Innovative Supply Chain and
Manufacturing Production Systems
For Presentation to the Annual Meeting of the
Institute of Industrial Engineering
Montreal, Canada
June 1, 2014
Martin M. Stein, D.Sc.
martin.stein@comcast.net
617-755-1960
The Toyota Production System and Proctor and Gamble’s, IWS
The Toyota Production System created a new form of management where
culture change and climate in the organization were fundamental elements
of production process control
Proctor and Gamble’s, Integrated Work System, is a major advance over TPM,
with linkages to the supply chain. Plants are now able to produce product in
response to inventory shortages.
Competitive advantage will require the expansion of internal capabilities and
the rapid transfer new programs globally including for use by potential
acquisitions and new plants.
Internal Capability will permit the use of internal resources that implement
best practices on a step by step basis. The availability of a road map for
implementation will provide an efficient and effective process for guiding
companies toward excellence in supply chain and manufacturing.
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Creating Leadership Opportunities for Culture Change
The TRACC System provides new opportunities for leaders to harness the
organization’s energy for culture change.
Cross-functional teams become engaged in problem solving at all levels.
Situational problems are solved by teams of front-line workers supported by
technical staff members. Systemic problems are supported by supervisors,
managers and technical staff who are dealing with recurring issues so they
are not repetitive. Strategic challenges are surfaced by the mid level teams
who identify barriers to strategic implementation.
The TRACC System contains several modules that drive culture change and
organizational development. The Leading and Managing Change module is
designed to create a holistic overview of the organization and is extremely
important for companies with silo organization structures. Enablers also are
included in the Human Capital Module where human resources, competency
testing and professional development implementation actions required by
culture change are provided.
The End to End, Demand Driven Organization Model (Stage 4 and 5) requires
integration of business planning and the creation of a Center of Excellence
that also facilitate culture change.
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Benefits of Integrating Manufacturing and Supply Chain
Coordination of supply and demand is a critical element in the design of an end
to end, demand driven value network.
The most advanced companies such as Procter & Gamble have recognized that
there are significant potential benefits form integrating supply and demand
planning.
The savings potential from manufacturing at P & G was $ 1B but when the
supply chain opportunities were incorporated, savings potential tripled to
$ 3B!
The logical structuring and systematic approach for continuous improvement
that is required for a manufacturing process can be extended to include and
integrate the supply chain components such as logistics, customer service
and warehousing.
The latest version of the TRACC system has been expanded to include 11
additional modules for Supply Chain components. The combination of these
to the 11 components for manufacturing, now create a comprehensive set
of 22 that include over 1300 best practice staged and structured
implementation actions.
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TRACC provides the platform for sustainable performance
improvement for a balanced set of metrics
3 years
3.0
1.6
WORLD
85%
90%
CLASS
Perfect Order
Leaders and Laggards
54
77%
Days of Inventory
58
90%
Deliver 20% More
Perfect Orders…
21%
Performance
68%
65
23%
68%
SC Cost as %
of Revenue
54 Days
…hold a third
less inventory…
24%
72 Days
72
21%
…have lower SC costs
equal to 5% of revenue
26%
26%
Practice Maturity
Example adapted from AMR research and CCI results
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The TRACC offering is functionally initiated and ensures
