Lean in the Supply Chain! MNASQ 10/12/2015 Advance your supply chain
Your Presenter: Ashley Yentz Career Focus Areas: Responsibilities in vision creation and deployment, project coordination, team leadership, detailed data analysis and forecast modeling, also conducting core functions within several operational disciplines. Director - Account Management LeanCor Supply Chain Group ayentz@leancor.com Skilled in coaching organizations through their lean logistics implementation: strategy deployment, culture change, process standardization Prior Roles: Kaizen Leader, Strategic Planning - Toyota Motor Sales U.S.A. Continuous Improvement Leader - Toyota s Parts Operation Supply Chain Transportation Analyst - Hilti, Inc.
Who Is LeanCor Supply Chain Group? Trusted supply chain partner that specializes in lean principles to deliver operational improvement. Three divisions: Lean, supply chain, six sigma, and leadership courses that develop people capability and problem solving skills while building a culture of operational excellence Project-based, end-toend supply chain solutions that improve your processes, reduce inventory and Total Cost, and optimize your network Custom, outsourced transportation management and warehousing solutions that optimize material flow and exceed your business goals Advancing the World s Supply Chains
Supply Chain: Understanding the Challenges 80% of supply chain activities are invisible to those accountable Multiple suppliers, multiple customers, multiple third parties High variability in material behavior, transportation modes High variability in lead time, supply and demand High variability in supplier performance and capability The extended network is not always visible Data are not always abundant
Supply Chain & Logistics Management Logistics Supply Chain Management Logistics are sections of the orchestra Supply Chain Management is the conductor who sets the rhythm for all logistics functions Trying to optimize each logistics function independently will sub optimize the supply chain Optimize the supply chain by enabling the logistics functions to work systematically
Words Have Meaning, Names Have Power Supply Chain Supply: Supplier Focused EOQ s Fulfillment Stream Fulfillment Customer Focused Takt Time Quantities Chain: Only touch points Each link independent Strong as it s weakest link Prone to kinking Stream Flows smoothly Flows evenly
Guiding Principles of the Lean Supply Chain Visibility Value Stream Thinking Lead Time Reduction Quality at the Source Complexity Management Performance Management Real time visibility to material and information flow Internal and external End to End collaboration to manage total cost Flow, velocity, pull, JIT, and leveling Standardization, error proofing, and first time quality of core processes Supply Chain centric decision making to manage planned complexity Clear targets, PDCA, and continuous improvement The ultimate supply chain would have everyday look the same.
Concept Application: Guiding Principles Discuss at your table each of the LFS principles the implications to your workplace.
The Ultimate Business Model Build to order = No overproduction so what s the problem? Supply LT + MLT + OL < Customer LT = BTO Supply LT + MLT + OL < Customer LT = Forecast LT = Leadtime MLT = Mfg Leadtime OL = Outbound Logistics BTO = Build to order
Supplier Build Product Design Manufacture Customer Consumes Lead Time = Value + Waste Lead Time is Only Made of Two Things! Value Waste Value Waste Value Waste Value 10
Lean FS & Systems Thinking The defining characteristic of a system is that it cannot be understood as a function of its isolated components. First, the behavior of the system doesn't depend on what each part is doing but on how each part is interacting with the rest... Kofman and Senge, 1993 What we need are more sales promotions! I love it when a plan comes together did it? All New Products every year with 100% new components You re a fool if you don t focus on BOM costs 11
What happens when we forget about the system?
What Are You Tolerating? Taking Responsibility for System Wide Results
Total Cost of Ownership Decision Where would you buy?
TCO Sourcing Decision
Focus on Total Cost
The Costs of Carrying Inventory
Mental Model 1 Inventory is Waste Inventory Paradigms Strategic Focus: 1. Eliminate all inventory Mental Model 2 Right-sized inventory as competitive strength Strategic Focus: 1. Flow, Cost, Visibility and Lead Time 2. On Time In Full (OTIF), First Time Quality.focus on the Customer.
Why? Purpose of Inventory 1. Customer Service Fill Rate Policies 2. Production Lot Sizes 3. Transportation Economies 4. Purchasing Economies & Hedging 5. Demand Variability: Seasonality, Spikes, New Product Launches 6. Cycle Stock ; Buffer Stock: Safety Stock: Raw Material: WIP: FG a) Lead Time b) Supplier Dependability c) Transportation Dependability d) Customer Dependability Is a retail store a warehouse? Imagine if everything we buy is built to order.no grocery store, no box store how would this effect our daily lives?
