Understanding Supply Chain Management

Type A Project: Team of 3-4 students will study a manufacturing or service company operation; the objective is to improve the equality of their final product. This could be done through improving any task in product realization process (Design, raw material, manufacturing, packaging, after sale …). The subject of the improvement has to be directly related to quality. The team will use quality analysis and improvement methods / techniques we learn in this course (six sigma methodologies in recommended).

Ideal project will focus on problems doable during time span of the course (i.e. not to much complex, also not trivial) and demonstrate the use of quality improvement tools on solving the problem at hand. Final report: • Full description of your company, • It’s quality management system. • Quality improvement opportunities • Implementation of quality improvement tool • Final outcomes • Conclusion " Each of these aspects of the instructions is included in this paper. Moreover, the rewrite request is not disputing this fact.

Additionally, the customer sent a message prior to the initialization of work for this paper stating: “Greeting The course is "Quality Engineering". The project is about implementing six sigma methodologies for a local company. Al Ain Distribution Company (AADC) in UAE has been chosen. The supply sector appointed, the data of their PO lead time for 2017 is attached. The idea now to write a report of how to reduce the lead time using six sigma and drew charts using (Minitab).

In addition, if we could add survey to the report of how the stakeholder helps us to improve the process. I prefer to focus on SIX-SIGMA implementation part and divided it into phases and write 2-pages each: A. Define Phase B. Measure Phase C. Analyze Phase D. Improve Phase E.

Control Phase Techniques such as Pareto Chart, Fish bone Diagram, 5 Whys, welding defects in SPARTAN Fabrication Section, Control charts could be very helpful if we could add them in the previous section." The paper includes the requisite number of pages for each of the five phases of Six Sigma.

Both Minitab and drew charts are discussed at length in this paper according to the part of the message stating “The idea now to write a report of how to reduce the lead time using six sigma and drew charts using (Minitab).” Minitab charts are included with the paper, as is a process map, and the report explains in great detail how Minitab can reduce the lead time for AADC.

However, the information in this message about “Techniques such as Pareto Chart, Fish bone Diagram, 5 Whys, welding defects in SPARTAN Fabrication Section, Control charts COULD be very helpful”. Stating these techniques COULD be helpful in a message (not in the instructions) does not mean it is a requirement to utilize each and every one of them. It means they COULD be used, or they COULD not. Therefore, the writer included the 5 Whys technique to improve the paper.

There are statistical calculations within the paper as well as the aforementioned Six Sigma processes and Minitab methods discussed at length and their statistics As such, the writer has fulfilled the instructions for this paper. Type A Project Proposal Introduction The company that is the focus of this proposal is Al Ain Distribution Company (AADC), which is headquartered in Al Ain in the United Arab Emirates. AADC is a subsidiary of Abu Dhabi Water and Electricity Authority (ADWEA).

The former company was incorporated in 1999 in the United Arab Emirates in accordance with Law No. 2 of 1998 (AADC). AADC is the lone purveyor and distributor of water and electricity in Al Ain and its surrounding, rural territories, which encompasses the Eastern Region of the Abu Dhabi Emirate. A large part of its efforts include owning, maintaining, and operating the myriad of network assets for the electricity and water supply industry, including the meters and select aspects of the infrastructure necessary to supply these services.

AADC furnishes water and electricity services to approximately 500,000 people; it employs roughly 2,000 employees (AADC) to do so. It is important to realize that as a utility company servicing the general public in the aforementioned region, AADC is a governmental entity and extension of ADWEA. As such, the latter has mandated a number of strict standards for the governance and performance of the former. Specifically, ADWEA is directly accountable for multiple aspects of the policies underpinning the operations of AADC, including policies for procurement, finances, and personnel (AADC).

ADWEA is also influential in pinpointing the corporate objectives of its AADC, which span a couple of different areas. AADC is attempting to upgrade the infrastructure for this utility to assist in the improvement of customer service. In financial terms, the company seeks to decrease the amount (and need for) its governmental subsidy, while decreasing its OPEX and CAPEX expenditures (AADC). Implicit to this objective is the goal of bettering the return on financial investments.

