Key Points of Supply Chain Management

Key Point 1: Understanding Downstream Operations

• It’s crucial to understand what customers are buying and analyze their behaviors to avoid oversupply or
other related issues.
• Tools like Point of Sales (POS) systems enable suppliers and managers to monitor how many products
have been sold, providing real-time data on demand.
• The Bullwhip Effect highlights how small changes in customer behavior can lead to significant
disruptions in the supply chain, often resulting in oversupply or inefficiency.
• An integrated supply chain, where companies manufacture and sell products through their own stores,
helps mitigate this effect. For instance, GAP in the 1980s adopted this strategy to gain better visibility
into customer demand.
Key Point 2: The Last 1-Mile
• The last phase of product delivery, from the distribution center to the customer or retail store, known as
the "last 1-mile," is typically the most expensive in terms of unit transportation cost.
• Reducing costs in the last mile is essential for maintaining competitiveness.
o Joint delivery systems, where companies share transportation resources, can reduce costs.
o Technological solutions, such as drones and autonomous vehicles, offer innovative ways to
minimize transportation expenses.
o BOPIS (Buy Online, Pick Up In Store) is another cost-effective strategy that helps avoid the
high cost of home deliveries.
Key Point 3: Vein System
• A robust system for collecting used products to be reused, refurbished, or recycled is essential in modern
supply chains, not only for cost-saving but also for environmental sustainability.
• This practice aligns with the principles of Environmental, Social, and Governance (ESG), and
companies excelling in ESG practices tend to perform better over time.
o For example, Adidas developed a thermal setting property urethane in 2021 to improve
recyclability.
o IKEA has implemented a program to collect used furniture, refurbish it, and resell it.
o The concept of urban mining is also gaining traction, with countries like Japan extracting
valuable metals from old electronics. Japan has 7,000 tons of gold in urban mines, more than
many nations with natural reserves.
Key Point 4: Get Customers In
• Rather than competing purely on price, companies can win customer loyalty by adding significant value
to their products.
• Komatsu (Japan) uses a system called Komtrax, which equips all its machinery with GPS and sensors,
allowing users to track equipment and prevent theft.
o Although Komatsu’s equipment is priced higher than its competitors, customers prefer it due to
the additional value of avoiding costly equipment breakdowns.
o This demonstrates that in certain industries, focusing on added value can be more effective than
engaging in a price war.
 Zara’s Case Study: Key Strategic Points
1. Quick Lead Time
o Lead Time Definition: The period from product planning to display in stores.
o Zara's Lead Time: 15 days from planning to store.
o Comparison: SHEIN takes 3 days from design to mass production, which, despite seeming
faster, is slower in practice than Zara’s approach.
o Zara's Motto: “Researching customers with the left hand, touching production with the right
hand.” This reflects the close integration of market research and production.
o Integrated Work Environment: All key functions—marketing, design, textile buying,
production, and logistics—are housed in the same space. This promotes a concurrent workflow,
where team members can "overhear" and stay aligned through mutual conversations.
2. Simplified, Yet Disciplined Supply Chain
o Twice-Weekly Orders: Zara stores can only place orders on Wednesdays and Saturdays (unlike
most retailers that allow daily orders to avoid stockouts).
o Efficient Distribution: Focusing logistics operations on only two days a week reduces the need
for daily staffing, lowering the “last 1-mile” costs significantly.
o Risk of Overstock: Limiting order frequency may cause store managers to over-order out of fear
of stockouts, potentially inflating inventory.
o CEO’s Policy: “Out of stock is okay!” This strategic tolerance for stockouts helps avoid excess
inventory and encourages frequent store visits for new items.
o Centralized Inventory Control: Zara uses just one distribution center (DC) to control
inventory, minimizing unsold goods and maintaining efficiency.
§ Result: Zara's unsold goods represent only 10% of stock, compared to the industry
average of 20%.
3. Flexible Production Systems
o Mass Production for Basics: High-volume, long-selling items are produced by external
suppliers.
o In-House for Complex Designs: Small-volume, intricate designs are handled internally,
allowing for quicker response times and higher quality control.
4. Adoption of New Technology
o RFID Technology: Zara introduced Radio Frequency Identification (RFID) in 2010 for
inventory management, the same system used by Uniqlo.
§ Benefits include:
§ Fully automated cashier systems, which streamline checkout.
§ Prevention of shoplifting through enhanced tracking.
§ Potential for use as a sales promotion tool by providing insights into product
demand patterns.
 Sales and Production Interrelation
1. Product-Out vs. Market-In Strategies
o Product-Out: A strategy where the manufacturer prioritizes its own values and convenience,
