Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive
-
Upload
txm-lean-solutions -
Category
Business
-
view
277 -
download
0
Transcript of Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive
![Page 1: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/1.jpg)
1 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
MANUFACTURING IN CHINA -
WHY YOU MUST CHANGE TO
SURVIVE
TIM MCLEAN
19 MARCH 2015
![Page 2: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/2.jpg)
2 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
COMPETING WITH CHINA
• Introduction
• The changing competitive landscape for China
Manufacturing.
• Lean Manufacturing – a strategy to compete.
• Case Study – Harvest
• Getting Started On Lean
![Page 3: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/3.jpg)
3 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
ABOUT ME
• Australian – born and educated in New
Zealand.
• 27 Years in Manufacturing
• Chemical Engineer and MBA
• Operations and General Manager 16
years
• Established TXM in 2004.
• Worked with over 100 Manufacturing
SMEs around Australia, China and
South East Asia
• Emphasis on implementation
and outcomes not training courses
• Lean Book Author.
![Page 4: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/4.jpg)
4 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
SO WHY IS CHINA SO SUCCESSFUL?
Source: US DeptOf Labour 2004 Low-cost regions
Large markets
China
$1.85
S. Korea
$11.50
Thailand
$1.50
India
$0.95
E. Europe
$5.70
W. Europe
$34.00
Brazil
$3.00
USA$23.10
Mexico
$2.50
Australia
$23.00
![Page 5: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/5.jpg)
5 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
* Source: National Bureau of Statistics, China Statistical Yearbook converted to $US
TIMES ARE CHANGING
0
200
400
600
800
1000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Mo
nth
ly W
age
$U
S
Average Monthly Compensation Urban Manufacturing Employees in China*
![Page 6: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/6.jpg)
6 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
Source: “Farewell to the China Price, Steven Dickinson, China Economic Review, March 2011
WAGES MUST INCREASE
Metric China World Average
Ratio of Minimum Wage to GDP per capita 25% 58%
Years to buy a home at average income 74 3-6
Ratio of Manager salary to minimum wage (SOE)
98 times 5 times
Cost of 1000kWH electricity as proportion of average monthly income
31% 3-8%
Wages must double over the next five years to bring them in to line with per Capita GDP”, Liu Xinrong, Independent Economist
![Page 7: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/7.jpg)
7 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
OTHER COSTS ARE INCREASING
• Industrial Land
• Construction Costs
• Energy Costs
• Regulatory Compliance Costs
• Interest Rates
![Page 8: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/8.jpg)
8 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
COMPARISON OF A “TYPICAL” PRODUCT – EX
WORKS COST
0
10
20
30
40
50
60
70
80
90
100
110
120
130
140
Western Supplier China Supplier
Margin
Overhead
Direct Labour
Material
Gap $34
Gap $34
Gap$40
![Page 9: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/9.jpg)
9 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
ADD SEA FREIGHT COST
0
10
20
30
40
50
60
70
80
90
100
110
120
130
140
Western Supplier China Supplier
Sea Freight
Margin
Overhead
Direct Labour
Material
Gap$34
![Page 10: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/10.jpg)
10 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
ADD INVENTORY HOLDING COSTS
0
10
20
30
40
50
60
70
80
90
100
110
120
130
140
Western Supplier China Supplier
Inventory Holding &Storage
Sea Freight
Margin
Overhead
Direct Labour
Material
Gap$29
![Page 11: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/11.jpg)
11 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
ADD COST OF POOR QUALITY
0
10
20
30
40
50
60
70
80
90
100
110
120
130
140
Western Supplier China Supplier
Inventory Holding &Storage
Sea Freight
Margin
Overhead
Direct Labour
Material
Gap$24
![Page 12: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/12.jpg)
12 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
ADD SUPPLIER SUPPORT COSTS
0
10
20
30
40
50
60
70
80
90
100
110
120
130
140
Western Supplier China Supplier
Supplier SupportCosts
Cost of Poor Quality
Inventory Holding &Storage
Sea Freight
Margin
Overhead
Direct Labour
Material
Gap$20
![Page 13: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/13.jpg)
13 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
BUT CHINA STILL WINS
Western total cost = 108
China total cost = 88
China Saving = 20
![Page 14: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/14.jpg)
14 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
BUT WHAT IS GOING TO HAPPEN
IN THE FUTURE?
