LEAN PRACTICES

SUBMITTED BY:AMALESH DEKA

RAJEEV SHARAN

ALOK LIEVENS

DFT (AP-08)/ NIFT BANGALORE

AUTOMOBILE INDUSTRY

Introduction- Lean

The purpose of lean is to remove all forms of waste from the value stream.–Waste includes cycle time, labor,

materials, and energy.The chief obstacle is the fact that waste

often hides in plain sight, or is built into activities.

Benefits

• Lean manufacturing delivers an insurmountable competitive advantage over competitors who don't use it effectively.

Benefits

(1) Lower production cost higher profits and wages

– Cost avoidance flows directly to the bottom line.(2) Supports ISO 14001 and "green"

manufacturing– Reduction of material waste and associated

disposal costs higher profits(3) Shorter cycle times: make-to-order vs. make-

to-stock

Bottom Line and the Language of Money

The first comprehensive implementation of lean manufacturing yielded:– Stock appreciation of 63 percent per year, for 16 years

(not counting dividends)– 7.2 percent annual wage growth

Implementation of fundamental lean principles at Automobile Industry

Lean Implementation at Toyota’s Existing Supply Chain and Customer Responsiveness

Initiatives

Enterprise Resource Planning System (ERP)

Enterprise Resource Planning System (ERP)

SAP Automotive ERP Suit Main means of information flow between

Toyota and its counterparts worldwide. Tighter collaboration links With SAP, gain:

– Outstanding strategic,– Operational,– Financial,– Marketing positions

E-Marketplace

iStarXchange Initiative with i2 Technologies Inc. Allow subscripted members able to view a single

catalogue to:– view information on parts – checking the prices and availability– conduct transaction online– forecasting supply and demand – delivery cycle

Improved forecasting Enhancing the planning Enhance deployment and replenishment of the inventory

Trade Matrix system

Initiative with i2 Technologies Inc Automates with equipment manufacturer

and suppliers in terms of : – site’s inventory management – warehousing – Logistic and shipping

Main SAP Automotive Suit ERP System

Main means of information flow between Toyota Australia and its counterparts worldwide.

Tighter collaboration links between TMCA and TMC– Logistic and shipping– Overall Value Chain

BEA Web-logic Integration 8.1

Integrated within the SAP automotive suit Main IT Backbone of TMCABased on Open StandardAllow connection to their numerous

partners in the value chain via an assortment of systems in Australia

Integrate the systems and processes that connects Toyota Australia and its trading partners

BEA Web-logic Integration 8.1

Functions:– Electronic proof of delivery – Online accounts payable status for suppliers– Fleet management integration– The Toyota Vehicle Order Processing System

(TVOPS)– Advance Shipping Notice for vehicle

deliveries– Vehicles inventory synchronization

BEA Web-logic Integration 8.1

Customized BEA Application

SAP

1st Tier/ 2nd Tier

Suppliers

End Customer

Dealers

Warehouse/ Parts Centers

Manufacturing Plants

International collaboration

Raw Material Suppliers

SAP/BEA

Electronic “Kanban”-Card System

Identical in function to the physical “kanban” cards used by Toyota in Japan

4 main purpose:– Sole means of requesting new parts – Send for every order shipment – Send to a specific supplier plant – Establishing the mix and volume criteria for

assessing if an order was correct

Electronic “Kanban”-Card System

“Kanban”= Card (Japanese)

Electronic “Kanban”-Card System

SYSTEM

PARTSSUPPLIER

TOYOTA(TMCA)

PlanningPlanning

Despatching

AccountsReceivable

AccountsPayable

Receiving

Material Requirements Forcast

Remittance Advice

BANKING

OrdersForecasts

ProductionLine

Kanban Sorting

Delivery Docket

Delivery Docket

Goods

Kanbans

Kanbans

ANSI X12 830

EDIFACT REMADV

EFTEFT

Australian Automotive Network eXchange (AANX)

Four major car manufacturers in Australia are involved

Numerous service providers and non-key suppliers

Provides IP based Extranets for the automotive industry in Australia

Operates as a virtual point network (VPN)Allows users to send date to each other in a

reliable and secure manner

Australian Automotive Network eXchange (AANX)

Main components:– A network that is based on available Internet

technology– Operated by agreed and standardized service levels.– Demonstrating proactive management of trading

partner connections– Practice the best standard of security and privacy for

transactions and interoperability between service providers

Australian Automotive Network eXchange (AANX)

TradingPartner

TradingPartner

AANXO Monitor

CASP Keytrust

Community Directory &

Authentication

FirewallHardware Gateway

Router

Permanent Connection

Firewall Hardware Gateway

Router

Permanent Connection

Dialup trading Partner

IBM Compatible

Laptop Computer

Modem

Modem

Software Gateway

ConnectEquant

Exchange Point

AANX Framework

Supplier Website

Toyota Supplier.com– www.toyotasupplier.com

TMCA focused on core competencies in– high-end design– engineering and– system integration

Toyota Australia needs highly focusedcore competency oriented suppliers.

Supplier Website

Small and diverse companies though have the ability to display such potential to add– Innovation– Flexibility and– Strength to TMCA’s supply base.

Supplier-centric web site– Provide opportunities to expand TMCA supplier

network.

Supplier Website

Access Flow From ToyotaAustralia Suppliers web site

Agent Oriented Domestic Marketplace

Will be able to support a broader base of services given further growth in e-Market infrastructure

Baseline interaction and directory services Specialty market services, such as:

– Dynamic trading;– Cooperative supply chain integration

and management Enables and facilitates the relationship between

business participants– Suppliers and service providers; and– Supporting systems

Agent Oriented Domestic Marketplace

Many-to-many relationships supported between TMCA and these business partners.