integration and alignments to Strategic and Operational Enablers
Strategy
Supply Chain
Strategy Workshops
Align
Transform
Innovate
Leading and
Managing Change
Supply Chain
Alignment
Product Lifecycle
Management
Plan
Demand Planning
Sales & Operations
Planning
Supply Planning
Source
Make
Procurement
Health and Safety
Focused
Improvement
Warehouse
Management
Environmental
Sustainability
Autonomous
Maintenance
Transport
Management
5S
Asset Care
Teamwork
Set-up Time
Reduction
Visual Management
Quality
Operational Enabler
Transactional
Excellence
Deliver
Administrative
Excellence
Return
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Organisational Enabler
Human Capital
CUSTOMER
SUPPLIER
Integrated Business
Planning
TRACC stages: The maturity growth is defined over 5 stages
and the implementation sequence ensures sound foundations
DDVN
Aligned
Competent
Basics established
Stage 5
Disconnected
Stage 4
Stage 3
Stage 1
Stage 2
Stage 1
Stage 2
Stage 3
Stage 4
Stage 5
Basics
established
Competent
Aligned
Excellence
Disconnected
• Misaligned
• Identify
• Standardised
• Simplicity
• Culture of teaching
• Ignorant
• Selective adoption
• Integrated
• Fragmented
• Deployed
• International
benchmarking
• Controlling
• Recognition of
waste / value
• Sharing
Collaboration
• Knowledge Expert
• Visibility
• Resilient
• Crises Management
• Risk awareness
• Consistent
• External / Internal
• Virility
• Fire fighting
• Value articulated
• Competent
• Culture of learning
• Dynamic
• Unclear strategy
• Prioritisation
• Clear / focused
• Improvement
• Predictive
• Unclear goals
• Stabilisation
• Available
• Undefined
• Silo approaches
• Initial awareness
• Business process
driven
• Best in the class
within industry
• Orchestrating
• Clearly defined
• Confidence & Trust
• Ad hoc
• Understanding of
root causes
• Addressing Root
causes
• Eliminating root
causes of problems
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• Shaping
• Advanced
detection
7
Planning TRACC’s: The Maturity Pathway
SUPPLY CHAIN
DDVN
Aligned
Competent
Basics established
Stage 5
Disconnected
Stage 4
Stage 3
Stage 1
Stage 2
Stage 1
Stage 2
Stage 3
DEMAND
PLANNING
No Insight
Functional
Forecasts
Consensus
Forecasts
SUPPLY
PLANNING
Disarray
Basic Plans
Reliable Plans
SALES & OPS
PLANNING
Fragmented and
Reactive
Rudimentary
Integration
Aligned and
Focused
Stage 4
Sensing
Stage 5
Shaping
INTEGRATED BUSINESS PLANNING
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Decision-making in Planning TRACC’s
Supply Chain Alignment
• Determine customer segmentation and differentiated internal supply chains
• Network configuration decisions with regard to manufacturing facilities,
sourcing locations, distribution centres and routes
• Collaboration decisions with regard to 2nd and 3rd tier customer and suppliers
• High capital investment decisions
• High importance and high complexity
• Long term — 3 to 5 years
• Broad impact on entire internal and external supply chain and organisation
Integrated Business Planning
• Set direction and priorities for business
• Decisions aimed at closing gap between supply chain plans and
financial objectives
• Decisions on new products, new markets and new improvement
projects
• Risk and opportunity based
• High importance and high complexity
• High investment decisions
• Medium to long term — 18 to 24 months
SCA
SP
IBP
SP S&OP
DP
Supply Planning
• Constrained supply plans
• Finite capacity plans
• Daily, weekly, monthly
• Rough-cut plans — 18 to 24 month horizon
S&OP
DP
Sales and Operation Planning
• Balancing demand and supply
• Controlling inventory
• Product portfolio management
• High-level capacity constraint decisions
• Decision on reaching consensus on demand and supply plans
• Medium term — 6 to18 months
• Execution of strategy
Demand planning
• Consensus demand plan
• 18 to 24 month horizon
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Planning TRACC’s:
Integration drives consolidation of Information and timing
Strategic Planning
Supply Chain Alignment TRACC
Business unit plans
and budgets
Demand Planning TRACC
Marketing and Sales planning
Price plans, promotion
schedules, etc.
