information to start their
work. Moreover, waiting is also when the team sits idle, waiting for the resources
that the company has to provide.

4. Transportation
The operations happen at varied locations in the industries spread across a large
area. Thus, there will be a lot of transportation of goods, accessories, and humans
to complete a project. If the site gets designed by experts, at least units that have
to work collaboratively stand nearby to reduce transportation expenses and time.
However, if the design is poor, you would have to consider transportation as waste.
The primary reason behind this waste is poor site design or lack of strategy while
managing the unit.
Example: You can link it with moving assets unnecessarily from one place to another. It is also related to the event
when one has to make too many mouse clicks on the website before getting the required information.

5. Unused Talent
It is one of the most significant losses associated with not using the available talent
efficiently. The management team doesn’t pay attention to how they can allot tasks
to people considering who would do what to the best of their capability. For
example, if you have an employee with a financial background, assigning inventory
management tasks to them is a blunder! Thus, it is essential to divide the task
smartly, ensuring no talent goes unnoticed and everyone contributes towards the
project to the best of their abilities.
Example: Not assigning tasks as per talents is significant waste in an organization. Moreover, not
organizing staff training to update the skills also leads to asset wastage.

6. Inventory
• Holding the raw materials and resources used for product
manufacturing results in inventory waste. You will have to
allocate space to things that are not required in the near
future and will have to bear the storage expenses.
Additionally, everything will go to waste if the product isn't
used soon! All of it happens due to mismanagement and not
keeping track of the production processes, and this wastage
of resources, capital, and time leads to lower productivity
levels.
• Example: Overstocking products even when you can do with
much lesser quantity. Keeping unnecessary documents and
files in the office cabinets is also an example of waste.

7. Motion
• To move people and things from one place to another will
cost money. So, if your manufacturing site is far from the
storage unit, consider the additional charges as waste.
The more you want to move these things your total
expense on the project will also increase. Another waste
category in Six Sigma is the significant amount of time
that goes into this process.
• Example: Excessive staff movement to fetch things they
require is a waste associated with time.

8. Extra Processing
• To keep processing information unnecessarily is the
eighth waste type in Six Sigma. It often happens when the
communication between the teams is not efficient.
However, it can also occur due to human error or delayed
approvals by management. Whatever the reason is, extra
processing is a waste that drastically impacts project
success.
• Example: Processing the same information over again is a
waste of time, effort, and resources. Once you get
satisfactory test results, move ahead and do not keep
processing them.

Muda, Mura and Muri
• Muda, Mura, and Muri are Japanese
terms that refer to the three broad
categories of waste found in a
business. Understanding how each of
these wastes impacts a facility is key to
implementing a successful Lean
manufacturing process.

Muda
Literally translated, Muda means “futility; uselessness; wastefulness,” though more broadly, it refers to
the seven common types of waste seen in business operations. These seven wastes include the
following:
• Defects occurring in the final product
• Waiting for the next step in production to occur
• Excess motion of people and equipment than is needed
• Excess inventory that is sitting and taking up space
• Overproduction meaning that the manufacturing process is ahead of public demand
• Overprocessing without creating value
• Unnecessary transport or handling of materials
There are two types of Muda that facilities must be aware of while performing manufacturing
processes. The first is waste that is non-value adding but essential for the satisfaction of the customer.
The other is non-value adding and is also unnecessary for customer satisfaction.
The latter form of Muda is what contributes to the above wastes as well as any hidden costs within the
process. This is the form of waste that must be eliminated.

Mura
Mura refers to “unevenness” or “irregularity,” specifically irregularity in production levels. Consistently
stable levels of production allow a business to effectively implement maintenance procedures and
reduce worker fatigue, while uneven production leads to more frequent equipment failures, employee
burnout, and increased difficulty in accurately planning.
Devising a way to prevent Mura in the workplace could begin with establishing a Just-in-Time
production system. Keeping little to no inventory in storage establishes a pull system from the
manufacturing process. This means the right parts must be delivered or made at the right time to
produce an even workflow for employees while also decreasing the cost of inventory storage,
preventing bottlenecks, and increasing efficiency.
To get here, companies may choose to implement Kanban to establish that “pull” effect in the
manufacturing process. Heijunka is also an excellent production leveling tactic.

