Chapter 8—Process Management: Lean and Six Sigma in the Supply Chain

TRUE/FALSE

1. Lean production is an operating philosophy or mindset that essentially attempts to minimize the impact
of system variability and flaws in forecasting through the use of high safety stock inventories.

ANS: F PTS: 1
BUSPROG: Analytic LO: 8-1 Bloom’s: Comprehension Difficulty: Easy

2. Lean production, JIT, and Six Sigma quality mean the same thing.

ANS: F PTS: 1
BUSPROG: Analytic LO: 8-1 Bloom’s: Knowledge Difficulty: Easy

3. Toyota initially designed their JIT program on Ford’s manufacturing system.

ANS: T PTS: 1
BUSPROG: Analytic LO: 8-1 Bloom’s: Knowledge Difficulty: Easy

4. Manufacturing cells are often U-shaped to make operator and material movements easier within the
cell.

ANS: T PTS: 1
BUSPROG: Analytic LO: 8-1 Bloom’s: Knowledge Difficulty: Easy

5. The primary design objective with lean layouts is to reduce wasted movements of workers, customers,
and/or work-in-process.

ANS: T PTS: 1
BUSPROG: Analytic LO: 8-1 Bloom’s: Comprehension Difficulty: Easy

6. When lean firms share their best practices with supply chain members, this is referred to as yokoten.

ANS: T PTS: 1
BUSPROG: Analytic LO: 8-2 Bloom’s: Knowledge Difficulty: Easy

7. Organizations practicing lean production often increase their inventory levels in order to create a
cushion against variability so that they can investigate and eliminate the weaknesses in their systems.

ANS: F PTS: 1
BUSPROG: Analytic LO: 8-2 Bloom’s: Knowledge Difficulty: Easy

8. Lean thinking and Six Sigma quality are both concerned with achieving low cost and high quality
throughout the supply chain.

ANS: T PTS: 1
BUSPROG: Analytic LO: 8-2 Bloom’s: Comprehension Difficulty: Easy
 9. A type of card called a kanban is used to signal when a process is out of control in a JIT production
process.

ANS: F PTS: 1
BUSPROG: Analytic LO: 8-3 Bloom’s: Knowledge Difficulty: Easy

10. A lean system is also known as a push system.

ANS: F PTS: 1
BUSPROG: Analytic LO: 8-3 Bloom’s: Knowledge Difficulty: Easy

11. The term "lean production" essentially refers to the Toyota Production System in its entirety.

ANS: T PTS: 1
BUSPROG: Analytic LO: 8-3 Bloom’s: Comprehension Difficulty: Easy

12. A weakness of lean systems is that none of its practices are related to the environment or
sustainability.

ANS: F PTS: 1
BUSPROG: Analytic LO: 8-4 Bloom’s: Knowledge Difficulty: Easy

13. Deming, Crosby, and Juran are all prominent quality professionals whose ideas were vital to the
development of Six Sigma.

ANS: T PTS: 1
BUSPROG: Analytic LO: 8-5 Bloom’s: Knowledge Difficulty: Easy

14. Some of Deming's 14 points actually conflict with many Six Sigma concepts.

ANS: F PTS: 1
BUSPROG: Analytic LO: 8-5 Bloom’s: Comprehension Difficulty: Easy

15. A cause-and-effect diagram is a useful tool for presenting data in an organized fashion, indicating
process problems from most to least severe.

ANS: F PTS: 1
BUSPROG: Analytic LO: 8-6 Bloom’s: Comprehension Difficulty: Easy

16. The Malcolm Baldrige National Quality Award recognizes firms for their quality achievements but is
only given to U.S. firms.

ANS: T PTS: 1
BUSPROG: Analytic LO: 8-6 Bloom’s: Knowledge Difficulty: Easy

17. When designing a manufacturing or service process, a Pareto chart would be an essential tool for
evaluating the process in terms of its action elements, waiting periods, and process flow.

