Conference Proceedings, IRC- 2015

Book of Proceedings

ISBN: 978-969-7581-00-9

International Research Conference on Business, Economics and Social Sciences, IRC-2015

August 01-02, 2015 Istanbul, Turkey.

Nippon Hotel

Topçu Caddesi No: 6 34437 Taksim / İstanbul

Istanbul, Turkey.

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Conference Session Plan

International Research Conference on Business, Economics and Social Sciences, IRC-2015

August 01-02, 2015

Istanbul, Turkey.

Venue: Nippon Hotel

Topçu Caddesi No: 6 34437 Taksim / İstanbul

Istanbul, Turkey.

08:15- 08:30 Welcome

08:30-09:00 Registration and Caucus

09:00-09:10 Welcome Address by Conference Secretary

Location: (Samurai 2) 09:10-09:30 Address by Muhammad Umer Azeem

Johannes Kepler University, Austria. 09:30 Combined Group Photo

09:40- 10:00 Tea/Coffee Break

(Socialization and Networking). 10:00- 12:00 Session I

Parallel Sessions (Samurai 2) 12:00- 13:00 Lunch Break 13:00-15:00 Session II

Parallel Sessions (Samurai 2) 15:00-15:30 Tea/Coffee Break

(Socialization and Networking). 15:30-17:30 Session III

Parallel Sessions (Samurai 2) 17:30-18:00 Closing Ceremony

Best Presentation Awards. Special Awards and gifts for Presenters

(Samurai 2)

Parallel Session II (Samurai 2)

Time: 1 p.m. – 3 p.m.

SESSION II (Samurai 2) PRESENTER DURATION FROM TILL

Session Chair: Umer Azeem, Ph.D.

PAPER 1: The willingness to prolong work life – an empirical analysis with respect to the level of education and gender differences PAPER 2: The active participation of civil society in the creation of public value PAPER 3: New Management Approaches in Higher Education PAPER 4: When does knowledge transfer work best within multinational corporations? PAPER 5: Emerging Political Culture And Attitudes In Post Military Nigeria PAPER 6: About problems of specialists training on informatics in Higher education institutions of Kazakhstan PAPER 7: The Role of Economic Factors in total efficiency of the securities market PAPER 8: Identifying Critical Points and Improvement Strategies in Supply Chain, Using SCOR Model, Theory of Constraint, and Six Sigma

1: Katrin Zohr 2: Laura Boy 3: Eisa Amiri & Mokhtar Ranjbar 4: Ruby P. Lee 5: Muhammad Reza Suleiman 6. Zhangissina Gulnur D. 7. Mohammad Hossein Karbalayi. 8. Amir Shams Koloukhi

15 Min each

Tea Break (Tea Hall)

Time: 3 p.m. – 3:30 p.m.

* Corresponding author.

Email address: khorsandihosein@yahoo.com

Identifying Critical Points and Improvement Strategies in Supply Chain, Using Scor Model, Theory of

Constraint, and Six Sigma

Amir Shams Koloukhi , Hosein Khorsandi Akbarnejhad

, Hossein Parsian

Department of Accounting, Torbat-e-Jam Branch, Islamic Azad University, Torbat-e-Jam, Iran

Department of Accounting, Torbat-e-Jam Branch, Islamic Azad University, Torbat-e-Jam, Iran

Young Researchers and Elite Club, Torbat-e-Jam Branch, Islamic Azad University, Torbat-e-Jam, Iran

ABSTRACT

This study combines Supply Chain Operation Reference (SCOR) Model, Theory of Constraint, and Six Sigma

methodology to identify critical points and offer some strategies for improving supply chain performance. To

identify critical points in supply chain, the measures of SCOR model, Shepherd and Gunter were used, facilitating

systematic measurement of supply chain. Under-study unit in this paper was machinery manufacturing of

Pillevaran. Identifying critical points revealed that planning process of supply chain is the weakest process and

improving project’s execution time is the weakest element of the process. Using definition stages, measurement,

and analysis of Six Sigma, the problem was particularly defined, measured, and analyzed, offering suggestions for

its promotion.

