©LeanCor 2012

BUILDING A LEAN

FULFILLMENT STREAM

Brad Bossence

bbossence@leancor.com

678-876-9009

May 15th, 2013

Derek Browning

dbrowning@leancor.com

859-652-1812

www.LeanCor.com

©LeanCor 2012

LeanCor offers a unique and strategic combination of services:

Third Party Logistics

Hands-on Consulting

Training and Education

We partner with organizations to

eliminate waste, drive down costs,

and instill a problem-solving culture

across their supply chain.

Locations:

LeanCor US,

LeanCor Canada,

LeanCor China

Who is LeanCor Supply Chain Group?

www.LeanCor.com

©LeanCor 2012

Are We Speaking the Same Language?

©LeanCor 2012

Supply Chain & Logistics Management A Practical Viewpoint

Logistics are sections of the orchestra

Supply Chain Management is the conductor who sets the rhythm for all logistics functions

Trying to optimize each logistics function independently will sub optimize the supply chain

Optimize the supply chain by enabling the logistics functions to work systematically

Logistics

Supply Chain Management

©LeanCor 2012

Words have meaning, names have power

Supply Chain

Supply:

Supplier Focused

EOQ’s

Chain:

Only touch points

Each link independent

Strong as it’s weakest

link

Prone to kinking

Fulfillment Stream

Fulfillment

Customer Focused

Takt Time Quantities

Stream

Flows smoothly

Flows evenly

©LeanCor 2012

Lean Fulfillment Stream : Guiding Principles

Make customer consumption visible

Increase velocity an reduce variation

1. Make consumption visible throughout the fulfillment stream

2. Reduce lead time to enable pull and reduce inventory

3. Create level flow to reduce variation and enable stability

4. Use pull systems to reduce complexity and over production

6. Increase velocity to drive flexibility to meet customer demand

5. Collaborate , solve problems and focus on process discipline

7. Lead and make decisions based on Total Cost of Fulfillment

Why : To eliminate all waste so that only value remains

©LeanCor 2012

Lean Organizations Think Differently

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What happens when we forget about the system?

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The Costs of Carrying Inventory

What

are the

other

costs?

©LeanCor 2012

Lead Time is Only Made of Two Things!

Lead Time = Value + Waste

Va

lue

Va

lue

Waste

Va

lue

Va

lue

Waste Waste

Custo

mer

Consum

e

Manufa

ctu

re

Pro

duct D

esig

n

Supplie

r B

uild

©LeanCor 2012

Concept Application: Arrows Chart

Discuss at your table the Arrows Chart that is being

distributed. Discuss each of the Variables and review

the relationships between the costs.

Complete the chart for the variable “Increase

Production Frequency”.

©LeanCor 2012

The Fulfillment Stream: Understanding the Challenges

80% of supply chain activities are invisible to those

accountable

Multiple suppliers, multiple customers, multiple third parties

High variability in material behavior, transportation modes

High variability in lead time, supply and demand

High variability in supplier performance and capability

The extended network is not always visible

Data is not always abundant

©LeanCor 2012

LFS Simulation

Decision 1: SKU Flow

©LeanCor 2012

The ultimate LFS would have everyday be the same

If everyday was the exact same = Totally Stable = Perfect Flow

When everyday is close to the same = Reasonably Stable = Pull

When everyday is different = Not Stable = Planning – Pull

When everyday is total different = Totally Unstable = Make to Order

Stability and the LFS

©LeanCor 2012

ABC Analysis Based on Stability

15

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ABC Analysis – Traditional vs. Flow

16

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Stability and Part Behavior

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LFS Simulation

Decision 2: Distribution Network

Optimization

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Outbound Logistics

©LeanCor 2012

Load

Leveling

Withdrawal

Pull

Supermarket

Finished

Goods

to Customer

Stage 1 – Data Collection

• Store locations

• SKU Level demand data

• SKU level variation data

• SKU weight / volume data

• Transportation rates

• Facility costs

• Inventory value (SKU)

