A supply chain is an entire system of producing and COMPONENTS OF SUPPLY CHAIN Six Sigma is a term used to define various

Six Sigma is a term used to define various techniques and

delivering a product or service, from the very beginning stage Component 1: Planning : One of the biggest questions procurement management tools designed to make business processes more
teams need to ask is whether the organization plans to manufacture efficient and effective. It provides statistical tools to eliminate
of sourcing the raw materials to the final delivery of the goods thmslves or they will buy ready-made goods.In the event that
product or service to end-users.The supply chain lays out all defects, identify the cause of the error, and reduce the possibilities
the cmpny manufactures finshed prdcts, the next question that arises
aspects of the production process, including the activities of error. Thus, Six Sigma creates an environment of continuous
is whre will raw materials be sourced? Will it be frm local, regional,
or internationl suppliers? process improvement, enabling businesses to provide
involved at each stage, information that is being
Component 2: Sourcing : Following on the heels of the first better products and services to customers. It was developed by
communicated, natural resources that are transformed into Motorola, Inc. in 1986. ix Sigma can be applied to any process in
component is the second step which involves sourcing.This step is
useful materials, human resources, and other components that one of the most critical of the entire supply chain as it is at this stage any industry to establish a management system for identifying
go into the finished product or service. Mapping out a supply that the biggest cost savings can be achieved.Choose the right vendor errors and eliminating them. It provides methods to improve the
chain is one of the critical steps in performing an external offering the ideal price and who has the capacity to deliver required efficiency of business structure and quality of processes, enhancing
analysis in a strategic planning process. The importance of volumes in a timely fashion and you’ve struck gold. the profitability of the business.
clearly laying out the supply chain is that it helps a company Component 3: Inventory : Having several suppliers so you can Six Sigma Principles
secure enough raw materials and or products so you can remain fully
define its own market and decide where it wants to be in the 1. Customer focus : The main objective is to maximize the
stocked up is extremely important. There are numerous lessons to be
future. In developing corporate-level strategies, a company derived by examining purchasing and supply chain management in
benefits for customers. Hence, a business must understand the
often needs to make decisions on whether to operate a single 2020.2020 demonstrated the importance of getting this component needs of their customers and the drivers of sales. It requires
line of business or enter into other related or unrelated correct. Acc to RetailNext, 28% of surveyed businesses suffered establishing quality standards according to the market or customer
severe shortages and even went out-of-stock of certain key items. demands.
industries.
56% of these enterprises had to renegotiate contracts. 2. Assess the value chain and find the problem : Outline the
Component 4: Production and Transportation : The next steps of a process to find out unwanted areas and gather related
Supply chain management process steps important component in supply chain management is production, data. Define goals for data collection, purposes for data gathering,
1. Planning and demand management : Forecasting warehouse, and transportation.This element of the supply chain takes and expected insights. Verify that the data is assisting in achieving
customer demand is the first step in building an efficient a look at what is needed to ensure that the organization is producing the objectives, whether more information is needed to be collected,
supply chain that ensures product availability. Typically, a the correct volume of products and that product quality meets
or if data cleansing is required. Find out the problem and its root
established stndards.This compnnt also factors in where the products
demand forecast starts with collecting and analyzing previous will be kept i.e. storage in warehouses as well as transportation from cause.
sales data to project future sales. For instance, if your sales said depots to stores that will retain the products. 3. Eliminate defects and outliers : After the identification of the
have been growing 10% month-over-month, you may predict Component 5: Return of Goods : What do you do when a customer problem, make appropriate modifications in the process to
that they’ll continue to do so for the next quarter or returns a product that’s faulty? What is the protocol to handle such eliminate defects. Eliminate any activity in the given process that
year. Demand forecasts can also use external information, an incident?These questions are answered in the final component of does not contribute to the customer value. If the value chain is
the supply chain ‘Return of Goods’. Because customer satisfaction is unable to reveal the problem area, various tools are used to find out
such as changes in customer behavior and macroeconomic extremely important, it is imperative that there be a clearly defined the problem areas and outliers. Eliminating the outliers and defects
trends. One example of a useful macroeconomic trend protocol surrounding the returns process. removes the bottlenecks in a given process.
includes interest rates.