Keywords: SCOR model, Six Sigma, Theory of Constraint, supply chain

. Introduction

For the inconsistency in customers' expectations, huge technology innovations and business globalization trends,

organizations need to upgrade their products to meet their customers' needs in relation to product diversity

increase, cost reduction, higher quality, and faster accountability. Since competition domain has spread from

single firms to the supply chain [ ], companies need to avoid acting autonomously [ ] and cooperate with others

to recognize competitive advantages [ ]. As - of final costs can be directly correlated with the performance

of supply chain [ ], its quality should be permanently improved. For its quality promotion, there are different

tools; but, the most common of them is Six Sigma [ ].Using Theory of Constraint; this paper suggests that

improving critical points promotes the performance of the entire chain. It identifies these points via SCOR mode,

improving them by redesigning sigma and improvement methods.

. Review of literature

It seems that all sciences that a man needs in research and scientific centers can be divided into groups of tools

and techniques, applications and examples, and philosophies. Philosophies reflect the attitudes toward issues

regarding the conditions [ ]. A philosophy of contemporary age has been supply chain management. Zailani and

Rajagopal define a supply chain as a net of raw materials’ sellers, factories converting raw materials into

applicable products, and distribution system for delivering goods to the customers [ ]. Some researchers have

differentiated direct supply chain, broad supply chain, and final supply chain. Direct supply chain includes central

section of a firm, suppliers and customers. Broad supply chain consists of suppliers of suppliers and customers of

customers; and final supply chain refers to all involved organizations [ ].

. Evaluation model of supply chain performance

Table lists various models for the evaluation of supply chain performance.

Table . Performance evaluation models

Model nature Performance evaluation model

Financial indices Accounting measurement system

Good measurement indices of supply chain

including:

. Planning indices

.resource indices

.construction indices

.delivery indices

.return indices

SCOR model

measurement area include:

.logistic financial measurement

. logistic productivity measurement

. logistic quality

. logistic time cycle

Economic efficiency and saving

Identifying time and cost for doing each action

Managers select key performances

Organizations provide a context for connection

with stakeholders.

Provided value by the factory should be

quantitatively

An Organization is evaluated from aspects:

.finance

.customer

.internal processes

.education and growth

A valuable tool for supply chain analysis is SCOR model. It defines some measures for supply chain performance

from general concepts to operational indices. Since corresponding scales of them are hierarchical models, they

comprise more operational measures. Thus, their definition identifies more than one domain, rather than a precise

measure at operational level. Therefore, this study uses SCOR method.

. SCOR model

SCOR model is a reference model. Unlike optimization models, in SCOR model, no mathematic formula,

optimization techniques, or innovation is offered for solving a problem. Instead, some terms and processes are

standardized in it. Configuring these processes helps modeling or representing different elements in a supply

chain to be compared. In the case of good element analysis and making good decisions, performance

improvement for each element and thereby for the entire supply chain is provided [ ].

. . . SCOR model levels

Hierarchically, standard processes are divided into levels:

. Process types. There are process types including planning, resourcing, construction, delivery, and return.

They include operational activities and strategic actions.

. Process category. above-mentioned process types are divided into categories. At this level, common

activities in business such as delayed customer orders, supplier and customer integration, and etc are identified.

Each category is allocated to planning, execution, or empowerment.

. Process element

At this level, process categories are introduced by synthesized process elements and detailed measures.

Generally, the measures of level provide an overview of supply chain to assess management. Level and

include more specific and detailed measures, regarding process categories and elements [ ].

. Theory of constraints

In the late s, Goldrat introduced Theory of Constraints in his book. The main idea of this theory is

focusing on gorges management. It seeks continuous improvements via recognizing limitations and manufacturing

throats in the organization. Thus, the aim of this theory is identifying constraints and managing them for

increasing efficiency. Similar to just-in-time production of Japanese management, this theory focuses on

continuous improvement. Accordingly, both of them are categorized traditionally. Their difference lies in the fact

that just- in-time approach focuses on decreasing inventories and waste reduction while Theory of Constraint

concerns the limitations in the firm and removing them [ ].