• Inventory carrying costs

• Customer lead time

Stage 2 – Modeling

1. ABC Stratification – SKU

Stability

2. Store consumption

3. Transportation to stores

4. Pull from DC’s

5. Facility turns at DC

6. Transportation to DC

7. Pull from Factory

8. Facility turns at Factory

9. Transportation to RDC

Stage 3 – Reporting

1. Facility locations

2. Facility size

3. Facility cost

4. Inventory footprint

5. Inventory turns

6. Inventory cost

7. Transportation modes

8. Transportation design

9. Transportation cost

10. Total logistics cost

Milk

Run

Transportation

Design

Stores Store

Delivery DC Line Haul

Delivery Factory

Outbound Logistics Review

©LeanCor 2012

Lean Logistics Concept 1 of 3:

Lot Size

Customer Daily Requirements = x75

100

25

75 100

Day 5

75 100

25

75 75 75 75 75

Day 1 Day 2 Day 5 Day 3 Day 4

Order Lot Size = 25

Day 1 Day 3 Day 4 Day 2

Order Lot Size = 50

What Happens Here? What are the Implementation Challenges?

©LeanCor 2012

Fri 1 /week Mon Tues Wed Thr

500 SQ/FT

4PM 1 /day 8AM 10AM 12PM 2PM

100 SQ/FT

4PM 8AM 10AM 12PM 2PM

25 SQ/FT

4 /day

What is the effect on Inventory? What is the obvious challenge?

Lean Logistics Concept 2 of 3: Frequency

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7AM 9AM 11AM 1PM 3PM

One Shift

Material

Handling

Where can we use this concept tomorrow?

Lean Logistics Concept 3 of 3: Level Flow

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LFS Simulation

Decision 3: Inventory Supermarket Sizing

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Supplier Part and Material Ordering

Current ordering process identification & documentation

Ordering system SIMPOC

Standard ordering processes

5S for an ordering system

Replenishment strategy for each part number

Complete PFEP

Review lot sizes and reduce lot sizes where necessary

Develop supplier replenish method by part number DNA

Review technology constraints and strategies

Develop standard supplier ordering process

©LeanCor 2012

The “Pull” Supermarket

Called a supermarket because we

withdrawal inventory from the “shelf”

and it is replenished in the exact

quantity

Replenishment is “fixed delivery

frequency” and “variable quantity”

Replenishment happens only when there

is consumption from the supermarket

The amount of inventory in the

supermarket is planned and controlled

Pop Quiz: What is the fundamental difference between supermarket replenishment and a Min–Max System?

©LeanCor 2012

LFS Simulation

Decision 4: Inbound Logistics

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Inbound Logistics

©LeanCor 2012 29

©LeanCor 2012

Inbound Logistics

Current inbound logistics network data collection

Current inbound logistics network mapping

Lean logistics design to drive frequency & savings

Inventory strategy based on replenishment

Inbound parts supermarket

Transportation strategy based on replenishment

Logistics engineering infrastructure

Milk runs and LTL consolidation

Supplier pickup verification process

Route management and track and trace

Warehouse strategy based on replenishment

Implementation of cross dock where applicable

Global supplier consolidation center

Packaging strategy based on replenishment

©LeanCor 2012

The Inbound Lean Fulfillment Stream

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Transportation Design

Customers

Suppliers

200 Cubic Yards / Day

X 6 day

X 12 day

X 4 day 400 Cubic Yards / Day 600 Cubic Yards / Day

1200 Cubic Yards / Day

©LeanCor 2012

Enter the Cross Dock

INBOUND MATERIALS from Suppliers

OUTBOUND MATERIALS to Customers

INBOUND RETURNS from Customers

OUTBOUND RETURNS to Supplier

How is the Cross Dock different from Warehousing? What Needs to take Place?

Cross Dock

©LeanCor 2012

Thank You