Answer the below question on Supply chain Management

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Zvabhpur2017

Business Finance

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Problem-1 (100 pts)

A small but important raw material is an ingredient in a special plastic used in automobile bumpers. The raw material costs $.50 per bumper. The plastic costs $5. The bumpers have a variable manufacturing cost of $25 each. XYZ Motor Company buys the bumpers from the bumper supplier for $40 each and assembles them into its autos. When a repair shop orders a replacement bumper, it buys bumpers for $100 each and charges the car owner $250 including labor to replace it.

The original raw material has a bad batch that goes into 10,000 front bumpers. While the bad raw material originally costs $5,00, the problem is not discovered until all 10,000 cars have been sold. The government requires XYZ to recall all the cars and have their front bumpers replaced. What is the closest estimate of the failure cost to XYZ and its 10,000 customers?

  • $400,000 minus $250,000 refunded by the bumper supplier, or $150,000
  • $1 million
  • $2 million
  • $3 million

Justify your choice with some rough calculations based on the information given. (Think of the different categories of costs involved.Estimate each of these costs and provide some justification for the numbers.)

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INFO 564 Operations & Supply Chain Management Module 3a: Total Quality Management Copyright 2017 Montclair State University History • Quality as inspection • Focus on output • Quality as an organizational-wide effort • Purchasing, engineering, training & supervision, process management • Quality as customer-defined, continuous improvement, competitive advantage. • Customer-defined quality • Enlarged process view of quality to include product, process, timeliness, cost, service • TQM – Total Quality Management Customer Defines Quality Continuous Improvement Just-In-Time Total Quality Management Benchmarking Employee Involvement Customer Defines Quality • Who are our customers? Feedback on Quality (Demand, Surveys, Complaints, Returns) • What do they want from us? • What are their needs? • How are they currently being met? • How do their needs evolve? • Customer perceptions of our quality • Entrenched perceptions are hard to change Us Product/Service Customer Marketing and Advertising Shaping Quality Perception Feedback on Quality (Demand, Surveys, Complaints, Returns) Us Product/Service Customer Marketing and Advertising Shaping Quality Perception Continuous Improvement • Quality can always be improved • Product • Design, production, better materials • Process • Cost, waste, time taken, worker effort, inventory • Timely delivery • Providing options • Service • During sales, emergencies, after sales • Warranty • Reuse and recycling The Continuous Improvement Cycle PLAN Analyze & identify Possible Solution ACT Implement on full scale Implement a small scale solution Monitor Solution Collect Process Data Identify quality improvement opportunity DO Put SOPs and Processes in Place CHECK Did it work? • PDCA • Deming or Shewhart Circle • Kaizen • Zero defects Employee Involvement & Empowerment • Quality is everyone’s responsibility • Employees often know • When a problem is about to arise • Where and how to fix it • Formal involvement of employees • Problem identification, solution, and implementation • Quality circles, suggestion schemes • Organization that fosters and rewards participation Benchmarking • Selecting an external or internal process to learn from and emulate • External benchmarking • A competitor (GM and Toyota) • Non-competitor within the industry (US healthcare delivery networks and Geisinger Health Care) • Universities benchmarking each other • Outside the industry • Xerox and Mercedes Benz benchmarked L.L. Bean for inventory management • Great Ormond Street Hospital benchmarked the Ferrari Racing Team on process management • Internal benchmarking • Division A learns from Division B in the company; • Cordis (a J&J Company) learns about managing sales-force incentives from OrthoMcNeil (another J&J Company) Prerequisites to Success of TQM • Complete commitment from top management • Long-term • Appropriate level of resources (skills, training, equipment, organizational) • Integration into all aspects of company’s operations • Integration into decision making at all levels • Ensuring communication • Supportive environment INFO 564 Operations & Supply Chain Management Module 3b: Six Sigma History of Six Sigma • Set of statistical techniques for process control • Developed at Motorola in the 1980s • Aims for very high levels of quality (or low levels of defects) • Widely-adopted approach and philosophy • Organization-wide • Continuous improvement • Variation reduction • Measurement and data driven • Often seen as part of TQM What is Six-Sigma (6σ)? • Set of tools and techniques for process control • • • • Charts and graphs for problem identification and diagnosis Control charts for process control Process capability measures Covered in more detail in Module 4 • Philosophy of business problem solving – the DMAIC approach • Define, Measure, Analyze, Improve, and Control • Organization • An ambitious quality standard • Variation in output is half of variation considered “tolerable” • No more than 3.4 defects per million opportunities The DMAIC approach A continuous cycle of process quality improvement DEFINE the problem with the process MEASURE CONTROL maintain the improvement IMPROVE by eliminating the cause the impact of the problem on the process ANALYZE the data to understand the cause • Define problem - scope, customer, and symptoms • Measure impact of the problem by collecting data on the symptoms • Analyze data collected to identify root causes • Improve the process by treating or eliminating root causes • Control the process by implementing the fixes and monitoring the symptoms The DMAIC approach DEFINE the problem with the process MEASURE CONTROL maintain the improvement IMPROVE by eliminating the cause the impact of the problem on the process ANALYZE the data to understand the