Total quality management (TQM) is a standard A process layout is a type of facility layout. Organizations Factors taken while deciding new factory location
management practice wherein each employee within an often use process layouts to design floor plans and arrange Primary factors
organization continually analyzes its production processes to equipment for maximized efficiency. Plants with a process 1.Availability of raw materials : Availability of raw materials is
improve the manufacturing quality of products and services layout may arrange work stations, machinery, tools and other the most important factor in plant location decisions. Usually,
and enhance customer satisfaction. It involves conducting equipment in groups according to the functions they perform. manufacturing units where there is the conversion of raw materials
into finished goods is the main task then such organizations should
management training and implementing analytical methods to Typically, pieces of equipment that perform a similar
be located in a place where the raw materials availability is
identify and remove problem areas in business operations. It function fall in the same group, which is why professionals maximum and cheap.
is a successful management approach commonly employed in often term these layouts as "functional layouts." The overall 2.Nearness to the market: Nearness of market for the finished
industries, such as manufacturing. As part of the quality purpose of a process layout is to provide manufacturing firms goods not only reduces the transportation costs, but it can render
improvement planning process, the executives train the the ability to provide a variety of goods or services that each quick services to the customers. If the plant is located far away
workforce from different departments about the process necessitate multiple processing requirements. from the markets then the chances of spoiling and breakage
standards and define business goals. Not only does TQM help become high during transport.
an organization meet customer expectations, but it also helps Advantages (Merits) of Process Layout: 3.Availability of labor:Another most imp factor which influences
them minimize operating costs by reducing resource waste 1.Flexibility: Process layouts are highly flexible and the plant location decisions is the availability of labor. The
due to insignificant practices. adaptable. They can easily accommodate changes in cmbination of the adequate no. of labor with suitable skills and
Principles of TQM production volume and product variety without major reasonable labor wages can highly benefit the firm.
4.Transport facilities:In order to bring the raw materials to the
#1 – Customer Focus : Every organization strives to serve reconfiguration.
firm or to carrying the finished goods to the market, transport
only one purpose, i.e., customer satisfaction through quality 2.Customization: Well-suited for customized or made-to- facilities are very important. Depending on the size of the finished
products and services. Hence, the first among the total quality order production where products or services are tailored to goods or raw materials a suitable transportation is necessary such
management principles is customer focus. It means the end meet specific customer requirements. as roads, water, rail, and air. The transportation costs must be kept
product must meet the demands and needs of the customers. 3.Resource Utilization: It allows the use of general-purpose low.
#2 – Employee Involvement : When implementing TQM, machines and equipment, which can be shared among 5.Availability of fuel and power: Unavailability of fuel and power
organizations need to create an environment where their different products or processes. is the major drawback in selecting a location for firms. Fuel and
employees will feel empowered. They, along with 4.Skill Specialization: Wrkrs can specialize in specific tasks power are necessary for all most all the manufacturing units, so
management, become responsible for assessing the quality of within their deprtmnts, leading to highr skill lvls & expertise. locating firms nearer to the coal beds and power industries can
the products and services at their levels. Here, organizational 5.Low Initial Capital Investment: The initial capital highly reduce the wastage of efforts, money and time due to the
communication plays a vital role in boosting employee investment may be lower compared to layouts that require unavailability of fuel and power.
morale. specialized equipment for specific product lines. 6.Availability of water: Depending on the nature of the plant
firms should give importance to the locations where water is
available.For example, power plants where use water to produce
power should be located near the water bodies.

