Lean Supply Chain - UNIVPMLean Supply Chain 5 The Dynamics of Lean To only one pacemaker process With just the right Standard Inventory of:-Cycle stock Buffer stock and Safety stock

Lean Supply Chain 1

La Lean Supply Chain

Lean Supply Chain 2

La Lean Supply Chain

Just in Time“le parti richieste al momento richiesto

nelle quantitàrichieste”

Precondizioni• Flusso Continuo

• Sistema Pull• Takt Time

• Produzione Livellata

Miglior Qualità – Costi Inferiori - Lead Time breviRiducendo il Production Flow Eliminando gli sprechi

“Qualitàintrinseca”

• Line Stop- Manual- Automate

• Error Proofing• Visual Control

Stabilità Operativa Lavoro Standardizzato Processi e Prodotti Robusti Total Productive Maintenance Coinvolgimento dei Fornitori

Manodopera Flessibile, abile,

Altamente Motivata

Lean Supply Chain 3

Lean Thinking

• The objective is to manage the business backwards from the consumer definition of value - not forwards from your organisation and your assets

• To create lean primary processes to design, deliver and support this value - with minimum wasted effort and time – and the necessary lean support processes

• And to build a lean management system to develop, sustain and improve these processes over time

• Be clear about consumer Purpose, before designing the Processes and then organising the People

Lean Supply Chain 4

Lean Principles• Specify value from the standpoint of the consumer -

(not from your assets and organisation)• Identify the value stream through the steps required to

create each product - from concept to launch and order to delivery - and remove the wasted steps

• Make the process of value creation flow smoothly and quickly to the customer

• But only in line with the pull of the consumer • While pursuing perfection by constantly improving the

product and the value stream

Lean Supply Chain 5

The Dynamics of Lean

To only one pacemaker

process

With just the rightStandard

Inventory of:-Cycle stock

Buffer stock andSafety stock

Uninterrupted flow back to the

customer’s point of use

No warehouses,only Cross-Docksand Mixed-model

Milk Runs

FIFOReflexive

Pull all the way back to raw materials

Every Product Every

Interval capability

Separate capacity planning from production

instructions

Production pulled from

every upstream step

Every step is:-ValuableCapableAvailableFlexible

and Adequate

Combine steps where you can

to flow

Demand signals direct from the

customer’s point of use

No createddemand

amplification

Levelled and released in

small quantities

Lean Supply Chain 6

Current State Value Stream

ShippingAssembly 2Assembly 1S. Weld 2S. Weld 1Stamping

Production Control

MRP

Weekly Schedule

Daily Ship Schedule

Production Lead Time = 23.5 daysValue Added Time = 184 secs

State StreetAssembly

Forecast

Daily Order

Daily

MichiganSteel

Forecast

Weekly Order

2 x Week

II I I I I

Future State Value Stream

Production Lead Time = 4.5 daysValue Added Time = 166 secs

Shipping

Production Control

State StreetAssembly

Forecast

Daily Order

Daily

Daily Order

Weld and Assembly CellStamping

MichiganSteel

Forecast

Daily Order

Daily

Ask the Ask the key key

questionsquestions

Implementing Lean

Value Stream PlanProduct Value PersonFamily Stream Measurable Monthly Schedule inBusiness Objective Goal ChargeObjective 1 2 3 4 5 6 7 8 9

ImproveProfitabilityIn Steering Brackets

V S Manager JimDate 03/02/2003

Product FamilySteering Brackets

Pacemaker *Continuous flow from

weld to assembly Zero WIP John*Kaizen to 168 secs < 168 s/t Dave*Eliminate weld

changeover < 30 sec c/o Sam*Uptime weld #2 100% Mike*Finished goods pull 2 days FG Sue*Materials handler Pull Schedule James

