International Supply Chain

Environment Analysis

Kimball Bullington, Ph.DProfessor

Middle Tennessee State University

What is Six Sigma?

A. Customer Focus – Focus on what is critical to customers

B. Data Driven – Extensive use of statistical tools

C. Robust Methodology – Tools plus implementation methods to make success more likely

What is Six Sigma?Key Concepts

1. Critical to Quality: What attributes are most important to the customer? (CTQ, CTC, CTD)

2. Defect: Failing to deliver what the customer wants / expects (DPMO)

3. Variation: The level of unpredictability the customer experiences

What is Six Sigma? Key Concepts

5. Process Capability: What your process can deliver – consistently

6. Stable Operations: Stable ops are predictable

7. Design for Six Sigma: Designing to meet customer needs and process capability in changing environments

What Types of Companies Can Benefit from Six Sigma? Companies that benefit from structured

organizational improvement Companies that need to improve customer

satisfaction All types of companies can benefit:

Manufacturing Service Non-profit Educational

The environment of a change process affects the nature and success of a change program.

We would like to design the supply chain to be robust to changes in the environment.

Process Flow

InputsTransformProcesses Outputs

Feedback

Suppliers Operations Customers

Process Flow

InputsTransformProcesses Outputs

Feedback

Suppliers Operations Customers

Environment

Process Flow

InputsTransformProcesses Outputs

Feedback

Suppliers Operations Customers

Environment

EnvironmentEnvironment Environment

Supply Environment Analysis Tools

Cause-and-Effect SWOT Supplier Category Trend Force Field Stakeholder Commitment Communication

Cause-and-Effect Diagram

Effect

MaterialsMethods

MachinesManpower

Environment

Cause

Cause

Cause

Cause

Cause

CauseCause

Cause

CauseCause

Cause

Cause

Cause-and-Effect Diagrams Supplier Failure - Causes

People

Materials

Equipment

Processes

Environment

Measurement

FireEarthquake

Mat'l price increase

Bankruptcy

Illness

Turnover

Process upset Commodity allocation

Bad specs

Inaccurate PO

New employees

New source

IncompetenceIncapable equip

Lack of PM

FraudLawsuit

Tornado

Flood

StrikeStrikeBusiness down

Business up

Different standards

Causes Environment

Measures

Materials

Methods

Machines

Manpower

SWOT Analysis

Positive Negative

Internal Strengths Weaknesses

External Opportunities

Threats

SWOT Analyses: Exercise Strengths

What are the strengths of your supply organization?

What are the strengths of your operations as a customer of supply?

Weaknesses What are the weaknesses of your

supply organization?

SWOT Analyses: ExerciseSupply personnel

Supply ManagementProcesses

Supply ManagementTechnology

Operations Environ

SuccessfulSupply

SWOT Analyses: Exercise Strengths

What are the strengths of your supply organization?

What are the strengths of your operations as a customer of supply?

Weaknesses What are the weaknesses of your

supply organization?

SWOT Analyses: Example Strengths

Extensive experience with supply base

Supplier performance history Procurement engineering ISO-quality process documentation

SWOT Analyses: ExerciseSupply personnel

Supply ManagementProcesses

Supply ManagementTechnology

Operations Environ

Supply Failure

SWOT Analyses: Example Weaknesses

Politically weak Lack of commitment to suppliers Tactically-focused Limited time for improvement

activities Data is suspect Little visibility to sister-division data

SWOT Analyses: Exercise Strengths

What positive developments have occurred? What are the untapped strengths of your

suppliers? Weaknesses

What are the weaknesses of your supply base?

What are the weaknesses of your supporting functions?

SWOT Analyses: Example Opportunities

Untapped intra-business unit leverage Consortia opportunities Supplier capabilities not used Opportunities for expanding business

with a key good performer

SWOT Analyses: Example Threats

Financially unstable suppliers Incapable suppliers Cost increases Poor performance in a key supplier

(quality, cost, delivery, service, technology development)

Logistics issues

Define Phase - Tools Project Charter Stakeholder

Analysis Affinity Diagram SIPOC Voice of the

Customer CT Tree

Kano Model SWOT Analysis Cause-and-Effect

Diagrams Supplier

Segmentation Project

Management

Critical 2: Special Situations

Critical 1:Long-term Relationship

Non-Critical 1:Contractual

High

Low High

Ris

k

Annual Spend

Supply Base Categorization

Non-Critical 2:Transactional

Critical 2: Special Situations

Critical 1:Long-term Relationship

Non-Critical 1:Contractual

High

Low High

Ris

k

Annual Spend

Supply Base Categorization

Non-Critical 2:TransactionalService-sensitive

Critical 2: Special Situations

Critical 1:Long-term Relationship

Non-Critical 1:Contractual Price, inventory & contract sensitive

High

Low High

Ris

k

Annual Spend

Supply Base Categorization

Non-Critical 2:Transactional

Critical 2: Special SituationsQuality, Risk, Financial, InventoryIssues

Critical 1:Long-term Relationship

Non-Critical 1:Contractual

High

Low High

Ris

k

Annual Spend

Supply Base Categorization

Non-Critical 2:Transactional

Critical 2: Special Situations

Critical 1:Long-term RelationshipCommunication,Design, Quality, etc.

