Seeing the Whole - Creating Lean Supply Chains

1. www.leanuk.org David Brunt November 10th 2011 Seeing the Whole: Creating Lean Supply Chains UK Lean Summit: Solving Business Problems Lean Enterprise Academy1

2. www.leanuk.orgLean Enterprise Academy Creating Lean Supply Chains Seeing the Whole Extended Value Stream Plenary Theme:   3. What can we learn from compressing lean supply chains?   As low-wage globalisation unwinds how to rebuild and manage a lean supply base in each region to bring jobs back and respond to customers cost effectively in high wage locations. This Session:   How do you analyze the opportunities from compressing value streams? 2

3. www.leanuk.orgLean Enterprise Academy Objectives of Mapping Extended Value Streams Seeing the Whole Extended Value Stream   Raise consciousness in every firm & function touching the value stream of the enormous waste of time, effort & movement   Typical current state 9 out of 10 steps & 99% of elapsed time are wasted   Raise consciousness in every firm & function of the effect of its actions on every other firm & function touching the value stream   Learn how a value stream team with representatives from every firm can envision a series of Future States & an Ideal State for their shared value stream   Learn how the team can progressively implement:   A Future State 1 in which smooth, levelled pull & flow are introduced within every facility touching the value stream   A Future State 2 in which smooth, levelled pull & frequent replenishment loops are introduced between every facility touching the value stream (eliminating warehousing & cross docking in the process)   An Ideal State (providing a North Star for collectively steering towards the perfect value stream with zero waste) by compressing the value stream & introducing right-sized technologies   Learn how value stream teams can share costs & gains to create win-win-win outcomes for every value stream participant 3

4. www.leanuk.orgLean Enterprise Academy Agenda   Introduction   Lean Thinking & starting the project   Mapping the flows   Deciding what to map   Every Product Every Cycle   Manufacturing   Warehousing   Developing the Future State 4

5. www.leanuk.org Lean Thinking A Refresher   Specify what creates value from the customers perspective   Identify all steps across the whole value stream   Make those actions that create value flow   Only make what is pulled by the customer just-in-time   Strive for perfection by continually removing successive layers of waste Lean Enterprise Academy5

6. www.leanuk.orgLean Enterprise Academy The Essence of Lean Thinking   Where is the time in your value stream?   e.g. A U.K. customer has to wait on average 48 days for their custom-built vehicle to arrive   It takes under 30 hours to produce in the factory!!! “All we are doing is looking at the time line - from the moment the customer gives us an order to the point where we collect the cash. And we are reducing that time line by removing the non- value-added wastes” Ohno (1988-ix) 6

7. www.leanuk.orgLean Enterprise Academy Value Stream Improvement & Process Improvement Company 1 Company 2 Company 3 CUSTOMER Raw Material Finished Product VALUE STREAM: All the steps, VA & NVA, required to bring the product from raw material to customer Necessary but non value adding 35% Value adding 5% Non value adding 60% 7

8. www.leanuk.orgLean Enterprise Academy Value Stream Improvement & Process Improvement Company 1 Company 2 Company 3 CUSTOMER Raw Material Finished Product PROCESS PROCESS PROCESS VALUE STREAM: All the steps, VA & NVA, required to bring the product from raw material to customer Necessary but non value adding 35% Value adding 5% Non value adding 60% Focus of “traditional” efficiency improvements 8

9. www.leanuk.orgLean Enterprise Academy Value Stream Improvement & Process Improvement Company 1 Company 2 Company 3 CUSTOMER Raw Material Finished Product PROCESS PROCESS PROCESS VALUE STREAM: All the steps, VA & NVA, required to bring the product from raw material to customer Necessary but non value adding 35% Value adding 5% Non value adding 60% Focus of LEAN improvement 9

10. www.leanuk.org “Seeing the Whole” Methodology Seeing the Whole: Creating Lean Supply Chains Lean Enterprise Academy10

12. www.leanuk.orgLean Enterprise Academy Toyota Production System Jidoka -Andon -Poka-Yoke -Visual control -5S, etc. Just-in-time -Flow production -Takt time -Pull system Customer service Continuous Improvement Through People Lead TimeCostQuality Heijunka Standardized Work Kaizen Equipment Stability Goal: Highest Quality, Lowest Cost, Shortest Lead Time Purpose 12