routesStamping*Stamping Pull 1 day inventory Fred

+ pull schedule*Stamping changeover batch size Tim

300/160 piecesc/o < 10 min

Supplier*Pull coils with daily delivery Graham

daily deliveryr < 1.5 days ofcoils at press

Check Check progress progress

and stabiliseand stabilise

Lean Supply Chain 7

Current State

44d55m

738

Steps

Time

Steel

DELTA STEEL

Stamping

GAMMA STAMPING

Warehouse Cross Dock

Wipers

BETA WIPERS

Assembly

Dist. Centre

Cross Dock

ALPHA MOTORS

Amplification

F E D C B A

%

40

30

20

10

0

F E D C B A

Quality & Deliveryppm

2000

1500

1000

500

0

F E C A

%

10

5

0

AssemblyWipersStamping

SteelDist. Centre

16d55m

398

Steps

Time

Amplification

F E D C B A

%

40

30

20

10

0


2000

1500

1000

500

0

F E C A

%

10

5

0

F E D C B A

DELTA STEEL

GAMMA STAMPING BETA WIPERS ALPHA MOTORS

Future State 2Flow and Pull between Plants

Time Time reduced reduced

from 44 to from 44 to 24 days24 days

Ideal StateValue Stream Compression

Dist. Centre

3d55m

308

Steps

Time

Amplification

F E D C B A

%

40

30

20

10

0


2000

1500

1000

500

0

F E C A

%

10

5

0

F E D C B A

Steel

EPSILON STEEL

Assembly

ALPHA MOTORSSUPPLIER PARK

WiperCell

StampingCell

Time reduced Time reduced from 24 to 3 from 24 to 3

daysdays

Across the Value Stream

Lean Supply Chain 8

Lean vs. Tradizionale

• Metà tempo per l’ingegneria• Metà tempo sviluppo prodotto• Metà investimento in macchine, utensili ed

equipaggiamenti• Metà impegno della manodopera in azienda• Metà difetti nel prodotto finito• Metà spazio in azienda a parità di output• Un decimo del WIP

Lean Supply Chain 9

Lean vs. Tradizionale

• 99,9% Customer Schedule Attainment• 15 PPM or Better• 4-6 Inventory Days of Supply• 92%+ Operational Availability• Leveled, Sequenced Production• Order to Customer Use - 4 1/2 Hours• Functioning Supplier Partnership• Strong Production Control Function

Lean Supply Chain 10

Changing Costing Methods

Principles of Cost Reduction: PROFIT = SALES PRICE - COST

ModernView

TraditionalView

ProfitProfit

Profit

Mfg.Mfg.CostCost

Mfg.Mfg.CostCost

Mfg.Mfg.CostCost

SalesPrice

SalesPrice

SALES

Profit

ProfitProfit

Mfg.Mfg.CostCost

Mfg.Mfg.CostCost

Mfg.Mfg.CostCost

SalesPrice

Principles of Cost Plus: SALES PRICE = COST+ PROFIT

Principles of Cost Reduction: PROFIT = SALES PRICE - COST

ModernView

TraditionalView

ProfitProfit

Profit

Mfg.Mfg.CostCost

Mfg.Mfg.CostCost

Mfg.Mfg.CostCost

SalesPrice

SalesPrice

SALES

Profit

ProfitProfit

Mfg.Mfg.CostCost

Mfg.Mfg.CostCost

Mfg.Mfg.CostCost

SalesPrice

Principles of Cost Plus: SALES PRICE = COST+ PROFIT


Lean Supply - Global Purchasing Strategies

• Common Strategy– Buy Cheapest in the world– Support with dual sourcing

• Toyota Strategy– Buy to achieve lowest total cost– Buy in country where manufacturing is performed– Minimize Number of Suppliers– Keep supply chain short as possible– Toyota is as strong as its weakest

supplier


Consequences of Cheapest Price

• Long Distance Supply– Long lead times– increases structural cost: people, travel, premium

freight, packaging, obsolete material, scrap due to handling damage

• Buying cheapest restricts buying from best supplier and achieving total lowest cost

vs• Buying from best supplier, then get lowest cost


Consequences of Long Supply Chains

• Long Value Streams Result in:• High Risk

– Quality Spills– Availability of Supply– Engineering Changes

• High Cost– Transportation (Premium and Standard)– Engineering Support/Supplier Development– Plant Overtime


