Innovative Supply Chain and Manufacturing Production Systems

Innovative Supply Chain and Manufacturing Production Systems

For Presentation to the Annual Meeting of the Institute of Industrial EngineeringMontreal, CanadaJune 1, 2014

Martin M. Stein, D.Sc. [email protected] 617-755-1960

© Competitive Capabilities International

Integrative Improvement [email protected]

The Toyota Production System and Proctor and Gamble’s, IWS

The Toyota Production System created a new form of management where culture change and climate in the organization were fundamental elements of production process control

Proctor and Gamble’s, Integrated Work System, is a major advance over TPM, with linkages to the supply chain. Plants are now able to produce product in response to inventory shortages.

Competitive advantage will require the expansion of internal capabilities and the rapid transfer new programs globally including for use by potential acquisitions and new plants.

Internal Capability will permit the use of internal resources that implement best practices on a step by step basis. The availability of a road map for implementation will provide an efficient and effective process for guiding companies toward excellence in supply chain and manufacturing.

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Creating Leadership Opportunities for Culture ChangeThe TRACC System provides new opportunities for leaders to harness

the organization’s energy for culture change.Cross-functional teams become engaged in problem solving at all

levels. Situational problems are solved by teams of front-line workers supported by technical staff members. Systemic problems are supported by supervisors, managers and technical staff who are dealing with recurring issues so they are not repetitive. Strategic challenges are surfaced by the mid level teams who identify barriers to strategic implementation.

The TRACC System contains several modules that drive culture change and organizational development. The Leading and Managing Change module is designed to create a holistic overview of the organization and is extremely important for companies with silo organization structures. Enablers also are included in the Human Capital Module where human resources, competency testing and professional development implementation actions required by culture change are provided.

The End to End, Demand Driven Organization Model (Stage 4 and 5) requires integration of business planning and the creation of a Center of Excellence that also facilitate culture change.

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Benefits of Integrating Manufacturing and Supply ChainCoordination of supply and demand is a critical element in the design

of an end to end, demand driven value network.The most advanced companies such as Procter & Gamble have

recognized that there are significant potential benefits form integrating supply and demand planning.

The savings potential from manufacturing at P & G was $ 1B but when the supply chain opportunities were incorporated, savings potential tripled to $ 3B!

The logical structuring and systematic approach for continuous improvement that is required for a manufacturing process can be extended to include and integrate the supply chain components such as logistics, customer service and warehousing.

The latest version of the TRACC system has been expanded to include 11 additional modules for Supply Chain components. The combination of these to the 11 components for manufacturing, now create a comprehensive set of 22 that include over 1300 best practice staged and structured implementation actions.

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TRACC provides the platform for sustainable performance improvement for a balanced set of metrics

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Practice Maturity

Perf

orm

ance

CLASS

WORLD

68%

77%

24%

3.01.63 years

90%

23%

Perfect Order

SC Cost as % of Revenue

68%

90%

26%

21%

Deliver 20% More Perfect Orders…

…hold a thirdless inventory…

72 Days

54 Days

…have lower SC costsequal to 5% of revenue

Leaders and Laggards85%

21%

72

65

54

58Days of Inventory

Example adapted from AMR research and CCI results

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The TRACC offering is functionally initiated and ensures integration and alignments to Strategic and Operational Enablers

Return

Source Deliver

Strategy

Align Transform

Plan

Make

Operational Enabler Organisational Enabler

SUPP

LIER

CUST

OMER

Supply Chain Strategy Workshops

Supply Chain Alignment

Leading and Managing Change

Demand Planning Sales & OperationsPlanning Supply Planning

Integrated Business Planning

Procurement Health and Safety

EnvironmentalSustainability

5S

Teamwork

Visual Management

FocusedImprovement

Autonomous Maintenance

Asset Care

Set-up TimeReduction

Quality

Warehouse Management

TransportManagement

Administrative Excellence

TransactionalExcellence Human Capital

InnovateProduct LifecycleManagement


Integrative Improvement [email protected] 7

TRACC stages: The maturity growth is defined over 5 stages and the implementation sequence ensures sound foundations

