Managing a Lean Supply Chain · Your customers customer. 4 Armstrong Road 3rd Floor Shelton, CT...

Managing a Lean Supply Chain

Valve Manufacturers AssociationWaterloo, IowaApril 2010

Michael Kuta, Partner

4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451

bulldoze the barriers!(wasn’t this way 20 years ago)

Mergers, divestitures, acquisitions, bankruptcies, off shore competition, globalization, housing market tanks, the big 3 slip and slide, financial abuse and the world’s economy goes in the tank!!

End of vertical integration

The reality of customization and Lean production

Go Green… Go Green… Go Green

X10


agenda…

What’s a Supply Chain anyway

Managing the Lean Supply Chain

Focus: extending Lean to suppliers

Top 5 Supply Chain strategic imperatives

A strategy for competitive advantage:the Supply Chain Quiz

Summary


Delivering products and services quicklyto the end customer with minimum waste….


…the supply/value chain

Your suppliers supplierYour supplierYouYour customerYour customers customer


Ultimate success of your business will be decided by your customers;

Customers buying decisions are based on quality, service, price and availability;

Customers expectations will change over time;

Must clearly define value and add value to what the customers perceive adds value!

in the beginning…


Do you have standards?

Do you adhere to them?


A Supply Chain is an integrated set of key business processes involved in

the sourcing, procurement, and logistics activities from end user through

original suppliers within and across companies that add value to customers

and stakeholders.

… this includes integration, coordination and collaboration with channel

partners: suppliers, intermediaries, third party service providers, and customers.

Source: Council of Supply Chain Management Professionals and goldsby OSU

What is a Supply Chain anyway?

It’s a lot….


the Supply Chain: the new domain

Members of the OEM’s Supply Chain

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The OEM Company

Tier 1Customers

Tier 2Customers

Tier 3 toConsumers/

End-Customers

Tier 2Suppliers

Tier 1Suppliers

Tier 3 toInitial

suppliers

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thanks to Tom Goldsby and The Ohio State University


…what are we trying to do?

To have the right products in the rightquantities at the right place at the rightmoment at minimal cost translating intocustomer satisfaction.


making supply match demand

P

DI C

Where:

D = Demand I = Inventory

P = Plan C = Capacity

keep in mind:

• balance is more

easily achieved with a

shorter board

• not only can the boxes

be altered but so can the

position of the fulcrum

thanks to Tom Goldsby and The Ohio State University

…who hears the demand signal?

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P U S H

P U L LGuess

Knowthanks to Tom Goldsby and The Ohio State University


Resiliency

Natural disastersTerrorist attacksThe economyPiracySwine Flu


Volatility

An exceptionor

The Normor

Self induced


What happens when the signal is suppressed?

Time

Baseline forecast

Retail orders

from customers

+10%

Source: Forrester, Jay W. (1958), “Industrial Dynamics,” Harvard Business Review, Vol. 36 (July-August), p. 43.

Distributors’ orders

from retailers +16%DC orders from

distributors +28%

Manufacturing

output +40%

Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.


…hey, buffer’s aren’t bad things!

Design compartments into ships

Circuit breakers into electrical networks

Minimum reserve requirements for banks

Air reserve in a SCUBA tank

Spare tire in trunk


so… Supply Chain Management

...is the planning, management, and integration of key business processes

involved in the sourcing, procurement, and logistics activities from end

user through original suppliers within and across companies that add value

to customers and stakeholders.

… this includes integration, coordination and collaboration with channel

partners: suppliers, intermediaries, third party service providers, and customers.

Source: Council of Supply Chain Management Professionals and goldsby OSU


agenda…






Summary


The practical realities…


Cash is King


Nobel Prize winning economist agree…

“A primary function of a company is reducing or eliminating transaction cost.”

Financial Times 2008


How do you make money?

How do you spend money?

Where’s the contribution?

Where’s the improvement focus?

Consider this…


…does the right hand know?

unknown internet source


Billing Handling

Pickup

LTL Delivery

TL Delivery

Accessorial

Linehaul

Scheduling

Rehandling

Local delivery

Unloading

Maintenance

Claims

processing

Marketing

Office Labor

Dock Labor

Yard Labor Driver Labor

Licenses

Fuel

Maintenance

DepreciationInsurance

TerminalSupervision

Utilities

Customer A

Customer D

Customer E

Customer F

Customer GOthers

Customer C

Customer B

…know your cost…and thereare a lot!


…managing the chain

Financial Planning

Item Planning

Catalog Planning

Web Planning

Promotion Planning

Business Intelligence

Production Planning

Lean Production

Extended Lean

Demand Management

much to consider

Demand Planning

Promotion Forecast

Replenishment

Vendor Manage Inv.

Audit, Payment, Claims

IT solutions

Cust. Relationship Mgmt.

Sup. Relationship Mgmt.

Prod. Develm’t. Mgmt.

Returns Mgmt.

Distribution Mgmt.

Warehouse Mgmt.

Billing Mgmt.