![Page 15: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/15.jpg)
15 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
ANNUAL INFLATION ASSUMPTIONS
• Wage Inflation 2%
• Other Costs 2%
• Currency Appreciation 0%
• Wage Inflation 10%
• Other Costs 4%
• Currency appreciation 5%
China West
![Page 16: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/16.jpg)
16 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
COST TREND OVER 10 YEARS
0
20
40
60
80
100
120
140
160
180
200
Tota
l Co
st P
er
Un
it
Western Supplier
China Supplier
![Page 17: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/17.jpg)
17 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
OUR COMPETITIVE PICTURE IN 2020
0102030405060708090
100110120130140150160170180190200
Western Supplier China Supplier
Supplier Support Costs
Cost of Poor Quality
Inventory Holding &Storage
Sea Freight
Margin
Overhead
Direct Labour
Material
![Page 18: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/18.jpg)
18 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
HOW CAN YOUR CHINESE OPERATION STAY
COMPETITIVE?
![Page 19: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/19.jpg)
19 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
MOVE OUT OF CHINA?
THAILANDINDIA
![Page 20: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/20.jpg)
20 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
CAN WE IMPROVE OUR CHINA OPERATIONS?
![Page 21: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/21.jpg)
21 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
HOW ARE YOU EXPERIENCING
COMPETITIVE PRESSURE?
WHAT ABOUT YOUR BUSINESS?
DO YOU THINK YOUR
BUSINESS HAS WASTE THAT
YOU CAN REDUCE?
![Page 22: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/22.jpg)
22 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
WHAT IS LEAN?
• A system of manufacturing management developed by Toyota over
the past 50 years.
• Also known as the Toyota Production System or TPS
• Adopted by companies in industries all over the world in industries
ranging from Aircraft manufacture to hospitals.
• Popularised in the west by Jim Womack and Dan Jones in their book
“Lean Thinking” and the “Learning to See” handbooks.
![Page 23: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/23.jpg)
23 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
THE LEAN APPROACH
“All we are trying to do is shorten the lead time…”
Taiichi Ohno
Toyota Production System
![Page 24: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/24.jpg)
24 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
THE TOYOTA PRODUCTION SYSTEMBest QualityLowest Cost Shortest Lead Time
Just in Time
One Piece Flow
Best QualityLowest Cost Shortest Lead Time
![Page 25: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/25.jpg)
25 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
FOUR KEY PRINCIPLES OF THE TOYOTA PRODUCTION
SYSTEM• All work is highly specified in its content,
sequence, timing and outcome
• Each person knows who provides
what to him, and when.
• Every product and service flows
along a simple, specified path
• Any improvement must be made
in accordance with a scientific method,
under the guidance of a teacher,
at the lowest possible level in the
organization.
Reference: Decoding the DNA of the Toyota Production System
by Steven Spear and H. Kent Bowen, Harvard Business Review, Sept-Oct 1999
![Page 26: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/26.jpg)
26 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
KEY TOOL IS THE VALUE STREAM MAP
It is all the actions, both value added & non value added required
to bring a product through the main flows essential to every
product:
1、Information management (order to delivery)
2、Operations management (raw materials to customer)
Total Value Stream
SUPPLIERS PLANT OR COMPANY CUSTOMER TO END USER
![Page 27: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/27.jpg)
27 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
WHAT IS VALUE?
• Those activities that a customer is willing to pay for when
they buy the product.
• Everything else!
WHAT IS WASTE?
