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Lean Supply Chains

Lean Supply Chains. Dr. Jay Heizer, CPIM Rod Cantu, CPIM, PMP, ITIL. Agenda. Background Managing the Supply Chain SC Opportunities, Economics SC Strategies High-performing Companies Measuring SC Performance. Lean Principles. Value Value Stream Flow Pull Perfection. Defining Lean.

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Lean Supply Chains

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  1. Lean Supply Chains Dr. Jay Heizer, CPIM Rod Cantu, CPIM, PMP, ITIL

  2. Agenda Background Managing the Supply Chain SC Opportunities, Economics SC Strategies High-performing Companies Measuring SC Performance

  3. Lean Principles Value Value Stream Flow Pull Perfection

  4. Defining Lean Lean is: “A systematic approach to identifying and eliminating waste (non-value-added activities) through continuous improvement by flowing the product at the pull of the customer in pursuit of perfection.” – The MEP Lean Network

  5. SHIP PRINTING CURATION MATTING ASSEMBLY QC SAW JOIN PUTTY PCE = 1.5% Value Stream Map

  6. Lean = Eliminating the Wastes D O W N T I M E Defects Overproduction Waiting Non-value added processing Transportation Inventory Motion Employees Underutilized Value Added Non-Value Added

  7. Lean Tools & Techniques Pull/Kanban Cellular/Flow TPM Quality at Source POUS Set up Reduction Standardized Work Batch Reduction Teams 5S System Visual Plant Layout Value Stream Mapping Continuous Improvement

  8. Firm Country Component Latecoere France Passenger doors Labinel France Wiring Dassault France Design and PLM software Messier-Bugatti France Electric brakes Thales France Electrical power conversion system and integrated standby flight display Messier-Dowty France Landing gear structure Diehl Germany Interior lighting Some Boeing Suppliers (787)

  9. Firm Country Component Cobham UK Fuel pumps and valves Rolls-Royce UK Engines Smiths Aerospace UK Central computer system BAE SYSTEMS UK Electronics Alenia Aeronautics Italy Upper center fuselage & horizontal stabilizer Toray Industries Japan Carbon fiber for wing and tail units Some Boeing Suppliers (787)

  10. Firm Country Component Fuji Heavy Japan Center wing box Industries Kawasaki Heavy Japan Forward fuselage, Industries fixed section of wing, landing gear well Teijin Seiki Japan Hydraulic actuators Mitsubishi Heavy Japan Wing box Industries Chengdu Aircraft China Rudder Group Hafei Aviation China Parts Some Boeing Suppliers (787)

  11. Firm Country Component Korean Aviation South Wingtips Korea Saab Sweden Cargo access doors Some Boeing Suppliers (787)

  12. A Supply Chain for Beer

  13. Supply Chain Management The objective is to build a chain of suppliers that focuses on maximizing value to the ultimate customer

  14. Competitionis no longer between companies; It is between supply chains

  15. A Lean Supply Chain Members are linked by upstream and down stream flows of products, services, finances, and information that collaboratively work to reduce cost and waste by efficiently and effectively pulling what is needed to meet the needs of the customer. Modified from APICS

  16. Managing the Supply Chain There are significant management issues in controlling a supply chain involving many independent organizations therefore: • Trust • Mutual agreement on goals

  17. Collaboration Is Necessary ButNothing works if you do not TRUST each other

  18. Because Effective Efficient Supply Chains are Integrated

  19. Integrate the Supply Chain Strategy – Mutual Goals

  20. Integrate the Supply ChainStrategy – Mutual Goals

  21. Integrate the Supply ChainStrategy – Mutual Goals

  22. Supply Chain Opportunities(besides selecting the vendors themselves) Important lean activities include collaboration on: Transportation / Logistics vendors Credit and cash transfers Distributors Accounts payable and receivable Warehousing and inventory Order fulfillment Sharing customer, forecasting, and production information

  23. Supply Chain Economics Supply Chain Costs as a Percent of Sales

  24. Supply Chain Strategies • Negotiating with many suppliers • Long-term partnering with few suppliers • Vertical integration • Joint ventures • Keiretsu • Virtual companies