Muri
“Beyond one’s power” is an especially potent definition for muri, as it refers to employees or equipment
that have been overburdened. The dangers of muri should be obvious. Employees who are overworked
experience greater levels of burnout, and a lack of situational awareness caused by exhaustion can be
extremely dangerous, particularly in industries that rely on heavy machinery or dangerous chemicals.
Likewise, equipment that’s stressed too much will break down more frequently and can create wholly
new hazards for anyone nearby.
Muri could and should be avoided with the establishment of standardized work. Ensuring that all
employees know how to complete a task one way is the definition of standardization. In a facility
without a standardized workflow, there could be 10 different ways a manufacturing process is
completed just because of a lack of communication not only between departments, but also the
employees and management themselves.
When standardized, facilities can enjoy higher morale, better quality products, an increase in
productivity, and lower facility operation costs due to less waste.

Relationship between Muda, Mura and
Muri
• Muda, Mura, and Muri are
interrelated. Eliminating one
of them will affect the other
two. For example, a firm that
needs to transport 6 tons of
materials to a customer has
several options

Muri
• The first option is to load one truck with all 6 tons and make a single trip. However in this example, it would be
considered Muri due to the overburden of the truck. This excess load can lead to a breakdown.
The second option is to divide the transportation into two trips. One with two tons and the other with four tons.
This would be considered Mura since the unevenness of the arrival of materials to the customer can lead to
problems at the receiving dock. In the first trip, the delivery may be too little for the production necessary on-site.
In the second trip, the amount of delivered material may be too much for on-site storage and material handling.
This leads to Muri since one of the truck is overburden and the receiver is also overburden for that delivery.
Additionally, Muda can be seen from the uneven workload. This can cause employees who receive the materials
to wait around.
The third option is to load two tons on each truck and make three trips. Even though this option has no Mura and
Muri, it has Muda since the truck would not be fully loaded on each trip. Each truck can carry up to 3 tons of
material and this option makes one unnecessary trip.

Muri
• The fourth option is to deliver the materials with two trucks each with 3 tons. In this example, this
would be the optimal level that minimizes Muda, Mura, and Muri. Muda does not exist because the
trucks are carrying the loads at their maximum capacity. There is no excess capacity nor unnecessary
trips with this strategy. Mura does not exist because the workload between the two deliveries are
uniform. As a result, there is no unevenness. And finally, Muri is absent from this option because both
the truck and the operators are not working beyond their capacity.
• In real world applications of Lean, it is not always easy or possible to find an optimal solution.
Reducing Muda can lead to Muri. The existence of Mura can be seen as a waste in Muda. And finally
Muri can lead to a breakdown in the system that will result in a large amount of Muda and Mura. Since
real world problems are dynamic and the needs of customers are always changing, our work
processes must also change as well. As we design our processes and standardize our work, we must
look at the resulting system from the lens of these three concepts. Only by considering the impacts of
Muda, Mura, and Muri and optimizing our production strategy can we develop an efficient Lean
system.

What Are Lean Tools?
• The Japanese word for waste is muda, which is defined as
“uselessness.” Lean tools are designed to reduce Muda in
organizations and improve quality control. In other words, Lean tools
seek to eliminate processes that aren’t valuable.
• Lean tools are utilized across many industries—from manufacturing
to engineering to finance— and organizations often leverage them
together with Six Sigma methods. Though there are some
differences between the two frameworks, the underlying
philosophies behind Lean and Six Sigma complement each other
exceptionally well: Lean tools are designed to eliminate invaluable
processes, while Six Sigma focuses on lessening variation within a
process. When used together, the two are referred to as Lean Six
Sigma, a process that reduces and manages different types of waste
in organizations.

