A case study on volatile demand Connecting craftsmanship, QRM and Lean at Eijkelkamp Agrisearch Equipment BV Stef Tiggeloven, 1-7-2014 http://www.han.nl/lectoraatlean
Contents Introduction Current state Problem definition Leagility concept Steps to implement Lectoraat Lean / WCP 2
Introduction Lectoraat Lean / WCP 3
Introduction Eijkelkamp Agrisearch Equipment (EAE) system supplier of a wide range of equipment for soil and water research. Founded 1911 auger range: Small but important No sample, no... Strong focus on efficiency Mix of ERP and kanban-system Lectoraat Lean / WCP 4
Current state Starting point of project Lectoraat Lean / WCP 5
FTMS/Productrange 1 product family (+ 1 family related but not in project) 155 SKU's in total. 32 varieties of forged bodies. 1-2 FTE are directly involved (total 2-3 in related family) yearly demand 8000 assemblies Low risk of changes Relatively low costs of inventory Lectoraat Lean / WCP 6
MCT map 13 steps, 62 days leadtime Lectoraat Lean / WCP 7
Value stream map Lectoraat Lean / WCP 8
Classification of demand Variability of the demand size The coefficient of variation (CV), CV^2 =squared (standard deviation/average). Average demand interval The average number of time periods between successive demands (total number of periods devidedby the number of time periods with demand) Lectoraat Lean / WCP 9
Classification of demand source: Syntetos et al. 2005 Lectoraat Lean / WCP 10
Demand characterisation EAE Source: author, based on Syntetos et al, 2005 Lectoraat Lean / WCP 11
Aggregated demand Aggregated demand full range of augers, 2012-2013, weekly demand 900 800 700 600 500 400 300 200 total numbers of SKU sold 100 0 2012-2 2012-7 2012-11 2012-15 2012-19 2012-23 2012-27 2012-31 2012-35 2012-39 2012-43 2012-47 2012-51 2013-2 2013-6 2013-10 2013-14 2013-18 2013-22 2013-26 2013-30 2013-34 2013-38 2013-42 2013-46 2013-50 year-week Total per week 4 week average 12 week average Lectoraat Lean / WCP 12
Demand analysis at EAE Lumpiness" of demand Forecasting is not possible with simple statistical tools. Also on semi aggregated level, demand is still Erratic or Lumpy. Inventory Management System therefore must have high responsiveness to meet demand. Aggregated level of full product range is relatively constant (compared to single SKU s). Total workload and capacity are within manageable limits. Current buffers not sufficient for required service level Lectoraat Lean / WCP 13
Problem definition 1. Demand of single SKU s is volatile and can not be forecasted with common methods. 2. Level of WIP is high, long lead times of subs, up to 9 weeks. 3. Planning and scheduling of processes is complex takes 2 days per week (!) daily changes in schedule Chaos ( flexotic?), disturbes rest of manufacturing 4. Service level is unsatisfactory (not measured for range, response time estimated 1-2 weeks 5. Workload is unbalanced and difficult to anticipate on (one week overtime, next week idle) Lectoraat Lean / WCP 14
Aim of the project (according to EAE) 1. Simplify and reduce planning and control effort on product range, 2. Service level of 95-99%: next day delivery, for as many products as possible (99%?) 3. Level demand to constant workload, make required 4. Reduce WIP and stocks (more: reduce the complixity). Lectoraat Lean / WCP 15
Leagility source: Christopher and Towill, 2001 Lectoraat Lean / WCP 16
Surge/base Demand Separation source: Christopher and Towill, 2001 Lectoraat Lean / WCP 17
