Lean Supply Chain
The History, Application, and Life after Live
Agenda
–Introductions
–Lean Definitions
–History of Lean
–Practical approach to Lean – Supply Chain deployment
–Deployment discussion
–Wrap up and questions
Introductions
• Why have a Chief Operating Officer of a Human Resource Consulting
Company speak on Lean and Supply Chain?
– Background
– Principles created from desire to improve Manufacturing Operations
– Finite ability to streamline operations
• Systems
• Measure results
– Continuous Improvement initiatives
– Examples
Lean Definitions
It is not Supply chain on a diet
It is not a stand alone process
Requires a cultural change within most organizations
Lean Definitions
Lean*
Production practice that considers the expenditure of resources for any
goal other than the creation of value for the end customer to be wasteful,
and thus a target for elimination
Value
Any action or process that a customer would be willing to pay for
Create “More Value with Less Work”
*Wikipedia definition
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Traditional vs. Lean
Traditional Perspective
•Some defects are acceptable
•Errors will be caught by inspectors
•Defects are fixed later
•Higher quality = higher cost
•Suppliers are adversaries
•Quality results from inspection
•Buy from lowest bidder
•Low quality is caused by people
•Quality is a function of the shop floor
•Quality is the responsibility of QC
•Management must discover problems
•Statistics constitute a complex tool
Lean Perspective
•Defects are never acceptable
•Employees catch mistakes
•Defects are fixed now
•Higher quality = higher profits/lower costs
•Suppliers are trusted team members
•Quality built into the product/process
•Buy for quality/reliability
•Low quality is caused by poor process
management
•Quality is a function of all functions
•Quality is everyone's responsibility
•Employees discover problems
•Statistics can be used by anyone
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Why deploy Lean?
Inventory Turns
On-time ship %
Customer order ship time
Sales
Defects (PPM)
Data entry (hrs/week)
PO release
Mat’l Mgt work week (hrs)
Base year
15
97
8
Base$
50
y
Hours
60+
% improvement
Base +5
50
333
99.99
3
4
50
Base X2$
100
2
96
.25y
75
1 Min
99
40+
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Automotive manufacturing company results from a 5 year period
By focusing on the Value Proposition your organization has to offer in the
marketplace, the reward is virtually unlimited
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History of Lean - Summary
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Foundation built in United States in early 1900’s
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After world war II concepts expanded in Japan – Toyota
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Industrial Revolution in United States masked impending quality and cost Tsunami
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1980’s saw the rebirth of the United States quality programs
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Late 1990’s early 2000’s began Holistic movement of quality to back office
operations
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Key concept:
Lean is focused on getting the RIGHT things to the RIGHT place at the RIGHT time in the RIGHT
quantity – while minimizing waste and implementing continuous improvement
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Lean & Supply Chain
Key Tenet
• Key Tenet of Lean is Elimination of Waste
• To eliminate – Must first understand
• Shigeo Shingo noted
• Only the last turn of the bolt tightens it – the rest is just
movement
• Toyota defined 3 types of waste
– Muri
– Mura
– Muda
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Types of Waste
Defined
• Muri
• Unreasonable work management imposes on people and machines
• Ask for higher performance than person or machine can achieve with out
taking shortcuts
• Usual cause of variations in product quality and output
• Focuses on the preparation and planning of the process – what work can be
avoided by design
• Mura
• Focus on implementation of work design
• Elimination of fluctuations at scheduling or operations level – i.e. quality or
volume
• Muda
• Results of the design and implementation of the process (Muri & Mura)
• Managements role to investigate causes of variations caused by Muri and
Mura
• Feedback to the Muri
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Typical Example
• Quarter end –
– “make the numbers” edict comes out
– Demand is increased to make plan (Mura)
– System is stressed causing extra capacity to be squeezed from the process
• Standards relaxed
• Short-cuts taken
– Muri – Focus on shipping product at all cost - leading to downtime, mistakes,
waiting, rework - Waste
– Leads to Muda
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Transportation (Moving products not required to perform the process)
Inventory (not all WIP being processed)
Motion (excess movement of people and materials)
Waiting (Queue times extend)
Overproduction ( build to stock)
Over Processing ( equipment & process not geared for increased volume)
Defects (Increase in rework and inspection)
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Waste Elimination
Three underlying Waste Elimination methods
• Pull Scheduling
Make what the customer is buying today
• Takt time
Change processes to run at rate which output is required
• Flow Production
Rearrange processes to eliminate batch processing
Strive for most efficient way to process one (1)
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Best In Class
Misperception
• Best in Class Companies*
– 96% of orders delivered to customers complete and on
time
– 96% of orders received from suppliers complete and on
time
– Decreased by 3% total landed costs per unit in past year
– Decreased by 3% supply chain execution cost relative to
revenue
*Aberdeen Group
Focus shift
Supply Chain Personnel Today
Kaizen
Acquisition
Product Line Profitability
Inventory Optimization
Supplier Relationship
Consulting
Consulting
Analysis
Analysis
Transactions
Transactions
Pricing
Cost Elimination
Multi-sourcing
Funding
Releasing purchase orders
Expediting
Quality tracking and reporting
A true transformation of activities
* Taken from Jean Cunningham's Real Numbers
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Guiding Principles For Implementation
Stepping back – Why are we interested in Lean Supply
Chain?