Enables both TMCA and suppliers to leverage economies of scale in their trading relationships

Allows access to a more liquid marketplace Further allows the use of dynamic pricing models

– e.g. Auctions (one of the services provided in the proposed e-marketplace)

– Improve the economic efficiency of the market where uncertainty about prices and demands are common.

Agent Oriented Domestic Marketplace

Many-to-many relationships supported between TMCA and these business partners.

Enables both TMCA and suppliers to leverage economies of scale in their trading relationships

Allows access to a more liquid marketplace Further allows the use of dynamic pricing models

– e.g. Auctions (one of the services provided in the proposed e-marketplace)

– Improve the economic efficiency of the market where uncertainty about prices and demands are common.

Agent Oriented Domestic Marketplace

Logical concept of the Domestic e-Marketplace

Agent Oriented Domestic Marketplace

Logical concept of system Integration.

Real Time Inventory Tracking Module

To be incorporated into the BEA system, which comprises of 4 agents

– Forecast Agent– Inventory Agent– Order Agent– Multi - Tier Visibility Agent

Real Time Inventory Tracking Module

Agent Based Supply Chain

An agent-based transport and logistics coordination system (collaborative e-market), are designed to accomplish transport and logistic coordination tasks among different automotive manufacturers in Australia.

Consist of 4 generic roles agents in supply chain:• Distribution Hub Agent • Logistics Coordinator Agent, • Manufacturer Agent • Transporter Agent.

Agent Based Supply Chain

Integration

Ford’s Lean Implementation at Supply Chain and Customer

Responsiveness Initiatives

Existing Supply Base

As the company had grown over the years, so had the supply base

In the late 1980s: there were several thousand suppliers of production materials in a complex network of business relationships

Suppliers were picked primarily on the basis of cost, little regard was given to:– overall supply chain costs– complexity of dealing with such a large network of

suppliers.

Existing Supply Base

As the company had grown over the years, so had the supply base

In the late 1980s: there were several thousand suppliers of production materials in a complex network of business relationships

Suppliers were picked primarily on the basis of cost, little regard was given to:– overall supply chain costs– complexity of dealing with such a large network of

suppliers.

Existing Supply Base

Beginning in the early 1990s: Shifted toward longer-term relationships with a

subset:– tier 1– tier 2 – below suppliers.

Ford made its expertise available: – just-in-time (JIT) inventory– total quality management (TQM)– statistical process control (SPC)

Ford Production System

Ford 2000 initiative produced five major, corporation wide reengineering projects

One was Ford Production System (FPS)Aimed at making Ford manufacturing

operations:– Leaner– more responsive– more efficient

Ford Production System

Aspired to level production and move to a more pull-based system, with:– synchronized production– continuous flow– Stability

throughout the process

What was Ford’s intentions when reengineering its production system, and how were they going to do this?

Exhibit 2 Moving from Push to Pull

Process Push Pull

Design Design strategy Please everyone Mainstream customer

Vehicle More is better wants minimalcombinations

Marketing Pricing strategy Budget-driven Market-drivenVehicle purchase Higher LowerIncentives

Manufacturing Capacity planning Multiple material/ Market-driven and and supply capacity constraints, (no constraints

FPV/Driven by program CPV* + 10% for

Budget vehicle, +15 forcomponents

Schedule and build Maximize production Schedule from make whatever you customer-driven

ordercan build bank, build to

schedule

Exhibit 2 Moving from Push to Pull

Process Push Pull

Dealer network Dealer ordering Orders based on Orders based on

Allocations and customer demand

Capacity constraints

Order to delivery Longer (60 + days) Shorter (15 days or times less)

Inventory High with low Low with rapid

turnoverturnover

Dealership model IndependentCompany-controlled

dealerships,dealerships (Ford

negotiations with Retail Network)

company

One Important Part of FPS was Synchronous Material Flow (SMF)

Ford defined as “a process or system that produces a continuous flow of material and products driven by a fixed, sequenced, and leveled vehicle schedule, utilizing flexibility and lean manufacturing concepts.”

One key to SMF was In-Line Vehicle Sequencing (ILVS):– used vehicle in-process storage devices (such as banks

and ASRSs) and computer software to assure that vehicles were assembled in order sequence

Order to Delivery

The purpose of OTD: – reduce to 15 days from 45 to 65 days

Pilot studies in 1997 and 1998 identified bottlenecks throughout Ford’s supply chain:– Marketing– material planning– vehicle production– transportation processes

Ford’s Approach to Implementing an Improved OTD Process

Ongoing forecasting of customer demand from dealers

A minimum of 15 days of vehicles in each assembly plant’s order bank – to increase manufacturing stability

Regional “mixing centers” that optimize schedules and deliveries of finished vehicles via rail transportation

A robust order amendment process – to allow vehicles to be amended for minor color and trim

variations without the need to submit new orders

Ford Retail Network

July 1, 1998, launched first Ford Retail Network (FRN) in Tulsa, Oklahoma– under the newly formed Ford Investment Enterprises

Company (FIECo). Two primary goals:

– to be a test bed for best practices in retail distribution and drive those practices throughout the dealer network

– to create an alternative distribution channel to compete with new, publicly owned retail chains such as AutoNation.

Enterprise Model Comparison

OrderMgmt

Dealers

Customers

Bill of Material

OutboundLogistics

Plan/SiteOperations

InboundLogistics

Suppliers

Ford Retail Network

Supply chainLeadership

OTD

FPDS

FPS

FPS

CFOP

DTD

FordBreakthrough Objectives/Key Initiatives

The End

Any questions?