The just-in-time (JIT) inventory system is a management strategy that Statistical Quality Control An operations strategy is a set of decisions an organization makes
aligns raw-material orders from suppliers directly with production regarding the production and delivery of its goods. Organizations may
schedules. Companies employ this inventory strategy to increase Controlling and improving quality is an important strategy for consider each step they take toward manufacturing or delivering a product
efficiency and decrease waste by receiving goods only as they need an organization since the quality provides a competitive an operation, and all decisions regarding these various operations are the
them for the production process, which reduces inventory costs. This advantage to the organization. The organization which delight operations strategy. An organization's operations strategy works in
method requires producers to forecast demand accurately.The just-in- its customers by improving and controlling quality, can tandem with its overall business strategy, helping the organization to
time (JIT) inventory system minimizes inventory and increases dominate its competitors. Hence the main objective an achieve its long-term goals and improve competitiveness in the
efficiency. JIT production systems cut inventory costs because marketplace.For example, a company that produces and sells computers
manufacturers receive materials and parts as needed for production and organization is to achieve quality assurance so that it can not may have the following operations: Obtaining materials , Working with
do not have to pay storage costs. Manufacturers are also not left with only satisfy its customers but also delight them.With the suppliers , Designing new computers , Manufacturing computer designs ,
unwanted inventory if an order is canceled or not fulfilled. advent of industrial revolution in the nineteenth century, mass Managing employees , Delivering finished computers to sellers or
One example of a JIT inventory system is a car manufacturer that production replaced manufacturing in small shops by skilled consumers
operates with low inventory levels but heavily relies on its supply chain craftsman and artisans. While in the small shops the Benefits of having an operations strategy
to deliver the parts it requires to build cars on an as-needed basis. 1.Employee efficiency : Operations strategies define the goals of different
The main principles of JIT are called the Five Zeros: individual worker was completely responsible for the quality departments, which lets team managers and employees know what they
1.Zero Stock. At every step of the production process, products must of the work, this was no longer true in mass production where are working toward. An operations strategy can help to ensure any
arrive at just the right moment of utilization. Otherwise, the resulting the contribution each individual worker towards the finished employee that contributes to an operation uses their time and skills
“waiting”, or even excess, inventory becomes an immobilized asset, product only constituted an insignificant part in the total efficiently. In addition, organization leaders can learn which departments
which absorbs company capital with no added value. process. The quality control in the large organization was are operating efficiently and which may need improvement.
2.Zero Delay. To increase flexibility, each step in the process should take 2.Resource management : Organizations often have a finite amount of
the least amount of time possible. Waiting for any product, part or achieved with the help of quality inspectors responsible for resources, making it essential that they use them efficiently. Operations
information from any source must be kept at a minimum. checking the product quality with the 100 % inspection of all strategies can help leaders determine which areas of the organization need
3.Zero Failure. All machines should ideally operate continuously with the important characteristics.In order to achieve this the most resources and how to best deliver those resources. By developing
controlled performance. Breakdowns cause delays and result in additional objective, different statistical techniques have been an operations strategy, leaders can learn more about the costs of running
costs, which can be minimized by implementing preventive maintenance developed, which are useful for controlling the quality of different departments. They can then analyze these costs and see if they
on equipment with regular checks to avoid unexpected issues. are in line with the organization's overall goals.
5.Zero Defect. Part defects can require extra corrective processing or products with respect to the specifications or standards. SQC 3.Department cooperation : An operations strategy details how multiple
even result in scrapping the part altogether, which is a loss of all material is to be viewed as a kit of techniques which can influence departments within an organization work together. By outlining this
and invested efforts, or even worse—client returns and damage to a decisions to the functions of specification, production, or coordination, each department knows how it relates to the others. They
company’s reputation. The Six-Sigma approach can help with the goal of inspection.QC is defined as the technique of applying can also see how their individual department's goals are helping to
getting it “Right the First Time”. statistical methods based on the theory of probability and achieve the overall goals of the organization alongside the other
6.Zero Paper. Bureaucratic procedures and steps obviously weigh down departments. This is useful for improving decision-making and helping
manufacturing and production processes. Fortunately, with modern sampling to establish quality standard and to maintain it in employees in different departments feel like they are on the same team.
digitalization tools, data collection can be automated for increasing the the most economical manner.
efficiency of any administrative tasks.
4. Involve stakeholders : A structured process should be adopted Types of Supply Chain 2. Procurement : Procurement (also known as sourcing or
where all stakeholders collaborate and contribute to finding 1. Raw Supply Chain: Supply chains consist of all the steps involved in supply management) refers to finding and purchasing the
solutions to complex issues. The team needs to achieve proficiency getting a product from a raw material into the hands of the customer.