The Lean Enterprise

TraditionalManufacturing

& Support Functions

Lean SupplyChain

Implemented

Full Benefits ofLean Supply Chain

Lean Enterprise Leap


Operations, PC&L, Engr


Purchasing, Finance, Quality

Purchasing, Finance, Quality World Class

Lean Supply Chains are not just a MaterialsManagement Effort

TraditionalManufacturing

& Support Functions

Lean SupplyChain

Implemented

Full Benefits ofLean Supply Chain





Purchasing, Finance, Quality

Purchasing, Finance, Quality World ClassWorld Class

Lean Supply Chains are not just a MaterialsManagement Effort


Demand/Schedule VarianceCauses

All production operations receive same schedule

Planning/Scheduling System Mechanics: Push Scheduling

PRODUCTION FLOW

Supplier Machining Assembly CustomeCustomerr

ScheduleSchedule

ProductionProductionSchedulingScheduling

Schedule

Schedule Sch

edul

eS

ched

ule

Schedule

Schedule

Reaction to Changes Occurs Only Weekly

All production operations receive same schedule


PRODUCTION FLOW


ScheduleSchedule


Schedule

Schedule Sch

edul

eS

ched

ule

Schedule

Schedule



PRODUCTION FLOW


ScheduleSchedule


Schedule

Schedule Sch

edul

eS

ched

ule

Schedule

Schedule



OEM Tier# 1

Tier# 2

Traditional Scheduling Systems1. Demand and schedule are usually different2. Noise increases moving down stream3. Affected most by changes in order quantity, delivery time and lead time

Schedule

Actual Demand

Typical Demand/Scheduling Model


Decoupling points and strategic inventory

DrivenBy

DemandDriven

ByForecast

Plants DistributionCentres

Warehouses Depots


Two key de-coupling pointsForecast Driven Order Driven

Less uncertainty due to enrichment of undistorted data

Push Pull

Factory Assembler Finished goods Stock

Retailer

Market sales

Informationde-coupling

point

Direct market sales information

Material de-coupling

point


RawMaterial Machining Assembly

CustomerLeveled Production

Plan

Ship

Pull Schedule Assembly Schedule

Ship Ship

Pull Schedule

Lean Supply Chain - Pull Production System


Process: Smoothing Production to Reduce Supply Chain Cost

O.E. Tier 1 Tier 2Ship

PullSignal

PullSignal

Ship

Leveled SequencedProduction

Leveled SequencedProduction

1. Smooth production build and communicate plan to suppliers2. Maintain daily production levels as planned (maintains smooth flow)3. Minimize parameter changes in system (lot size, quantity, & lead time)4. Convert from push scheduling to pull scheduling5. Maintain open communications with supplier - Provide Supplier

access or view of actual demand

Action Steps-All Customers

OEM’s Lead Supply Chain Management Process


Takt Time = Time (Available seconds per working day)Volume (Daily production requirement)

Cycle Time = Actual time required for a worker to

complete one cycle of his job process

Sets pace of production tomatch pace of sales.

Takt Time Vs. Cycle Time -An Important Distinction


Implementing the Lean Supply Chain

• Level Sequenced Production– producing a repeatable pattern by volume

and mix within each day of the monthly production plan

– Characterized by:• a smoothed production plan over an

extended time• every model made every day• daily adjustment can be made• a predictable production process


Implementing the Lean Supply Chain

Summary– Find the best supplier and engage early in the

design process– Partner with key suppliers that have high

capability for design and supply– Suppliers should be located in the country where

you build your product– Shorten the supply chain by having suppliers

close, frequent deliveries, and leveled production plans

– Develop pull systems with suppliers– Know production capacity by comparing effective

cycle times with Takt times.


Impact ofAgileManufacture

Impact ofAgileLogistics

PostponedFulfillmentPostponedFulfillment

AgileSupply Chain

AgileSupply Chain

RapidReplenishment

RapidReplenishment

OrganisationalAgility

OrganisationalAgility

FlexibleResponseFlexible

Response

LeanProduction

LeanProduction

Economiesof Scale

Economiesof Scale

Standardisation/Modularisation

Standardisation/Modularisation

WasteReduction

WasteReduction

AgileSupplyAgile

Supply

VendorManagedInventory

VendorManagedInventory

SynchronisedOperations

SynchronisedOperations

ProcessManagement

ProcessManagement

CrossFunctional

Teams

CrossFunctional

TeamsDemandDriven

DemandDriven

Visibility ofReal Demand

Visibility ofReal Demand

ContinuousReplenishmentProgrammes

ContinuousReplenishmentProgrammes

Set-upTime Reduction

Set-upTime Reduction

QuickResponse

QuickResponse

Non-Value-AddingTime Reduction

Non-Value-AddingTime Reduction

Principles

Programmes

Actions

CapacityManagement

CapacityManagement

ProcessRe-engineering

ProcessRe-engineering

Documents

Lean Supply Chain - UNIVPMLean Supply Chain 5 The Dynamics of Lean To only one pacemaker process With just the right Standard Inventory of:-Cycle stock Buffer stock and Safety stock