Demand Planning and Communication
Sales forecast
MATERIALS PLANNING
Material Planning (MRP)
Collaboration
Material Releasing
Purchase orders
Short Term
(days or weeks)
Supplier
Vendor Schedules
CAPACITY PLANNING
Resource Planning (RP)
Medium Term
(weeks or months)
Resource
Availability
PRODUCTION PLANNING
Production Planning (MPP)
Medium Term
(weeks or months)
Rough Cut Capacity
Planning (RCCP)
Short Term
(days or weeks)
Short Term
(weeks or months)
Production
Plans
Production
Scheduling (MPS)
RCCP Plans or
Info
Short Term
(days or weeks)
Capacity Requirements
Planning (CRP)
Procurement TRACC
Sales forecast
Requirements
Capacity Plans
Production
Schedules
DEPLOYMENT PLANNING
Inventory Planning (IP)
Medium Term
(weeks or months)
Inventory Targets
Distribution Deployment
Plan (DRP)
Short Term
(days or weeks)
Deployment
Requirements
Finite
Scheduling (FPS)
Short Term
(hours or days)
Finite
Schedules
Finite Loading
Order Fulfilment TRACC
Warehousing TRACC
Transportation TRACC
Supply Planning TRACC
Supply
Collaboration
Material
Plans
Sales forecast
Shipment
History
Make (Convert)
Demand
Consumer orders
Sales and Operations
Planning TRACC
Medium Term
(weeks or months)
Sales forecast
Customers
Customer-driven Supply Chain (i.e. pull based)
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Case Study: Kellogg Latin America
Kellogg Latin America consists of 8 plants in Mexico, Brazil, Venezuela, Ecuador
and Colombia. At present, 7 of these plants are utilizing the manufacturing
TRACC system.
Recently, Kellogg Latin America, has added Supply Chain Alignment, Demand
Planning, Supply Planning and Sales and Operations Planning modules of the
expanded TRACC system for Supply Chain.
This region will be the first region at Kellogg’s to launch the Supply Chain
modules.
In 2013-4, task forces will be organized to implement the Stage 1 to 3
Implementation best practices.
Initial conclusions are that there will be organizational change required to
move to the end to end demand value based network.
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Implementation Philosophy
Embedding best practices underpins lasting performance. World class
organisations drive performance improvement by standardising practices and
continuously improving these standards.
WORLD
CLASS
Y
Operations excellence systems
must show results by
improving hard KPIs or they
will lose support before they
are embedded in the culture.
Performance
Can't go the distance
Contenders
Back of the pack
Defining what 'good' looks
like and monitoring best
practice implementation
ensures a focus not on
current performance, but on
long-term, sustainable
market-beating performance.
Promising
Stragglers
1
2
3
Practice
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5
X
12
Case study: SABMiller - Practice Performance Ranking
(presented at public conference)
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Case Study: SABMiller – Energy Usage
Low
High
(presented at public conference)
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Case Study: DuPont Production System
(presented at public conference)
DuPont:
The TRACC Integrative Improvement System is the backbone for the
DuPont Production System globally.
Our DPS System (powered by TRACC) has returned
$2 billion back
to the business in the last two years.
Paul Mocniak,
Program Manager, DPS TRACC, DuPont, USA
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Case Study: DuPont integrated Improvement Approach
(presented at public conference)
DPS Vision statement
Everyone, everyday in pursuit of Operations
Excellence enabling DuPont to win in a dynamic
world
Current and
future
requirements for
capability and
performance
Managing
process
Technical
model
Capability
building
Mindsets and
behaviours
Keep focus on
what really
matters, with
the right people
Apply
tools and
practices to
drive focused
improvement at
all levels
Insure the right
skills and
coaching
Align
cultural norms
with the
organisation's
vision, mission
Brought in to support
and sustain all aspects of DPS
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Required
business
outcomes
Case Study: Heinz integrated Improvement Approach
(presented at public conference)
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Example:
Quantification and Opportunity Prioritisation
Performance Assessment
Practice Assessment
$ Opportunity
How sustainable are
your current practices?
