Supplier Process Improvement Strategies Improving Apparel Supply Chain without Major Investments Presentation for Prime Source Forum March 30, 2011 Roger.

Supplier Process Improvement Strategies Improving Apparel Supply Chain without Major Investments

Presentation forPrime Source Forum

March 30, 2011Roger Nelson

Managing DirectorConcepts 2 Results Ltd.

Hong Kong 852-9839-6987 mobilerogernelson.c2r@gmail.com

Purpose

• This session will discuss the methodologies of lean manufacturing and other process improvement strategies. Learn what is required for a successful implementation and also how to measure the impact of your improvements.

WHAT Does this Mean?

Global Trends

• Speed

• First Time Quality

• Accuracy in everything

• On-time delivery – all the time

• Cost effectiveness

• Collaborative, seamless processes

Total Cycle Time™

• Fastest Customer Responsiveness

• Lowest Costs

• Best Quality for the Money

• High Speed Product/Service Development

• High Productivity

• Flexible Capacity with Optimized Resources

• Excellent Value for all … customers, owners, employees, suppliers

What determines competitive advantage?

Solution

• Improve the process from end-to-end

• Consider all steps– Eliminate, combine, streamline

• Measure progress– Cockpit charts

How do we address this?

• Everything is a process

• Processes can be mapped, measured and improved

• Processes are cross companies and cross functional within a company

Using Total Cycle Time™ Methodology

Issues

• Competing Objectives

• Too long in total cycle time

• Rework of samples

• Inaccuracy in orders

• Incomplete and late deliveries

• Slow collection process

• Disconnected processes

What use is a good process?

• Achieving a GOAL requires a good process

• Performed by the right resources

… Utilizing the proper investment in People, Inventory & Equipment

• Executed with a set of high Value Added steps

• Delivered within a range of repeatable outcomes

• Delivered within a range of repeatable time frames

Actions to Achieve Goal

1. Analyze2. Develop plan3. Try it out4. Review results5. Standardize / correct / repeat

Lean Management• A process improvement strategy focused on:

– Meeting customer requirements & Increasing satisfaction

– Reducing variation & Improving on-time performance

– Eliminating waste & Reducing cost

– Cleanliness, organization & Improved safety

– Standardization & Improved quality

• The goal is to achieve perfection through the total elimination of waste in the value stream

5 Principles of Lean Management

1. Specify Value

2. Identify Value Stream

3. Flow

4. Pull

5. Perfection

Lean Management

Identify the Value Stream• Make the process visible

– Process sequence descriptions

– Process sequence flow maps

– Value stream mapping (Value Added/Non-Value Added)

• Make the process speak with data

– Cycle time, first pass yields, productivity

– Volumes, capacity, hours available, defects

– Inventory levels at each process step

– Staffing requirements, shifts

– Set-up times and frequencies

– Lot sizes

Types ofWaste

CORRECTIONRepair or Rework.

Doing it over.Not getting it right

the first time

MOTIONAny wasted motion to pick up parts or stack parts. Also wasted walking,

searching.

WAITINGAny non-work time

waiting for tools, supplies, parts,

paperwork, engineering, QA,

E&E, etc.

OVERPRODUCTIONProducing more than is

needed before it is needed.

Batching

OVER PROCESSING

Doing more work than is necessary..

INVENTORYMaintaining excess

inventory of raw mat’ls, WIP, or

finished product.Managing WIP.

TRANSPORTATIONWasted effort to

transport mat’ls, parts, or finished product into

or out of storage, or between processes.

Understanding the Process

If any of the following questions are answered yes, Throughput will improve:

1.  Will the decision result in a better use of the worst constrained resource?

2.  Will it make full use of the worst constrained resource?3.  Will it speed up delivery? 4.  Will it provide a product or service that is valuable?5.  Will it improve consistency?6.  Will it reduce scrap or rework? 7. Will it reduce rework/replacement costs?

Questions to ask to identify constraints:

What is Process Improvement Implementation?