ANS: F PTS: 1
BUSPROG: Analytic LO: 8-6 Bloom’s: Comprehension Difficulty: Easy
 18. Statistical process control uses control charts to monitor the outputs of a process to identify variations
due to assignable causes and variations due to common causes.

ANS: T PTS: 1
BUSPROG: Analytic LO: 8-7 Bloom’s: Comprehension Difficulty: Easy

19. Statistical process control (SPC) allows firms to compare process performance to desired levels or
required standards.

ANS: T PTS: 1
BUSPROG: Analytic LO: 8-7 Bloom’s: Comprehension Difficulty: Easy

20. Acceptance sampling is a statistical technique that enables a shipment reject or accept decision to be
made based on information obtained from a representative sample drawn from the population.

ANS: T PTS: 1
BUSPROG: Analytic LO: 8-7 Bloom’s: Knowledge Difficulty: Easy

MULTIPLE CHOICE

1. Which of the following are among the MOST important elements of the lean production philosophy?
a. Quality inspections and a standardized product line
b. Fully automated assembly lines and a large supplier base
c. Large inventories and quality inspections
d. Waste reduction and continuous improvement
ANS: D PTS: 1
BUSPROG: Analytic LO: 8-1 Bloom’s: Knowledge Difficulty: Easy

2. Which of the following is NOT one of the Seven Wastes?

a. Excess inventory
b. Environmental waste
c. Waiting
d. Scrap and rework
ANS: B PTS: 1
BUSPROG: Analytic LO: 8-1 Bloom’s: Knowledge Difficulty: Easy

3. The Five-Ss refer to:

a. Overspending habits
b. Keiretsu relationships
c. Industrial housekeeping
d. Robust evaluation techniques
ANS: C PTS: 1
BUSPROG: Analytic LO: 8-1 Bloom’s: Knowledge Difficulty: Easy
4. Calculate the inventory container size required given the following:
Demand rate = 10 parts per hour, Safety stock required = 16%
Number of containers = 14, Time to cycle through entire system = 6 hours
a. 2 parts
b. 3 parts
c. 4 parts
d. 5 parts
ANS: D PTS: 1
BUSPROG: Analytic LO: 8-1 Bloom’s: Application Difficulty: Easy

5. Which of the following layouts is primarily designed to process parts, components, or jobs requiring
the same or similar processing steps, saving duplication of equipment and labor:
a. Work centers
b. Production kanbans
c. Work-in-process
d. Manufacturing Cells
ANS: D PTS: 1
BUSPROG: Analytic LO: 8-2 Bloom’s: Knowledge Difficulty: Easy

6. Which of the following is NOT consistent with the lean philosophy?

a. Cross-training employees to increase processing flexibility
b. Developing a culture of continuous improvement within the organization
c. Increasing batch sizes to take advantage of economies of scale
d. Positioning WIP inventories near each processing center
ANS: C PTS: 1
BUSPROG: Analytic LO: 8-2 Bloom’s: Comprehension Difficulty: Easy

7. Lean production emphasizes all of the following EXCEPT:

a. Continuous improvement
b. Reduction of waste
c. Synchronization of material flows
d. Long production runs
ANS: D PTS: 1
BUSPROG: Analytic LO: 8-2 Bloom’s: Comprehension Difficulty: Easy

8. Which person was a key figure in developing the Toyota Production System and also developed the
concept of poka-yoke?
a. Deming
b. Ohno
c. Toyoda
d. Shingo
ANS: D PTS: 1
BUSPROG: Analytic LO: 8-3 Bloom’s: Comprehension Difficulty: Easy

9. Waste in Japan is also referred to as:

a. Muda
b. Kanban
c. Poka-yoke
d. Sakichi
ANS: A PTS: 1
 BUSPROG: Analytic LO: 8-3 Bloom’s: Comprehension Difficulty: Easy