13. Analysis Countermeasures Plan Follow-up Background Goal   Purpose: What is the business reason for choosing this issue?  Overall Situation: What is the strategic, operational, historical or organizational context of the situation? Theme: Review Questions For Problem Solving A3s Ref: Developed from Sobek & Smalley 2008 pp 50 & David Verble Current Situation   What is the Problem or Need- the Gap in Performance?  What is happening now versus what needs to be happening or hat you want to be happening?  What are the specific conditions that indicate you have a problem or need, where and how much?  Show the facts visually with charts, graphs, maps   Is there a clear goal or target (gap?)   What, specifically, is to be accomplished?   How will this goal be measured or evaluated?   What will improve, by how much, and when?   What are the options for addressing the gaps & improving performance in situation?   How do they compare in effectiveness, feasibility & potential impact?   What are their relative costs and benefits?   Which do you recommend and why?   Show how your proposed actions will address the causes of the gaps or constraints in the situation.   What will be main actions & outcomes in the implementation process & in what sequence?   What support & resources will be required?   Who will be responsible for what, when & how much?   When will progress & impact be reviewed & by whom?   Use a Gantt chart to display actions, steps, outcomes, timelines & roles.   How will you measure the effectiveness of the countermeasures?   Does the check item align with the previous goal statement?   When and how you will know if plans have been followed & the actions have had the impact needed?  What related issues or unintended consequences do you anticipated & what are your contingencies?  What processes will you use to enable, assure & sustain success   What do the specifics of the issues in related work processes (location, patterns, trends, factors) indicate about why the performance gap or need exists?   What conditions or occurrences are preventing you from achieving the goals?   Use the simplest problem analysis tool that will suffice to show cause-effect down to root cause. From 5 Whys, to 7 QC tools (fish-bones, analysis trees, Pareto charts) to sophisticated SPC or other tools as needed. What are you talking about & why? Where do things stand now? What specific outcome is required? Why does the problem or need exist? What do you propose & why? Specifically how will you implement?4Ws1H How will you assure ongoing PDCA?

14. www.leanuk.orgLean Enterprise Academy Michigan Steel Sales Manager Gamma Stampers Value Stream Manager Beta Wipers Plant Manager Product Line Manager Alpha Motors Head of Supplier Development (Team Leader) One or two people from each organisation Step 1: Select a Team from Across the Chain 14

15. www.leanuk.orgLean Enterprise Academy Manufacturing Plant Plant Manager Lean Manager European Distribution Centre Distribution Manager Lean Manager Retailer Head Office Project Manager Category Buyer Retailer High Street Branch Manager Optician Contact Lens Example Planning Manufacturing Outbound Logistics Goods In Inventory Mgmt Order Processing Pick/Pack/ Ship Ordering Promotions Ordering Delivery Consumption 15

16. www.leanuk.orgLean Enterprise Academy Who Should be on the Team?   Responsibility for part or all of supply chain activity   People who can take a view beyond their functional silo   People who are sufficiently senior and have sufficient authority & respect to drive through changes across functional boundaries   People who can take a strategic perspective   People who have a ‘willingness to learn ’   The people who are going to do the improving – do the mapping 16

17. www.leanuk.orgLean Enterprise Academy Alpha Motors Platform A Apex Wheels Beta wipers Epsilon Fuel Pumps Cosmic Brakes Eclipse Engine Computers Gamma Stampers Ampersand Magnets Utopia Castings Michigan Steel Odyssey Fasteners Smith Heat Treatment Step 2: Select a Key Value Stream for the Pilot Improvement Project The companies in the target value stream The specific product or product family for analysis 17

18. www.leanuk.orgLean Enterprise Academy Glenday Sieve & Product Family Analysis Process Steps & Equipment LH Steering Bracket RH Steering Bracket Instrument Panel Brace Seat Rail Bumper Brackets Electronic Test Fixtures Assy Robot Weld Flash Remove Paint Manual AssySpot Weld X X XX X X XX XXX X XX XXX Products BLUES 95% 6%50% Cumulative % Product Range Cumulative % of Sales Last 1% 18