![Page 28: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/28.jpg)
28 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
CAN ANYONE LIST THE SEVEN
WASTES?
TYPICALLY THERE ARE SEVEN TYPES OF
WASTE WE LOOK FOR
![Page 29: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/29.jpg)
29 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
INVENTORY
![Page 30: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/30.jpg)
30 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
WAITING
![Page 31: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/31.jpg)
31 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
EXTRA-PROCESSING
![Page 32: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/32.jpg)
32 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
REJECT PRODUCT AND MATERIAL.
![Page 33: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/33.jpg)
33 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
MOVEMENT
Total Travel Distance=1030m
![Page 34: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/34.jpg)
34 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
OVER PRODUCTION - COMPLETING MORE
WORK THAN IS NEEDED OR SOONER THAN IS
NEEDED.
![Page 35: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/35.jpg)
35 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
TRANSPORTATION
![Page 36: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/36.jpg)
36 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
THREE TYPES OF ACTIVITIES
Incidental
Work
Pure
Waste
Value Typical target area -
Often leads to more
capacity to create waste
![Page 37: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/37.jpg)
37 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
WHY LEAN??
• Typically 50%-80% lead time reduction
• Lower inventory/working capital
• Faster response
• better service to customers.
• At least 30% reduction in space for given output
• Reduce movement, storage and select smaller, cheaper more agile equipment.
• Up to 30% productivity improvement
• Eliminate wasted operator time
• Level workload in production.
• Significant quality and safety improvements
![Page 38: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/38.jpg)
38 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
SO HOW CAN LEAN KEEP OUR CHINA
SUPPLY CHAIN COMPETITIVE?
![Page 39: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/39.jpg)
39 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
OUR COMPETITIVE PICTURE IN 2020
0102030405060708090
100110120130140150160170180190200
Western Supplier China Supplier
Supplier SupportCosts
Cost of Poor Quality
Inventory Holding &Storage
Sea Freight
Margin
Overhead
Direct Labour
Material
![Page 40: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/40.jpg)
40 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
STEP 1 – SIMPLIFY THE SUPPLY CHAIN
![Page 41: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/41.jpg)
41 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
WHAT PROBLEMS HAVE YOU
EXPERIENCED?
ARE YOU INVOLVED IN AN
INTERNATIONAL SUPPLY CHAIN?
![Page 42: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/42.jpg)
42 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
EXAMPLE OF SIMPLIFIED PARTS REPLENISHMENT FLOW
FROM CHINA TO AUSTRALIA
![Page 43: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/43.jpg)
43 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
KEY BENEFITS
• Clear accountabilities at every step.
• Routine reduces cost and complexity.
• Regular cycle keeps down logistics cost and minimizes unplanned delays (one delay in 20 weeks)
• Reduced supply and quality risk and inventory through shorter replenishment interval.
• Lead time from order to delivery in store around three weeks.
• Suppliers adopt kanban process internally on own initiative!!
![Page 44: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/44.jpg)
44 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
HOW WILL THIS AFFECT OUR TOTAL COST
EQUATION?
• Tendering all our freight and logistics requirements to a single
provider lead to a 20% freight cost reduction.
• Inventory at our customer was reduced by around 50%.
• Cost of poor quality was reduced by half as the amount of
inventory in the supply chain was reduced by half.
• Simplified Ordering process reduced supplier support costs by
around 25%
![Page 45: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/45.jpg)
45 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
OUR COMPETITIVE PICTURE IN 2020
0102030405060708090
100110120130140150160170180190200
Western Supplier China Supplier Lean China SupplyChain
Supplier SupportCosts
Cost of Poor Quality
Inventory Holding &Storage
Sea Freight
Margin
Overhead
Direct Labour
Material
![Page 46: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/46.jpg)
46 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
STEP 2 – MAP THE CHINA FACTORY’S PROCESS
AND IMPROVE QUALITY AND PRODUCT FLOW
![Page 47: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/47.jpg)
47 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
WHAT KIND OF WASTE HAVE
YOU SEEN IN CHINESE
FACTORIES?