Leagility 80/20 not an option, keep full range in same proces Decoupling point Product range is modular, parts are recurrent DP can be moved to assemble (weld) to order (#SKU from 155 to appr60) Surge base demand separation can level demand to capacity. Lectoraat Lean / WCP 18
Steps to implement (1) Move the customer decoupling point option 2 (Cristopherand Towill, 2001)to "partially create and deliver to order Create single kanbancontrolled buffers of heads, with sufficient safety levels Assemble products daily on customer sequence. Lectoraat Lean / WCP 19
Steps to implement (2) Give assembly of customer orders the highest priority in the group, option 3 (Cristopherand Towill, 2001), Spend rest of capacity on adding to buffers of heads. Add capacity when buffers are below safety level. Direct customer orders direct from sales to production Lectoraat Lean / WCP 20
Steps to implement (3) Work towards a situation with minimal setup times to be able to make every full end product on customer order Lectoraat Lean / WCP 21
Conclusion/summary QRM was starting point of analysis Smoothing of demand covered by leagility concept Next steps: Implement cell High level planning, POLCA(?): Planning and control simplified Various routings and combining of processteps to reduce leadtime Reduce setup times and batch (kanban) quantity to... Reduce buffers to minimal capacity buffer Lectoraat Lean / WCP 22
Lectoraat Lean / WCP 23
SKU classification Glenday Sieve Colour code Cumulative % of Sales Cumulative % of SKU range green 50% 6% yellow 95% 50% blue 99% 70% red last 1% last 30% Source: Glenday(2005) Lectoraat Lean / WCP 24
SKU classification SKU Cum percentage Type Percentage Sales number Sales 01010207 Combi boorlich. 7 40,4% 40,4% 01010205 Combi boorlich. 5 16,2% 56,6% 01010204 Combi boorlich. 4 6,1% 62,7% 01010107 Klei boorlich. 7 5,8% 68,5% 01050007 Grind boorlich. 7 5,1% 73,6% 01030007 Riverside boorlich. 7 4,1% 77,7% 01010210 Combi boorlich. 10 4,0% 81,7% 01010307 Zand boorlich. 7 2,9% 84,6% 01030010 Riverside boorlich. 10 2,3% 86,9% 01010215 Combi boorlich. 15 2,0% 88,9% 01121507 Zachte klei boorlich. 7 1,9% 90,7% 01010407 Grofzand boorlich. 7 1,7% 92,4% 01010206 Combi boorlich. 6 1,5% 93,9% 01010212 Combi boorlich. 12 1,2% 95,1% 01010110 Klei boorlich. 10 1,22% 96,4% 01050010 Grind boorlich. 10 0,75% 97,1% 01010208 Combi boorlich. 8 0,68% 97,8% 01010310 Zand boorlich. 10 0,59% 98,4% 01030005 Riverside boorlich. 5 0,42% 98,8% 01121510 Zachte klei boorlich. 10 0,27% 99,1% 01010108 Klei boorlich. 8 0,25% 99,3% 01010220 Combi boorlich. 20 0,22% 99,5% 01010410 Grofzand boorlich. 10 0,20% 99,7% 01030008 Riverside boorlich. 8 0,16% 99,9% 01030015 Riverside boorlich. 15 0,10% 100,0% 01010245 Combi boorlich. 4,5 0,0064% 100,0% 01010610 Combi boorlichaam linksdr. 10 0,0024% 100,0% 01010607 Combi boorlichaam linksdr. 7 0,0012% 100,0% 01050015 Grind boorlich. 15 0,0000% 100,0% Cum percentage of product range 7% of SKU = 56,6% cum sales 48% of SKU = 95% cum sales 66% of SKU = 99% cum sales last 34% SKU = 1 % of sales Lectoraat Lean / WCP 25
Inventory management strategies (IMS) Inventory Optimisation high service level is key factor: a well defined buffer in the process is acceptable as long as it pull based (products are relatively low priced). reduction of WIP: use inventory to facilitate aspects 2 and 3. Reduce WIP to only one stage Lectoraat Lean / WCP 26