• In business to maximize profits by selling what the customer wants
• Timely – Accurate - Meaningful – Actionable information
• How do we do that? – 5 Principles
1. Value
2. Value Stream
3. Flow
4. Pull
5. Perfection
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5 Guiding Principles
1. Value
• Everything that a company does must add value
• Every activity must be aligned or changed or
eliminated
• Set in marketplace –
• Not cost plus markup to get selling price
• i.e. Postal Service vs FedEx
5 Guiding Principles
(Cont.)
2. Value Stream
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All items from raw materials to customer delivery
Determined at Product/Service design
Includes Invoicing – field service – etc….
When Lean is implemented – traditionally this is where folks begin
3. Flow
• Products & Information should flow from inception to completion
with no stops
• Prime example of non continuous flow – leaf floating down a
mountain stream
• One Piece Flow
• Control systems must be updated when moving from Job-shop
(batch) to flow – i.e. no longer have materials sitting in queues –
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no standard lot sizes – etc….
5 Guiding Principles
(Cont.)
4. Pull
• Traditional ERP systems (Push) build to forecast (Inventory build)
• Only build what Customers want – (small inventory)
• Dynamic re-assignment of personnel to other tasks not related to
building products
• Will require change to performance benchmarks
– Efficiency & Utilization become obsolete terms
– One of the quickest ways to “Kill” a lean implementation
• All downstream processes are driven by upstream demand
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5 Guiding Principles
(Cont.)
5. Perfection
• Perfect quality
– No inventory buffers– can’t afford defects
– Quality programs and Lean Programs go hand-in-hand
– Not just physical product quality – but right product at right place at
right time (subassemblies)
– Toyota Tundra plant – door glass example
• Continuous improvement
– Goes beyond the shop floor
– Focus on driving waste out of the “system”
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How do we do it?
• Starts with the product and/or service being offered
• People are the foundation – Empowered employee program must be
underway
• 5s methodology in-place
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Sort
Set in Order
Shine
Standardize
Sustain
Just in Time manufacturing based only on customer demand
Quality designed into product and processes – not inspected in
Suppliers included in design process
Visual performance tracking
Continuous improvement
Cells vs traditional work centers
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Some Common Misconceptions
Regarding Lean
• It is a management program to lay off workers
• It is a management ploy to bust the union
• It is a management ploy to make workers work harder for
same pay
• Management will lose control of the operation
• It is to difficult to put in
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Analyze the work flow
2nd Floor
1st Floor
8th Floor
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Redesign the workplace/process
3rdFloor
3rdFloor
3rdFloor
Measure & Refine Metrics
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Deploying Lean
• I’ve captured the low hanging fruit – now what?
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The vision is to drive down transaction processing costs, while driving the work
towards more value added analysis
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Reduce overproduction with end goal to eliminate it
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High setup costs
Making the numbers
Poor quality – high scrap rates
“Clean the plate” mentality
Everything is running well – hate to stop
Work to drive production cycle times to match customer consumption
Make versus Buy analysis on every component
Attempt to Continuous flow everything
Be selective in areas where inventory buffers are created
Tie customer trigger to pacing manufacturing item
Educate the customers on your activities to help normalize demands
Educate your suppliers to reduce variations and minimize outages
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Post Deployment Discussion
• Continuous process – does not end
Act
Plan
Check
Do
• Be Patient
Earth wasn’t made in a day
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Post Deployment Discussion
• Remember why you are in business
• To make a profit
• Lean implementations tend to become self serving
• Tools are a means to the end – not the end
• Over measurement – not every variable is important
• Tendency to take tools beyond their practical application
• i.e. value stream mapping good at flows, but poor in metrics
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Post Deployment Discussion
• Management Techniques
– Cultural change – employees must pull change not
management push
– Train the management team – then the employees
– Get buy in at mid management level – hardest for them to
give up authority
– Practice what you preach
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Deployment Discussion
Things to consider
• Have we communicated to all involved parties? - are they committed?
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Senior Management
Board of Directors
Shareholders
Employees
Unions
Banks/financial institutions/Investment community
Auditors
Suppliers
Customers
• Do we have a clear vision of why we want to implement Lean? – “program
of the day”
• Who is going to lead down in the trenches?
• Where and how much help will we need?
• Are we in it for the long haul?
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Wrap up
Questions?
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Gary D. Glick
Chief Operating Officer
Provenir LLC
(210) 479-3444
gglick@provenirusa.com
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