. Six Sigma

Six Sigma is regular innovation, emphasizing the areas which are important for the customer. They identify the

changes in the processes and remove them. This method is precise, decreasing the changes in all important

processes for performance improvement, inducing financial economization for the organizations. Six Sigma

enables the firms to use real data and exact methodology to root the causes of process changes (production,

service, transactions) not an empirical, abstract, or hypothetical one [ ]. Six Sigma is a powerful business

strategy, leading to default, error, and problem reduction [ ]. Kumar et al. define Six Sigma as a powerful

managerial tool, inducing enormous achievements for the organization [ ].

. Common methodologies in Six Sigma

a. DMAIC

In Define, Measure, Analyze, Improve, control (DMAIC) methodology, after identifying the problem and its

measurement, improvement continues as much as possible.

Fig . Improvement methodology

b. DMADV

In Define, Measure, Analyze, Design/ Redesign, Verify (DMADV) methodology, after identifying the problem

and its measurement, design/ redesign of the product or process is exerted [ ]. In this study Improvement

methodology has been utilized.

Fig . Design/ Redesign methodology [ ]

Due to the novelty of combining SCOR Model, Theory of Constraint and Six Sigma for identifying critical points

and improvement strategies in supply chain, this paper has sufficed to the overview of the studies close to the

current research.

According to Choi et al, the way of accessing the quality level of Six Sigma in supply chain is not clear [ ].

Swartwood also supports the notion of combining SCOR Model with Six Sigma; since they can complement each

other. In a way that SCOR causes a fundamental understanding of supply chain issues while Six Sigma is used for

improving the projects [ ].Trent emphasizes the extension of Six Sigma in supply chain, offering trainings for

the suppliers of main equipment manufacturers [ ].Avery, Moore, and Baljko Shah used Six Sigma for the

companies which have problems with their suppliers [ ][ ][ ]. Raytheon studied some suppliers’ attempts to

reach on time delivery, concluding that Six Sigma decreases deviations in supply chain [ ]. Burton and

Boeder offered some applications of Six Sigma for improving inventory performance and reducing supply chain

costs [ ]. Dasgupta showed in his study that how Six Sigma standards can help the organizations. Organized

methodology of this article with Six Sigma measures provided effective control and improvement for the

performance of supply chain [ ]. Wang et al. introduced an applied directory for evaluation, improvement, and

quality control in supply chain management, using Six Sigma measures. They led to significant cost reduction and

service promotion [ ]. Knowles et al. tried to prove that Six Sigma measures not only are improvement and

change strategy, but also yield important business advantages for the organization. Their offered model in that

study integrated balanced evaluation and SCOR Model and DMAIC methodology of Six Sigma in two-level

framework [ ]. Chappel and Peck reported some findings about variations of supply chain management in

England’s defense mechanism. This study had two goals: .investigating type and reason of variation in supply

Define Control Improve Analyse Measure

Define Verify Design/Re

design Analyse Measure

chain, . identifying if Six Sigma measures can be usefully exerted in their context. This study showed efficiency

of Six Sigma measures in defense industry’s supply chain [ ]. Yeh et al. aimed to access a calculation model of

bilateral fuzzy linguistics to evaluate management performance of supply chain. In this model, management had a

high precision in applying DMAIC processes and offered a framework for performance evaluation [ ]. Shepherd

and Gunter had a critical review of contemporary literature, aiming to achieve the criteria and evaluation systems

of supply chain. Accessing effective factors in successful execution of evaluation system of supply chain and

creating preventive evaluation fields are the issues which haven’t received enough attention [ ].In an article

titled "integrating hierarchical analysis and balanced evaluation card", Kumar and Bhagwat sought an approach

for identifying effective factors in evaluating supply chain and its management. They offered their criteria in

groups of balanced evaluation card for financial, customer, internal processes, learning, and growth [ ]. Yang et

al. used Six Sigma measures to evaluate the success of suppliers and a model for supply chain of Samsung