![Page 48: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/48.jpg)
48 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
MAPPING THE SUPPLIER’S PROCESS
• Set improvement objectives.
• Provide coaching resources.
• Map the supplier’s end to end process –
Value stream mapping to “see the waste”.
• Agree an action plan.
• Coaching support to implement the plan.
• Improve internal processes at the supplier
to manage the flow of production.
• Focus on “right first time” rather than
quality through inspection
![Page 49: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/49.jpg)
49 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
CASE STUDY – SOUTH CHINA SUPPLIER TO
ELECTRONICS INDUSTRY
Improvement Benefit
35% reduction in customer returns Reduce cost of poor-quality
18% reduction in scrap 1% material cost reduction
On time delivery increasedfrom 85% to 99%
Reduced customer inventory
34% reduction in downtime Reduce maintenance overheadIncrease productivity
35% reduction in WIPand lead time
Reduced customer inventory
![Page 50: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/50.jpg)
50 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
OUR COMPETITIVE PICTURE IN 2020
0102030405060708090
100110120130140150160170180190200
Western Supplier China Supplier Lean China SupplyChain
Supplier SupportCosts
Cost of Poor Quality
Inventory Holding &Storage
Sea Freight
Margin
Overhead
Direct Labour
Material
![Page 51: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/51.jpg)
51 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
STEP 3 CHANGING THE SHOP FLOOR CULTURE
IN CHINESE FACTORIES
![Page 52: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/52.jpg)
52 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
ALIGNING FOR LEAN SUCCESS
![Page 53: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/53.jpg)
53 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
WHAT KIND OF CULTURAL AND
LEADERSHIP BARRIERS DO
YOU SEE IN YOUR BUSINESS?
![Page 54: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/54.jpg)
54 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
KEY ELEMENTS OF LEAN SUPPLIERS
• Lean Leadership Process
• Drive changed leadership behaviors
• Focus on key metrics
• Plant Layout Improvement
• Improve space utilization
• Work cell design
• “One piece flow” at the production cell level
• Eliminate WIP.
• Standardized Work
• Standardize manufacturing processes
![Page 55: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/55.jpg)
55 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
CASE STUDY – GARMENT MANUFACTURING IN JIANGSU
PROVINCE
Previou
s Status
Current
Status%
1. Total Lead
Time84 Days 70 Days 16.7%
2. Ironing and
Packaging
Utilization
Area
1302.4M2 475.2M2 63.6%
3. WIP
Inventory130K pcs 60K pcs 53.8%
4. Labor
Efficiency44.5% 55.7% 25.2%
![Page 56: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/56.jpg)
56 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
OUR COMPETITIVE PICTURE IN 2020
0102030405060708090
100110120130140150160170180190200
Western Supplier China Supplier Lean China SupplyChain
Supplier Support Costs
Cost of Poor Quality
Inventory Holding &Storage
Sea Freight
Margin
Overhead
Direct Labour
Material
![Page 57: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/57.jpg)
57 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
GETTING STARTED ON LEAN
• Identify clear business objective.
• Usually start with Value Stream Mapping to “see the waste”.
• Work with cross functional team:
• Individuals from end to end supply chain.
• Develop action plan
• Key metrics and actions
• A3 Plan
• Coaching to implement plan
• Build Lean foundations
• Expect dramatic impovement
![Page 58: Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive](https://reader030.fdocuments.net/reader030/viewer/2022032421/55a774ec1a28ab9c298b48fe/html5/thumbnails/58.jpg)
58 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL
SUMMARY
• Relative competitiveness of Chinese manufacturing changing
quickly.
• In less than 5 years total cost of sourcing many products from China
will be higher than sourcing locally in the west.
• Improving your supply chain through lean manufacturing can
reverse this trend.
• Lean can help you and your suppliers get there..