The implementation of a standard logic for the efficient layout of a production line including work stations, machines, personnel assignments, skill levels, constraints, lot sizes, etc. This also applies to any related process such as design development, product launch, supply chain steps, collection, etc.

OrderFulfillment

Process CFT

SellingProcess

CFT

Warehouse & Distribution Process CFT

BIT

Barrier Removal Teams/BRT

BusinessImprovement

Team/BIT

How Do We Do It?

BRT BRT

Cross Functional Teams/CFT

BRT

Map the Process

Customer

Sales

Marketing

Planning

Production

Purchasing

Suppliers

Receiving

Shipping/Warehouse

IDRqmt

QuotePDT

IssuePO

GenerateS.O.

BuildCompnts

Ship

RecGoods

TestAssemble

RcvMtls

ShipMtls

OrderMtls

Approve

Yes

No

ScheduleB=20E=4 FPY=80%

B=30E=10

B=4E=3 FPY=75%

B=8E=3

B=3E=3

B=3E=2

B=8 E=5 FPY=70%

B=3 E=2 FPY=90%

B=3 E=2 FPY=90%

B=3E=2

B=20 E=9 FPY=40%

B=15E= 6Baseline Cycle Time

Baseline FPYEntitled Cycle TimeEntitled FPY

120 Days14%

51 Days95%

Rework

FPY – First Pass Yield

Process Improvement Methodology

Time

Entitlement = Where you should be

Baseline = Where you are today

Process Improvement Im

pact

Re

sults

Barriers

Measure The Process StepsEstablish Baseline and Entitlement

What is a Required for Successful Process Improvement Implementation?

are willing to learn new concepts,

Managers who:

are willing to accept risks,

are willing to accept failures as COL’s (Cycles of Learning),

thoroughly understand the concept and potential huge benefits, and

are willing to commit the required investment in time and support,

are willing to take initiatives to see that unforeseen difficulties are quickly resolved,will insist that good preventative maintenance and quick equipment repair is practiced,

will work cross-functionally with other managers as a team.

What is a Required for Successful Process Improvement

Implementation ? (continued)

are top performers,

Workers who:

understand that Improvements will make their jobs more enjoyable,

understand that experimentation and frequent changes are necessary,understand that change is necessary for a company to survive in the present climate of intense competition, andhave a spirit of cooperation and willingness to share positive experiences with others.

are team players,

want maximum pay,

Everyone Benefits ! Process

Improvements Do This:

•Identify and minimize bottlenecks

•Eliminate unnecessary steps

•Simplify remaining steps

•Reduce waiting

•Reduce movement of people

•Reduce movement of material

•Cause us to produce only what is needed downstream

Which Contribute to:•Much less WIP (work-in-process)

•Improved productivity

•Shorter Cycle Time

•High First Pass Yields

•Less rework

•Efficient use of material

•Less scrap

•Less clutter

•Less confusion

That Result In:•Higher pay

•Better working conditions

•Happier workers

•Better on-time delivery

•Better quality

•Happier customers

•Lower costs

•Greater profits

•More business

•More worker opportunities

Measure Progress

• We Know Baseline

• How are we progressing towards entitlement?

• What Drives improvement?

• What are the results?

• How do we identify stalls in improvement progress?

Global Supply Chain ChartInventory Turns

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rns

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100%

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Inbound Freight Costs

0.0

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Do

lla

rs (

M)

Material Cost % COGS

0%

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90%

100%

Mar-0

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% C

OG

S

Complete and OTD to CustomerB

B

E

E

B

E

B

E

B

E

Forecast Cycle Time & FPY

0

0.1

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Cyc

le T

ime

(D

ay

s)

0%10%

20%30%

40%50%60%

70%80%

90%100%

Yie

ld (

%)

B.C/TB.FPY

E..FPY

E.C/T

Procurement Cycle Time & FPY

0

12

3

45

6

7

89

10

WK

1

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le T

ime

(D

ay

s)