Labor

Yard Mgmt.

Transportation Mgmt.

Fleet Mgmt.

Carrier Mgmt.

Reverse Logistics

The Lean Enterprise

Value Adding

Transformation Process

TECHNICAL

SOCIAL

RESPONSE AND FEEDBACK LOOP

MARKET IN

MARKET OUT

PULLFLOW



Product flow

Information flow

Material flow

Financial flow

Strategic Focus

Location

Production

Inventory

Logistics



Open communication of expectations plan, alignment, and deployment a direct communication program

A series of standardized processes waste elimination ideal and reliable methods experimentation

Building capabilities

Supplier Relations



expectations:

Supplier Qualification

Standardized assessment of capabilities

Supplier Performance Requirements

KPI’s: quality, lead time, total cost, and participation

Supplier Development

OEM enablers to enhance competitive advantage

Supplier Relations


Do you have standards?

Do you adhere to them?


building capabilities

Strive for perfect quality Reduce cost of quality Provide prompt feedback Increase flexibility Deliver supplies frequently Lean = Zero waste Make money

DFM/DFA/DFC Stable configurations Shorter lead times Zero incoming testing Minimized reporting Lean = Zero waste Make money


Supplier Relations


agenda…






Summary

The Extended Lean Enterprise

Capital

Suppliers

Regulatory Bodies

Consortium Companies Environment and Energy

Value Adding

Transformation Process

TECHNICAL

SOCIAL

RESPONSE AND FEEDBACK LOOP

MARKET IN

MARKET OUT

PULLFLOW


an Extended Lean improvement perspective

...supply chain continuous improvement to cost, quality, delivery, and capability

…through the progressive identification and elimination of all non-value adding waste

…with the involvement of stakeholders at all levels: employees, customers, and suppliers

Extended Value Chain

The Customer

The OEM

Tier 1

Tier 2

The Supplier’s Supplier

Buffer

Buffer

Buffer

Buffer

Current State

Target


A Lean Transfusion


Activities

• All work shall be highly specified as to content, sequence, timing and outcome. Reliable, ideal methods.

• Embed a test in every activity that signals if an activity has been performed in a non-standard way.

• The pathway for every product and service must be simple and direct.

• Embed a test in every pathway that signals when someone other than an expected supplier does a task.

Flows

• Every customer-supplier connection must be direct and their must be an unambiguous yes-or-no way to send requests and receive responses.

• Embed a test in every connection that signals that a delivery did not match customer request.

Connections• All improvements must be made in

accordance with the scientific method, under the guidance of a teacher, at the lowest possible level in the organization.

• Embed a test in every learning to show evidence of cause and effect.

Learning

…a common theme


66% of started Projects fail

• Poorly defined deliveables and scope

• Poor buy-in and sponsor support

• Poor resource allocation

• Not linked to key objectives


Importance of project management

• Your business is comprised of projects varying in scope and complexity

• Customer satisfaction is directly tied to project performance

• Company profits are directly tied to project performance

• All projects must align with strategic intent

• Achieve standard work


the attack…

the target…

waste… anything that addscost without adding value

collapse the time it takes to monitor,order, receive, process products, provide services, complete transactions,make decisions, and deliver the goods


A common theme: all lean methods and techniques are scientific

and reliable, based upon the principles of system, feedback,

and local control.

waste out: upstream-downstream

• Employee Involvement

• Value Stream Management

• 5S - Visual Display & Control

• Quick Changeover

• TPM/Equipment Reliability

• Mistake Proofing

• Cell Design – Process Flow

• Kanban

• Lean Administration

• Variation Reducton

• Process/Product Engineering

• High Performance Work Place

• Scientific Method – Cause & Effect

• Standard Work


Making things…


Doing things


Movingthings


Scientific Method

Identify opportunity

Determine measures

Determine targets

Gather & analyze data

Generate hypotheses

Test countermeasures

Standardize

Integrate

Adhere

6SSort

ShineSet in orderStandardize

SustainSafety


Visual Display and Control

Quick Changeover

• The principles target the value stream

• Changeover reduction

controls WIP

increases flexibility

Do more changeovers, make-ready, set-up’s

enhance system utilization

allows Lean flow to happen

0

2

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Observed

1st Level

Target

TARGET

START

OUTCOME


Mistake-Proofing

• Builds automatic feedback loops into critical, difficult, dirty, or dangerous operations

• Automates corrective action

buzzer

limit switch 1

limit switch 2

Switch 1 confirms

beginning of drilling

Switch 2 confirms

penetration

Product Flow

C

E

AB

D

Cell Design – Process Flow

• Value Adders control product flow to takt time

• A linked chain of value adding operations….


Kanban

Literal translation is sign board. In the context of production, it refers to the signal or authorization from a customer to a supplier to produce….

A supermarket ties together two separate processes with a pull system.

It controls and levels production upstream.

It is used when continuous flow is brokendue to distance and/or process technology limitations, and right-sizing is not an option.

Downstream customers withdraw items from the front of each supermarket; upstream suppliers replenish the supermarket from behind.