supplying products based on internal capabilities. This is common in smaller or developing
markets with limited competition.
o Market-In: A customer-centric approach where products are developed based on consumer
demand and preferences. This strategy becomes crucial when the market expands and
competition increases. The earlier a company adopts a market-in approach, the better.
§ Example: P&G: P&G discovered that in certain regions, customers prefer bubbly
detergents as they associate bubbles with cleanliness. In response, P&G produced such
products to meet local preferences.
o Investment Criteria:
§ Typical business investments aim for profitability within five years.
§ For smaller, high-potential markets with long-term growth (over 10 years), companies
should adopt double standards—using different investment criteria for these markets.
This ensures clarity and transparency in the decision-making process.
2. Inventory Management
o Inventory is a key element of the supply chain, but it represents "sleeping capital"—it generates
no profit if it’s sitting idle in the warehouse.
o More inventory = higher risk. Efficient supply chains aim to minimize inventory while
maximizing its function.
o Retail Inventory Ownership: Typically, retailers own their inventory and pay suppliers upon
receipt.
§ Exception: Book Industry: In the publishing industry, retailers do not pay for inventory
upfront. They only pay after selling the product. This system, rooted in post-WWII
policies to promote literacy and free speech, results in inefficiencies, with up to 40% of
books remaining unsold.
§ Amazon's Innovation: Amazon disrupted this model by buying directly from
distributors and selling to retailers, improving efficiency and reducing unsold inventory.
§ Lesson: Even long-standing business practices can be improved, offering opportunities
for game-changing innovations.
o Stock Inflation by Sales: Sales departments tend to inflate inventory due to fear of stockouts,
leading to overproduction and unsold goods. This highlights the importance of cross-functional
communication (between sales, production, procurement, etc.) to better manage inventory and
avoid oversupply.
3. Flexible Production
o The goal is to keep production levels stable and aligned with sales, avoiding fluctuations that
could lead to overproduction or stockouts.
4. Product Standardization and Consolidation
o Establishing a set of product standards can significantly reduce inventory and production costs.
§ Example: Potato Chips Company: By standardizing chip size and frying methods
across different flavors, the company can achieve greater efficiency, as the only variation
happens in the final flavoring step. This minimizes costs related to errors and excess
inventory.
5. Mid-Term and Long-Term Business Planning
o Develop comprehensive production plans spanning 3-5 years, with annual budgets allocated
accordingly.
o Setting targets too high or too low can be counterproductive. The key is to establish reasonable
goals, though this may be difficult initially.
o A solution lies in fostering an open atmosphere within the company, where employees feel
comfortable addressing challenges and proposing ideas. A culture that encourages diverse
perspectives and collaboration helps the organization stay agile and responsive.
 Production Planning
1. Strategy for ~5 years business
- Objectives/Goals
- Brand Image
- Annual Budget ! Important
- Management cycle (PDCA): Plan (plan what you want to achieve) à Do (what was set out in the plan) à
Check (if theres anything goes wrong) à Actions (take actions upon problems)
- Types of Professionals:
+ 3rd-class Prof: cannot execute 100% in the plan
+ 2nd-class Professional: execute 100% in the plan
+ 1st-class Professional: As executing, monitoring where they are vs. goal all the time and MODIFY plan if
necess to make sure goal is accomplished.
Ví dụ: Vụ 2017 United Express passenger removal (minh chứng cho việc 2nd-class Prof chỉ theo plan without
being sufficiently flexible)
2. Optimum Planning
(a) Cost minimum AND Profit maximum
(b) Supply reliability/Flexibility (= supply and LOGISTICS should be reliable and there should be back up
plans)
- Database for optimum production planning:
+ Factory Cost and Logistics Cost: consisting of Variable Cost (V) and Fixed Cost (F)
Therefore:
People Cost (V or F): manager (V or F), Staff (V or F), worker (F)
Energy cost (V)
Raw material cost (V)
Waste + Scrap cost (V), Waste = in-process waste (ví dụ vỏ khoai tây trong dây chuyền sản xuất bim bim khoai
tây), Scrap = Unusable Product ( ví dụ sp lỗi)
Expense (V or F): machine maintenance (V), consumables (V), consultance fee (F), IT service (F), security
service (F), etc.
Tax + Insurance (F)
Depreciation (F)
Logistics Cost (V)
There should be mastersheet to check through costs in all plants!
- Man-hours (Database ab people’s cost) (per task) = number of people involved in a task x allocated time per
person for each task
E.g. Potato chips manufact
To make 10 kg of potato chips
Step 1. Washing peeling 2ppl x 0.3h = 0.6 man-hours
Step 2. Slicing 1ppl x 0.2h = 0.2 man-hours
Step 3. ……
.
.
Step n. …….
Assume that total man-hours = Step 1 to n, each of which man-hours summed up!
Assume total = 2.5 man-hours and hourly wage = 10$
Then ppl’s cost = 2.5 x 10 = 25$
- Illustration of Cost Min – Proft max Principle:

- Application of Cost Min – Profit Max Principle: Off-shoring (relocating plants/manufact to overseas countries
that have low cost, e.g. China (in the past), Vietnam, India…)
- Other considerations:
Supply Reliablity, flexibility: -----> Make near-by or dual Source (near-by plant as BACK UP: What if
transportation takes too long?)
 Optimum Production Planning (cont.)
Supply reliability and flexibility
+ If a product is too profitable to lose sales
Important for business growth
Need strict supply contract
Rist mana
à Other than main plan = off shoring à Make near-by or dual source (near by plant as a back up aka.
Nearshoring/reshoring)

+ If sales volume is small or product requires unique resources (equipment)

à consolidate to 1 plant only

＋ Make a judgment when investing/building plants off-shoring

• Country risk （currency risk, political risk） : This can become an opportunity (Friend-shoring)
• Low people cost country : Forecast future market size. Use as export base in the beginning and then
change as production base for domestic market.
• Judging if plant is worth investment
Character/Constitution of each plant
Quality level, Cost competitiveness
Level of continuous improvement initiative : Trend in quality and cost
Management level : Must visit and observe (3S seiri-seiton-seisou 整理整頓清掃, Capability and
passion to challenge) à Barometer of management level
Long term, production will move toward near-shoring as technology/automation advances and the
difference in people cost becomes smaller.
Procurement
 Production Scheduling
2 missions (measurements)
(1) Meet sales plan
(2) Minimize factory cost by utilizing plant resources

If sale plan > production capacity

(1) Utilize inventory and keep production as planned
(2) Temporarily increase production capacity (overtime, additional part timers, increase outsourcing)
(3) Communicate with sales to put priority
Utilize inventory keeep production = avoid out-of-stock and avoid increasing costs

If sale plan < production capacity

(1) Utilize inventory and keep production as planned
(2) Temporarily decrease production capacity (cut overtime, cut part timers, cut outsourcing)
(3) Shut down the plant
Utilize inventory keeep production = avoid wasting plant resources

Production capa and restrictions:

Production capacity = How many units can be produced
Produce more different products à more product/size changeover à increase down time à lower capa
(output)
Vice versa: less different products à more output
à Principle: Reduce product/size changeover = reduce cost
For example: Change from star-shaped products to round-shaped products require:
+ Stop the star shape machine
+ Remove material in machine
+ Remove star-shape die from machien
+ Install round shape machine
+ Feed new materials to the machine
+….
à All of this cost NON PRODUCTION TIME aka DOWN TIME (or IDLE TIME)

Production Control
Review: Business Plan (~5 years) à Establish annual budget (sales and production!)
à Plant budget: safety, quality, production, factory cost (use assumptions to make plant plan for production,
e.g. this plant will make XX products of YY size – which ties with sales plan – how much to sell so how much
to make?)
à Measure plant’s effectiveness/performance: assess how much a plant makes? Versus its production schedule
(use theoretical cost as the benchmark) (compliance measurement)
Production Control Tool:
From this visualization below, becoz Product X is doing not as well good as Product Y à Should continue to
produce product Y rather than Product X as in schedule (utilize Realtime status – industry 4.0)
Industry 4.0 à Synchronizing supply chain!
Make to order production control:

Create time through “de-bottlenecking” (bottleneck = point which restricts the flow)
(Focus on bottlenecks aka. Materials or manufacture parts that require much time to produce or deliver)
E.g. If material C takes much time to delivery time than material A and B -> Focus on material C
à priority by supplier, multiple suppliers, early purchase order
If part Z takes much time to produce than part X or Y -> Focus on Z
à delivery of raw material for Z in portions (don’t wait until whole volume of raw for Z ready) -> utilize
workers for Z after completing X and Y!
à Added value: products can be shipped to retailers ON TIME (日本会社の特徴)

Sales/Inventory/order Point model

• Min Inventory (Safety stock)= ơ x √𝐿𝑒𝑎𝑑 𝑡𝑖𝑚𝑒 x 𝛼 ơ = Variation, 𝛼 = Safety parameter
• Max Inventory = Order volume + 2 x Safety stock
• Order point = Average sales x Lead time + Safety stock
(Example)
Daily sales: 100pcs, 100, 110, 100, 80, 120, 100, 90, 100, 100 (10 days data), Supply lead time = 4 days
Average = 100, Variation (ơ) = 10, Safety parameter: Probability of out-of-stock @5% = 1.65 @1% = 2.33
• Min Inventory = 10 x √4 x 1.65 = 33 pcs
• Max Inventory = 100 x 4 + 2 x 33 = 466 pcs
• Order point = 100 x 4 + 33 = 433 pcs
 Production lot and Inventory
1. Big lot vs small lot

Let’s compare: Instead of producing 400 pcs of A then 400 of B then 400 of C per moth
à produce 100 of A then 100 of B then 100 of C then back to 100 of A again …… repeat the cycle until the
production schedule is met
à comment: Shorter scheduling cycle = smaller lot production = less inventory = +++ flexibility
à this is called “small lot production”

Biglot vs smalllot production comparison:

Big lot Small lot
Flexibility Worse Better
Inventory Higher Smaller
Changeover Time Efficient Inefficient

Big lot: less flexible but more efficient of time and productivity
Small lot: more flexible but less efficient of time and productivity
E.g. If product/size changeover operation takes 1 hr?
Big lot: 1hr x 3 times of changeover (A->B->C->A) = 3 hrs
Small lot: 1hr x 12 times of changeover = 12hrs
Difference = 9hrs/month (SIGNIFICANT)
But if changeover time just = 5min à Difference is JUST 0.75 hrs/ month (NEGLIGIBLE)
à MINIMIZE CHANGEOVER TIME IS KEYYY!!!!