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P-D-C-A
Phase 3: Performance Management Control Loops
Example
Hour
Shift
Day
Week
Corporate
Month
Month Review
P-Q-D-C-S-M
VP SC
Site
Month Review
P-Q-D-C-S-M
Site manager
Quarter
Quarter Review
P-Q-D-C-S-M
Year
Year Review
P-Q-D-C-S-M
Quarter Review
P-Q-D-C-S-M
Week Review
Department
P-Q-D-C-S-M
Month Review
P-Q-D-C-S-M
Dept manager
Day Review
Area
P-Q-D-C-S-M
Week Review
P-Q-D-C-S-M
Team leaders
Shift Review
P-Q-D
Process - Line
Team
Day Review
P-Q-D-C-S-M
Shift Review
P-Q-D
Machine
1-2 hour review
Operator
P-Q-D
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Example:
Full TRACC implementation and support
AM on shop floor
Downtime trend
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Kellogg LatAm – TRACC Results
Strong Correlation between TRACC maturity and OEE
Practice Maturity
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Kellogg LatAm – TRACC Results
Strong Correlation between TRACC maturity and Plant Performance
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TRACC Practice Maturity
1.6
2.2
Practice
Maturity
Improvement
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Improvement Potential
95%
1.61
90%
92%
87%
84%
Processing
65%
55%
55%
45%
OEE
37%
30% 1
Packaging
2
3
Maturity of Practices
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5
Improvement Potential
4%
1.61
5.4%
5.0%
6.0%
7.0%
Waste
12%
1
2
3
Maturity of Practices
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4
5
Kellogg Australia – Botany Plant
TRACC Manufacturing Practices Overview
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Kellogg Australia – Botany Pilot Plant OEE analysis
OEE
OEE
3 per. Mov. Avg. (OEE)
70
March 2011
TRACC Starts
42% to 62%
65
OEE (%)
60
55
50
45
40
35
Korea
Benchmarking
Aug 2009
K-lean
Phase 1
30
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The evolution from traditional CI to Integrative Improvement
Systems
• 70% of companies are
between Stage 2 and 2.5
5. Learning Network
Integrative Improvement deployed across network
Culture of Innovation and Sharing of Know How
Entire Global Network
• Companies below Stage 4
are unlikely to successfully
replicate the long-term
performance culture
exhibited by the likes of
Toyota & P & G
4. Integrative Improvement System
Codified and integrated implementation
(Strategic, Systemic and Situational)
Process
3. Functional Excellence
5
Structured implementation approach
within the functions
(Systemic)
Functional
2. Expert Based
3
Implementation approach based on
the capability of the local expert
Project
1. No Continuous Improvement
No Continuous Improvement
Plans or structure
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2
1
Enabling Execution
………“to improve everything”……
Insight
The pursuit towards operational excellence to date has been
characterized by functional improvements and project based
methodologies such as Six Sigma and Lean. Functional
excellence and pockets of Lean do not create the organization
capability required to step change operational competence,
particularly when applied to complex global companies. There are
just too many intricate process interdependencies across the end
to end supply chain.
The challenge for organizations is to manage and coordinate a
sequenced and prioritized set of inter related actions across
multiple functions, departments and the global network to execute
strategy.
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Integrative Improvement across a global network requires a
codified set of prioritized and sequenced work.
2015
“……everything must improve……”
A company needs to provide a prioritized, holistic and integrated set of
work packages that allows each and every part of the organization to
execute the many pieces of work in a synchronized way that
transforms the entire organization towards process based excellence
2015
2014
2013
2012
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VISION
Integrative Improvement across a global network requires a
codified set of prioritized and sequenced work.
“……everything must improve……”
A company needs to provide a prioritized, holistic and integrated set of
work packages that allows each and every part of the organization to
execute the many pieces of work in a synchronized way that
transforms the entire organization towards process based excellence
2015
2014
2013
2012
KWS Advanced
KWS Basics
KEY
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VISION
2016
Relevance for Industrial Engineers?
Plant managers will be motivating change and accountability for each of the
process based teams.
Decision making and priorities are facilitated by the existence of a structured
approach for developing improvement in each of the critical process areas.
Metrics and benchmarks can be used to guide the teams from the changes in
levels of maturity ratings to important process measures such as OEE.
Regional and central headquarters staff will facilitate the development of
standardized definitions and performance measures, sharing of best
practices and tracking KPI’s.
Plants that have achieved the greatest success and the greatest relative
improvement will be recognized and rewarded.
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