19. www.leanuk.orgLean Enterprise Academy Lisbon Birmingh am Mila n Rome Stockhol m Helsinki Vienn a Manches ter Warsaw Madrid Bas el 2005 European Daily Volume over 10,000 packages on 24/48 hrs delivery Os lo Athens Pari s Marseille Bruss els Osnabrüc k Customer Distribution Chart 19

20. www.leanuk.orgLean Enterprise Academy Step 3: Data Collection   Go and see ----- GEMBA   All the team ---- Walk all of the chain   Record all the steps in the process & the time taken for each – Process Activity Map   Classify each step as Value Adding (VA) or Non–Value Adding (NVA)   It may seem time consuming – but it is invaluable   Use the data collected to construct a Current State map for each facility 20

21. www.leanuk.org Global System Map Lean Enterprise Academy21

22. www.leanuk.orgLean Enterprise Academy Steel mill Stamping Company Wiper Assembly Company Car Assembly Car Distributor Current State Map For the Complete Value Stream 22

24. www.leanuk.org Demand Amplification The Forrester Effect Small changes in end-user demand become amplified as they are passed upstream along the chain Lean Enterprise Academy24

25. www.leanuk.orgLean Enterprise Academy Demand Amplification The Bull-Whip Effect Customer Demand, Retailer Orders Distributor Orders Factory Production Time Demand [units] 40% increase 10% increase 25

26. www.leanuk.orgLean Enterprise Academy26

29. www.leanuk.orgLean Enterprise Academy Constructing a Demand Amplification Map   Major decision areas   Customer forecast   Your business plan - volumes   Your forecast/schedule   Your weekly plan   Final assembly   Feeder operations   Actual production numbers   Supplier forecast   Supplier orders   Actual deliveries   Produce line charts Date 29

30. www.leanuk.orgLean Enterprise Academy Quality & Delivery Demand Amplification Consumption Map Geography etc. Current State Summary Purpose Select Product FamilySupply Chain Network & VS Selection Alpha Motors Platform A Apex Wheels Beta wipers Epsilon Fuel Pumps Cosmic Brakes Eclipse Engine Computers Gamma Stampers Ampersand Magnets Utopia Castings Michigan Steel Odyssey Fasteners Smith Heat Treatment Current State by Facility PRODN. CONTROL Weekly Schedul e Prod’n Plan Forecas t Daily Call In Forecas t Weekly Call In Weekly Suppliers Customer Mon. + Wed. PRESS ASSEMBLY SHIP I I C/T = 30 sec. C/O = 30 min. 3 shifts 2% Scrap C/T = 90 sec. C/O = 5 min. 2 shifts 3% Scrap 600 pieces 2 Day 300 pieces 1 Day 30 sec 2 days 90 sec 1 day Total lead time 3 days VA time 2 mins LH Steering Bracket RH Steering Bracket Instrument Panel Brace Seat Rail Bumper Brackets X X XX X X XX XXX X XX XXX Products BLUES 95% 50% Cumulative % Product RangeCumulative % of Sales Last 1% Supply Chain Current State 30

31. www.leanuk.orgLean Enterprise Academy Workshop For each of your firms:   Describe your supply chain network   Which product family would you select   Has anyone in your organisation created:   A Consumption Map?   Quantified Demand Amplification   What is the Quality & Delivery performance of the chain?   You have 15 minutes 31

33. www.leanuk.orgLean Enterprise Academy Heijunka box Forecast 1. Replenishment Pull System Concept Key Points   Each process has a supermarket which holds the product it produces   The easiest of all pull systems to start with to implement   Each process replenishes the market in front of the process   Pace and order of replenishment at the pacemaker can be controlled by a Heijunka box (discussed later in more detail)   Scheduling needs to calculate average demand quantity, the right mix for the line to produce and continually watch inventory to reconcile what is actually taken away. (Caution: If you have the line produce exactly what is taken away you may wind up with an “un-level pull” system) Customer Production Control 33

