building a lean fulfillment stream - lean … · ©leancor 2012 building a lean fulfillment stream...
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©LeanCor 2012
BUILDING A LEAN
FULFILLMENT STREAM
Brad Bossence
678-876-9009
May 15th, 2013
Derek Browning
859-652-1812
www.LeanCor.com
©LeanCor 2012
LeanCor offers a unique and strategic combination of services:
Third Party Logistics
Hands-on Consulting
Training and Education
We partner with organizations to
eliminate waste, drive down costs,
and instill a problem-solving culture
across their supply chain.
Locations:
LeanCor US,
LeanCor Canada,
LeanCor China
Who is LeanCor Supply Chain Group?
www.LeanCor.com
©LeanCor 2012
Are We Speaking the Same Language?
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Supply Chain & Logistics Management A Practical Viewpoint
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
Logistics
Supply Chain Management
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Words have meaning, names have power
Supply Chain
Supply:
Supplier Focused
EOQ’s
Chain:
Only touch points
Each link independent
Strong as it’s weakest
link
Prone to kinking
Fulfillment Stream
Fulfillment
Customer Focused
Takt Time Quantities
Stream
Flows smoothly
Flows evenly
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Lean Fulfillment Stream : Guiding Principles
Make customer consumption visible
Increase velocity an reduce variation
1. Make consumption visible throughout the fulfillment stream
2. Reduce lead time to enable pull and reduce inventory
3. Create level flow to reduce variation and enable stability
4. Use pull systems to reduce complexity and over production
6. Increase velocity to drive flexibility to meet customer demand
5. Collaborate , solve problems and focus on process discipline
7. Lead and make decisions based on Total Cost of Fulfillment
Why : To eliminate all waste so that only value remains
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Lean Organizations Think Differently
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What happens when we forget about the system?
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The Costs of Carrying Inventory
What
are the
other
costs?
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Lead Time is Only Made of Two Things!
Lead Time = Value + Waste
Va
lue
Va
lue
Waste
Va
lue
Va
lue
Waste Waste
Custo
mer
Consum
e
Manufa
ctu
re
Pro
duct D
esig
n
Supplie
r B
uild
©LeanCor 2012
Concept Application: Arrows Chart
Discuss at your table the Arrows Chart that is being
distributed. Discuss each of the Variables and review
the relationships between the costs.
Complete the chart for the variable “Increase
Production Frequency”.
©LeanCor 2012
The Fulfillment Stream: 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 is not always abundant
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LFS Simulation
Decision 1: SKU Flow
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The ultimate LFS would have everyday be the same
If everyday was the exact same = Totally Stable = Perfect Flow
When everyday is close to the same = Reasonably Stable = Pull
When everyday is different = Not Stable = Planning – Pull
When everyday is total different = Totally Unstable = Make to Order
Stability and the LFS
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ABC Analysis Based on Stability
15
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ABC Analysis – Traditional vs. Flow
16
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Stability and Part Behavior
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LFS Simulation
Decision 2: Distribution Network
Optimization
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Outbound Logistics
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Load
Leveling
Withdrawal
Pull
Supermarket
Finished
Goods
to Customer
Stage 1 – Data Collection
• Store locations
• SKU Level demand data
• SKU level variation data
• SKU weight / volume data
• Transportation rates
• Facility costs
• Inventory value (SKU)
• Inventory carrying costs
• Customer lead time
Stage 2 – Modeling
1. ABC Stratification – SKU
Stability
2. Store consumption
3. Transportation to stores
4. Pull from DC’s
5. Facility turns at DC
6. Transportation to DC
7. Pull from Factory
8. Facility turns at Factory
9. Transportation to RDC
Stage 3 – Reporting
1. Facility locations
2. Facility size
3. Facility cost
4. Inventory footprint
5. Inventory turns
6. Inventory cost
7. Transportation modes
8. Transportation design
9. Transportation cost
10. Total logistics cost
Milk
Run
Transportation
Design
Stores Store
Delivery DC Line Haul
Delivery Factory
Outbound Logistics Review
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Lean Logistics Concept 1 of 3:
Lot Size
Customer Daily Requirements = x75
100
25
75 100
Day 5
75 100
25
75 75 75 75 75
Day 1 Day 2 Day 5 Day 3 Day 4
Order Lot Size = 25
Day 1 Day 3 Day 4 Day 2
Order Lot Size = 50
What Happens Here? What are the Implementation Challenges?
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Fri 1 /week Mon Tues Wed Thr
500 SQ/FT
4PM 1 /day 8AM 10AM 12PM 2PM
100 SQ/FT
4PM 8AM 10AM 12PM 2PM
25 SQ/FT
4 /day
What is the effect on Inventory? What is the obvious challenge?
Lean Logistics Concept 2 of 3: Frequency
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7AM 9AM 11AM 1PM 3PM
One Shift
Material
Handling
Where can we use this concept tomorrow?
Lean Logistics Concept 3 of 3: Level Flow
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LFS Simulation
Decision 3: Inventory Supermarket Sizing
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Supplier Part and Material Ordering
Current ordering process identification & documentation
Ordering system SIMPOC
Standard ordering processes
5S for an ordering system
Replenishment strategy for each part number
Complete PFEP
Review lot sizes and reduce lot sizes where necessary
Develop supplier replenish method by part number DNA
Review technology constraints and strategies
Develop standard supplier ordering process
©LeanCor 2012
The “Pull” Supermarket
Called a supermarket because we
withdrawal 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
Pop Quiz: What is the fundamental difference between supermarket replenishment and a Min–Max System?
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LFS Simulation
Decision 4: Inbound Logistics
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Inbound Logistics
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Inbound Logistics
Current inbound logistics network data collection
Current inbound logistics network mapping
Lean logistics design to drive frequency & savings
Inventory strategy based on replenishment
Inbound parts supermarket
Transportation strategy based on replenishment
Logistics engineering infrastructure
Milk runs and LTL consolidation
Supplier pickup verification process
Route management and track and trace
Warehouse strategy based on replenishment
Implementation of cross dock where applicable
Global supplier consolidation center
Packaging strategy based on replenishment
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The Inbound Lean Fulfillment Stream
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Transportation Design
Customers
Suppliers
200 Cubic Yards / Day
X 6 day
X 12 day
X 4 day 400 Cubic Yards / Day 600 Cubic Yards / Day
1200 Cubic Yards / Day
©LeanCor 2012
Enter the Cross Dock
INBOUND MATERIALS from Suppliers
OUTBOUND MATERIALS to Customers
INBOUND RETURNS from Customers
OUTBOUND RETURNS to Supplier
How is the Cross Dock different from Warehousing? What Needs to take Place?
Cross Dock
©LeanCor 2012
Thank You