The company is also trying to meet its obligations according to regulatory entities and its operating license. Additionally, AADC has numerous core business areas upon which it is focused. The primary goal is to sate the water and electricity needs of a diverse customer base including agricultural, residential, government and commercial users.

There are several different aspects of this goal that the company must account for, including regularly testing and ensuring water quality via its laboratory services, operating and maintaining its decentralized assets network, and maintaining the implementation of customer interfaces for billing, call center, and revenue purposes. The complexity of this undertaking is aggrandized by the need to fulfill these objectives for both current and future clients.

The latter involves “extension and augmentation projects” that “will satisfy the demand from new residential, agricultural and commercial customers including major developments in the Region” (AADC). Obviously, the principal stakeholder for AADC is ADWEA, which owns it. However, the company is responsible for a host of other stakeholders, which include both its burgeoning customer base as well as regulatory entities.

Specifically, the Regulation & Supervision Bureau has a superintendent and regulatory role in the prosperity of AADC, as does Transco, the entity tasked with the “the planning, construction, and operation of the Abu Dhabi water and electricity transmission network” (AADC). AADC also has several influential relationships with its suppliers for the various necessities required to keep water and electricity going in this part of the world. Additional stakeholders include both capital works developers and The Abu Dhabi Executive Council.

The ability of AADC to furnish electricity and water is a pivotal element of the council’s Plan Abu Dhabi 2030 (AADC). All of these stakeholders have a vested interest in the quality assurance and quality improvement measures that can assist AADC in better servicing its customer base. It is critical to understand, however, that despite the many pieces of equipment pertaining to infrastructure and monitoring capabilities for individual customers provided by AADC, this company does not provide products—it provides services.

As such, this fact intrinsically affects the complexity of the quality improvement measures AADC must consider in order to meet its organizational objectives. Instead of having to deal with a finite number of products or even a single one, the company must account for the many numerous parts and components required to implement electricity and water services systemically through an entire region. Therefore, the chief issue of quality improvement AADC is concerned with is facilitating electricity and water to the array of customers outlined above.

Moreover, it should ideally perform this task while accounting for regulatory issues and the financial expectations previously denoted for reducing costs while bettering its services. AADC needs to achieve these objectives for the core business areas it focuses on while remaining a commercially viable and profitable subsidiary of ADWEA. Even a perfunctory analysis of AADC’s quality management systems reveals that these goals may be attained by reducing the company’s lead time for parts ordered via the deployment of Six Sigma and drew charts using Minitab.

By effectively implementing these measures for supply chain management, the company can more effectively service its current customers while planning accordingly for future ones. AADC’s Quality Management System AADC has a couple of different elements of its quality management system. One of the most indispensable elements of its quality management system is its Integrated Management System, for which it has received International Organization for Standardization certification for a number of different standards.

These include ISO 9001, which was issued in 2008; ISO 14001, which was issued in 2004; and ISO 18001, issued in 2007 (AADC). These standards, in addition to the implementation of the Integrated Management System, are indicative of AADC’s efforts to integrate various aspects of its business in a sustainable, well governed fashion that is aligned with quality assurance. Furthermore, there are many different auxiliary tools that assist this Information Management System in regards to quality.

That system also contains various factors pertaining to “IMS Policy Statement, IMS Objectives, IMS Management Manual, IMS Procedures, Operating Procedures, Process Maps, Flow Charts and IMS Records” (AADC). Each of these individual components plays a different role in reinforcing the quality of the Information Management System for successfully administering electricity and water to the multitude of AADC customers.

In particular, the process maps and flow charts are an integral means of the company ascertaining what specific parts are required for which workflows and procedures AADC needs in place in order to conduct business. Another extremely prominent aspect of the company’s quality management system is the laboratory it keeps for testing the quality of water disseminated to its customers.