Non-Critical 1:Contractual

High

Low High

Ris

k

Annual Spend

Supply Base Categorization

Non-Critical 2:Transactional

Critical 2: Special Situations

Critical 1:Long-term Relationship

Non-Critical 1:Contractual

High

Low High

Ris

k

Annual Spend

Supply Base Categorization

Non-Critical 2:Transactional

Consolidate

ConsolidateRisk reduce &Consolidate

Trend Analysis

Intense Competition Globalization Customer Sophistication Mass Customization Virtual Integration

Trend Analysis

Network Rationalization Outsourcing Electronic Channels Dominant Organizations Constant Change

What are the trends in your environment?

Supply chain?Commodity?

Supplier?Project?

Force Field Analysis

TransformationProcesses

Environmental Forces Balanced – improvement

stalled

Force Field Analysis

TransformationProcesses

Restraining Forces Reduced– improvement

progresses

Cause-and-Effect Diagram

Failure

MaterialsMethods

MachinesManpower

Environment

Cause

Cause

Cause

Cause

Cause

CauseCause

Cause

CauseCause

Cause

Cause

Force Field Analysis

TransformationProcesses

Driving Forces Increased – improvement progresses

Cause-and-Effect Diagram

Success

MaterialsMethods

MachinesManpower

Environment

Cause

Cause

Cause

Cause

Cause

CauseCause

Cause

CauseCause

Cause

Cause

Force Field AnalysisTarget Forces

Largest impact Easiest to change Most economical to change Politically acceptable to change Mix of driving and restraining

forces

Force Field AnalysisDriving Forces

Economic Globalization Time Compression Rising Customer Expectations Process Management Supply Chain Integration Technological Innovation

Force Field AnalysisRestraining Forces

Management Commitment Distrust Low Morale Communication Failures Inadequate Resources Stakeholder Commitment

Stakeholder AnalysisPeople or Groups

Level of Commitment Buy Mfg EngEnthusiastic Support

Help it work

Compliant

Hesitant X

Indifferent

Uncooperative X

Opposed

Hostile X

Stakeholder Commitment

Management Buyers Engineers (ours) Engineers (theirs) Manufacturing Supervision Supplier Production Planners

Process Flow

InputsTransformProcesses Outputs

Feedback

Suppliers Operations Customers

Process Flow

InputsTransformProcesses Outputs

Feedback

Suppliers Operations Customers

Process Flow

InputsTransformProcesses Outputs

Feedback

Suppliers Operations Customers

Process Flow

InputsTransformProcesses Outputs

Feedback

Suppliers Operations Customers

Environment

Process Flow

InputsTransformProcesses Outputs

Feedback

Suppliers Operations Customers

Environment

EnvironmentEnvironment Environment

Control PhaseCommunication Model

Transmit(Encode)

Receive(Decode)

Feedback

Noise

Communication ImprovementEncoding / Decoding Problems

Language skills Cultural differences Physical limitations Technical knowledge Technical language differences

Communication ImprovementEncoding / Decoding Solutions

Training Improved specs Face-to-face meetings Standardized communication Simplified communication Feedback

Communication ImprovementNoise Problems

Auditory Psychological Physical distractions Workload

Communication ImprovementNoise Problems

Increase signal! Repetition Simplified communication Standardized communication Proximity

Conclusion Supply Environment Analysis is an

important process in organizational change.

A Six Sigma company should be especially interested in Supply Environment Analysis.

Six Sigma Tools are helpful in analyzing the environment and preparing responses to environmental forces.

References

Books: Six Sigma Pocket Guide (Rath & Strong’s) The Future of Purchasing and Supply (Carter, et al ISM) Supplier Strategies (Goldfield) Implementing Six Sigma (Breyfogle) Competitive Advantage (Porter) By What Method (Sink) The Six Sigma Way Team Fieldbook (Pande, Neuman,

Cavanagh) The Supply Management Environment (Fawcett, ISM) Supplier Strategies (Goldfeld) www.isixsigma.com