2. Minimize changeover time

minimize changeover time, u can apply following tactics:
• Simplify size change operation
Example:
• Easy set up

Example:

• Internal to external
Example: Mixing different chocolate flavors
 • Exact change (SUPPLY EXACT amount of materials for productions to AVOID LEFTOVERS!!!)
this require very good quality consistency!
Example:

3. Other tactics
Another key to minimize extra cost for smaller lot production: Reduce product/size change frequency
• Standardize/consolidate product, parts, materials (e.g. automobiles of diff models but same engine, same
battery!)
• Multiple compact machines versus 1 big capacity machine
Example;

My own experience: my aunt has a pho restaurant and it’s usually very crowded during “rush hours”
(meal times like break fast or lunch because VN people eat pho for breakfast and lunch a lot)
Although her restaurant offers lots of pho types (toppings beef, chicken, etc.) but she use the same broth and
same side dish for all flavors of pho à the difference is really just the topping (beef or chicken ish which takes
1-2 second to add to each bowl of pho)
à This improves efficiency, cooks can make food faster and serve faster during rush hours

Important Point: lead time makes significant difference! E.g.:

Problems with Fat Inventory

--> Lean inventory is BETTER than fat inventory

Case study: Toyota Production System

Ultimate goal is to eliminate 3 無 from supply chain:
無駄：method/tool/réources too much for a task = waste
無理：method/tool/resources not enuf to accomplish a task
ムラ： situation when both Muda and Muri exist
Eliminating Muda (waste):
(1)
(2) Takt time = standard time for each production job. Line balancing. Design the most efficient way of prod.
(3) JIT (just in time) = right product, right volume, right timing à Small lot prod and pull system (No excess
parts inventory at assembly line). Toyota is basically make-based-on-sales-plan (monthly prod scheduling)
however they are flexible to change based on actual sales
(4) lean inventory to accelerate improvement
-> utilize lean inventory as a tool to accelerate problem finding and solving
---
Bottleneck materials/parts (Long lead time = risk)
Hyper inflation à dont keep cash, buy inventory (raw materials)
Business model with Quick inventory turnover days (for e.g. COSTCO)
 Quality Assurance and Quality Control
Definition by ASQ (American society for quality)
Quality assurance: The planned and systematic activities implemented in a quality system so that quality
requirements for product or service will be fulfilled.
Quality control: The observation techniques and activities used to fulfill requirements for quality.
(Traditional Quality Assurance)
Assure quality by inspection (Things happen)
(Japanese concept)
Assure quality at each manufacturing process (Upstream QA and QC)

Upstream QA: Dr. Edward Deming came up with this concept and spread out in many Japanese companies pose
WWII
• Inspecting and finding defective product at final inspection is TOO late! It’s same as issuance of
Certificate of Death!
• So it is important to have good QC and QA system in each manufacturing process so that 100% of in-
process products meet quality standards and as a result 100% of finished products meets the QS (quality
standards). Aiming at ZD (Zero Defect)
Sampling Check/Inspection
E.g. 1% sampling, Prod lot = 500
Appearance check: every product
Assembly check: 5 out of 500 (1%)
If all 5 samples pass Q criteria, release all 500
If 1 sample fails -> increase samples fto make additional inspection. If +3 (for example) pass -> release the
rest ….
--> Should base on past data + statistics to standardize this sampling model to cater to each product’s
requirements…
Control Tool: x-R chart (process control): ensure that Quality falls into the tolerances:
Control chart is One of the most useful tool to realize QA at each manufacturing process.
• Tool to monitor if quality is under control and to be proactive in quality probs
• Tool to judge if manufacturing process is qualified to start making new product and to judge if new
equipment (machine) is qualified to start making product

Quality Control circle actitivy

TQM (Total Quality Management team) = Total involvement team + Focus on variation problem
A core definition of total quality management (TQM) describes a management approach to long-term success
through customer satisfaction. In a TQM effort, all members of an organization participate in improving
processes, products, services, and the culture in which they work.
Why?
Workers are the best to identify the possible cause (factor) of qual variation
-> Set as hypothesis -> Verify
Problem solving through stratification
Keys to successful implementation:
(1) Make it mandatory for all workers. Qual improvement should be everyone’s resposnsbility. Avoid division
among workers
(2) Focus on variation prob. Stratification. Work on small and many problems. Don’t start to expect
bigger/complicated prob solving. Repeat success to maintain workers’ motivation
(3) Continue by understanding the side-benefits that it brings:
(a) Workers have stronger ownership on qual of products!
(b) Improve morale through problem solving. Feeling of accomplishment
(c) Learn ab business through investigating the products and the process
Why variation matters?
The narrower variation -> lower the upper tolerance limit -> less usage of materials -> save cost
Variation Prob solving example
Tools of Quality Control
1. Checklist