Company to improve its management improvement [ ]. Jingyuexu et al. developed a conceptual model, picturing

DMAIC principals for improving supply chain [ ]. Jin et al. introduced an integrated model of Six Sigma and the

theory of constraint whose practical application was followed in a production line step by step. The results of

testing model’s reliability showed performance difference in production line in the form of increasing production

capacity, decreasing standard production deviation and during production goods [ ].

. Research questions

To examine the effects of oil price volatilities on macroeconomic variables, SVAR model is used. We use Impulse

Response Function and Due to the nature of present study, this study doesn’t have any hypotheses. But, the

questions of the study are as follows:

. What are the critical points of supply chain in the firms of the study?

. What are the needs of internal customers and essential actions for accessing Six Sigma levels?

. What are the criteria of performance measurement for accessing Six Sigma levels?

. What quality and quantity should the criteria have?

. What deviations in supply chain cause deviation in the product?

. Executive stages of the study

Using Theory of Constraint by which critical points improve and redesign Six Sigma, this study offers some

suggestions for improving the entire supply chain. To identify critical points in supply chain, the criteria of

Shepherd and Gunter ( ) were used to provide the systematic measurement of supply chain.

Thus, the executive stages of the study are as follows:

. Identifying the weakest process in supply chain amongst the processes of a model , SCOR model

(plan, resourcing, construction, delivery, and return) by the head and counselors of the organization

. Identifying the weakest elements of the process amongst the elements of level three process , SCOR

model has been depicted weak from the view of the manager and experts

. Definition, measurement, and analysis of the problem in DMAIC or DMADV methodology

According to mentioned points, this study is applied regarding its nature; and it is descriptive-analytic regarding

its methodology. The executive model of the study is represented in Figure .

Fig . Conceptual model of the study

. Methodology

This study uses questionnaires. questionnaires were designed according to the elements of SCOR model for

identifying critical points. Two other questionnaires and an interview were used for defining the needs of internal

customers and evaluating current status.

These tools were utilized as depicted below:

. To identify critical points of supply chain, first questionnaire was given to the head and counselors of

producing firm to recognize the weakest process among the processes of level one in SCOR Model.

. Second questionnaire was given to decision-making team to examine and match the elements of level

three processes in SCOR Model, regarding the conditions.

. Third questionnaire was given to the managers and the experts of the weakest process to identify the

weakest elements of that process amongst localized process elements of level three in SCOR Model.

. Using questionnaire and interview with managers and experts, weak process is identified and the

customer of that process defines, measures, and analyzes DMAIC methodology of Six Sigma.

To analyze data in identifying the weakest process among the processes of level one of SCOR Model and the

weakest elements of the process in level three of SCOR Model, fuzzy-group hierarchical analysis was used. Using

interview and the questionnaires of customer needs (problem definition in DMAIC methodology), performance

measurement criteria of selected projects and their quality and quantity (problem measurement in DMAIC

methodology) and deviation determination, leading to deviation in final product (problem analysis in DMAIC

methodology) were recognized.

. Results

This section aims to answer the following question:

. Where are critical points in supply chain of Pillevaran Company?

Questionnaire was given to a team with members to identify the weakest process in supply chain among the

processes of level of SCOR Model (planning, resourcing, construction, delivery, and return). Due to their

knowledge about the organization, decision-making team introduced planning with the weight of . as the

weakest process amongst supply chain processes of Pillevaran Company (Table ).

Identifying the weakest process in supply chain amongst the processes of SCOR model by the head and counselors of the

organization

Identifying the weakest elements of the process amongst the elements of level three process of SCOR model from the

view of the manager and experts

Definition, measurement, and analysis of the problem in DMAIC or DMADV methodology

DMAIC DMADV

Table . The weights of supply chain processes

Element topic weight

planning .

resourcing .

construction .

delivery .

return

It is worth notifying that for the nature of the firm’ s contracts and repairs, happening in the place if necessary,

return process is regarded as insignificant.