This laboratory, in conjunction with the more administrative concerns and procurement issues facilitated by the Information Management System, are indispensable to the quality management system AADC has in place. These two aspects of the company’s quality management system help to ensure the quality of different parts of its infrastructure for issuing service. The requisite end of this quality management system, of course, is to ensure consistent, quality water and electricity to the full scope of AADC’s customers.

Quality Improvement Opportunities The quality improvement opportunities that are most salient for AADC directly pertain to its supply chain management. The company has sizable opportunities for improving the overall quality of its output—the distribution of water and electricity—if it can streamline and expedite its supply chain management, which will produce heightened quality management of these resources. Specifically, there is an opportunity to improve the management of various supplies necessary for the power grids, design materials, and other infrastructural necessities for AADC to operate at maximum capacity.

There is definite, causal correlation between how AADC’s supply chain is monitored, annotated, and implemented, and the overall efficacy of its distribution network. Quite simply, the latter depends upon the former. To truly denote what aspect of the supply chain presents the biggest opportunity for AADC to improve its quality management, it is important to consider the lead time for its product ordering.

There is always a period of latency between when supplies are ordered and when they arrive which, under perfect circumstances, is timed so that the organization is neither overstocked nor under-stocked. If AADC would implement some of the modern methods for adequately managing its product ordering activities for procurement, it could positively impact the quality of the services it provides.

Moreover, it could also lead to more accurate predictions of what supplies are needed when, so the organization could realize one if its objectives of expanding its customer base in a sustainable manner. Therefore, a single statement defining the specific problem/opportunity for AADC to redress with Six Sigma and Minitab is: the company needs to decrease the lead time of its product orders to maximize efficiency, reduce costs, and increase productivity.

Implementation of Quality Improvement Tool The vast majority of this document will center on the implementation of the quality improvement tool used, Six Sigma. Minitab will largely be reserved for use in the final Six Sigma phase, control. Six Sigma is always implemented in five steps that include Define, Measure, Analyze, Improve, and Control. This paper will examine each of these steps at length in the context of AADC’s purchase order lead time. A. Define The define phase is the first step in the Six Sigma methodology.

This is the phase in which organizations evaluate the exact problem that is preventing them from achieving objectives, or that is not allowing them to realize the sort of savings that are immensely beneficial. The define phase for AADC’s implementation of Six Sigma is largely determined by the data available regarding the company’s 2017 purchase order lead time which, when used in conjunction with the technique known as the 5 Whys, can identify this situation is occurring and offer insight into how to correct it.

As previously noted, the main issue (known as Y in Six Sigma) (6Sigma.us) is reducing the lead time of the products ordered; the first why question then, is why is there such inordinate lead times for purchase orders? Lengthy lead times can considerably decrease the efficiency of AADC in servicing its customers, and can slow production of the entire scope of operations.

An analysis of some of the lead times reflected in the 2017 purchase order data for AADC reveals some time frames that are excessively long, and simply not acceptable for an organization attempting to remain competitive while sating the needs of its shareholders. That analysis reveals the answer to the first why question, that in some instances there are over a hundred days between the time a product is cleared to be ordered and the time it is actually received.

It is worth noting that these lengthy delays do not characterize the purchase orders for all of the various purchases displayed for AADC in 2017. Still, they occur far too frequently and represent wasted time and opportunities that could be better spent utilizing the parts in stock—as opposed to waiting for them. This first why answer indicates the critical to quality characteristics (Wang et al) that have the most pronounced effect on quality then, definitely include the length of time between preparing an order and when it is received.

Specifically, this information is identified by the Receipt PO APP column in AADC’s 2017 data for its purchase order lead time (AADC). Some of the lengths of time exceed the better part of a year. In most instances, the receipts of the orders made were complete; there were only a few partially delivered. This fact attests to the strength of the relationships with the purveyors for AADC.