34. www.leanuk.orgLean Enterprise Academy Heijunka Box Order Sequence List Supplier Parts 2. Sequential Pull System Concept Key Points   1. The sequence of production is dependant upon actual orders from the customer   2. Production instruction is sent to an upstream process in the value stream, often in the form of a “sequence list" or instruction kanban   3. Each following process normally produces in the sequence of the item delivered   FIFO of individual products must be maintained throughout   Without WIP inventory to act as a buffer rigid adherence to lead-time and on-time delivery of supplier components becomes absolutely critical Customer F I F O F I F O Production Control 34

35. www.leanuk.orgLean Enterprise Academy Heijunka box Order Scheduling 3. Mixed pull system concept Key Points   Both Supermarket replenishment and Sequential type pull systems may be used concurrently. Such a mixed system works well when and a small number (perhaps 20%) of parts comprise the majority (perhaps 80%) of daily production volume, and there are many low runners that are required at much less frequency   Demand segmentation analysis is required to break products up into high runners, medium, low, and infrequent (perhaps special order or service parts) orders   Two schedule points (i.e. pacemaker) exist which can cause problems which I will demonstrate later in the simulation game Customer F I F O F I F O 35

36. www.leanuk.orgLean Enterprise Academy How will you level production mix at the pacemaker?   Key concept   Leveling concept & SMED   Leveling options 36

37. www.leanuk.orgLean Enterprise Academy Level Production Mix Concept & Effect Days 0 10 20 30 X Y Z 1,200 per lot 3 lots of 1,200 3 changeovers 10 day build 10 day avg. inventory 10 to 21 day lead time "Large batch" Case - 1 30 40 per lot 0 10 20 X Z Y 90 lots of 40 90 changeovers 3 items per day build (EPED) 1 day avg. inventory 1 day lead time "Small batch" Case - 3 Repeat schedule 0 10 20 30 X Y Z 400 per lot 9 lots of 400 9 changeovers 3.3 day build 3.3 day avg. inventory 3.3 to 6.6 day lead time "Medium batch" Case - 2 Repeat schedule Illustrative example 37

38. www.leanuk.orgLean Enterprise Academy Change Over Reduction (SMED) = External = Internal 10 minutes E I 6. Standardize and improve the new changeover procedure over time E I10 minutes5. Reduce the external elements E I 20 minutes20 minutes4. Reduce and eliminate the internal elements, adjustments, etc. E I 40 minutes20 minutes3. Strip out external elements and pull them forward before the machine stops 2. Identify internal vs. external elements and calculate individual time I 10 I 10 I 5 I 5 Step Pre-work During machine shutdown 60 Minutes1. Measure total changeover time 20 minutes 10 minutes E 4 I 10 E 3 E 3 E 7 E 3 E I 38

39. www.leanuk.orgLean Enterprise Academy Leveling Options – Two Scenarios 1.  Batch Machines: Set number of changeovers and determine best EPEI interval 2.  Flexible Assembly: Calculate pitch Intervals Time available ÷ Pitch = Intervals 450 min. ÷ 9 min. = 50 intervals 35 30 Machine 1 Machine 2 40 hours Run Time Allowable C/O Time 39

40. www.leanuk.org Determine Time Available for non-production Work (1 Machine) Lean Enterprise Academy40 Total 1-shift production time available (net breaks and lunch) 450 min. Number of shifts x 2 Time available for production on 1 machine 1 day = 900 min. Time required per day to meet average demand* - 703 min. Net time available for set up and changeovers per day = 197 min. * Taken from above chart on basic machine data 703 min.1,000 1.5%55 min.339 min.40 sec.50015489 1.3%55 min.228 min.45 sec.30015488 1.5%55 min.136 min.40 sec.20015487 Average scrap rate Average changeover time Required run time per day Cycle time Per piece Average demand per day* (pieces) Part # *Your situation may require calculating demand per week or month as required

41. www.leanuk.orgLean Enterprise Academy Set the Number of Change Over Events per Interval 30 min.- Average downtime (not including set-up and changeover times) 197 min.Non-production time available 3.04=Possible number of changeovers per day 55 min.÷Average changeover time 167 min.=Time available for changeover work on 1 machine 1 day With 3 part numbers and 3 possible changeovers per day - Every part every day (EPED) is a good interval to start with in this instance 41