10. Lean production systems are sometimes referred to as pull systems because demand from customers
activates the production actions of the manufacturing facilities. In order for this demand to be
communicated to everyone in the supply chain/manufacturing facility a signal must be passed from
downstream processing centers to the upstream processing centers. This system of relaying signals is
referred to as a:
a. Kanban System
b. Semaphore System
c. Keiretsu Network
d. TQM Network
ANS: A PTS: 1
BUSPROG: Analytic LO: 8-3 Bloom’s: Knowledge Difficulty: Easy

11. When compared to their U.S. counterparts, a benchmarking study found that Japanese auto
manufacturers used:
a. Twice the manufacturing labor
b. Double the manufacturing space
c. Half the engineering hours to produce a new automobile model
d. All of the above

ANS: C PTS: 1
BUSPROG: Communication LO: 8-3 Bloom’s: Knowledge Difficulty: Moderate

12. The following is a term that refers to error or mistake proofing:

a. Kaizen
b. Muda
c. Kanban
d. Poka-yoke
ANS: D PTS: 1
BUSPROG: Analytic LO: 8-3 Bloom’s: Knowledge Difficulty: Easy

13. Which of the following is an example of how lean programs can help to protect the environment?
a. Parts made from recycled materials
b. Using rubber from used tires in auto parts
c. Batch size reduction to reduce plastics
d. All of the above

ANS: D PTS: 1
BUSPROG: Analytic LO: 8-4 Bloom’s: Comprehension Difficulty: Easy

14. The Quick Response program, developed in the 1980's, was an offshoot of the following supply chain
concept:
a. Efficient Consumer Response
b. Six Sigma
c. Just-in-Time
d. Kaisen
ANS: C PTS: 1
BUSPROG: Analytic LO: 8-5 Bloom’s: Knowledge Difficulty: Easy

15. Efficient Consumer Response was initially developed in the 1990's for the following industry:
a. Fashion
 b. Grocery
c. Small Electronics
d. Automobile
ANS: B PTS: 1
BUSPROG: Analytic LO: 8-5 Bloom’s: Knowledge Difficulty: Easy

16. Japanese manufacturing firms sometimes create cooperative coalitions with their suppliers in order to
provide the suppliers with a certain degree of financial support. What are these cooperative coalitions
called?
a. Jidoka Networks
b. Keiretsu Networks
c. Kanban Networks
d. Kaizen Networks
ANS: B PTS: 1
BUSPROG: Analytic LO: 8-5 Bloom’s: Knowledge Difficulty: Easy

17. Which company probably played the largest role in the development of the Toyota Production
System?
a. General Motors
b. Chrysler
c. Ford
d. Boeing
ANS: C PTS: 1
BUSPROG: Analytic LO: 8-5 Bloom’s: Knowledge Difficulty: Easy

18. If lot sizes are reduced by 50 percent, what impact will this have on average inventory levels?
a. Increase by 50%
b. Increase by 100%
c. Decrease by 25%
d. Decrease by 50%
ANS: D PTS: 1
BUSPROG: Analytic LO: 8-5 Bloom’s: Comprehension Difficulty: Easy

19. Which of the following quality gurus believed that companies should strive for zero defects and that
quality was, in a sense, free since quality improvement programs invariably paid for themselves?
a. Juran
b. Deming
c. Baldrige
d. Crosby
ANS: D PTS: 1
BUSPROG: Analytic LO: 8-5 Bloom’s: Knowledge Difficulty: Easy

20. Which tool is useful for presenting data in an organized fashion, indicating process problems from
most to least severe:
a. Pareto Charts
b. Check Sheets
c. Cause-and-Effect Diagrams
d. Fishbone Diagrams
ANS: A PTS: 1
BUSPROG: Analytic LO: 8-6 Bloom’s: Knowledge Difficulty: Easy
21. A company that produces 8 pound bags of cat litter gathered 5 samples of 6 bags each. The weights of
each bags' contents are listed below. What would you plot on the x chart for sample 2?