The second why question is what factors affect this length of time? The answer appears to be that, the length of time between when orders are processed and when they come in is also influenced by the Request For Quote (RFQ) send date and closing date. An examination of this data for AADC reveals that in instances in which it took several months for parts to be delivered once they were ordered, there were several weeks between when RFQs were sent out and when they closed.

Conversely, when parts came in relatively quickly after they were ordered, there were considerably shorter time periods between when RFQs were sent out and when they were closed.

The answer to this second why questions leads to a third, which is are there any other factors contributing to the previously mentioned delays? Looking at the data suggests that the answer involves the other time period that must be included in the critical to quality characteristic: the amount of days from the approval of a purchase requisition to the approval of a purchase order, which is indicated in AADC’s 2017 purchase order data via the column stating PO APP PR APP (AADC).

The fourth why question is what is the correlation to this length of time and the other identified factors? The answer is there is a direct correlation to the length of time of this column and that of the other factor in the critical to quality component for AADC, the Receipt PO APP. Again, when there are inordinate delays of hundreds of days in one of these columns, there typically is the same sort of inordinate delays of hundreds of days in the other column.

As such, the define phase of the Six Sigma methodology, as duly informed by the 5 Why technique, indicates that both of these factors present the greatest opportunity for quality improvement for AADC. Simply circumscribing these two time periods would immensely assist with the quality improvement of AADC overall.

Measure When attempting to determine which aspects of the Y or capital issue for AADC—which is the lengthy lead times for products to be delivered within the company’s supply chain—to measure, it is important to evaluate how to quantify the data which requires measurement. In the case of AADC that data is fairly straightforward, since the number of days included in the critical to quality characteristic is already quantified.

An analysis of the two critical to quality columns in AADC’s 2017 purchase order data shows that there were some products that were sent in less than 14 days. Therefore, the ideal goal would be to determine a way to get all of the purchase orders completed in five weeks at the most. To achieve this goal, it is necessary to identify the inputs and the outputs for each of these critical to quality characteristics. The principal output would be the completion of the receipt of the order.

As previously mentioned, in the majority of the cases indicated for AADC’s purchase orders in 2017, these orders were complete. Still, there were some which were only partially completed. Thus, one of the fundamental outputs would be to have all the purchase orders completed. Another output would be to have these purchase orders completed with both of the critical to quality metrics taking no longer than five weeks.

This output means that both the Receipt PO App and the PO App PR App should be either 35, or some number of days less than 35. Cp= USL-LSL/ 6 * Standard deviation = 15.6 – 15 / 6 * 0.09 = 0.6/0.54 = 1.111All of these outputs are fairly simple. The outputs for the critical to quality characteristics are quantifiable. The output regarding the receipt of the product is so simple that it does not necessitate quantification—although it is still one of the outputs.

There are also a number of metrics associated with the inputs of this process, which will be described at length below. The way the supply chain process works for AADC is similar to the way it works for other companies. Initially, there is a requisition for the purchase of a part. That requisition must be approved; the approval of the requisition is the first date noted in the data which AADC has for product orders in 2017 (AADC).

Following the approval of the requisition, the company must send out quotes for prices. Frequently, those requests for quotes are not sent out immediately after the requisition is approved, which causes delay and inflates the PO APP to PR APP number of days. The first input then, is the time between when the requisition is approved and before the request for quotes is made. Oftentimes, soliciting quotations may involve more than one quotation, which can be time consuming.

The data indicates that some of the swiftest purchase orders are done for items (such as paper) in which there are no request for quotations (AADC). Therefore, the time between request for quotes sending and completion dates is a critical input. Once the quoting process is complete—or if it does not take place—the purchase order must get approved. Although the approval data is influenced by the request for quotes, there are other bureaucratic factors which can add to the delay for items to get approved.

Therefore, the setting of the purchase approval date is another input to measure. Finally, once the purchase order is approved, there are various logistics with the supply chain that affect the date the item is actually received. Effectively controlling these logistics should contribute to the described outputs for AADC.