0%

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Yie

ld (

%)

B.C/T

B.FPY

E..FPY

E.C/T

Supplier L/T & OTD

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ad

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e (

Da

ys

)

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100%

OT

D (

%)

B.C/T

B.FPY

E..FPY

E.C/T

Supplier Delivery Accept Rate

0

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Cyc

le T

ime

(D

ay

s)

0%10%20%30%40%50%60%70%80%90%100%

Yie

ld (

%)

B.C/T

B.FPY

E..FPY

E.C/T

PROCESS DRIVERS

PROCESS RESULTS

Cost of Ownership

0%

10%

20%

30%

40%

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60%

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90%

100%

Mar-0

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% C

OG

S

B

E

Inventory Turns Customer Satisfaction INT/ EXT

Cost of Ownership % Of Turnover

Material Cost % Turnover

:

Dock To Stock CT/ FPY

Sample C/T & FPYHit Rate %

Order Management CT Suppliers CT/FPY

Total Inventory $Divided by

Cost of Goods Sold

Rework +Scrap+ICC+Cost $ Purchased +

Lost Margin $+ Write Off $+ Expedite $ + Total

IncomingFreight Cost divided by

The Turnover $

Days from Receipt of Tech Pak to the Final Sample Approval % of

Sample Styles Produced To # Converted to

Volume Orders

Days from Issue of the BOM Until the

receipt on the Material at the

Production Factory, % Received as

scheduledFabric Only

Days From receipt of Goods at Factory until goods are

Ready for consumption% of Goods Passing Initial

Inspection

Total $ ReceivedDivided byTurnover $

Matrix Components TBD

Percentage of Styles planned for release to productionduring the reporting period which were released, complete,

And on time. Both Material and Non Material related support activities

US$ (month)

% (Monthly

% Monthly

US$ (month)

CT (days) FPY (%)

Days from Order Confirmation to BOM complete

CT (days) FPY (%) CT (days) FPY (%)

% (monthly) % (YTD)

% YTD

MMMMMM Material & Non Material Schedule Adherence Hit Rate %

CCCU

CT (days)

Supply Chain

Entitlement

Baseline

Barriers

Barrier

BRT Dissolved

CFT Selects Next Barrier

BRT Commissioned

Implementation - Road to Entitlement

Process Improvement Management (PIM) Methodology

Process Improvement Do’s and Don’ts

• Do– Involve operators and maintenance personnel

• Check machines, samples of thread tension at beginning and lunch break

– Visually manage by walking around– Make needed changes immediately– Recognize good performance– Make daily target achievable– Emphasize it is a team effort

• Don’t– Say it cannot be done– Be negative– Ignore bottleneck problems– Wait for someone else to solve the problems, take action

Process Improvement Guidelines

•Release XX pieces from cutting every XX minutes

•Walk around and look for WIP buildup or no WIP at each station

•Watch potential bottlenecks

–Add operator

–Move part of work to another operator

•Look for excessive moving of material, relocate stations if possible

•Monitor output and record production

Source: Inditex

Q1 Q2 Q3 Q4 Q5

TraditionalIndustry

Visit ToExhibits

Design Intro ToCollection

Manufacturing Distribution & Sales

Sale

s M

ark

do

wn

s

SEASON

Zara

Design & Raw Material Sourcing

External Manufacturing

Sale

s M

ark

do

wn

s

SEASON

65%

55%

15%Internal Manufacturing 85%

40-50%

35%

The Model Is Changing: Zara’s Speed to Market

Case Study Apparel Manufacturing

Global garment manufacturer of Women’s Fashion, Outerwear and Casual Pants

Headquartered in Hong Kong with 17 factories in Hong Kong, China, Philippines, Thailand, Laos, Viet Nam, and Taiwan