Bag Number of each sample

Sample 1 2 3 4 5 6
1 7.98 8.34 8.02 7.94 8.44 7.68
2 8.33 8.22 8.08 8.51 8.41 8.28
3 7.89 7.77 7.91 8.04 8 7.89
4 8.24 8.18 7.83 8.05 7.9 8.16
5 7.87 8.13 7.92 7.99 8.1 7.81

a. All of the following numbers: 8.33, 8.22, 8.08, 8.51, 8.41, 8.28
b. All of the following numbers: 8.34, 8.22, 7.77, 8.18, 8.13
c. 8.130
d. 8.305
ANS: C PTS: 1
BUSPROG: Analytic LO: 8-6 Bloom’s: Application Difficulty: Easy

22. A company produces 8-pound bags of cat litter; as shown below, it gathered 5 samples with 6 bags in
each sample for quality control purposes. The weights of each of the bags are listed below.
Determine x́ .

Bag Number of each sample

Sample 1 2 3 4 5 6
1 7.98 8.34 8.02 7.94 8.44 7.68
2 8.33 8.22 8.08 8.51 8.41 8.28
3 7.89 7.77 7.91 8.04 8 7.89
4 8.24 8.18 7.83 8.05 7.9 8.16
5 7.87 8.13 7.92 7.99 8.1 7.81

a. 8.26
b. 8.06
c. 7.97
d. 7.92
ANS: B PTS: 1
BUSPROG: Analytic LO: 8-6 Bloom’s: Application Difficulty: Moderate

23. A company sells eggs in boxes with 12 cartons and 12 eggs in each carton, thus there are 144 eggs in
each box. The organization wants to construct a P-chart to track the proportion of broken eggs in each
sample (shown below). If the company used one box of eggs in each sample in the dataset below, what
would be the centerline, upper control limit (UCL), and lower control limit (LCL) for the appropriate
P-chart? (Use z = 3.) Choose the closest answer.

Sample Eggs Sample Eggs Sample Eggs

1 3 8 6 15 5
2 5 9 4 16 0
3 3 10 9 17 2
4 4 11 2 18 6
5 2 12 6 19 2
6 4 13 5 20 1
 7 2 14 1 TOTAL 72

a. Centerline = 0.50, UCL = 0.625, LCL = 0.375

b. Centerline = 0.025, UCL = 0.64, LCL = 0
c. Centerline = 0.30, UCL = 0.70, LCL = 0
d. Centerline = 0.083, UCL = 0.152, LCL = 0.014
ANS: B PTS: 1
BUSPROG: Analytic LO: 8-6 Bloom’s: Application Difficulty: Moderate

24. Calculate the defects per million opportunities (DPMO) given the following:

Blake, owner of Blakester's T-shirt Shoppe, keeps track of customer complaints. For each T-shirt sold,
there are four possible complaints: T-shirt shrinks, poor quality, design wears off, and doesn't fit right.
Each week, Blake calculates the rate of T-shirt "defects" per total T-shirts sold, and then uses this
information to determine his company's DPMO. During the past week, his company sold 1200 T-
shirts. His company received 22 customer shrinkage complaints, 16 poor quality complaints, 12 design
wears off complaints, 8 doesn't fit right complaints.