2. Ripe Supply Chain: This type of supply chain exist in the situations materials you need to meet your demand forecasts. Sourcing
in the methodologies and principles applied. Hence, specialized activities include: Finding vendors. , Ensuring the materials
where organizations are satisfied with what they have achieved and
knowledge and training are required to lower project failure risks meet your product specifications. , Negotiating prices. ,
whatever needs to be achieved
and ensure optimal performance of the processes. 3. Internal Supply chain: It refers to the chain of activities within a Acquiring the right amount of materials.Once you’ve found
5. Flexible and responsive system : Whenever an inefficient or company that concludes with providing a product to the customer. This
faulty process is eliminated, the employee approach and work your providers, much of procurement becomes monitoring
process involves multiple functions within companies such as sales,
practices need to be changed. A flexible and responsive production, and distribution supply and adjusting orders based on demand.
environment to the changes in processes can lead to the efficient 4. Extended Supply Chain: All the people involved in creating, storing 3. Production planning : Your production strategy covers
implementation of the projects. or transporting the hat are members of the extended supply chain, everything you need to do to turn materials into finished
Six Sigma Methodology including those whom the store owner would never expect to deal with goods. That includes subtasks like manufacturing, quality
DMAIC : DMAIC is a data-driven approach used for optimizing directly. control, and packaging. At this stage, it’s crucial to reduce
5. Self monitored supply chain: In this type of supply chain, the
and improving the existing business designs and processes. It is an inefficiency and waste that can affect product quality, eat
manufacturing company becomes the center, and takes the lead in
effective method of controlled change management. The five bringing all the partners and suppliers in its supply chain. They take all into profit margins, and slow down operations.
phases of DMAIC are listed below, and each phase involves tools the critical decisions and also monitor the working of the supply chain 5. Delivery and order fulfillment : Lastly, you have delivery
and tasks to help find the final solution. 1.Define the problem and 6. Outsourced supply chain: SCM outsourcing the entire supply chain and order fulfillment, which is the process of getting
the goals of the project. 2.Measure the different aspects of the management activity of an organization to an external organization that purchased items into the hands of your customers. For in-
existing process in detail. 3.Analyze data to find the main flaw in a specializes in the same
process. 4.Improve the given process. 5.Control the way the Characteristics person customers, this step is simpler. It includes processing
process is implemented in the future. a) Integrated Behaviour: SCM incorporates integration of stakeholders the order and payment and packaging the product. Retailers
DMADV : DMADV focuses on the development of an entirely from supplier to customers. can choose from several fulfillment methods,
new process, product, or service. It is used when existing b) Mutually sharing channel risk and rewards: Efficient SCM also including: ,Direct-to-consumer (D2C): You manage your
requires mutually sharing channel risks and reward that yield a inventory and handle all shipments to consumers. , Stores as
processes, even after improvement, do not satisfy the customer’s
competitive advantage.
needs, and new methods are required to be developed. It comprises c) Cooperation: It refers to similar or complimentary coordinated fulfillment centers: This method includes things like
five phases: 1.Define the purpose of the project, product, or activities performed by a firm in a business relationship to produce curbside pickup and buy online, pick up in store
service. 2.Measure the crucial components of a process and product superior mutual outcomes. (BOPIS). ,Third-party logistics (3PL): You outsource your
capabilities. 3.Analyze data and develop design alternatives, d) Focuses on serving customers: SCM will be successful when all the warehousing and fulfillment to a third-party distribution
ultimately selecting the best design. 4.Design the selected best channel members have similar goals.i.e. serving the customers. center. , Dropshipping: You rely on manufacturers to ship
alternative and test the prototype. 5.Verify the effectiveness of the e) Partners to build and maintain long term relationship: Successful
relationship aims to integrate channel policy to avoid redundancy and products. Ecommerce stores that don’t manage inventory
design through several simulations and a pilot program.
overlap while seeking a level of cooperation that allow participants to be commonly use this fulfillment method.
more effective at lower cost levels.