Results

Reduced Sample Cycle Time – 20%

Improved Sample First-Time Quality – 317%

Improved Sample On-Time Delivery – 136%

Reduced Fulfillment Total Cycle Time – 30%

Improved Production On-Time Delivery – 154%

Reduced WIP Inventory – 40%

Challenges

Improve Sample Process

Improve Inventory Management

Improve First Time Quality

“The consultants teamwork, communications, and coaching lead to strong trust among our people and helped us develop a new way of doing business across all segments of our business” Country Manager, Philippines

Case Study Global Supply Chain

Supply Chain Management Company headquartered in Hong Kong

Coordinates the manufacture and distribution of goods through offices located in 40 countries

Results

Reduced Administrative costs – 30%

Reduced Sales Order process – 33%

Reduced A/R collection time – 20%

Developed Structure and Global Sales Processes Returning Operations to Profitability

Challenges

Execution of the Global Business Strategy in chaos Administrative costs too high

Sales generation activities too slow and expensive

Inefficient sales order process

The Consultants introduced world-class methodology that resulted in transforming a national business into a highly responsive, customer focused distribution organization providing unparalleled service to principal clients.” CEO, Country Logistics Subsidiary

Concept to Rack Phases(Overlaid with Retail Promotions Phases)

Concept Rack

DC

/Store

Logistics

Garment Production

CountryAllocations

52 Weeks

13 Weeks

13 Weeks

16 Weeks

6 Weeks

4Wks

ConceptDevelopment

8 (E)Weeks

8 (E)Weeks

9 (E)Weeks

? (E)Weeks

? (E)Weeks

Advance PlanningP

lann

ing

Forecast

Valid

ation

Ad

F

inalization

DC

/Store

Imp

lemen

tation

Gate 2

-11 wks

Gate 3

-7 wks

Gate 1

-15 wks

Concept to Rack

Retail Promotions Planning4

Wks4

Wks5

Wks4

WksC

ut -

Sew

F

inish

Gate 4

-4wks

RE

TA

IL E

XE

CU

TIO

N

Greige Weaving

Fabric Dyeing

In-Factory to Cut

Cut to X Factory

X Factory to X Country

X Country to In-W/H

30

30

7

35

730

139 109 79 72 37 30

Typical Example of CT Reduction

Greige Weaving

Fabric Dyeing

In-Factory to Cut

Cut to X Factory

X Factory to X Country

X Country to In-W/H

30

30

7

35

7

30

139 109 79 72 37 30

50% Commitment on greige

95

GreigeForecast

125

23

5

30

Days savedGreige Weaving 30

Dyeing 7

Production 5

44 CT 95 days

In-Factory to cut 2

Measure Potential

• Customer Response Time improve by over 10%• Fill rate (completed orders) improve at zero cost• On time delivery to customers improve by over 10%• Supplier on time delivery improve to over 10%• Supplier Lead time reduction 10 to 20%+

• Inventory reduction//cost improvements 10 to 20%+• Cost Reduction 5%• Rework reduction/Improved Quality 10 to 20%+• Productivity Improvements 10%

These improvements are based on each Factory implementing this approach without outside process improvement expert support.

Textile/Apparel Supplier Improvement Potentials

Measure Potential

• Customer Response Time improve by over 30%• Fill rate (completed orders) improve at zero cost• On time delivery to customers improve by over 40%• Supplier on time delivery improve to over 40%• Supplier Lead time reduction to over 50%+• Inventory reduction//cost improvements 10 to 20%+• Cost Reduction 5%• Rework reduction/Improved Quality 40 to 50%+• Productivity Improvements 20%+

These improvements are based on each Factory implementing this approach USING

outside process improvement expert support.

Textile/Apparel Supplier Improvement Potentials

Go For it !!!!

Who We Are

• Results—dramatically impact cash creation• Process Focus—radical increases in speed and

reliability• Methodology—top-down focus drives and

manages change• People—20+ years of management, industry

experience• Clients—operate in diverse, global markets

Years of success in fundamentally changing corporations’ management processes and dramatically improving their bottom-line results

Presentation forPrime Source Forum

March 30, 2011

Supplier Process Improvement Approach