Calculate his firm's DPMO.

a. 69,600
b. 0.193
c. 5.8 x 106
d. 12,083
ANS: D PTS: 1
BUSPROG: Analytic LO: 8-7 Bloom’s: Analysis Difficulty: Easy

25. An important outcome of statistical process control is:

a. Firms can take corrective actions before process variabilities get out of control
b. Firms can visually monitor process performance
c. Firms can minimize total inventory cost
d. Both A & B
e. None of these
ANS: D PTS: 1
BUSPROG: Analytic LO: 8-7 Bloom’s: Comprehension Difficulty: Easy

SHORT ANSWER

1. Why is the workforce considered such an important element of lean production?

ANS:
Lean production is a philosophy that centers upon the ideals of eliminating waste and continuously
improving. Employees are the keys to identifying and developing waste reduction programs and
building a culture of continuous improvement in a flexible production environment. But here are some
ways employees contribute to eliminating waste, creating a flexible production system, and improving
the organization:
a. Cross trained employees add processing flexibility
b. Employees are capable of inspecting quality throughout the processing stages
c. Employees not only identify problems, but are empowered to fix problems
d. Skilled and well trained employees are more equipped to identify and fix high-level
problems
e. An intelligent workforce is more capable of supporting a strong program of continuous
 improvement

PTS: 5
BUSPROG: Communication LO: 8-1 Bloom’s: Comprehension Difficulty: Moderate

2. Discuss the linkages between lean production and environmental sustainability.

ANS:
Since lean production is ultimately concerned with waste reduction throughout the firm and its supply
chains, the linkage between lean production and environmental sustainability should seem clear. Many
organizations have realized the positive impact lean production can have on their environmental
performance  adopting lean practices reduces the cost of environmental management and then leads
to improved environmental performance. Further, lean production increases the possibility that firms
will adopt more advanced environmental management systems, leading to yet further improvements in
environmental performance.

PTS: 5
BUSPROG: Communication LO: 8-4 Bloom’s: Comprehension Difficulty: Moderate

3. A Nevada Bank keeps track of errors from 20 clerks. Each sample has 100 records. They want to
construct a P-chart to track the proportion of errors in each sample. The table below shows the
number of errors per sample. (Use z = 3 for control limit calculations.)

Sample Errors Sample Errors Sample Errors

1 6 8 6 15 5
2 5 9 4 16 1
3 3 10 9 17 2
4 4 11 2 18 6
5 5 12 6 19 2
6 4 13 5 20 7
7 2 14 4 TOTAL 88

a. Determine P .
b. Determine σP.
c. Determine the 3-sigma UCL and LCL.
d. Does the process appear to be in statistical control?
ANS:
a. 88/2000 = 0.044 or 4.4%
b.

σP = √ √
( P )( 1−P ) .044 (.956)
n = 100 = 0.02

c. UCL = .044 + 3(.02) = 0.105; LCL = .044 – 3(.02) = 0

d. 1 point close to UCL; half above and below P ; probably in control. Should create a graph
to look for patterns.

PTS: 5
BUSPROG: Communication LO: 8-6 Bloom’s: Analysis Difficulty: Moderate

4. Briefly explain THREE of the statistical tools of Six Sigma.

 ANS:
Flow diagrams These are sometimes called process maps. It is used to help
evaluate a manufacturing process or service. They use ovals,
boxes and arrows to show the flow of people or material through a
process.
Check sheets Check sheets are used to collect data about problems in a business.
It allows managers to review and compare problems and
determine which problems occur most frequently.
Pareto charts Pareto charts present data in an organize graph. They expose the
critical problems by presenting the data from most severe to least
severe. This allows managers to focus on problems which may
yield the greatest payoff.
Cause and effect This is sometimes called the fish-bone chart as it resembles the
diagrams bones of a fish. Each of four diagonals of the diagram presents a
possible cause of an error/problem. The four group causes are
Material, Machine, Methods, and Manpower. Managers use a
brainstorming method to associate possible causes in each group.
Control charts This show data over time with upper and lower limits as well as a
centerline. Operators use these to plot data and compare
performance over time. When a sample plot falls out of acceptable
limits, the process is stopped and measures are taken to rectify the
problem.