2. Control chart
3. Pareto chart

4. Stratification (A, B, C analysis)

5. histogram
Application: Find attractive selling price
"How much are you willing to pay for lunch set meal at APU cafeteria?"
Questionnaire to randomly sampled students.
JPY 350, JPY 320, JPY 350, JPY 400, JPY 280, JPY 420, JPY 370,
Average = JPY 350
ơ (Standard deviation) = JPY 20
50% of students are happy at JPY 350 (Average)
68.3% of students are happy at JPY 330 (Average - 1 ơ)
95.4% of students are happy at JPY 310 (Average -2 ơ)
99.7% of students are happy at JPY 290 (Average - 3 ơ)

6. Scattered diagram

7. Fish bone /Cause and effect diagram (Show all possible causes)
Cross-functional team/members to list up all possible causes and then verify them. Used mostly for big or
complicated problem.
 Daily Problem Comment
control solving

Check list ✔ ✔ To make sure necessary checks and confirms are done.
Record of quality check results. Information source in
problem solving.
Control chart ✔ ✔ To monitor if manufacturing process is under control.
(X bar-R Proactive tool to avoid defects. To judge if it’s OK to
chart) start making new product or start using new
equipment. Information source in problem solving.
Pareto ✔ To identify where problem exists.

Stratification ✔ To find root cause of variation problem.

Histogram ✔ ✔ To understand quality level. Visualize quality

characteristics’ data dispersion. To estimate the whole
population with limited number of samples. Trigger
improvement if estimated defect rate is excessive.
Scattered ✔ To find factors which influence quality. Find
Diagram quantitative influence one variable has to another. To
set proper manufacturing parameters.
Fishbone ✔ To identify all possible causes of quality problem from
cross-functional viewpoint.

Problem solving step and tools

Problem solving step (DMAIC) Problem solving tool

D (Define) What specific problem

to solve

M (Measure) Collect data Check list, Control chart, Histogram, etc.

A (Analyze) Find cause(s) through Pareto, Stratification, Correlation analysis, Fishbone,

analysis Why 5 times, FTA (Fault Tree Analysis)
I (Improve) Implement
countermeasure
C (Control) Monitor if
countermeasure is still effective
(Example)
D Quality problem of pizza→What specific problem?→Pizza weight has excessive variation
M Use gram as measurement. Do sampling check on pizza weight. Draw histogram. Calculate average and
variation(Standard deviation). Estimate defect (out of tolerance) %.
A Stratification. Stratify by Dough weight, Cheese weight, Pepperoni weight, Worker, Room
temp/humidity, Baking temp, etc.
I Implement countermeasure
C Do sampling check on pizza weight periodically to see if countermeasure implemented is still effective. This
C is important because changes may take place in manufacturing process over time.

Supplier Quality Control

1. Qualification process
• Determine what quality items and criteria (specifications) are required
• See if supplier is capable of making product per spec -> measure qual of supplier’s prod
• See if supplier is capable of CONSISTENTLY making products per spec -> Audit supplier’s qual system
(qual control, control chart…) -> Audit supplier’s process (qual) capability (control chart,
average/variation - [Link], Ca/Cp/Cpk, etc.)
2. Initial special control process
Let supplier make limited vol of prod, make thorough
3. ********************
4. ********************

Level up quality control system

1. Bring up all the problems (Big or small)
(Heinrich’s law) (1-29-300 triangle)
1 = 1 big quality problem (such as recall)
29 = 29 smaller quality problems
300 = 300 near-misses (Problem didn’t happen, but was close)
Most people just try to fix the top 30 (problems that actually happened) and forget the rest 300 -> in the “fire-
fighter” mode (always extinguishing but not preparing)
--> Should pay attention to the bottom 300 near-misses (which often detected by workers not managers who
directly exposed to the manufacturing process)
This is also called “eliminate bud before it becomes a flower”
Requires companies to change performance management ---> Near-miss reporting
-> Make it mandatory for workers

2. Fail-safe (Fool-proof, Poka-yoke)

Prevent human error
Example: auto-lock doors (the bell rings if its opened for too long), auto-alarm temperature warning (if falls
below acceptable range)
3. 100% non-destructive inspection : 100% assurance instead of sampling check
On-line, automatic, and non-destructive inspection
Ultra-sound, Radiation, Image sensor, Magnetic particle, etc.
4. Surprise inspection (audit) on quality system/procedure compliance

LOT INFORMATION AND TRACING SYSTEM

Lot information system includes history/record of every prod
When, Where, by Who?...
Whenever quality problem arises, narrow down the prob using the lot info system = lot tracing
Extremely important for just in case
Example: Lot X has a problem -> Freeze product A
Lot A has a problem -> freeze products A and B
Even with good qual assurance upstream, things happen because (1) design prob cannot be avoided 100%. (2)
variation taking place in manufacturing process continually, (3) many different raw materials/parts are being
used to make product. (for ex, automobile is made out of ~ 30000 parts)
Reliable and efficient lot tracing and info system can save company from distrust and bankruptcy
Example: Case of Johnson n Johnson recall of Tylenol in 1982
Johnson n Johnson (J&J) products were drug-tampered -> J&J received blackmail from the criminal demanding
1M to stop tampering.
-> J&J developed triple-seal tamper resistant cap seal before resumed production -> led to new regulation in the
packaging of OTC substances
But also J&J in 2010: Tylenol recall but didn’t play safe (recalled 49 types of Tylenol products but problem
remains) -> lost confidence among customers
 PRODUCTION CAPACITY
• Machine control operation
(1) Speed
Capacity = Machine speed x Operational time (Working hours – Down time)
(2) Cycle time
Capacity = Operational time / Cycle time x Batch volume
• Human control operation
(1) Design work
Most efficient way of performing work (Safety and quality are fundamental assumptions)
(2) Time study
Set standard time to perform work Capacity = Operational time/Standard time
(3) Work standard

