lean deployment in supply chain: materials. presentation objectives foundation: lean thinking a...
TRANSCRIPT
Lean Deployment in Supply Chain: Materials
Presentation Objectives
• Foundation: Lean Thinking• A Culture Shift – The Lean Journey In
Supply Chain• Highlights of the Transformations at CPS
Energy’s Materials Team• Our Future State - Relentless Pursuit of
Perfection
Foundation: Lean Thinking
What is Lean
• The term ‘Lean’ is an outside term to describe the Toyota Production System
• It is a philosophy based on eliminating waste and defining value from the customer’s perspective.
• Lean is rooted in observation… go and see, analyze the situation and ask why the problem occurs.
• It is a philosophy of continuous improvement and learning.
• Lean means dependence on people.
The Foundation
• The foundation to Lean is to gain an understanding of a few key principles: Waste Standardization Visual Management Strategy Deployment Continuous Improvement The Pillars – JIT and Jidoka
• The goal is to improve quality, reduce lead time and reduce cost
The Seven Wastes
• The main restriction to profitability, efficiency and flexibility:
1. Defects, Mistakes, Corrections2. Overproduction (over acquisition)3. Transportation4. Waiting5. Inventory6. Motion7. Over Processing
The Cost Principle
• The cost principle is based that in a competitive market, the customer sets the price:
Price – Cost = Profit
Price – [VA + NVA + Waste] = Profit
• Value added work is what the customer is willing to pay for… all else is a form of waste (cost).
Standardization
• Standardization is the essential if you are going to have any form of improvement
• Standardization can be obtained by finding best practices and applying them as the way to do the work
• This is true until another best practice or a better method is found, therefore, becoming the new standard
Visual Management System
• It is key to measure and monitor your operations
• This must be displayed where all can see and understand
• Strategies, improvements, problems and goals are displayed
Strategy Deployment
• It is important to get the team involved in strategy deployment
• Our Supply Chain Director has to main strategy objectives:
1. Reduce Lead Time2. Improve Quality
• The Materials group’s strategy must support Supply Chain’s strategy
• The Supervisor’s strategy must support the Material group’s strategy
• This is the nature of goal alignment bottom up
Continuous Improvement
• Continuous improvement is not an event, but way of doing business
• It is key to train your managers and supervisors on how to solve problems
• Root cause analysis becomes part of their role
JIT and JidokaThe Pillars of Lean
Best Quality – Short Lead Time – Lowest Cost
JIT Jidoka
Goal Alignment and Strategy DeploymentTrain People: Problem SolvingWork Processes: Standardized
Philosophy: Understand and Eliminate Waste
PeopleProcess
Technology
Culture Shift: The Lean Journey
Lean Supply Chain
• Perfect first-time quality: quest for zero defects, revealing & solving problems at the source.
• Building and maintaining relationships with suppliers: collaborative risk sharing, cost sharing, and information sharing arrangements.
• Continuous improvement: reducing costs, improving quality, increasing productivity and information sharing.
Go to the Gemba
• Gemba in Japanese means “where the truth can be found”.
• As Lean practitioners, we must go and see where the problem occurs to thoroughly understand the situation.
• Supervisors and team members must be intimately involved in quality issues.
• Going to the Gemba (actual place) will increase the speed of resolution of problems.
Importance of Standardization
• Stadardization is backbone of Lean.• It consists of three elements:
1. Pace of customer demand2. Sequence of doing things or sequence of
processes3. How much inventory or days on hand is
needed to accomplish the work
It is impossible to improve any process until it is standardized.
Waste Creation
MudaWaste
MuraUnevenness
MuriOverburden
Building the Foundation
• Train employees to identify waste• Build a culture of stopping to fix problems• Get quality right the first time• Standardize work processes and tasks• Train employees to solve problems and
work together towards common goals• Go and See mentality• Become a learning organization
The Lean Supply ChainCustomer SupplierOrder
Management
Customer MgtSupplier Mgt
Logistics
Engineering
Planning &Scheduling
Construction
Planned SystemEvent ManagementPull ReplenishmentReduced Lead Time
Cross DockingYard Control
Receiving ScheduleDelivery Frequency
Pick Up FrequencyPick Up VerificationSupplier Compliance
Feedback Mechanisms
Customer ComplianceFeedback Mechanism
Shared AccountabilityBOM Accuracy
Schedule Accuracy
Total Cost of Ownership
Easier to Identify
Harder to Identify,
Measure and Relate to Purchase
Unit
Price
Freight
Cost
Duties
&Fees
Planning Purchasing
QC
Warehouse
& Inventory
Lead Time
Impact
Poor Quality
Impact
(Internal)
Late
Delivery
Impact
Field Failures Service General Admin.
Total Cost of Ownership
• TCO is the cornerstone of the Lean Supply Chain.• TCO encompasses all the costs associated with
the acquisition, use, and maintenance of a good or service.
• In theory, TCO may include all costs originating with the conception of a construction/service idea, all the way through rework once the product or service has been provided to the end customer.
• So what is the paradigm shift that is required in CPSEnergy today?
Manifestation of Costs
• Although many of the TCO costs are hard to see and quantify….. Where do they manifest themselves?
Inventory Carrying Costs
• Administrative Overheads 2%• Cost of Capital 9%• Damage 5%• Insurance 2%• Transfers 4%• Obsolescence 5%• Shrinkage 3%• Space to Handle Excessive
Inventory 5%• Storage Systems ½%
So the focus is not on inventory….
But rather how we manage our excessive inventory!!
Highlights of the Transformation
Supply Chain: Materials Management
Breaking Down the Walls
• Our department was segregated into 4 groups:
MRP Buyers Stores Salvage• We introduced a customer first team
where we combined and reclassified departments into teams:MA Team Warehouse Team Customer
Material Flow
Information Flow
Are Key Strategies for FY09
• Lead Time Reduction – Baby A3• Lean Warehousing Implementation• Reverse Logistics Group Formation• Quality Improvement with Fleet (Beginning
Stages)• Inventory Reduction Project: Milk Runs
with Techline (Beginning Stages)
Lead Time Reduction
Value Stream Perspective
Lean Warehousing
Reverse Logistics
Right Direction?
05
10
15202530
3540
Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08
Lead Time Target
Future State
Pursuit of Perfection
Visualizing the Supply Chain
1. Right Materials2. Right Quantity3. Right Time4. Right Place5. Right Source6. Right Price7. Right Quality8. Right Service
• Can we answer these questions?
• What process are in place?
• What are the moments of truth?
• What are the failure modes?
Value Stream Mapping
• Lean Thinking1. Specify Value by
Product2. Identify the Value
Stream3. Make the Product Flow4. At the Pull of the
Customer5. In Pursuit of Perfection
• Learning to See1. How Does the Process
Work?2. Can we Agree on
Performance?3. Can we be Involved?4. How will we Improve?
Mapping the Supply Chain
• The challenges… • 80% of the 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 enterprise is not always visible• Data is not always abundant
The Future State
• What are the customer’s expectations?• What is the rate of customer demand?• What processes are non value added?• Where is the First Time Quality an issue?• Where is availability an issue?• Where are excessive inventories?• Where can we implement flow and pull?• Where do we go and see?• What can we see? What can we do?• What projects must be prioritized?
Questions or Comments?