In summary, the inputs are the length of time between the product requisition and the request for quotes sent date, the length of time between this date and the request for quote close date, and the length of time between the latter date and the purchase approval date. These inputs affect the outputs of Receipt PO App, PO App PR App, and whether or not receipt of the product is complete.

Analyze In the Six Sigma methodology, the analyze phase is the step where the data is scrutinized to discern problematic areas in processes related to quality improvement.

To this end, there are a number of varying approaches which can help to confirm the hypothesis that the foregoing inputs can produce the outputs pertaining to the completion of the receipt of the item purchased, and the number of days to receive the materials from the purchase order approval along with the number of days from purchase requisition approval to the purchase order approval. This hypothesis is expressed mathematically with the formula that Y = f(x).

An as is process map can substantially help to illuminate the nature of the inputs to the outputs, helping to clarify which facets of the hypotheses are accurate and which may not be so. The main items in this process map correlate to the inputs.

Thus, with this diagram illustrating the various steps in this process map, the processes (based on the inputs) are: a) the requisition for a part purchase, b) the approval of the requisition for a part purchase and its corresponding date, c) the number of days between the approval of the requisition and the request for quotes, d) the number of days between this request and the request for quote closing date, and e) the purchase approval date.

The sub process for c) includes administrative tasks necessary to send out a request for quotes, while the sub process for d) includes the number of vendors selected to get quotes from. The sub-process for d) involves factors such as the part’s availability and the location of the vendor, as well. An evaluation of this process map proves that each of these steps in the process significantly contributes to the desired outputs. There are also a plethora of implications for improvement based on this analysis.

These various steps are the chief forms of variables associated with this process. By refining these processes in accordance with the process map delineated above, organizations should be able to reduce the amount of time taken to achieve each of the quantitative outputs: the amount of days between purchase requisition approval and purchase order approval, and those between purchase order approval and receipt of the part.

The main variables pertaining to this process map are the intermittent periods of time between the approval of a requisitioned order and the send date for the requisition of quotes, and the period between when the request for quotes is completed and the process order is approved. The data indicates that these temporal periods have great degrees of fluctuations for AADC’s purchase order time in 2017 (AADC).

Moreover, there is a fair amount of insight into these variables as demonstrated by analyzing the sub processes involved with them, particularly for that relating to the former of these variables. The administrative tasks necessary for sending out a request for quotations can vary considerably; as previously mentioned, there are some basic supplies for which this entire process is effectively eschewed.

However, this variable is one that requires more strict regulation and controlling so that it does not add to the time of the two quantifiable outputs, but ideally decreases that time. Improvement The analysis phase demonstrates there are a variety of ways in which AADC can improve its quality improvement when ordering parts via its supply chain. The improve phase in Six Sigma is the step in which organizations devise measures to account for these opportunities and actually implement them.

One of the most readily accessible means by which AADC can decrease the time for its two quantifiable outputs is by eliminating latency between the time when a part requisition is approved and when the request for quotations for that part is made. There is no reason for gaps between these two dates; ideally, no more than three days (including the weekend) should take place between the approval of a part requisition and a request for a quotation.

Technological measures can largely prevent any inordinate delays between these two procedures, as can changes in the supply chain policies of AADC. As soon as parts are approved for requisition, data management software should issue a real-time alert to the departments responsible for disseminating requests for quotations. Data integration solutions such as Talend with Microsoft Azure or Dell Boomi have cloud-based platforms where such information is readily exchanged, and alerts can be issued as part of their messaging capabilities (Microsoft Azure).

The request for quotation departments should implement and maintain a database in which they keep a supply of vendors from whom to issue parts. When personnel in this department are not issuing quotes or negotiating them, they should be tasked with actively seeking additional vendors to get quotes from to populate this database, which is an effective use of this stakeholder.

