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Exam paper Quality Control Management and Six sigma BY fh123ilu TQM, Six Sigma and LEAN (29259?±09) BACHELOR EXAM data Open book Exam prepared by Mikkel N??ssler Please note: Each of the exam assignments has an individual weight. The weight is expressed as a percentage. Assignment 1 (Weight: 20%): LEAN and TQM Based on the case ‘Office Chairs Inc. “. A. Evaluate the organizational changes made by the company in 2005 relative to the theory of LEAN and TQM. Assignment 2 (Weight: 60%): LEAN – Value Stream Analysis A. Make a Value Stream Map (VSM) of the company’s current set-up B.
Analyze the urrent value stream and describe waste and improvement opportunities (Kaizen events). C. Present a VSM future state, and discuss/argue for your choices of design Assignment 3 (Weight: 20%): Six Sigma A. Explain what characterize a process that has a Six Sigma Capability. B. Explain the difference between special cause variation and common cause variation (i. e. assignable variation versus system variation), and why the ability to identify and distinguish between these types of variation is crucial when working with Six Sigma. Case to the exam assignment: Office Chairs Inc.
The company ‘Office Chairs, Inc. in the case the Company’) designs and produces office chairs. The company is placed in Denmark where administration, design and manufacturing takes place. The company sells its chairs to whole sellers throughout the ELI, who in turn sell the chairs to retailers. Both the whole sellers and company’s chairs. Market situation: retailers keep a small inventory o Since 2005 the company has experienced an increasing pressure from the whole sellers demanding: 1. Lower prices 2. Faster delivery performance (lead time) 3. More product variants 4. Customer tailoring (i. . the customer designs his/her own chair) Key financial figures: Figure Year 2006 2007 2008 Total revenue (in million DKR) 235 243 Number of chairs sold (in thousands) 213 241 265 EBIT on million DKR) 31 5 -11 Total number of full time employees 110 114 119 Orders delivered on time -performance 82% 98% Raw material inventory (average, in million DKR) 2 7 11 Work in progress inventory (average, in million DKR) 6 Finished goods inventory (average, in million DKR) 4 9 18 Organizational changes made in 2005: In 2005 the company made the following organizational changes: 1 .
The company builds a new production plant (schematically shown at the last page f the case) 2. New vision: The company wants to be the best supplier in the EIJ with regards to delivery time. The goal, which the company more or less reached in 2006, is to be able to ship orders the day after the order is placed. Most of the company’s whole sellers now expect this fast service, the effect being a significant increase in the companys inventories. 3. The company changed its chair design so that all office chairs are build using the same basic components.
The company produces the following components: 2 types of feet (one with and one without wheels) 2 types of seats (soft and hard) types of back rest (low and high) The company orders the following components from suppliers: 1 type of piston (making the seating height adjustable) 1 type of arm rest These basic components allows for 16 different basic models (8 basic models that can be fitted with arm rests if the customer so desires). All components are in the same color (black).
The company offers 5 different types of fabric (for the seat and back rest) in 10 different colors. 4. With the new design the company also changes the way offices chairs are ordered by retailers. The company have made a catalogue and an order sheet showing the ifferent design components (i. e. types of feet, seat, arm rest… ) fabrics and colors, and the customer (end user) simply fill out this order sheet in the retail shop. The retailer then fills out an order form that is faxed directly to the company (or to the whole seller that taxes the order torm to the company). . Customer orders are processed in the ‘Customer service and order processing department”, where the faxed order forms from the retailers/whole sellers are registered in the company’s ERP system. The ERP system contains all delivery orders as well as data on inventory evels of all raw materials, work in progress inventory and finished goods inventories. The ERP system automatically transfer packaging and invoice instructions to the shipment department, who is responsible for packaging and shipment of all incoming orders.
Orders received before 2 0’clock are made ready for shipment before 12 0’clock the following day. The whole sellers are responsible for arranging transport from the company to the whole seller (or directly to the retailer). 6. The company makes a “Department for quality control”, that are placed organizationally nder the inventory department. Quality control is done using statistically calculated samples, which are analyzed by specialists from the inventory department. Samples are taken from both the raw materials inventory and the finished goods inventory no later than one week after it is places in inventory.
