An important part of a project is to indemnify the key process input variables (

Question

An important part of a project is to indemnify the key process input variables (KPIV) and key process output variables (KPOV). Suppose that you are in charge of a hospital emergency room. Discuss the KPIVs and KPOVs for this business. How do they relate to possible customer CTQs? Why are designed experiments most useful in the improve step of DMAIC? Suppose that your business is operating at the three-sigma quality level. If projects have an average improvement rate of 50% annually, how many years will it take to achieve six-sigma quality? Suppose that your business is operating at the four-and-a-half-sigma quality level. If projects have an average improvement rate of 50% annually, how many years will it take to achieve six-sigma quality? Explain why it is important to separate sources of variability into special or assignable causes and common or chance causes. Consider improving service quality in a restaurant. What are the KPIVs and KPOVs that you should consider? How do these relate to likely customer CTQs?

Explanation / Answer

Supply Chain Variability can be caused due to

Bullwhip effect and Snowball effect are two classic examples of the result of Supply Chain Variability.

Bullwhip Effect
Variability in order sizes grows as demand signals propagate upstream in the supply chain. For example, in a study conducted some years ago, P&G found puzzling, dramatic fluctuations in retailers' orders to wholesalers for its diapers, even though there was a steady rate of consumption of the diapers by babies (end customers). Even wilder were the fluctuations in orders that P&G was receiving from the wholesalers.

Snowball Effect
Variability in supply quantities and supply delays increase as one moves downstream in the supply chain. For example, a small breakdown in a machine in a thread manufacturing plant in India can cause a four-day delivery delay to the Knitter in Malaysia, which can result in a seven-day delivery delay to the Dyer in Hong Kong and finally snowball into a 10-day delivery delay of a hot, new model to the clothing manufacturer in Europe, resulting in loss of sales worth millions of dollars.

Specifically, these effects can result due to isolated forecasting (demand forecasts updated based on orders rather than customer demand), fixed costs and economies of scale encouraging large orders, hockey stick sales patterns (bulk of sales taking place at the end of month), price promotions, forward buying, overstocking at month/year end to meet targets, rationing and gaming shortage (scarce supplies allocated in proportion to requested quantities rather than the ability to sell) etc.

Effect of variability on Supply Chain Performance

Some of the critical areas that can be looked at to reduce the impact of variability on the supply chain include aligning incentives to overall supply chain performance objectives; developing trust and contractual agreementsbetween supply chain partners; approaches such as delayed differentiation, designing for commonality; direct sales, vendor managed inventory, continuous replenishment; multi-echelon inventory control policies; lead time reduction through operational efficiency and design; lot size reduction using efficient transportation and distribution systems; price stabilization and uniform pricing.

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