This same cloud based infrastructure and its messaging capabilities is also applicable to the other prime area for improving AADC’s quality improvement process, the inordinate (and at time, even exorbitant) lengths of time between the completion of quotations and when the purchase order is approved. The foregoing cloud integration hubs can issue notifications to those in the purchase order departments for when quotes are finalized. Therefore, from a basic messaging and communication perspective, the proper personnel should know when it is time to approve purchases.

Nonetheless, there are more considerations for the delays between when requests for quotes are closed and when purchase orders are approved. In some instances, those delays are associated with financial concerns, such as having the requisite amount of capital to actually purchase a specific part. What is needed to surmount this obstacle of financial constraints that may delay this part of the supply chain process is to prioritize the supply chain within the budgetary measures of AADC and its applicable stakeholders.

Thus, the requisitioning of parts will not take place until it is actually guaranteed that the there are funds to finance them. The particular paradigm deployed to assure this guarantee depends considerably on previous data gathered from quotations, and from the data pertaining to the request for quote send date and its close date. This data must be gathered and placed in the cloud with one of the previously mentioned cloud integration options in the form of a data lake.

The financial personnel who work on the supply chain will use this previously existing data to determine an estimate for the amount of parts—prior to any requisitioning for them. These financial employees can allocate funding for these parts before they are needed so that when they do become necessary, there will not be delays for the time between when quotes are closed and before parts are approved.

The actual request for quote period (the time between quotes getting sent and when they are closed) should influence this process as well. Ideally, it would positively impact the financial departments supporting the procurement process if the lowest possible quotes were approved. This way, there could be funds left over to help finance other parts or to increase the allotments for specific products.

Still, simply by having the aforementioned estimates based on currently available data from previous purchase orders for supplies, AADC should be able to designate funds for parts prior to their needing to order them. That way, when the purchase order process begins with the product requisitioning, there should be far less delays from the time between the completion of the request for quotes and the approval date for the process order.

Control The control phase of Six Sigma is largely based on the efficacy of the previous four phases, and of the improve phase in particular. One of the crucial factors explicated in the improve phase is the stakeholders involved in the Six Sigma methodology. Those stakeholders not only include the departmental organizations tasked with approving the requisition of parts, but also those accountable for the request for quotes and approving the process order.

Those who are responsible for approving the process order include employees in finance who have to actually fund the parts once there are sufficient quotations in place to do so. In terms of the actual controls that are implemented to ensure the improve phase works based on the ideas denoted within them, they occur at both the policy and data integration/communication levels.

At the policy level it is necessary for AADC to establish protocols whereby delays are discouraged for its supply chain process and each department (those responsible for product requisitioning, sending for quotes, and approving purchase orders) is aware of the financial necessity of expediting this process. The data integration and communication platform will automate those policies by furnishing a central location (in the cloud) to store data pertaining to the supply chain process.

More specifically, it will automate messages alerting these different departments once the work of the previous department is completed, and it is necessary for those departments to do their part to keep the process moving efficiently. This degree of centralization is the primary control which effectively encapsulates both policy and communication, procedures and the requisite action necessary to spur departments to achieve the objectives of decreasing the latency for the two quantitative outputs: the decreased times for Receipt PO Approval and PR APP PR APP.

In formulaic terms, then, the data has largely conformed to the common Six Sigma, precedent formula of Y = f(x). In the case of AADC, Y is the desired output, which is quantified according to two variables: the number of days from purchase order approval and the number of days from the approved requisition to the purchase order and its status, whether completed or only partially so. Therefore, by getting rid of latency caused by silo information and poor communication or messaging, it should be possible to achieve this objective.

In this case, it becomes necessary to consider the values ascribed to these variables, or rather to their relationships. Individually, each of these factors—the inputs and the outputs—are weighted the same. Ideally, the AADC would like all of these factors aligned so it could achieve maximum productivity. However, some of the weights produce a heavier effect than others do. Both of the outputs could be given any arbitrary number, so long as it is the same. 5 makes.