Quality control results are registered in a computer program that will alert the specialist in case the sample deviates from the set specification limits. In the case of deviations from the specified limits the specialist will notify the production department, who is responsible for lacing the inspected lot in quarantine and wait for instructions from the department for quality control. The department for quality control inspects quarantined goods once a week and decides what to do with it (i. e. rework or scrap).
Production The production takes place in different production units (see the schematic drawing at the last page): Piston: Delivered by an independent supplier, who receives an order every 14 days. Pistons are ordered when the minimum inventory level reaches 8000 and a minimum order of 15000 is placed. The pistons are delivered within 2-3 days, and are placed in he raw material inventory. Arm rests: Also delivered by independent supplier, who receives an order every 14 days. Delivery time is much longer (typically up to 6 weeks), which is the reason why the minimum inventory level is set at 14000 pairs.
Arm rests are placed in the raw material inventory. Feet: The company produces the feet in their own metal casting department. The foot is made of aluminum and the production capacity is 180 feet per production hour. Production is planned when the inventory level reaches 3000 feet, and a minimum batch size of 5000 feet is produces. The feet are the same regardless of wheels or nor – the foot is mounted with wheels or rubber cylinders right after the foot have cooled off, and the feet are then placed on pallets in the work in progress inventory (50 feet on each pallet).
Change over time is O. Seats: The company produces the two types of seats in their own plastic casting department (casting unit 1), and the capacity is 100 seat per hour. Production is planned when the inventory level reaches 2000 units, and a minimum batch size of 3000 units is produced. The seats are then placed on pallets in the work in progress inventory (40 seats on each pallet). Change over time is 2 hours. Back rests: The company produces the two types ot back rests in their own plastic casting department (casting unit 2), and the capacity is 150 back rests per hour.
Production is planned when the inventory level reaches 1500 units, and a minimum batch size of 4000 units is produced. The back rests are placed on pallets in the work in progress inventory (30 seats on each pallet). Change over time is 2 hours. Seat and back rest upholstery: The company prepares and do the upholstery in the upholstery department. The upholstery department is responsible for making sure that there is minimum of 50 seats and 50 back rests on inventory in each of the fabrics and colors offered by the company.
The capacity is 250 seats or 250 back rests per hour when all machines are running. The upholstered seats and back rests are placed on pallets in the work in progress inventory (25 seats or back rests on each pallet). Change over time is 30 minutes. The workers in the metal casting department and the two units in the plastic department operates one machine only, and each worker is responsible for getting the raw materials he/she needs from the inventory, and also for transporting the nits they produced to the work in progress inventory.
Because it takes 2-3 days of training to learn how to operate each machine, the majority of workers can only operate one machine. Assembly: The assembly department assembles the chairs by mounting a piston, seat, back rest, and arm rests on a foot. The workers assemble chairs based on actual customer orders, sent to the department from the shipping department. The capacity is 200 chairs per hour. When a chair is assembled it is labeled with the customer’s order number and transported by the worker to the shipping department. Change over time is O.
Shipping: The shipping departments prints out shipping documents and invoice, and pack these with the finished chair. The chair is then transported to the loading area where it waits for the whole sellers transport to arrive. Factory layout: The metal casting and plastic casting units are placed in production site 1, and all machines in each department and unit is placed in one line. The other production units are placed in production site 2. Inventory and production planning Production is planned using MRP to calculate inventory levels for all inventories. The
MRP is based on a running forecast on the next 30 days of sold chairs. If an inventory level reaches a defined threshold, a procurement or production order is generated. The MRP is done once a week by the production planning department and the result is an overall production schedule for the next 30 days. Based on the estimated production needs for the next 30 days, the production department makes a detailed production plan tor the tollowing week, trying to minimize the number of change over on each machine. Schematic representation of information and production flow in Office Chairs Inc.