The supermarket prevents over-production by upstream processes and replaces costly and inaccurate MRP systems.

Material moves only

when the customer

signals a need….

…what’s a supermarket?


Lean Administration

The lean office goal: to flow the processes and reduce the probability of variances that prevent the organization from achieving its value adding objectives.

A systemic approach to integrating people, systems,processes, tasks, procedures, instructions, equipment,physical layouts, and the environment to reflect and build-off each other.


Product/Process Engineering

A systematic approach to creating a product designthat considers all elements of the product life cyclefrom conception throughout disposal.

Multidisciplinary teams co-design all desired productcharacteristics producing a more robust design that is tolerant of manufacturing and use variation at a higher quality and at a lesser cost.


Variation Reduction

• CEDAC

• PDCA

• DMAIC

• FMEA

Fact Idea Analysis

CATEGORY

Target: < 50%

Opportunity

Must experiment and have scientific methods for getting to root cause


Standard Work

• Standardization of policy, sequence, timing, flows, method, skills, learning and outcomes for all we do

• Rules defining standards for how work is to be performed

• Improvement in the workplace begins with adherence to standard

• A standard is the documented

expression of the best method

known at a given point in time;

it enforces that method until

a better one comes along….


A common theme: all lean methods and techniques are scientific

and reliable, based upon the principles of system, feedback,

and local control.

waste out: upstream-downstream

• Employee Involvement

• Value Stream Management

• 5S - Visual Display & Control

• Quick Changeover

• TPM/Equipment Reliability

• Mistake Proofing

• Cell Design – Process Flow

• Kanban

• Lean Administration

• Variation Reducton

• Process/Product Engineering

• High Performance Work Place

• Scientific Methods - Cause & Effect

• Standard Work


agenda…






Summary


2010 – 2011

the top 5

supply chain strategic imperatives


1) Strategic alignment

2010 - 2011supply chain strategic imperatives

• theme: change ready and risk robust • focus: demand driven value network• balance: people, profits, planet • systemic approach to planning and deployment• project management


2) B2B technology and software


• controlled use of RFID, GPS, and Voice [Speech] Recognition• general Purpose ERP• supply Chain Network Modeling• internet technology• seamless cross-referencing and integration of data

o order processing to cash collection: buy signal, entry, requisition, schedule, production, logistics, warehousing

radio frequency ID technology and global positioning systems


3) Carbon management


• green work place: up-stream and down-stream• inter and intra transportation [logistics]• production and packaging• warehousing and distribution• utilities• green metrics on every manager’s scorecard


Green Supply Chain Management…

"the process of using environmentally

friendly inputs and transforming these

inputs into outputs that can be reclaimed

and re-used at the end of their lifecycle

thus, creating a sustainable supply chain”.


4) Production flexibility and execution


• enterprise wide Lean capabilities• focus: activities, connections, flows and learning• readiness for mass customization• modular production


5) Extended lean enterprise


• globalization and localization• risk management and assessing supplier health• inventory visibility and responsiveness • mantra: cost reduction and control through waste elimination

o information flow, material flow, process flow




3) Carbon Management



2010- 2011The top 5



2010 - 2011… what is it going to take tostay a head of the competition?

Thanks, mike donovan, donovan asso., framingham, ma

The million dollar Supply Chain question:

answer: Plenty

Xbillion


agenda…






Summary


The Supply Chain Quiz

Consider the alternatives!

10 attributes to competitive advantage


agenda…






Summary





3) Carbon Management



2010- 2011The top 5




Financial Planning

Item Planning

Catalog Planning

Web Planning

Promotion Planning

Business Intelligence

Production Planning

Lean Production

Extended Lean

Demand Management

much to consider

Demand Planning

Promotion Forecast

Replenishment

Vendor Manage Inv.

Audit, Payment, Claims

IT solutions

Cust. Relationship Mgmt.

Sup. Relationship Mgmt.

Prod. Develm’t. Mgmt.

Returns Mgmt.

Distribution Mgmt.

Warehouse Mgmt.

Billing Mgmt.

Labor

Yard Mgmt.

Transportation Mgmt.

Fleet Mgmt.

Carrier Mgmt.

Reverse Logistics



Open communication of expectations plan, alignment, and deployment a direct communication program

A series of standardized processes waste elimination ideal and reliable methods experimentation

Building capabilities

Supplier Relations


Our Supply Chain attributes

Our company has developed Supply Chain Management to a core competency level.

Yes No



an Extended Lean improvement perspective

...system-wide continuous improvement to cost, quality, delivery, and capability

…through the progressive identification and elimination of all non-value adding waste

…with the involvement of stakeholders at all levels: employees, customers, and suppliers


agenda…






Summary

Managing a Lean Supply Chain

Valve Manufacturers AssociationWaterloo, IowaApril 2010

Michael Kuta, Partner

Managing a Lean Supply Chain · Your customers customer. 4 Armstrong Road 3rd Floor Shelton, CT...

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