42. www.leanuk.orgLean Enterprise Academy 50 intervals=9 min.÷450 min. Possible intervals (on a Heijunka Box)=Pitch÷Time available Leveling Demand with Respect to Pitch Intervals   Pitch (54” x 10 items) = 540 seconds (9 minutes) Assume in this example:   60% of production equals high-runner A items (of which there are 5).   20% of production equals medium-runner B items (of which there are 5).   20% of production equals low-runner C items (of which there are 15). 42

43. www.leanuk.orgLean Enterprise Academy Leveling Demand with Pitch Intervals (Continued) Step 1 – Basic Level 90 min. / 100 items 10 reserved for Cs=20%x 50 intervals 90 min. / 100 items 10 reserved for Bs=20%x 50 intervals 270 min. / 300 items 30 reserved for As=60%x 50 intervals Equivalent time & quantity Intervals per item= % of production mix x Total interval   Assume average order quantity of 50 units the best you would practically accomplish is making:   Each of the 5 A items in quantity of 60 (or every part every day)   2 of the 5 B items per shift in quantity of 50 (or every part every 2.5 days)   2 of the 15 C items per shift in quantity of 50 (or every part every 7.5 days) 43

44. www.leanuk.orgLean Enterprise Academy Leveling Demand with Pitch Intervals (Continued) Step 2 – More Detailed Level (EPES) 6.6 pieces per C part number =15 Cs÷100 20 pieces per B part number =5 Bs÷100 60 pieces per A part number =5 As÷300 Intervals per product number = Number of products per category ÷Category 44

46. www.leanuk.orgLean Enterprise Academy Future State 1 Flow & Pull within Plants Create Cells Level orders Link through Pull 46

47. www.leanuk.orgLean Enterprise Academy Impact of Internal Changes on Whole Value Stream KPI’s Current State Future State 1 Total Lead Time 44 days 23.9 days Value % of time 0.08% 0.16% VA Steps as % of total steps 12% 15% Inventory Turns 5 9 Quality Screen 400 200 Delivery Screen 8 8 Demand Amp’ Index 7 6 Product travel distance 5300 5300 47

49. www.leanuk.orgLean Enterprise Academy What makes the Extended Value Stream Lean?   Everyone in the entire VS should be aware of the rate of end-customer demand   Very little inventory - & the inventory that does exist is the right amount, in the right place in the VS, for the right reasons   As few transport links as possible between the steps in the production process   As little information processing as possible with pure signal and no noise in the information flows that remain   Shortest possible lead time   Changes introduced to smooth flow, eliminate inventories /transport/lead-times should involve the least possible or even zero cost 49

50. www.leanuk.org AssemblyWipersStamping Steel Dist. Centre Amplification GO GP BO BP AO AP % 40 30 20 10 0 Quality & Delivery ppm 2000 1500 1000 500 0 M-G G-B B-A A-A % 1 0 5 0 Future State 2 Eliminate Non Value Adding Facilities Intermediate warehouses & handling points 50 Lean Enterprise Academy

51. www.leanuk.org AssemblyWipersStamping Steel Dist. Centre 16d 55m 39 8 Steps Time Amplification F E D C B A % 40 30 20 10 0 Quality & Delivery ppm 2000 1500 1000 500 0 F E C A % 10 5 0 F E D C B A DELTA STEEL GAMMA STAMPING BETA WIPERS ALPHA MOTORS Future State 2 Flow and Pull between Plants Levelled Pull system between plants with Kanbans Frequent Milk round logistics 51 Lean Enterprise Academy

52. www.leanuk.org AssemblyWipersStamping Steel Dist. Centre Amplification F E D C B A % 40 30 20 10 0 Quality & Delivery ppm 2000 1500 1000 500 0 F E C A % 10 5 0 Future State 2 Flow and Pull between Plants Simplify & straighten order flows Disconnect MRP from daily planning 52 Lean Enterprise Academy

53. www.leanuk.org Future State 2: Value Stream KPI’s Lean Enterprise Academy53 Current State Future State 1 Future State 2 Ideal State Total Lead Time 44 days 23.9 days 15.8 days Value % of time 0.08% 0.16% 0.6% VA Steps % 12 % 15% 21% Inventory Turns 5 9 14 Quality Screen 400 200 50 Delivery Screen 8 8 3 Demand Amp’ Index 7 7 5 Product travel distance 5300 5300 4300