PTS: 5
BUSPROG: Communication LO: 8-7 Bloom’s: Comprehension Difficulty: Moderate

ESSAY

1. What are the TWO primary techniques/philosophies discussed in Chapter 8 that are used to manage
processes in the supply chain such that they'll meet the needs of customers today. Provide the prime
objectives for each of the two techniques/philosophies. Also, for each technique, provide three
elements used to achieve the prime objectives.

ANS:
1. Lean production
a. The prime objectives of lean production are to employ a program of continuous
improvement in order to minimize/eliminate waste.
b. The elements of lean used to achieve the prime objectives are:
i. Waste reduction
ii. Close supplier and customer relationships
iii. Effective and efficient layouts
iv. Inventory reduction programs
v. Effective and efficient scheduling
vi. Developing and promoting programs of continuous improvement within the
organization and throughout the supply chain
vii. Exemplifying a commitment to the workforce
2. Six Sigma
a. The prime objectives of Six Sigma are to understand, meet, and then strive to
exceed customer expectations. In essence, Six Sigma is all about pleasing the
customer. Six Sigma programs attempt to make a firm capable of satisfying
customers in the present as well is in the future.
b. The elements of Six Sigma are:
 i. Focus on the Customer
ii. Workforce Involvement
iii. The philosophies of Deming
iv. The philosophies of Crosby
v. The philosophies of Juran
vi. The guidelines of the Malcolm Baldrige National Quality Award
vii. The guidelines/standards required to become ISO 9000 certified
viii. Utilization of Six Sigma tools: flow diagrams, check sheets, Pareto charts,
cause-and-effect diagrams, SPC, acceptance sampling

PTS: 10
BUSPROG: Communication LO: 8-1 Bloom’s: Comprehension Difficulty: Difficult

2. Provide an overview of the beliefs of each of the following quality professionals:

W. E. Deming
Philip Crosby
Joseph Juran

ANS:
a. W. E. Deming: since managers developed a system used by an organization, managers
are ultimately responsible for the organization's problems. Management should fix
problems by using the right tools and resources, demonstrating employee
encouragement, program commitment, and facilitating cultural change. Deming also
developed the 14 points for management that are similar to the principles of TQM.

b. Philip Crosby: Strive for zero defects. Quality is free quality programs invariably paid
for themselves. Developed four absolutes of quality conform to requirements, practice
prevention, zero defects, the measure of quality is the price of nonconformance. Crosby
also emphasized management's commitment, prevention systems, employee education
and training, and continuous assessment. Crosby also developed the 14 steps to quality
improvement.

c. Joseph Juran: Advocated the determination of costs of quality, and the use of statistical
methods. He felt costs caught the attention of managers, and statistics caught the
attention of workers. Juran created the quality trilogy: quality planning, quality control,
and quality improvement.

PTS: 10
BUSPROG: Communication LO: 8-5 Bloom’s: Comprehension Difficulty: Difficult

3. Describe SPC and Acceptance Sampling. What is the key difference between the two?

ANS:
a. SPC  SPC stands for statistical process control. SPC is a statistical quality control
method. SPC monitors quality during production through the use of statistical methods.

In other words, it is a way to monitor the quality being output by a process using
statistical methods. SPC allows firms to visually monitor performance, compare the
performance to desired levels or standards, and take corrective steps quickly before
major errors are made and/or reach the customer.

b. Acceptance Sampling  Acceptance sampling is also a statistical quality control method.

Acceptance sampling determines the quality of a finished batch of product based upon
 statistical methods using a sample of finished batch.

DIFFERENCE: While both SPC and acceptance sampling are statistical quality control methods, SPC
monitors quality during production in the hopes of detecting defects early in the process and
preventing continued production of defective product. Acceptance sampling, on the other hand,
measures quality of finished products. Acceptance sampling is utilized only after processing is
complete. In some cases, though, it may be the only statistical quality control method option,
especially if the organization is purchasing product rather than producing it.

PTS: 10
BUSPROG: Communication LO: 8-7 Bloom’s: Analysis Difficulty: Difficult