(I) Design work

• Most efficient way : ECRS Principle of E (Eliminate), C (Combine), R (Rearrange), S (Simplify)
• Path of flow
• Ergonomics
(ECRS example)

Attaching plate to body

Eliminate 1 set of higher strength bolt and nut instead of 2 sets of regular one.
Combine Job sequence

Rearrange Layout change

Simplify Use impact wrench (Powered wrench)
(Example of path of flow)
Kitchen layout

(Ergonomics)
Ergonomics (Physical)
Better maintaining of physical health of users/workers
(1) Neutral posture
Minimal tension and neutral posture is ideal to reduce strain
(2) Excessive force
Mechanical aid to avoid excessive force (Lifting and handling)
(3) Easy reach
Keep everything within reach of worker to reduce arm strain and loss of good posture
(4) Proper heights
Elbow height is ideal
(5)Excessive motions
Mechanical aid to avoid excessive motions (Electrical drill, Power wrench)
(6) Static load
Better design tool or layout to avoid awkward position of work
(7) Pressure points
Avoid or soften pressure (Cushioned floor mat, Cushioned shoes, Cushioned grip on tool)
(8) Clearance
Secure enough space to work
(9) Exercise and Stretching
Warm up exercise
(10) Comfortable environment
Proper temperature, Lighting, Air ventilation, Fume, Odor, Vibration, Noise
(II) Time study
Standard time : Based on standard procedure and reasonable (maintainable) pace
Job sequence/element Time
1. Pick up plate and place on table 15 DM
2. Pick up body and place on table 15DM
3. Pick up bolt and place on plate 6 DM
4. Pick up nut and place on body 6 DM
5. Insert bolt and push all the way 10 DM
6. Place nut on bolt 6 DM
7. Pick up wrench and place on bolt 15 DM
8. Tighten bolt 25 DM
nd
9. Repeat 3 through 8 for 2 set of bolt 68 DM
10. Release wrench and place body/plate on cart 20 DM
Total standard time 186 DM (1.86 Min)
Motion and Time study
Reasonable pace : 110% of measured time (10% is incentive pace)
Work load = work hours * work pace
(While work hours are usually quite clear, work pace is often a HIDDEN prob (i.e. reasonable pace being
ignored) -> there’s a need to measure)
Examples of unreasonable pace (workload): sweatshops (UK)/3K(きつい、汚い、危険) workplace (JP)/
血汗工厂xiehan gongchang (CN)
Line Balance (cân bằng dây chuyền)

-> Solution: You can combine workstep 1 and 2 à 1 + 2 = 0.4 min

Also do that 3 and 4. -> 0.4 min
-> by doing so Line Balance = 100% (productivity improved by 9%)
MANPOWER PLANNING Production capacity calculation
(Same example)
Standard time = 0.22 Min (before line balance improvement)
0.20 Min (after line balance improvement)
Production capacity = Operational time (Up time) / Standard time
Operational time = On duty time (Example 8 hours shift) – Down time

If annual sales = 5 Million pieces

Need 5 Million/439,200 = 11.4 Teams
Need 12 Teams x 5 Workers/Team = 60 Workers
 (Before line balance improvement 5M/399,184 = 12.5 teams → 13 teams x 5 = 65 workers)
• Plus, need to consider “Vacation and absentee coverage”
Vacation liability 1 Week/year → 2%
4 Weeks/year → 8% → 60 x 1.08 = 65 Workers
(Given that vacation usage is levelled throughout year)
(If plant is shut down for summer vacation season which is the case in some European countries
where labor law mandate company to provide week(s) of vacation during summer, this is not required – but in
Japan and other Asian countries, theres no similar policies)
Casual absentee coverage is generally done with overtime
• Plus, need to consider “Training coverage” in high-turn over workplace
• Plus, need to consider “Service and utility type workers”
Trucking materials/products, assist size (product) change, etc.