  25. Typical Problems / Issues in a Supply Chain • Local optimization - focusing on local profit or cost minimization based on limited knowledge • Incentives (sales incentives, quantity discounts, quotas, and promotions)- push merchandise prior to sale • Large lots - low unit cost but do not reflect sales • Bullwhip effect- stable demand becomes lumpy orders through the supply chain

  26. Opportunities in an Integrated Supply Chain Collaborative planning, forecasting, and replenishment (CPFR) Accurate “pull” data Single stage control of replenishment Vendor managed inventory (VMI)

  27. Opportunities in an Integrated Supply Chain Postponement Drop shipping and special packaging Pass-through facility Channel assembly

  28. Opportunities in an Integrated Supply Chain Blanket orders with end of period volume discounts Standardization of processes Lot size reduction Improved Inventory Tracking (RFID)

  29. Collaboration on PurchaseSupplier’s Costs

  30. Collaboration on Purchase

  31. Collaboration on PurchaseSupplier’s Profit @75% CapacitySupplier and Buyer both Profit

  32. Vendor Selection & Development • Vendor Evaluation • Critical decision • Find potential vendors • Determine the likelihood of them becoming good suppliers • Vendor Development • Training • Engineering and production help • Establish policies and procedures

  33. Harley-Davidson • Emphasizes quality and lean manufacturing • Materials as Needed system • Many variations possible – modules • Tightly scheduled repetitive production line

  34. Frito-Lay • Effective Sales & Operations Planning process covers 3 to 18 months • High fixed costs require high volumes and high utilization • Demand profile based on historical sales, forecasts, innovations, promotion, local demand data

  35. Frito-Lay • Match total demand to capacity, expansion plans, and costs • Quarterly aggregate plan goes to 38 plants in 18 regions • Each plant develops 4-week plan for product lines and production runs

  36. Attributes of a Lean Supply Chain Improved Demand Management Waste and Cost Reduction Process Standardization Industry Standards Adoption Cultural Change Agent Cross Enterprise Collaboration Source: 2005 Report on Lean Practices in the Supply Chain Report

  37. Supply Chain Benchmarks

  38. Inventory as a % of Total Assets(with exceptional performance) Manufacturing 15%(Toyota 5%) Wholesale 34%(Coca-Cola 2.9%) Restaurants 2.9%(McDonald’s .05%) Retail 27%(Home Depot 25.7%) Measuring Supply Chain Performance - Assets

  39. Examples of Annual Inventory Turnover Food, Beverage, Retail Manufacturing Anheuser Busch 15 Dell Computer 90 Coca-Cola 14 Johnson Controls 22 Home Depot 5 Toyota (overall) 13 McDonald’s 112 Nissan (assembly) 150 Measuring Supply Chain Performance - Turnover

  40. Other Performance Metrics Supply Chain Attribute Metric Measure order fulfillment (Quantity, quality, timeliness, etc.) Order fulfillment cycle time Responsiveness to demand changes Delivered cost plus supply chain mgt costs • Reliability • Speed to customer • Flexibility • Costs

  41. Resources Whitepaper: Understanding the Lean Supply Chain: Beginning the Journey 2005 Report on Lean Practices in the Supply Chain Lean Six Sigma for Supply Chain Management by James Martin Lean Supply Chain Management Essentials: A Framework for Materials Managers Improving the Extended Value Stream: Lean for the Entire Supply Chain Darren Dolcemascolo Lean Supply Chain Management: A Handbook for Strategic Procurement by Jeffrey P. Wincel http://www.youtube.com/watch?v=Mi1QBxVjZAw&feature=related (Arizona State University)

  42. Plan: Demand/Supply planning and Management Source: Identify, select, manage, and assess sources Make: Manage production execution, testing and packaging Deliver: Invoice, warehouse, transport and install Return: Raw material Return: Finished goods The SCOR Model Processes, metrics and best practices

  43. THANK YOU Questions?

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