Lean Distribution - Howard Coleman, MCA Associates
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Transcript of Lean Distribution - Howard Coleman, MCA Associates
Lean Distribution
A Change In Thinking;
Lean Forever
Howard Coleman
MCA Associates
• Principal, MCA Associates, a management consulting firm.
• Since 1986 providing operational excellence thought- leadership to Wholesale-Distributors & Manufacturers
• “Lean Thinking” & Continuous Improvement solutions; business process re-engineering, supply chain management, sales revenue development, information systems, and organizational assessment & development
• Frequent article contributors to industry & trade publications, invited speaker to industry associations
Who We Are?
Lean Distribution:
A Change In Thinking
Uh?
What am I going to do here?...
Lean Distribution:
A Change in Thinking
• “It’s not just about data, but useful data”
• “driving costs out of the supply chain”
• “how the electrical channel communicates”
• “quality data flowing between trading partners”
• “Collaboration must be based on a partnership between trading partners”
Lean Distribution:
A Change in Thinking
Some adjustments necessary!..
Lean Distribution:
A Change in Thinking;
Lean Forever
Agenda
• Lean Thinking…What Is It/Is Not? (Objectives,
Principles & Culture)
• Brief History
• Lean in Distribution & Supply Chain – Challenging
Old Assumptions
• Changes in Thinking
• What If? In Supplier Relationships
Lean Distribution:
A Change in Thinking
= Changing
Eating Habits
= Continuous
Improvement
X
Lean Distribution:
A Change in Thinking
Lean Thinking…What Is It?
Objective:
• Drive “waste” out of our processes
• By eliminating waste – create more value
Lean Distribution:
A Change in Thinking
A Brief History
• Let’s not forget Henry Ford!
• “Toyota Production System”
• Value-Stream based & employee collaborative
• A “tool kit” for assessing processes/corrective
actions
Lean Distribution:
A Change in Thinking
“The Seven Wastes”
• “Overproducing”
• “Waiting/delays”
• “Inappropriate processing”
• “Unnecessary inventory” (how much?)
• “Unnecessary motion”
• “Defects”
• “Unnecessary transport”
Lean Distribution:
A Change in Thinking
Lean Principles
• Specify value - Provide more value to customers
• Identify & Understand the “Value-Stream”
• “Flow” – activities move smoothly with little “dwell
time”
• “Pull” – Let the “customer” pull product
• Pursue perfection – “no end” to continuous
improvement
Lean Distribution:
A Change in Thinking
The “Barriers” to Improvement
• People
• Processes
• Technology
• Performance Measurement (lack of)
Lean Distribution:
A Change in Thinking
Yes It’s True!
• 10 to 15 percent increases in
measurable results
Lean Distribution:
A Change in Thinking
High
Low Hanging Fruit
Lean Distribution:
A Change in Thinking
Yes It’s True!
• As high as 50% !!
Lean Distribution:
A Change in Thinking
Lean…What Is It?
Lean Distribution:
A Change in Thinking
60% of activities – add no value to
your external or internal customers!
“Eliminating them represents your
greatest potential source of
performance improvement and
creating value”
Culture - It Takes “The Want” To Improve
• Leadership from the top…or nobody!
• “Overhaul” of culture & team dynamics
• Trust (“We” vs. “I”)
• Empowerment
• Training/Learning
Lean Distribution:
A Change in Thinking
Lean Distribution:
A Change in Thinking Your “Value Stream”
Sales/
Marketing
Order
Quotation
Order
Manage-
ment
Fulfillment
Purchasing
&
Inventory
Mgt.
Distribu-
tion/
Whse//DC
Finance/
Acct’g
Returns,
Corrections,
Etc.
“Post-Order
Activities”
Lean Distribution:
“Diagram” of A Process
Overall
Process Input Output
?
94% 98% 98%
Entire
System =
90%
100% 100%
2
3
1
Lean Distribution:
A Change in Thinking
Impact!
