Industrial Engineering Research Paper Summary Project

Industrial Engineering Research Paper Summary Project

                                                            

Presented by

Ruby Shah

Roll no. 119

PGDIE 42

Research on the Lean Six Sigma Supplier Recovery Management

INTRODUCTION

The supplier recovery management is a topic of tremendous importance of supplier management. In the operation decisions of a firm, the supplier recovery management has a great influence on the supply chain design

in terms of transportation and distribution planning and production planning. Reliable supplier recovery management may be done to minimize the damages of the manufacturer and the supplier. Lean six sigma is an advanced managing method and is utilized by more and more enterprises. Based on lean six sigma, the supplier recovery management can identifY better performing suppliers in a supply chain and creat more benefit for suppliers and manufacturers. The supplier recovery management has been considered as a complex problem in the literature due to the several following reasons:

( 1) Individual suppliers may have different performance

characteristics for different criteria;

(2) There may be time constraints on the delivery of items.

Within these time constraints, some criteria for the supplying

the items may become important, while other criteria may not

be the dominant ones;

( 3 ) Constraints related to suppliers' quota allocation,

number of suppliers to employ, minimum and maximum order

quantities, use of minority suppliers etc.

LEAN SIX SIGMA SUPPLER RECOVERY MANAGEMENT

Face on the commercial competition, enterprises must focus on the velocity, cost and benefit simultaneously. The lean six sigma combined Lean Production and Six Sigma into a new powerful managing measure. Its essence is to

eliminate any waste and to diminish defects. The company usually uses Lean production into the producing process to solve manufacturing problems, and used Six Sigma into the upper or overall management or some important projects managing. The core of Lean Six Sigma is the "JIT producing", "zero stocks", "3.4 defects percent million". The supplier recovery is defined that recovery, from a supplier, for any costs incurred by an enterprise resulting from a supplier's failure to perform to contractual requirements, in

terms of delivery, quality, performance, or other contractual element. In the supplier recovery management, early notification is the most pivotal element. Early notification can come ture faster communication and resolution of supplier caused field defects. As usual, the recovery opportunity

sources are as follows: 

(1) internal defect - defect found in the enterprise; 

(2) external defect - defect found in the field; 

(3) premium transportation supplier caused premium transportation costs; 

(4) Luidated damages: costomer incurredluidated damages which is supplier caused; 

supplier liquidated damages in contract with an enterprise. With the theory of Lean Six Sigma and the tools of DMAIC to analyze and improve the supplier recovery process, the befmit between suppliers and enterprises can be

maximized. Due to Lean Six Sigma's perfections and advancement, the Lean Six Sigma supplier recovery management becomes one of the most effective

management.

ONE EXAMPLE OF THE SUPPLIER RECOVERY MANAGEMENT

This example is about the supplier recovery management and the data are collected from a firm. The enterprise uses the early notifition process to resolve the failture of suppliers.

A. Early notification process

In each step one day or one to three days will be spent to resolve the defect.each step will spend one day or some days. In the third step , QE (quality engineer) will do the three jobs: technolygy assessment; request part return; request RCA. During the four steps the last step is the most important stage. In this procedure the supplier is the key element. Supplier mustfirstly review the case which would spend one day or so. Secondly suppliers will take one or two days to ask for missing information to field or QE. Supplier is expected to respond within two business days (day of receipt + 2) to make

the response. Responses must conform to one of the 5 options

(1) fix at site or technology guidance

(2) accept responsibility and authorize the firm to fix

(3)send a replacement part

(4)repair or refurbish the part at supplier site

(5) refute responsibility.

 Supplier must provide a part return logistics charge code or carrier name if part return is requested for RCA.For support the upper steps suppliers must update engineer metrics, update clarify with supplier decision ans QE

comments, update clarify with revised supplier decisions where applicable.

For QE, they should support engineer team to identify correct supplier name on SN request cases. If supplier "refutes responsibility", QE must advise if this is a supplier caused defect or not. QE must support any supplier requests for more

information and insure their response is received by three days.The other else bounden duties invole: update clarify with QE comments (timming is critical when "refute" is valid - complete by three days), and review and proactively act ondaily engineer metrics. All proactive effort can reduce defect impact. In the firm the status is over 300 suppliers are enabled, less to 1000 cases processed to YTD, the program expansion is ongoing. The benefits is spent on the timely customer issue resolution, early supplier engagement, reduced cost impact, driving timely communication and RCA.The firm applied the early notification in 2009, and achieved great success (explained as fig.3). 2009-YTD EN metrics are as follows: 1,215 defects and recoveried $13.8($MM), processed 1,059 defects and recoveried $8.0($MM); 8 of 10 new suppliers added, 2 pending; the defming system modification, 20 suppliers ID'd to train.

B. Supplier recovery process

The supplier recovery CTQs are: accountability, timeliness of recovery, recovery rate. The Goal is to maximize recovery rate by establishing a time sensitive (digitized) workflow based on a robust data capturing system with cefmed handoffs and ownership.In this step, the soucing roles and responsibilities is very important. The quality engineer determines the problem of quality if supplier is at fault; The sourcing commerical person informs supplier of recovery of recovery to be back billed or negotiateds recovery amount; The business recovery leader(BRL) makes recovery reporting and recovery process improvements.The provess makes 36%reduction in total backlog - $35.8MM (EOY 06) to $22.9MM.

C. the opportunity of supplier recovery: Sourcing COF

The most effective and advantaged opportunity of supplier recovery is sourcing COF. Only control the sorucing COF, decrease the occupation of cost, the suppler recovery will realize smoothly favorably. 

CONCLUSION

The supplier management is the key problem of supply chain management, so enterprises couldn't ignore the problem of the supplier recovery management. To apply the Lean Six Sigma into Supplier Recovery will develop a new

method and way to manage the suppliers recovery.Enterprises can require more and more economical results.The case quoted and discussed just proved the early notification process is very powerful and the recovery

process is very effectively and practicefully.The core thinking of Lean Six Sigma - saving and making the defects minimum is also the core of Lean Six Sigma supplier recovery management. This kind of study and demonstration is very significant and useful.