#3 – Integrated System : Having an integrated system is a

must for an organization to implement a TQM strategy across
Secondary factors
1.Suitability of climate:Climate is really an influencing factor for 6.Process Optimiztion: Each deprtmnt can be optimizd fr its its business processes. Therefore, incorporating quality
industries such as agriculture, leather, and textile, etc. For such industries specific function, leading to efficient & specialized processes. standards like ISO 9000 standards could help produce quality
extreme humid or dry conditions are not suitable for plant location. Disadvantages (Demerits) of Process Layout: products and services.
Climate can affect the labor efficiency and productivity. 1.Low Efficiency and Throughput: The intermittent flow of #4 – Process-Centric Approach : A prdct or service reaches
2.Government policies:While selecting a location for the plant, it is very work and the need fr materials to move between diffrnt the mrket after passing through diffrnt processes. It means it
important to know the local existed Government policies such as licensing
policies, institutional finance, Government subsidies, Government dprtmnts can reslt in lower overall efficiency and throughput. is monitred & assessed at each prdction level & nt only at the
benefits associated with establishing a unit in the urban areas or rural 2.Higher Material Handling Costs: Material handling can final stage. Process-led thinking is a sign of effective TQM.
areas, etc. be more complex and costly due to the movement of #5 – Systematic Flow : TQM is all about strategic planning
3.Availability of finance:Finance is the most important factor for the materials between various work centers. to achieve quality excellence and business objectives. Thus,
smooth running of any business; it should not be far away from the plant 3.Equipment Duplication: Duplication of machinery and considering a systemic flow would ensure the products and
location. However, in the case of decisions regarding plant location, it is
the secondary important factor because financial needs can be fulfilled equipment across different departments can lead to higher services are passing through every stage in the quality
easily if the firm is running smoothly. But it should be located nearer to capital and maintenance costs. production process.
the areas to get the working capital and other financial needs easily. 4.Space Inefficiency: Space may not be utilized as #6 – Continual Efforts : Quality improvement should be a
3.Competition between states:In order to attract the investment and large efficiently as in other layouts, leading to larger facility continuous process. Once done and then left would only
scale industries various states offer subsidies, benefits, and sales tax footprints. mean gradual deterioration in the manufacturing standards.
exemptions to the new units. However, the incentives may not be big but
it can help the firms during its startup stages. 5.Communication Challenges: Communication and For the TQM approach to prove effective, people at every
4.Availability of facilities:Availability of basic facilities such as schools, coordination betwn deprtmnts are crucial, and any breakdown level need to be alert in being regular with quality checking.
hospitals, housing and recreation clubs, etc can motivate the workers to in communication can disrupt the production process. #7 – Factual Decision-Making : The organization must
stick to the jobs. On the other hand, these facilities must be provided by 6.Higher Work-in-Progress (WIP): The intermittent flow make fact-based decisions because every employee is
the organization, but here most of the employees give preference to work of work may result in higher levels of work-in-progress participating in the quality evaluation processes. Analyzing
in the locations where all these benefits/facilities are available outside
also. So while selecting plant location, organizations must give preference inventory, tying up capital and potentially leading to waste. the organizational performance using performance data, such
to the location where it is suitable for providing other facilities also. 7.Complex Supervision and Management: Managing and as sales, profit, and customer retention could result in more
5.Disposal of waste:Disposal of waste is a major problem particularly for supervising multiple departments and processes can be more accurate decision-making.
industries such as chemical, sugar, and leather, etc. So that the selected complex, requiring effective coordination and oversight. #8 – Relationship Management : A well-maintained
plant location should have provision for the disposal of waste. 8.Longer Lead Times: The non-continuous flow and the relation with stakeholders like customers and employees will
need to wait for materials to move between departments can ensure proper quality control procedures and honest
result in longer lead times for production. feedback. With TQM, organizations can establish effective
communication with all of them and implement result-
oriented changes.