Bottleneck Analysis
• How many times have your projects gotten stuck somewhere
between development and delivery? Bottleneck analysis is a
structured way of looking at the processes and workflows for
developing a product or service. Bottleneck analysis is also used to
address both present and future issues, by identifying and
addressing operational and process challenges.
Applications
• Utilizing Lean practices to spot and rectify a bottleneck saves
companies time, energy and money. Depending on the type of
bottleneck, there are several things you can do to address it. For
example, bottlenecks caused by inefficient processes can be fixed
through streamlining and improving those processes; if it is instead
caused by a lack of resources, you may need to hire more people or
purchase technology to make your existing resources go further.

Just-in-Time (JIT)
• Just-in-time manufacturing is an on-demand system that allows
manufacturers to go into production only after the customer has
requested a product. This means that companies do not have to
stock up on unnecessary inventory, lowering the risk of some
components or products being overstocked or damaged while being
stored.
Applications
• Professionals who use Lean principles should consider JIT if their
business is capable of working on-demand and can minimize the risk
of only carrying inventory as needed. JIT can be an effective
framework for managing inventory, but it can also make it more
difficult to meet customer demand if there is a breakdown in the
supply chain.

Value Stream Mapping
• Value stream mapping is a technique developed from Lean manufacturing. Organizations
use it to create a visual guide of all the components necessary to deliver a product or
service with the goal of analyzing and optimizing the entire process.
• Value stream mapping is used in a variety of industries, including manufacturing, finance
and healthcare. This principle takes all the people, processes, information and inventory
necessary, and displays them in a flow chart in order to get an overview of the business.
Applications
• Value stream mapping can be applied to your organization by methods such as:
• Encouraging continuous improvement in processes
• Enabling culture change within an organization
• Facilitating clear collaboration and communication

Overall Equipment Effectiveness (OEE)
• Overall equipment effectiveness (or OEE) measures how much planned
productive time is actually productive. For example, imagine you’re planning to
work on a project for an hour, but then spending 20 minutes of that time
answering a client call, meaning your OEE would be about 67% (40 minutes of
actual production time, divided by 60 minutes of planned production time).
• In terms of manufacturing, OEE takes into account the percentage of “good parts”
produced (“good parts” being the parts that meet the quality standards of that
particular company). In the example above, if your project has parts that are
poorly constructed, those would not count towards the “good parts” or overall
OEE score.
Applications
• Companies apply OEE in order to increase production effectiveness and
perform effectively and efficiently by establishing accurate baselines of
performance—while still maintaining quality standards. This efficiency
saves companies money and time.

Plan-Do-Check-Act (PDCA)
• Lockheed Martin used PDCA to create a more efficient process in material management. One of its award-
winning achievements was its ability to reduce the time to move parts from the receiving department to the
stock department. Initially, this process took 30 days, but the entire process was shortened to four hours.
• Error Proofing
• Error proofing—also known as poka-yoke—is a common process analysis tool that is based on the idea of
prevention. As stated by BusinessMap, a project management software company, poka-yoke focuses on
making sure that the right conditions exist before any process is put in place. This step lessens the chance of
defects and human error happening.
Applications
• There are a few steps companies can take to successfully implement root cause analysis:
• Recognize the issue you are trying to solve.
• Learn details about how long the problem has been going on, and how it is specifically affecting your
process/business.
• Collect data about the problem, and try to identify as many potential causes as possible.
• Once you have data, decide what the source of the problem is.
• Decide how to lessen the chances of the problem happening again.

Lean Tools Summary
Bottleneck Analysis Structured way of looking at workflows
Just-in-Time (JIT) On-demand system of production
Value Stream Mapping Analyzing and optimizing a process
Overall Equipment Effectiveness (OEE) Measure of productive time
Plan-Do-Check-Act (PDCA) Method to manage change
Error Proofing Analysis tool based on prevention
Root Cause Analysis (RCA) Method to get the foundation of an issue

Module 4_Session 6.pptx_Operations Management

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