LEAN THINKING 4 COMPETITIVE EDGE

Your Gateway to Operational Excellence

© PSL 2010 All Rights Reserved

LEAN THINKING 4 COMPETITIVE EDGECBAFF Breakout Session – May 13, 2010



Characteristics of current environment

• Ten years into the “new century,” supply chain management has become – more global, – more complicated, – more demanding, and – less forgiving.

• Trade barriers are down. • Competition is up. • Stakes are higher. • Margins are lower.

• The question is how can we be competitive?



• Many companies are using lean logistics management to save money and Tesco is one example.

• Addressing Lean Logistics & Distribution– Throughput time, from the filling line at the supplier to the customer

leaving the store with the cola, has declined from 20 days to 5 days. – The number of inventory stocking points has been reduced from five to

two, – and the supplier’s distribution center for the items has disappeared.– 30% increase in Overall Vehicle Effectiveness

• Addressed Lean Order Fulfilment

– 1 Touch Replenishment

Lean Logistics Management Case Study - Tesco



Tesco One Touch Replenishment

TescoStore

TescoStore

TescoBack ofStore

TescoBack ofStore

TescoRDC

TescoRDC

ColaRDC

ColaRDC

ColaProduction

ColaProduction

1 2 3 4 5 6

30% Lower Logistics Costs

TescoBack ofStore

TescoBack ofStore

TescoX DockTescoX Dock

ColaRDC

ColaRDC

ColaProduction

ColaProduction

1 2 3

TescoStore

TescoStore



Tesco Profitability

0

500

1000

1500

2000

2500

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005£ millions Start of Lean

Programme

£400m due to Lean

Thinking

Functional…....Process………..Value Stream……………….



Case Study: Italian Footwear • At Italian footwear and clothing retailer - Scarpe & Scarpe

logistics activities are run from two warehouses, processing delivered stock of 250,000 boxes a year.

• A Lean initiative identified three key areas for improvement – Inbound, Accessories and Return Clothes.

1. Inbound operation - time was wasted searching for and matching the correct label to the correct box, with excess motion taking place in repeating the process for each box.

• A new layout for the inbound area and a new process involving a one piece flow of cut, label, scan, together with a specially designed ticket for the process resulted in a time saving of 15.4 hours per week and reduced the time stock was buffered for before being put away.



Case Study: Italian Footwear (continued…)

2. Accessories area - a combination of high transportation waste, double handling and excessive data manipulation created a challenge.

• The solution - change the layout of the area, introduce new work stations and create a one piece flow to reduce double handling. The RF system was also adapted to recognise more than one item for each shop. The result was a saving of 21 hours per week and greatly reduced transportation waste.

3. Return Clothes - had challenges around double handling and levels of sorting, transportation waste due to the layout of the sorting area and the absence of a direct flow for pallet movements.

• The solution - compact 4 processes into 2, create direct flow, and change the layout of the sorting area to a Z formation. This approach helped standardise the work flow, reduced transportation waste, and optimised warehouse space, increasing pallet density from 460 locations to 684.



What is Lean?• Lean Thinking is a business philosophy that has been

applied World-wide and is designed to

– improve the value proposition to customers,

– reduce waste (Non-Value Adding),

– smooth out peaks and troughs of activity (feast or famine),

– and make individual’s life easier.

• Value – is what the customer is prepared to pay for



Lean Thinking Guiding Principles

• Customer First Philosophy• Highest Quality Service• Lowest Cost• Fastest Lead Time• Respect for People



The Central Theme of Lean… Waste (Non-Value Add) Elimination

Waste

Value Addition(<5%)

Defects

Over Production

Waiting

Non-Effective UseOf Staff Talent

Excessive Processing

Motion

Transportation

Inventory



Lean and the Logistician• The impact of Lean on the logistician is significant,

as the goal of Lean is eliminate waste which will decrease work in process inventories which in turn will decrease process and cycle times and ultimately increase supply chain velocity and flow.

• Lean also has a vital cultural element to it that is crucial to the logistician. This is the concept of “Total Cost “. The Lean practitioner does not focus on individual cost factors such as transportation or warehousing, but rather focuses on “total cost of ownership”.

• With inventory carrying costs representing 15-40% of total logistics costs for many industries, making decisions based on total cost has dramatic implications for the logistician.



Some Lean Tools useful in Logistics• Value Stream Mapping (Mapping of material and

information flow to identify opportunities for improvement, to reduce lead times, cost, and other wasted efforts);

• 5S – Workplace organisation (Sort, Set-to-Order, Shine, Standardise and Sustain);

• Continuous Flow or 1 Piece Flow – a concept where the tasks are carried out 1 at a time in sequential manner;

• 80/20 rule – Pareto principle – 20% of SKU’s account for 80% of revenues, so organise the warehouse so as to minimise transportation and motion;

• Root Cause Analysis

• Kanban – Signal systems to replenish stocks only when needed;

• Standardisation – for consistency of work;

• Waste Walks or Gemba Walks – daily walks around the work areas to identify waste with a view to eliminate it;



Discussion

• What opportunities do you see in your businesses to– Improve flow?– Improve Lead Times?– Improve Quality (or reduce returns or complaints)?– Minimise Waste (what wastes?)?– Standardise?– Minimise total cost?– Any other?



Make New Zealand Clean, Green and Lean

Thank You!

Questions & Answers

An old Chinese Proverb states: “You can’t do today’s job with yesterday’s methods and be in business tomorrow”.

LEAN THINKING 4 COMPETITIVE EDGE

Documents

Transcript of LEAN THINKING 4 COMPETITIVE EDGE