Disconnected Basics established

• Misaligned• Ignorant• Fragmented• Controlling• Crises

Management• Fire fighting• Unclear strategy• Unclear goals• Undefined• Silo approaches• Ad hoc

Competent

• Identify• Selective

adoption• Recognition of

waste / value• Risk awareness• Value articulated• Prioritisation• Stabilisation• Clearly defined• Initial awareness• Understanding of

root causes

• Standardised• Integrated• Deployed• Knowledge

Expert• Consistent• Competent• Clear / focused• Available• Business process

driven• Addressing Root

causes

Aligned Excellence

• Simplicity• Sharing

Collaboration• Visibility• External /

Internal• Culture of

learning• Improvement• Best in the class

within industry• Eliminating root

causes of problems

• Culture of teaching

• International benchmarking

• Resilient• Virility• Dynamic• Predictive• Orchestrating• Shaping• Confidence &

Trust• Advanced

detection

Stage 1 Stage 2 Stage 3 Stage 4 Stage 5

DisconnectedBasics established

Competent

Aligned

DDVN

Stage 5

Stage 1 Stage 2Stage 3

Stage 4



Planning TRACC’s: The Maturity Pathway

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Shaping

No Insight Functional Forecasts

Consensus Forecasts

DEMAND PLANNING

Stage 1 Stage 2 Stage 3 Stage 4 Stage 5

DisconnectedBasics established

Competent

Aligned

DDVN

Stage 5

Stage 1 Stage 2Stage 3

Stage 4

SUPPLY CHAIN

Disarray Basic Plans Reliable PlansSUPPLYPLANNING

Fragmented and Reactive

Rudimentary Integration

Aligned and Focused

SALES & OPSPLANNING

Sensing

INTEGRATED BUSINESS PLANNING



Decision-making in Planning TRACC’s

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DP

IBPSP S&OP

SCA

S&OP

DP

SP

Supply Chain Alignment• Determine customer segmentation and differentiated internal supply

chains• Network configuration decisions with regard to manufacturing facilities,

sourcing locations, distribution centres and routes• Collaboration decisions with regard to 2nd and 3rd tier customer and

suppliers• High capital investment decisions• High importance and high complexity• Long term — 3 to 5 years• Broad impact on entire internal and external supply chain and

organisation

Integrated Business Planning• Set direction and priorities for business• Decisions aimed at closing gap between supply chain

plans and financial objectives• Decisions on new products, new markets and new

improvement projects• Risk and opportunity based• High importance and high complexity• High investment decisions• Medium to long term — 18 to 24 months

Sales and Operation Planning• Balancing demand and supply• Controlling inventory• Product portfolio management• High-level capacity constraint decisions• Decision on reaching consensus on demand and supply

plans• Medium term — 6 to18 months• Execution of strategy

Supply Planning• Constrained supply plans• Finite capacity plans• Daily, weekly, monthly• Rough-cut plans — 18 to 24 month

horizon

Demand planning • Consensus demand plan• 18 to 24 month horizon



Planning TRACC’s: Integration drives consolidation of Information and timing

CustomersSupplier

Strategic PlanningSupply Chain Alignment TRACC

CollaborationColla

bora

tion

Marketing and Sales planning

Demand Planning and Communication

MATERIALS PLANNINGMaterial Planning (MRP)

Material Releasing

CAPACITY PLANNINGResource Planning (RP)

Rough Cut CapacityPlanning (RCCP)

Capacity RequirementsPlanning (CRP)

Finite Loading

PRODUCTION PLANNINGProduction Planning (MPP)

ProductionScheduling (MPS)

FiniteScheduling (FPS)

DEPLOYMENT PLANNINGInventory Planning (IP)