Since planning process involved all organizational units, in the next stage all team members were polled. The

elements of planning process, introduced by Shepherd and Gunter were gathered in Questionnaire . They were

given to decision-making team to measure adoption extent of these elements with organizational activities from

one hand and add any activity considered important by the team members later from the other hand.

Before providing decision team with process elements, process elements were recognized as contradictory with

the nature of project activities of the company. Thus, the elements of planning process reduced to elements and

were given to decision team for localization. Table shows the means and standard deviations of the elements of

the process.

Table . The means and standard deviations of process elements

Process elements mean Standard deviation Variable

type

Sale . . Cost

profit . . Cost

Capital return . . Cost

Capital return rate . . Cost

equity . . Cost

Data transfer cost . . Cost

Deviation from contracts

amount

. . Cost

Total costs of supply chain . . Cost

Asset return . . Cost

Added value of productivity . . Cost

Overhead costs . . Cost

Intangible cost . . Cost

Encouraging cost and etc . . Cost

Empowerment increase in

cost control

. . Cost

Capital opportunity cost . . Cost

Total responsiveness time of

supply chain

. . Time

Total time cycle of supply

chain

. . Time

responsiveness time to

customers

. . Time

Spent time for order(order

lead time)

. . Time

Spent time for order

execution(order execution

lead time)

. . Time

Total time of current money . . Time

Business relations record . . Time

Cycle time of turning cash

into cash

. . Time

Improving project execution

time

. . Time

Accessing rate to quality

goal

. . Quality

Order entrance methods . . Quality

Cooperation and presence in

planning

. Quality

Orde r flexibility . . Quality

Perfect order execution . Quality

Inter-unit interaction . . Quality

Mixing flexibility . . Flexibility

Using new technology . . innovation

Process elements with the mean of and higher and standard deviation of and lower were selected for

prioritization. As seen in Table , process elements were considered containing required conditions.

According to suggested classification of Shepherd and Gunter, process elements were included in general

classifications (cost, time, quality, and innovation). Priority and weight of key criteria which are effective in

planning supply chain, extracted from Questionnaire , are shown in Table .

Table . Priority and weight of key criteria in planning supply chain

criteria Index(process

element)

process element

weight

Final weight Critical points

Cost ( . ) sale . .

profit . .

Capital return -

Capital return rate -

equity

Special earning -

Deviation from

contracts amount

. .

Empowerment

increase in cost control

. .

Time ( . ) Total time of supply

chain

-

Responsiveness time

to customers

-

Order lead time -

Total time of current

money

-

Business relations . .

record with suppliers

Improving project

execution time

. .

Quality ( . ) Accessing rate to

quality goal

. .

Order entrance

methods

. .

Cooperation and

presence in planning

. .

Order flexibility . .

Perfect order

execution

. .

Inter-unit interaction . .

Innovation

( . )

Using new technology . .

Based on Table , the weakest element of improving the time of project execution is with the final weight of . .

Due to the weight of . of planning process , the weight of improving the time of project execution in supply

chain is . . = . which is significant.

. What are the needs of internal customers and necessary actions for accessing Six sigma level?

To answer this question, interview technique was used. To assure about precise identification of directing

management and executive manager, Kano ’s questionnaire was given to them after interview.

The arguments such as quality provision along with project delivery in due time from directing manager and the

head of the firm in this study have different reasons. First, the company mentions the expected quality of the

projects in its primary contract. Also, the firm guaranties tools’ performance during work. Moreover, heavy

financial fines for delays in contracts are regarded and delivery delay in projects leads to damages to the firm’s

reputation. After interview, for making sure about precise identification of internal customer needs, Kano

questionnaire was distributed. Analyzing the questionnaires revealed that time and cost have higher priorities than

quality and innovation. Then necessary actions should in the path of reducing time and cost in the framework of

required quality.