Need to “get out” – 600 lines/sku’s per day
Our overall “process system effectiveness” =
90%
Assume 80% of our activity is “value-added”
600/.90 = 667 lines (capacity we must plan for)
667/.80 = 834 (capacity to account for “waste”)
Lean Distribution:
A Change in Thinking
More Lean Thinking…in
Distribution
Lean Distribution:
A Change in Thinking
“The Eighth Waste”
“More inventory than meets customer’s
needs”
• excess inventory (not “dead”)
• excess production (more than what’s needed)
Lean Distribution:
A Change in Thinking
The Lean Supply Chain Challenge
• Your channel partners are part of the “lean
equation”
• Suppliers can help you reduce waste – cost –
in your supply chain activities.
• Suppliers can be lean(er) also
Lean Distribution:
A Change in Thinking
Challenging Old Assumptions
“More Inventory Than Meets Customer’s Needs”
• “Push” to “Pull” SCM?
• “Where” is more important than “How Much”
• Collaborative Supplier Relationships?
Lean Distribution:
A Change in Thinking
Challenging Old Assumptions
“More Inventory Than Meets Customer’s Needs”
• How much inventory to order from suppliers?
• How much inventory at DC’s
• How much inventory at branch/warehouses?
• How do I communicate “buy signals” (?) to
my suppliers?
Pull Inventory Levels
Pull Push
Lean Distribution:
A Change in Thinking
Push vs. Pull
C
28
Push Model
Supplier
Distribution Center
Branch Branch Branch Branch Branch
Lead Time Variability Order Sizes
Cost Trade-
Offs
Forecasts Forecasts
500/490
100/50 50/100 200/140 150/100 0/100
Customers
The Effects of Demand
Variability
Lean Distribution
Pull: A Change in Thinking
Lean Distribution:
A Change in Thinking
The Basic Pull Principles
• Aggregate inventory at distribution center
• Pull inventory based on customer buy signal
• Replenish as frequently as possible - foster “continuous flow” & increase velocity
• Develop/maintain “target inventory levels” (buffers)
• Develop “new” relationships with suppliers
Challenging Old Assumptions
Target Inventory Levels (Buffer) • Amount of inventory you “shoot for” in the supply chain
• Demand x Lead-time + Safety Stock”
• Manage the target inventory level
• Target inventory - a measure and a priority signal
Lean Distribution:
A Change in Thinking
Target Inventory Levels (Buffer Utilization)
Zones: Green, Yellow, Red
• Levels of target penetration
– Green – less than 33% “TIL” penetration
– Yellow – between 33% and 67% “TIL” penetration
– Red – Between 67% and 100% “TIL” penetration
Lean Distribution:
A Change in Thinking
Customer requirements are being
met
“TIL” Gage
Danger zone, on the verge of not satisfying
customer requirements
“TIL” Gage
Target Inventory Levels (Utilization,
Measures & Signals)
• Company, location, SKU, A-B-C Ranking
• Time in A Zone
• Number of products in a zone
“TIL” Measures
• Suppliers “Push”
• “Disconnected functional silos”
• “Economy of scale” as opposed to “Economy of time”
Challenging Old Assumptions
Supplier Relationships
What If?
• Distributors & supplier share
“consumption” data?
• Win-Win, Aligning of Interests
Challenging Old Assumptions
Supplier Relationships
Supplier
Red, Yellow, Green Zones
Challenging Old Assumptions
Supplier Relationships
Pull
Continuous Flow
Challenging Old Assumptions
Supplier Relationships
Lean Distribution:
“Pull” - A Change in Thinking
Customer Service
Policy
Target
Inventory
Level
Lot Sizes
Replenish
-ment
Cycles
Pull
Approach
Operations +
Sourcing Capabilities
Linkage to Pull
(customer orders,
replenishment
triggers, inventory
zones)
Isolate Variability
(Forecast & Lead-
time
Lead Time Variability Cost
Trade-Offs
• The Challenge: Change in thinking
• Look at what others have done (outside your four walls)
• Each organization will have to ask; what adds value to our supply chain – or only cost to what we do.
• What should you be doing now?
Lean Distribution:
A Change in Thinking
• Receive a copy of:
– “Lean Principles in
Wholesale Distribution
Supply Chains – Do You
Pull or Push?”
White Paper
Lean Distribution
A Change In Thinking;
Lean Forever
Thank You! Howard Coleman
MCA Associates
www.mcaassociates.com
203-732-0603