Inventory management strategies (IMS) Production and Scheduling Reduction in planning and control: costs are relatively high (17 hours per week) and non value adding. Group in manufacturing should be "self-managing" Capacity Management Balanced workload: Variability in total aggregated demand seems relatively low (appendix 2) Craftsmanship of forgers is not exchangeable Lectoraat Lean / WCP 27
EPEC Lean perspective: Glenday Sieve results Green: Optimize to one stream Yellow: standardize,add to green (or add to:) Blue: separate from green/yellow Red: eliminate? Pricing? Lectoraat Lean / WCP 28
Safety stocks Veiligheidsvoorraad: Voorraad bovenop afzet Meest eenvoudige benadering, bij wekelijkse bestelling: Vraag+ k x st.devvraag Betrouwbaarheid K (sigma) 95% 1,65 sigma 98% 2,06 sigma 99% 2,33 sigma Lectoraat Lean / WCP 29
Safety stocks Required safety stock Cum percentage Average 2013 Cum percentage Average 2004-2013 Average per week 2013 Artikelnummer dim Omschrijving Groep Current stock 99% Saldo stock st.dev 2013 01010207 Totaal combi 7 Combi boorlich. 7 1 82 176 94-40,42% 46,2553% 63,792 48,346 01010205 Totaal combi 5 Combi boorlich. 5 1 21 133 112-16,18% 15,8575% 25,528 46,153 01010210 Totaal combi 10 Combi boorlich. 10 1 26 18 8 3,99% 6,8250% 6,302 4,962 01010212 Totaal combi 12 Combi boorlich. 12 1 7 9 2-1,22% 1,4648% 1,925 3,179 01010215 Totaal combi 15 Combi boorlich. 15 1 15 11 4 1,97% 2,7976% 3,113 3,202 01010220 Totaal combi 20 Combi boorlich. 20 1 17 3 14 0,22% 0,4725% 0,340 0,951 01010204 Totaal combi 4 Combi boorlich. 4 1 0 33 33-6,13% 5,0621% 9,679 9,990 01010245 Totaal combi 45 Combi boorlich. 4,5 1 0 0 0 0,00% 0,1309% 0,000 0,000 01010206 Totaal combi 6 Combi boorlich. 6 1 10 9 1 1,48% 2,4293% 2,340 2,788 01010208 Totaal combi 8 Combi boorlich. 8 1 11 4 7 0,68% 1,7823% 1,075 1,439 01010110 Totaal klei 10 Klei boorlich. 10 1 81 10 71 1,22% 1,7399% 1,925 3,267 01010107 Totaal klei 7 Klei boorlich. 7 1 41 29 12 5,79% 7,5713% 9,132 8,594 01010108 Totaal klei 8 Klei boorlich. 8 1 57 3 54 0,25% 0,6240% 0,396 0,938 01010610 Totaal links 10 Combi boorlichaam linksdr. 10 1 1 0 1 0,00% 0,0012% 0,000 0,000 01010607 Totaal links 7 Combi boorlichaam linksdr. 7 1 1 0 1 0,00% 0,0024% 0,000 0,000 01121510 Totaal z klei 10 Zachte klei boorlich. 10 1 8 2 6 0,27% 0,3502% 0,434 0,813 01121507 Totaal z klei 7 Zachte klei boorlich. 7 1 22 9 13 1,85% 1,7811% 2,925 2,605 01010310 Totaal zand 10 Zand boorlich. 10 1 11 4 7 0,59% 1,2261% 0,925 1,179 01010307 Totaal zand 7 Zand boorlich. 7 1 21 12 9 2,87% 4,3206% 4,528 3,201 01050010 Totaal grind 10 Grind boorlich. 10 2 7 10 3-0,75% 1,0904% 1,189 3,777 01050015 Totaal grind 15 Grind boorlich. 15 2 0 0 0 0,00% 0,0061% 0,000 0,000 01050007 Totaal grind 7 Grind boorlich. 7 2 18 33 15-5,06% 6,5233% 7,981 10,579 01010410 Totaal grofzand 10 Grofzand boorlich. 10 3 11 2 9 0,20% 0,3792% 0,321 0,772 01010407 Totaal grofzand 7 Grofzand boorlich. 7 3 29 9 20 1,72% 2,1882% 2,717 2,763 01030010 Totaal riv 10 Riverside boorlich. 10 4 8 11 3-2,34% 2,8654% 3,698 3,283 01030015 Totaal riv 15 Riverside boorlich. 15 4 3 2 1 0,10% 0,0642% 0,151 0,959 01030005 Totaal riv 5 Riverside boorlich. 5 4 11 4 7 0,42% 0,6821% 0,660 1,601 01030007 Totaal riv 7 Riverside boorlich. 7 4 31 16 15 4,11% 6,4852% 6,491 3,893 01030008 Totaal riv 8 Riverside boorlich. 8 4 3 3 0 0,16% 0,3465% 0,245 0,989 Totaal 553,000 554,431 100,00% 157,811 140,273 Lectoraat Lean / WCP 30