. What are the performance measurement criteria of necessary actions for accessing Six Sigma level?

In another research framework, effective elements in firm’s performance were identified and measured. Among

elements of that study, elements consistent with production area and identified needs were selected. Those

elements are as follows:

. Product design

. Precise evaluation of contractors

. Project control and plans(regarding time and costs)

. Learning new methods for cheap production

. Operation and product quality and inventory management

. Adoption with standards

. Intention of group work

. production planning

. Planning materials

. The process of equipments purchase and contracting

. The system of repair and maintenance planning

. What quality and quantity should the criteria have?

Due to the nature and difference of amounts in contacts, no special quality can be regarded for the criteria. Since

decision team described Number out of as satisfactory during filling the questionnaires, number was

regarded as expected satisfactory quantity.

. What deviations in supply chain induce deviations in time and quality?

To identify deviations leading to time and quality deviation, the means, standard deviation, effect intensity, and

deviation amount of above -mentioned elements are shown in Table .

Table . Deviation rate of elements

Elements

Effect

intensity

α

Element

score in

current

state

µ

Deviation

amount

δ

In case of

not using

standard

deviation

in

deviation

extent

Product design . . . . .

Precise contractor

evaluation . . . . .

Controlling projects,

sketches, plans

(regarding time and

cost)

. . . . .

Learning new

production methods for

cheap production

. . . . .

Operation, product, and

inventory quality . . . . .

Adoption with

standards . .

Intention to group work . . . . .

Production plan . . . . .

Materials plan . . . . .

Equipment purchase

and contracting process . . . . .

Repair and

maintenance planning

mechanism

. . . . .

According to Table , examining standard deviation of research questions changes deviation order. Six deviations

remain fixed. Third element (controlling projects, designs, plans) are identified as an element with the maximum

standard deviation. th, nd, th, th, and th elements (production planning, precise evaluation of contractors,

learning new methods for cheap production, equipment purchase process, and contracting) play the maximum role

in deviations. In measuring the current status, using predetermined criteria, the present status of the company was

measured. Total deviation of those elements is , ; but, since it is not significant, DMAIC process is

suggested for improvement.

Conclusion

Six Sigma is a considerable tool for improvement. When it is combined with Theory of Constraint, it gives

improvement priority to the weakest point, offering an effective technique for promoting total performance of the

unit. As a result of inconsistency in customers' expectations, huge innovations, and business globalization for

meeting customer demands, increasing product diversity, and higher quality, an important contemporary

philosophy of two recent decades has been supply chain. Using SCOR model, the weakest process and process

elements were identified. Using Theory of Constraint, some suggestions were provided for improving critical

points of supply chain.

The weakest process of supply chain for Pillevaran Company was planning and the weakest planning elements

(critical points - ) included improving project execution time, inter-units interaction, accessing rate to quality

goals, using new technology, sale and business relation records. Elements leading to the maximum deviation

included project control, sketches and planning, production plans, precise evaluation of contractors, learning new

production methods for cheap production, equipments’ purchase, contracting, and materials’ plan. Since the

company acts in a competitive environment, its equity is zero. From the other hand, the company usually

estimates project time lower than predicted time to win tenders in competitive conditions. Then, regarding on time

delivery and cost, the firm is under pressure.

The suggestions for this company are as follows. The firm should compensate for time shortage to halt whip effect

of lagged delivery. Although there is a good archive of the suppliers in the firm, business relations record is th

critical point because of its imprecise contractors' evaluation. Since accessibility rate to quality goals depends on

qualitative input, fortifying it in annual evaluation framework is suggested.

For inter-units interaction as the second critical point, it is suggested that proper and matching units are located in

one physical space to increase close interactions. Evaluations are in group form to involve the staff in group work.

It is also suggested that the company considers hybrid issues in production planning to control the projects and

plans precisely; for example, pieces’ hardness, machinery breakage, staff power, and education amount given to

the staff.

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