• Remember: Always keep the workers/employees busy all the time! Importance of multi-skill!
Net requirement is 11.4 teams. So, instead of 12 teams with 5 workers each,
9 teams with 5 workers at 100% capacity + 3 teams with 4 workers at 80% capacity
9 x 5 + 3 x 4 = 57 workers (3 teams with 5 workers require further multi-skilling)
For example: 13 hours of workload at a combini with 5 types of skills -> If single-skill then 5 people need to be
hired but if multiskill then just 13/7 = 1.85 ~ 2 people need to be hired
Comparison of solutions

So sánh :
Cell production Assembly line production
(multi-skill) (single-skill)
Descrp Workers take multi tasks Workers take single task
Pro Minimize manning loss (no line balance loss Easy to train workers
Flexible absentee coverage
Cons Training takes time so that workers can Manning loss
master multi skills Less flexible when it comes to
absentee covering

Productivity Management:
Productivity at manufacturing plant CÔNG THỨC
Material productivity = Product weight/Raw material input weight (Yield rate)
Machine productivity = Uptime/Total time (Utilization), Speed or Cycle time/Design
Human productivity = Uptime/Total time (Utilization), Actual time/standard time
(Work pace, Effectiveness)

Ugly management = Quota without solid basis. Assess workers whether each achieved quota.
Bad management: Uptime = Management responsibility ; Effectiveness = Worker’s responsibility
Good management Focus on process (reasons) of low productivity, specify problems, and attack those with
total involvement
 Machine Maintenance

--> Total
Total Productive Maintenance (TPM) by Production Workers (make them responsible for their work!!!!
INVOLVE WORKERS in machine maintenance)

Housekeeping = Nihon’s 3S = seiri, seiton, seisou (barometer of management level) – simple and everyone can
do, everyone understand why its important
TPM MIGHT FAIL if MANAGERS FAIL TO EDUCATE WORKERS ABOUT HOUSEKEEPING!
Also, TPM encourages kaizen 改善! (Ví dụ safety cover màu đen dễ nhìn xuyên qua hơn safety cover
màu vàng)
Spare part control:
Có 2 hình thức spare part control: Central control và decentralized
Central control – better control:

Spare parts inventory is hotbed of dead cash, sleeping capital:

Work Schedule
 Safety management
According to ILO
+ 337 million/year (2015), 370M (2019)
+ 3.4B working population
+ 2.3M deaths/year, 3.0M (2019) increasing, Japan 2000-2500 deaths/year (long working hours, mental illness)
Cost $2.8T/year
Safety risks always exist.
Need to be protected!
1. Hardware
(1) Physically block dangerous area
(2) Sensor and interlock dangerous area
(3) Poka-yoke (Fool-proof, Fail-safe) for example: automobile auto-brake, microwave won’t start unless door
closed
(4) Protective gears
(5) Lock-out Tag-out

2. Software <-- IMPORTANT

Danger caused by:
Human error: (1) miss-lack of skill/knowledge (2) slip-different action from intention ; or
Violation/Short-cut: (1) violating rule (2) laziness

Awareness, awareness, awareness

(1) safety talk
(2) safety control
(3) pointing finger (VD: nhân viên nhà ga ở Nhật Bản point their fingers sang hai bên khi safety check ở
platform
(4) ergonomics (công thái học, vd tư thế làm việc đúng,…)
(5) Warm up exercise
(6) Hiyari-Hatto (Near-miss accident reporting) Nhớ lại nguyên tắc Heinrich: Gần như các tai nạn đều sẽ là
near-miss! Vì thế cần kĩ càng analyse các nearmiss này để tránh gặp lại trường hợp tương tự, vì hầu như toàn là
nearmiss chứ ít khi là tai nạn serious, nhưng việc phòng tránh từ những nearmiss này sẽ gíup tránh đc tai nạn
nghiêm trọng

(7) KYT (Kiken-Yochi Training) Danger detection training

Điều quan trọng: Phải nhắc đi nhắc lại về safety đến mức workers thuộc nằm lòng các quy định về safety thì
thôi (ngày nào cũng phải nhắc!!!! đén mức họ phát chán và ngấm vào trong tiềm thức!!)
Và quan trọng phải có total involvement từ workers!! Hãy chú ý involve toàn bộ workers để bản thân họ nhận
thức trách nhiệm đảm bảo an toàn

Safety management
• Occupational safety and health regulations : More and more strict
Company must demonstrate commitment to safety
Hardware improvement, Software improvement, Training/Education record,
Zero tolerance on safety violation (such as LOTO Lock-Out Tag-Out)
• Worker’s compensation
is a form of insurance providing wage replacement and medical benefit to employees injured in the
course of employment
(Worker’s compensation fraud is becoming serious problem in many countries)
 Labor relations
Labor relations : Generally, management of unionized employment situations
Many principles are applicable in any types of people management
Key points Decent pay/benefit are pre-requisite

(1) Company policy with clear expectation

Many pages of detail policy dont help! Labor law overrides companies policies.
Labor dispute will be judged CASE by CASE anyway!
Concise policy book which contains only minimal but critical expectations is much more valuable!