Distribution DeploymentPlan (DRP)

Medium Term(weeks or months)

MaterialPlans

Short Term(days or weeks) Vendor Schedules


Resource Availability

Short Term(days or weeks)

RCCP Plans orInfo

Short Term(weeks or months)

Requirements Capacity Plans


ProductionPlans


Production Schedules

Short Term(hours or days)

FiniteSchedules


Inventory Targets


Deployment Requirements

Make (Convert)Supply Demand

Customer-driven Supply Chain (i.e. pull based)

Purc

hase

ord

ers

Sales and OperationsPlanning TRACC

Shipment History

Business unit plansand budgets

Price plans, promotionschedules, etc.

Sales forecast

Sales forecastSales forecastSales forecast

Procurement TRACC

Cons

umer

ord

ers

Order Fulfilment TRACCWarehousing TRACCTransportation TRACC

Supply Planning TRACC

Demand Planning TRACC

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Case Study: Kellogg Latin America

Kellogg Latin America consists of 8 plants in Mexico, Brazil, Venezuela, Ecuador and Colombia. At present, 7 of these plants are utilizing the manufacturing TRACC system.

Recently, Kellogg Latin America, has added Supply Chain Alignment, Demand Planning, Supply Planning and Sales and Operations Planning modules of the expanded TRACC system for Supply Chain.

This region will be the first region at Kellogg’s to launch the Supply Chain modules.

In 2013-4, task forces will be organized to implement the Stage 1 to 3 Implementation best practices.

Initial conclusions are that there will be organizational change required to move to the end to end demand value based network.

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Implementation Philosophy

Operations excellence systems must show results by improving hard KPIs or they will lose support before they are embedded in the culture.

CLASSWORLD

Practice

Perf

orm

ance

Back of the pack

Stragglers

Can't go the distance

Contenders

Promising

Defining what 'good' lookslike and monitoring best practice implementation ensures a focus not oncurrent performance, but on long-term, sustainable market-beating performance.

X

Y

1 2 3 4 5

Embedding best practices underpins lasting performance. World class organisations drive performance improvement by standardising practices and continuously improving these standards.

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Case study: SABMiller - Practice Performance Ranking(presented at public conference)

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Case Study: SABMiller – Energy Usage (presented at public conference)

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Low

Hig

h



Case Study: DuPont Production System (presented at public conference)

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Our DPS System (powered by TRACC) has returned $2 billion backto the business in the last two years.

DuPont:The TRACC Integrative Improvement System is the backbone for theDuPont Production System globally.

Paul Mocniak,Program Manager, DPS TRACC, DuPont, USA



Case Study: DuPont integrated Improvement Approach (presented at public conference)

DPS Vision statementEveryone, everyday in pursuit of

Operations Excellence enabling DuPont to win in a dynamic world

Current and future

requirements for capability

and performance

Required business outcomes

Managing process

Keep focus on what really

matters, with the right people

Technical model

Applytools and

practices to drive focused improvement at all levels

Capability building

Insure the right skills and

coaching

Mindsets and behaviours

Aligncultural norms

with the organisation's vision, mission

Brought in to supportand sustain all aspects of DPS



Case Study: Heinz integrated Improvement Approach (presented at public conference)

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Example: Quantification and Opportunity Prioritisation

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Performance Assessment$ Opportunity

Practice AssessmentHow sustainable are

your current practices?