cause Process Improvement Organization • Master Blackbelts • Coaches or leaders of process improvement teams • Expertise in DMAIC approach and statistical analysis • Training responsibilities • Blackbelts • Coaches or leaders of process improvement teams • Expertise in DMAIC approach and statistical analysis • Greenbelts • Some training DMAIC approach and statistical analysis • Work under supervision of BBs • Project champions • Business leader of project Six Sigma as a Quality Standard • All processes have some natural variation Process Output Distribution • Six Sigma aims for very high quality (very low defect) levels σ = Process Standard Deviation • By cutting natural variation to less than half of tolerable variation • Continuous process improvement • Reducing process standard deviation σ Natural Process Variation=6σ LTL Tolerable Variation=12σ Customer will accept product that is in this range UTL • Probability of a defective product (falling outside tolerable variation) is 0.0000034 • 3.4 defects per million Success of Six Sigma • Complete commitment from top management • Long-term • Appropriate investment in resources (skills, training, equipment, organizational) • Problem-solving approach integrated into all aspects of company’s operations • Commitment to a measurement mind-set • Belief in and support of data-driven statistical techniques INFO 564 Operations & Supply Chain Management Module 3c: ISO 9001 ISO 9001 – A Quality Management System • ISO: International Standards Organization • Representatives from 165 countries • How organizations can meet the needs of their customers • Based on seven principles • Adapted to specific industries – Petrochemicals, software engineering, medical devices, local government, etc. • Organizations implement the system • External certification of implementation by certified third parties • Over a million organizations certified world-wide • Some evidence of higher product and process quality ISO 9001-The Seven Quality Management Principles • Customer focus • Leadership • Engagement of people Similar to TQM and Six • Improvement Sigma • Process approach • Evidence-based decision making • Relationship management with external providers ISO 9001 - Prescriptions • Focus on processes • Aligning quality with business strategy • Designing processes so that only the right outcomes are possible • Collecting and analyzing evidence • Risk-based thinking • PDCA cycle • Documentation ISO 9001 – Certification Process Problems 12-18 month process Audit Auditor Improvement Plan Organization Certification renewed periodically Certification Corrective Action Auditor Organization ISO 9001 • Certification is a desirable badge • Often required by customers and regulators • Many companies have reported higher quality products and processes • • • • Greater awareness of quality-focused operations More competitive Greater growth in sales Safety of operations Requirements for Success • Long-term orientation • Top management commitment and support • Resources • Goal-setting • Organization-wide commitment and support • Employee education and empowerment • Communication • High organization morale INFO 564 Operations & Supply Chain Management Module 3d: Quality and Services Services • A very big part of business landscape • Well over 80% of US economy employment is service-based • Banks and insurance, transportation, education, retailers, health-care, construction, entertainment, etc. • Thoroughly integrated into US economy • Present challenges in managing quality Services – Challenges with Quality • Output of service • Intangible components • Customer involvement in service • Not fully controllable • Labor intensiveness • Services often delivered by humans • Perceptions of quality • In eye of customer Output of a Service • Service outputs are often a mix of tangible and intangible components • Tangible components: food, drugs, money, college degree • Intangible components: safety, security, pleasure, relief, prestige, fun, pride • Intangible components • Hard to define • Cannot count or measure • Difficult to create conformance specifications • Impact of process on intangible components is unclear Customer Involvement • Customer part of the process • Provides input needed to provide service • Specifies output needed • Adds uncontrollable variability to the process • People skills become important • Politeness, courtesy, attentiveness, promptness become part of service expectations • Forces consideration of customer comfort • Servicescape: environment in which service is provided – lighting, music, seating, etc. Labor Intensiveness • Humans still a big part of service delivery • Receive inputs from customers • Provide knowledge, experience, physical skills • Hard to automate • Human actions have high degree of variability • Variability impacts quality • Reduced through standardization, training, and supervision Perceptions of Quality • Perceptions of quality are important • May be at odds with “actual” or “objective” quality • First impressions are important • Once set, perceptions are hard to shape or change • Perceptions will vary among customers • Market research to understand perceptions • Marketing strategies to shape perceptions • How much effort to expend on improving objective quality versus improving perceived quality
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Explanation & Answer

Please find answer.Thank you.

Unit

10000

Cost
Raw material
Plastic Cost
Bumper Manufacturing Cost
Cost to XYZ Motor company
Repair shop
Customer
Total Profit

Failure Cost
In million failure cost to XYZ

$ 0,5
$5
$ 25
$ 40
$ 100
$ 250
$ 150

$ 2.900.000
$3

Cost of 10,000 unit
$ 5.000
$ 50.000
$ 250.000
$ 400.000
$ 1.000.000
$ 2.500.000
$ 1.500.000

million


Last Name 1
Name
University Name
Course
March 16,2018
Operation and Supply Chain Management
Q1.
Given the price of the raw material =$0.5 per bumper
Price of the plastic = $5
Price of the bumper =$25
Price paid by XYZ Motor Company = $40
Price paid by the repair company =$100
Customer pays the price of $250 for replacing the new bumper including replacing it.
Now, when the 10,00...


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