Facility layout is an arrangement of different aspects of COQ : The business climate is becoming increasingly more competitive.
manufacturing in an appropriate manner as to achieve desired Economic order quantity (EOQ) is a calculation companies perform There are multiple options available to the consumer for nearly every
production results. Facility layout considers available space, final that represents their ideal order size, allowing them to meet demand product on the market. Companies must stay price competitive to survive.
without overspending. Inventory managers calculate EOQ to minimize The top performing companies set themselves apart from the competition
product, safety of users and facility and convenience of
holding costs and excess inventory.It doesn’t matter if your business sells by listening to the voice of the customer and providing products that meet
operations.An effective facility layout ensures that there is a jelly beans, appliances, furniture or airplanes. Finding the economic order the customer’s requirements while maintaining a high level of quality and
smooth and steady flow of production material, equipment and quantity for every product you purchase is almost certain to impact the dependability. These companies measure Cost of Quality and use the
manpower at minimum cost.Facility layout looks at physical bottom line. Every business that manages inventory can benefit from information gained to their advantage. The principle of Cost of Quality is
allocation of space for economic activity in the plant. Therefore, measuring and following the EOQ.Economic order quantity is a useful similar to a commercial that aired years ago on television that advertised
main objective of the facility layout planning is to design effective metric for businesses that buy and hold inventory for manufacturing, oil filters. The tag line was “Pay Me Now or Pay Me Later”. The message
workflow as to make equipment and workers more productive. resale, internal use or any other purpose. Businesses that follow EOQ look was that preventive maintenance of your vehicle could prevent more
Facility Layout Objective at all costs related to purchasing and delivery while also factoring in costly repairs down the road. Cost of Quality is much the same. An
A model facility layout should be able to provide an ideal demand for the product, purchase discounts and holding organization can choose to invest in upfront quality costs to reduce or
costs.Experienced business owners and managers understand that prevent failures or pay in the end when the defect is eventually discovered
relationship between raw material, equipment, manpower and final
purchasing and finding the ideal inventory levels can be complex. When by the customer. In too many cases organizations choose the latter.
product at minimal cost under safe and comfortable environment. your vendors offer volume discounts and other incentives to purchase Product failures can result in increased warranty costs and possibly even
An efficient and effective facility layout can cover following more, EOQ can help you decide on the right place to draw the line. product recalls. The impact to the bottom line can be devastating.
objectives:1.To provide optimum space to organize equipment and Four Types of Cost of Quality
facilitate movement of goods and to create safe and comfortable The EOQ model is based on several assumptions, including: Appraisal Costs:Measurement and inspection activities during operations
work environment. 2.To promote order in production towards a • Demand is constant and known: EOQ assumes that the demand for the to determine conformance to quality requirements.Examples include
single objective 3.To reduce movement of workers, raw material product is constant over the ordering period and is accurately known in inspection, testing, process or service audits, calibration of measuring and
and equipment 4.To promote safety of plant as well as its workers advance. This assumption implies that demand does not fluctuate or vary test equipment.
5.To facilitate extension or change in the layout to accommodate significantly during the lead time. Prevention Costs:Activities planned and designed before operations to
new product line or technology upgradation 6.To increase • Lead time is constant: EOQ assumes a consistent lead time, which is the guarantee good quality and prevent bad quality products or
time between placing an order and receiving the inventory. This services.Examples include new product review, quality planning, supplier
production capacity of the organization
assumption allows organizations to plan their order cycles effectively. surveys, process reviews, quality improvement teams, education and
Factors affecting Facility Layout • Costs are constant: The model assumes that both holding costs and training.
Facility layout designing and implementation is influenced by ordering costs remain constant regardless of the order quantity. In reality, Internal Failure Costs:Expenses incurred to remedy defects discovered
various factors. These factors vary from industry to industry but costs may vary due to factors such as economies of scale, volume before the delivery of a product or service.Examples include scrap,
influence facility layout. These factors are as follows:1.The design discounts, or seasonal variations. rework, re-inspection, re-testing, material review, material downgrades.
of the facility layout should consider overall objectives set by the • No stockouts or backorders: The EOQ model assumes that there are no External Failure Costs:Expenses incurred to remedy defects discovered
organization. 2.Optimum space needs to be allocated for process stockouts or backorders during the lead time. This assumption implies that by customers after the customer receives the product or service.Examples
and technology. 3.A proper safety measure as to avoid mishaps. the organization can meet customer demand fully and on time. include processing customer complaints, customer returns, warranty
4.Overall management policies and future direction of the • Continuous replenishment: EOQ assumes that inventory replenishment claims, product recalls.
organization. occurs instantaneously and continuously.