(2) Fair and consistent

(3) Reward and penalty : 20/60 rule

(4) Communication (slide 63)

(5) Employee involvement (slide 64)

Leader system để provide on-the-job business education (giúp worker hiểu được vì sao lại phải làm cái này cái
kia, help understand the importance of rules)

--> Reminder: Total Involvement (make them responsible for their work!!!! INVOLVE WORKERS!) ->
Workers cảm thấy phải work cho ai đó, thì cảm thấy trách nhiệm của mình ở mỗi công việc -> Ipmprove self-
fulfillment needs -> encourage KAIZEN 改善

Labor Union

Developing countries : Lack of labor law to protect workers

“Greedy management” “Exploit labor” = Huge need for labor union
As labor law becomes well developed to protect worker’s right,
→ Less and less need for labor union, and to keep labor union (Union due and some
case intimidation and violence by union radicals)
Reaganomics in US (1980’s)
Deregulation : Airline industry (thúc đẩy cạnh tranh tự do, khiến nhiều hãng bay cũ biến mất và thị phần
taken over bởi hãng bay mới mà giờ đây là những hãng bay lớn, ví dụ American Airlines), Trucking industry,
and many others
Example : Teamster (Truck driver’s union)
Ratio of organized labor
US 1983 = 20.1% 2013 = 11.3% 2020 = 10.8%
(Japan 18%, Europe 20~30%)
Labor union gains power over management → Restrict management right and flexibility (Governs
by seniority) → Weaken company’s competitiveness
It is extremely difficult to de-certify labor union

Bàn thêm về Reaganomics (1980s)

Reagan đối đầu với công đoàn vì ông tin rằng chúng làm giảm năng suất kinh tế, tăng chi phí lao động, và cản
trở sự vận hành hiệu quả của doanh nghiệp. Vụ PATCO là một bước ngoặt, làm suy yếu công đoàn và thiết lập
tiền lệ rằng chính phủ (và doanh nghiệp) có thể chống lại công đoàn mạnh mẽ nếu cần thiết.

Reagan theo đuổi chính sách thị trường tự do và tin rằng sự can thiệp của chính phủ, cũng như sự kiểm soát
quá mức từ các công đoàn, làm suy giảm hiệu quả kinh tế. Ông cho rằng:

• Công đoàn đẩy chi phí lao động lên cao thông qua việc thương lượng lương bổng, phúc lợi, và điều
kiện làm việc.
• Các chi phí cao này làm giảm năng lực cạnh tranh của doanh nghiệp, đặc biệt trong bối cảnh toàn cầu
hóa và cạnh tranh quốc tế.
• Hạn chế sức mạnh của công đoàn được xem là một cách để doanh nghiệp hoạt động linh hoạt hơn và
giảm giá thành.

Reaganomics nổi tiếng với lập trường chống công đoàn, được thể hiện rõ ràng qua vụ đình công của PATCO
(Professional Air Traffic Controllers Organization) năm 1981. Reagan sa thải hơn 11,000 nhân viên không
lưu đình công, điều này có những hệ quả quan trọng:

1. Suy giảm quyền lực công đoàn:

o Sau sự kiện này, nhiều công đoàn lao động trong ngành hàng không (như công đoàn phi công,
tiếp viên) mất quyền lực thương lượng.
o Điều này giúp các hãng hàng không mới giảm chi phí lao động, góp phần vào sự xuất hiện của
các hãng giá rẻ.
2. Tăng sức ép tài chính với các hãng truyền thống:
o Các hãng lớn có chi phí lao động cao (do hợp đồng công đoàn) không thể cạnh tranh về giá vé
với các hãng giá rẻ.
o Điều này dẫn đến việc nhiều hãng truyền thống gặp khó khăn hoặc phá sản.

2. Vụ đình công của PATCO (1981)

Sự kiện mang tính biểu tượng nhất trong lập trường chống công đoàn của Reagan là cuộc đình công của
PATCO vào năm 1981: PATCO yêu cầu tăng lương và giảm giờ làm trong khi ngành kiểm soát không lưu đã
bị quá tải. Cuộc đình công bị tuyên bố là bất hợp pháp theo luật liên bang, vì nhân viên không lưu là công
chức liên bang. Reagan đưa ra tối hậu thư yêu cầu các nhân viên đình công quay lại làm việc trong 48 giờ. Khi
họ không tuân thủ, ông sa thải hơn 11,000 nhân viên đình công và cấm họ làm việc cho chính phủ liên bang
trong suốt cuộc đời.

Hành động này: Gửi một thông điệp mạnh mẽ rằng chính phủ sẽ không khoan nhượng với công đoàn nếu họ
cản trở sự vận hành của nền kinh tế. Làm suy yếu các công đoàn khác: Sau vụ PATCO, nhiều doanh nghiệp tư
nhân cảm thấy được khuyến khích đối đầu với công đoàn mà không sợ hậu quả pháp lý hoặc chính trị.

-> Ngành hàng không chuyển từ một thị trường tập trung (các hãng lớn) sang thị trường cạnh tranh tự
do với sự xuất hiện của nhiều hãng giá rẻ.

-> Labor union : Management must make union leadership part of the team.
Communicate and educate (Right priority, Business, Long term objectives and vision)
How to handle union radicals, Focus on voice of silent majority
Help union leadership to get credit and save their face on outcomes of negotiation
Incentives (or Bonus) Allocation: Measurement dựa trên cái càng tổng thể thì càng tốt (dù sẽ tốn
communication nhưng bonus là để share the company’s success, nếu chỉ dựa trên cá nhân thì vô nghĩa)
PLANT MANAGEMENT