54. www.leanuk.org Seeing the Whole: Creating Lean Supply Chains Examples Lean Enterprise Academy54

55. www.leanuk.org Global System Map Current State Lean Enterprise Academy55

56. www.leanuk.org Global System Map Future State Lean Enterprise Academy56

57. www.leanuk.org Wiper Current State Map Lean Enterprise Academy57

58. www.leanuk.org Wiper Future State Map Lean Enterprise Academy58

59. www.leanuk.org Candyman Current State Map Lean Enterprise Academy59

60. www.leanuk.org Candyman Future State Map Lean Enterprise Academy60

61. I. BASIC CONCEPT JIT: RIGHT QUANTITY OF THE RIGHT PARTS AT THE RIGHT TIME The ideal state of JIT physical distribution is where high frequency replenishment is carried out at the speed determined by consumers purchases TMC DIST DLR 1pc/day 1pc/day 1pc/day Parts Supplier New parts logistic concept: Target Order Taking Inventory Control Storage Pick-Check Pack-Dely Stock Replenishment Receiving Binning OEM Dealer Retail Needs Service Needs Stock Policy + = Small lot & frequent & periodical due date ordering Small lot periodical due date ordering Frequent Planned Delivery Due Date Diagrammed Shipment Desired State Small lot frequent receiving  Prioritisation of receipt  P to P processing  Planned cyclic ops  Implementation of PULL system  6 points of Toyota storage technique  Enhanced regularity control  Reserve location control  Empty location control  Small lot frequent & staggered order receipt  Irregularity check & control  Planning order separation  Diagrammed, staggered high frequency operations based on delivery diagram  Establishment of small lot standard batch cyclic ops based on PULL  High frequency, small lot staggered delivery based on delivery diagram  Consideration of loading efficiency  Shortest & most economic transportation Receiving Storage Order Taking Pick/Check/Pack Delivery 61

62. www.leanuk.org The Ideal State   So far we have been looking at how to improve the process with existing assets, facilities & systems   Dare to Dream   What would a really lean chain look like if we were not constrained by existing assets, in existing locations etc   What would be the gains?   Would it be worth fundamentally changing the structure of the chain to avoid the on-going costs of a sub-optimal process   It may not all be feasible – but it gives a North Star towards which to aim Lean Enterprise Academy62

63. www.leanuk.orgLean Enterprise Academy Compress the Value Stream in Time & Space   Locate all manufacturing facilities as close together as possible   Locate production as close as possible to the consumer   If close location involves extra cost – this should be weighed against time savings 63

64. www.leanuk.org Ideal State Value Stream Compression Dist. Centre 3d 55m 30 8 Steps Time Amplification F E D C B A % 40 30 20 10 0 Quality & Delivery ppm 2000 1500 1000 500 0 F E C A % 10 5 0 F E D C B A Assembly ALPHA MOTORSSUPPLIER PARK Wiper Cell Stamping Cell Suppliers co-located Flow & Pull Frequent Water-spider loops Right sized equipment Capacity proportional to VS needs 64 Lean Enterprise Academy

65. www.leanuk.org Ideal State Value Stream Compression Dist. Centre 3d 55m 30 8 Steps Time Amplification F E D C B A % 40 30 20 10 0 Quality & Delivery ppm 2000 1500 1000 500 0 F E C A % 10 5 0 F E D C B A Assembly ALPHA MOTORSSUPPLIER PARK Wiper Cell Stamping Cell Steel NEW JERSEY Steel Service Centre Alternative closer raw material supplier 65 Lean Enterprise Academy

66. www.leanuk.org Ideal State Value Stream Compression Dist. Centre 3d 55m 30 8 Steps Time Amplification F E D C B A % 40 30 20 10 0 Quality & Delivery ppm 2000 1500 1000 500 0 F E C A % 10 5 0 F E D C B A Steel NEW JERSEY STEEL Assemb

Seeing the Whole - Creating Lean Supply Chains

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