Stability and Inventory Stable! Reasonably Stable Guessing Game Totally Unstable!
Stability and the Ultimate Goal The lean operation would have everyday look the same A Lean operation exposes problems. A problem is a deviation from the standard, or more simply, a deviation from what we expected to happen (The Plan in PDCA). Therefore, the ultimate goal is have everyday look the same stable and predictable. While we may never get there this is the goal.
The Pull Supermarket Called a supermarket because we withdraw inventory from the shelf and it is replenished in the exact quantity Replenishment is fixed delivery frequency and variable quantity Replenishment happens only when there is consumption from the supermarket The amount of inventory in the supermarket is planned and controlled What is the difference between a pull supermarket and a min-max system?
Inventory Supermarket Sizing Which factors increase inventory? 1. Cycle Stock: frequency in which you receive from suppliers/production. 2. Buffer Stock: purpose of product (service level), variation in demand, frequency in which you receive from suppliers/production. 3. Safety Stock: Total lead time to order and get inventory from supplier, globalization, risk for damage, supplier risks, transportation risks
Supermarket Size Decision
Application Question You realize that Velocity is a big part of implementing Lean in the fulfillment stream. While nobody would ever disagree that speed is good, you are not sure everybody on the team understands the impact of speed. You ask the team a few questions. 1. What does velocity even mean? 2. How does velocity impact the fulfillment stream? 3. What are the tactical techniques to increase velocity (speed) in the fulfillment stream?
Lean Logistics Concept 1 of 3: Lot Size Customer Daily Requirements = x75 100 75 100 75 100 25 25 75 75 75 75 75 Day 1 Day 2 Day 3 Day 4 Order Lot Size = 50 Day 5 Day 1 Day 2 Day 3 Day 4 Day 5 Order Lot Size = 25 What Happens Here? What are the Implementation Challenges?
Lean Logistics Concept 2 of 3: Frequency 500 SQ/FT 1 /week Mon Tues Wed Thr Fri 100 SQ/FT 1 /day 8AM 10AM 12PM 2PM 4PM 4 /day 25 SQ/FT 8AM 10AM 12PM 2PM 4PM What is the effect on inventory? What is the obvious challenge?
Increased Delivery Frequency 500 SQ/FT 1 /week Mon Tues Wed Thr Fri 100 SQ/FT 1 /day 8AM 10AM 12PM 2PM 4PM Delivery Frequency Analysis 1 Truck Load = 1 Week Store / Distribution Center Requirements Delivery Frequency (One Part or SKU #) Monthly Weekly Daily 2X Day 4X Day Space Used for Inventory (SQ Feet) 2000 500 100 50 25 Average Days on Hand (Days Inventory) 10 2.5 0.5 0.25 0.125 Minimum Order Lead Time 1 month 1 week 1 day 12 hours 6 hours Percent Improvement from Increased Frequency Space Used for Inventory (SQ Feet) 75% 80% 50% 50% Average Days on Hand (Days Inventory) 75% 80% 50% 50% Minimum Order Lead Time 75% 80% 50% 50%
Lean Logistics Concept 3 of 3: Level Flow 7A M 9A M 11A M 1PM 3PM One Shift Material Handling Where can we use this concept tomorrow?
Entropy & Pressure
Second Law of Thermodynamics In a system, a process that occurs will tend to increase the total entropy of the universe. Second law of thermodynamics Entropy: A measure of the disorder or randomness in a closed system System: A group of interacting, interrelated, or interdependent elements forming a complex whole. What does this have to do with Problem Solving?
Putting Pressure on Logistics Processes
Use Lean Logistics Measurement Systems To enable you to collaborate and develop supply chain partners Purpose: Create metrics that add value to monitoring and improving processes. Outcomes: Identify key metrics that can be collected to monitor performance and identify gaps. Establish key targets for metrics that maintain, promote, or make visible instability or stability. Define purpose for each metric, that purpose should drive action. Examples: On-Time Pickup and Delivery: Cost impact: prevents overtime on loading/shipping docks, increases customer satisfaction and prevents line-down scenarios, stability in this metric leads to reduced inventory Pickup/Delivery Frequency: Cost impact: can lead to increased logistics cost, must be paired with decreases in inventory Trailer Utilization: Cost impact: full trucks lead to fewer trucks, reduces transportation cost
Thank You! Questions? Ashley Yentz ayentz@leancor.com 925.899.9725 Let s connect on