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Phase 3: Performance Management Control LoopsExample

Hour Shift Day Week Month Quarter Year

CorporateVP SC

SiteSite manager

DepartmentDept manager

AreaTeam leaders

Process - LineTeam

MachineOperator

1-2 hour review

P-Q-D

alignment

feedback Shift Review

P-Q-D

Shift Review

P-Q-D

Day Review

P-Q-D-C-S-M

Day Review

P-Q-D-C-S-M

Week Review

P-Q-D-C-S-M

Week Review

P-Q-D-C-S-M

Month Review

P-Q-D-C-S-M

Month Review

P-Q-D-C-S-M

Month Review

P-Q-D-C-S-M

Quarter Review

P-Q-D-C-S-M

Quarter Review

P-Q-D-C-S-M

Year Review

P-Q-D-C-S-M

P-D-C-A



Example:Full TRACC implementation and support

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AM on shop floor Downtime trend



Kellogg LatAm – TRACC ResultsStrong Correlation between TRACC maturity and OEE

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Practice Maturity



Kellogg LatAm – TRACC ResultsStrong Correlation between TRACC maturity and Plant Performance

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TRACC Practice Maturity

1.6 2.2

Practice Maturity

Improvement



Improvement Potential95%

55%

30% 53 41

1.61

2

Processing

Packaging

37%

45%

84%87%

90%

55%

92%

65%

OEE

Maturity of Practices



Improvement Potential4%

12%53 41

1.61

2

7.0%

6.0%5.4% 5.0%

Waste

Maturity of Practices



Kellogg Australia – Botany PlantTRACC Manufacturing Practices Overview



Kellogg Australia – Botany Pilot Plant OEE analysis

2009

Jan

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Nov30

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65

70

OEE OEE

Moving average (OEE)

OE

E (%

)

March 2011

TRACC Starts42% to

62%

Korea Benchmark-

ing

Aug 2009K-lean

Phase 1



The evolution from traditional CI to Integrative Improvement Systems

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3

4

5

1. No Continuous Improvement

No Continuous ImprovementPlans or structure

3. Functional Excellence

Structured implementation approachwithin the functions(Systemic)Functional

5. Learning Network

Integrative Improvement deployed across networkCulture of Innovation and Sharing of Know HowEntire Global Network

2. Expert Based

Implementation approach based onthe capability of the local expertProject

4. Integrative Improvement System

Codified and integrated implementation(Strategic, Systemic and Situational)Process

• 70% of companies are between Stage 2 and 2.5

• Companies below Stage 4 are unlikely to successfully replicate the long-term performance culture exhibited by the likes of Toyota & P & G



Enabling Execution

The pursuit towards operational excellence to date has been characterized by functional improvements and project based methodologies such as Six Sigma and Lean. Functional excellence and pockets of Lean do not create the organization capability required to step change operational competence, particularly when applied to complex global companies. There are just too many intricate process interdependencies across the end to end supply chain.

The challenge for organizations is to manage and coordinate a sequenced and prioritized set of inter related actions across multiple functions, departments and the global network to execute strategy.

Insight

………“to improve everything”……

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Integrative Improvement across a global network requires a codified set of prioritized and sequenced work.

VISION

2012

2013

2014

2015

2015

A company needs to provide a prioritized, holistic and integrated set of work packages that allows each and every part of the organization to execute the many pieces of work in a synchronized way that transforms the entire organization towards process based excellence

“……everything must improve……”



Integrative Improvement across a global network requires a codified set of prioritized and sequenced work.

VISION

2012

2013

2014

2015

2016

A company needs to provide a prioritized, holistic and integrated set of work packages that allows each and every part of the organization to execute the many pieces of work in a synchronized way that transforms the entire organization towards process based excellence

“……everything must improve……”

KWS Basics

KWS Advanced

KEY



Relevance for Industrial Engineers?

Plant managers will be motivating change and accountability for each of the process based teams.

Decision making and priorities are facilitated by the existence of a structured approach for developing improvement in each of the critical process areas.

Metrics and benchmarks can be used to guide the teams from the changes in levels of maturity ratings to important process measures such as OEE.

Regional and central headquarters staff will facilitate the development of standardized definitions and performance measures, sharing of best practices and tracking KPI’s.

Plants that have achieved the greatest success and the greatest relative improvement will be recognized and rewarded.

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Innovative Supply Chain and Manufacturing Production Systems

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