Bob Stahl & Bill Kerber www.tfwallace.com The S&OP/Lean Connection The S&OP/Lean Connection Making Lean work with demand variability Making Lean work with demand variability Bob Stahl Bill Kerber October 20-24, 2008 Toronto, Canada AME AME TOTONTO TOTONTO 2008 2008 From From Good Good to to Great Great
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Bob Stahl & Bill Kerber The S&OP/Lean Connection Making Lean work with demand variability Bob Stahl Bill Kerber October 20-24, 2008 Toronto,
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Bob Stahl & Bill Kerber www.tfwallace.com
The S&OP/Lean ConnectionThe S&OP/Lean ConnectionMaking Lean work with demand variabilityMaking Lean work with demand variability
Bob StahlBill Kerber
October 20-24, 2008Toronto, Canada
AMEAMETOTONTOTOTONTO20082008FromFrom Good Good toto GreatGreat
AMEAMETOTONTOTOTONTO20082008FromFrom Good Good toto GreatGreat
Bob Stahl & Bill Kerber www.tfwallace.com
Who are We?Who are We?Who are We?Who are We?
Bob StahlBill Kerber
Bob Stahl & Bill Kerber www.tfwallace.com
The “4P Model” of the The “4P Model” of the Toyota WayToyota Way
The “4P Model” of the The “4P Model” of the Toyota WayToyota Way
Problem Solving
(Continuous Improvement &
Learning)
People & Partners(Respect, Challenge, & Growth)
Process(Eliminate Waste)
Philosophy(Long-Term Thinking)
Our Focus
“The Toyota Production System [TPS] is the basis for much of the ‘lean production’ movement that has dominated manufacturing trends for the last 10 years or so.”
Jeffrey LikerThe Toyota Way
Bob Stahl & Bill Kerber www.tfwallace.com
“. . . many businesses in America are rushing to a build-to-order model of production. They want to make just what the customers want when they want it -- the ultimate lean solution. Unfortunately, customers are not predictable and actual orders vary significantly from week to week and month to month.”
Jeffrey LikerThe Toyota Way
“. . . many businesses in America are rushing to a build-to-order model of production. They want to make just what the customers want when they want it -- the ultimate lean solution. Unfortunately, customers are not predictable and actual orders vary significantly from week to week and month to month.”
Jeffrey LikerThe Toyota Way
Schedule(to dealer orders/
forecast)
Schedule(to dealer orders/
forecast)
PushLinearity
Toyota Flow ModelToyota Flow ModelToyota Flow ModelToyota Flow Model
Toyota Assembly
Toyota Assembly
Customers
Customers
Dealers
Dealers
Demand PullDemand Pull FG Inv.BufferFG Inv.Buffer
VariableDemandVariableDemand
Suppliers
Suppliers
Plant
Plant
There is nothing illegal, immoral, or fattening with this approach, but many (most) companies can’t afford, or simply can’t follow, this approach to creating “linearity” with very large finished goods inventory. For Toyota, as we all know, it has worked very very well!
There is nothing illegal, immoral, or fattening with this approach, but many (most) companies can’t afford, or simply can’t follow, this approach to creating “linearity” with very large finished goods inventory. For Toyota, as we all know, it has worked very very well!
Bob Stahl & Bill Kerber www.tfwallace.com
LEI’s LEI’s InterpretationInterpretation
LEI’s LEI’s InterpretationInterpretation
LEI’s Seven Characteristics of a Lean Value Stream:
1.Takt2.Finished goods strategy3.Flow4.Pull where can’t flow5.Scheduling at one point6.Pitch7.EPEI James P. Womack
Danie T. Jones
Bob Stahl & Bill Kerber www.tfwallace.com
An Inconvenient An Inconvenient Truth . . .Truth . . .(with apologies to Al Gore)(with apologies to Al Gore)
An Inconvenient An Inconvenient Truth . . .Truth . . .(with apologies to Al Gore)(with apologies to Al Gore)
“In general, when you try to apply the Toyota Production System [TPS], the first thing you have to do is to even out or level the production. Leveling the production schedule may require some front-loading of shipments [push to dealers] or postponing [delaying] of shipments and you may have to ask some customers [dealers] to wait for a short period of time. Once the production level is more or less the same or constant for a month, you will be able to apply pull systems and balance the assembly line. But if production levels – the output – vary from day to day, there is no sense in trying to apply those other [pull] systems, because you simply cannot establish standardized work under such circumstances.”
Fugio ChoToyota President
Bob Stahl & Bill Kerber www.tfwallace.com
Big Fat Question(s) . Big Fat Question(s) . . .. .
Big Fat Question(s) . Big Fat Question(s) . . .. .
What if it impossible or unaffordable to have
FG Inventory as a buffer?
How do you do Lean, if not exactly the Toyota Way?
High Quality Low Cost (Low Inventory) Customer Service
Quick ResponseReliabilityWide Variety
Best in Class
Getting to AND . . . Diminishing ORGetting to AND . . . Diminishing OR
Bob Stahl & Bill Kerber www.tfwallace.com
The Many Tools The Many Tools for for
Improving Improving EffectivenessEffectiveness
The Many Tools The Many Tools for for
Improving Improving EffectivenessEffectiveness
IncreaseReliability
EnhanceCoordination
Reduce Waste& Time
Total Quality, Six Sigma, Poka-Yoke, ISO
+ others
Lean Mfg., Just-In-Time, Quick Changeover (SMED),
Flow + others
Sales & Operations Planning, ERP, Kanban, VMI,
+ others
XX
X
Bob Stahl & Bill Kerber www.tfwallace.com
The Many Tools The Many Tools for for
Improving Improving EffectivenessEffectiveness
The Many Tools The Many Tools for for
Improving Improving EffectivenessEffectiveness
IncreaseReliability
EnhanceCoordination
Reduce Waste& Time
Total Quality, Six Sigma, Poka-Yoke, ISO
+ others
Lean Mfg., Just-In-Time, Quick Changeover (SMED),
Flow + others
Sales & Operations Planning, ERP, Kanban, VMI,
+ others
XX
X
X
Bob Stahl & Bill Kerber www.tfwallace.com
The Many Tools The Many Tools for for
Improving Improving EffectivenessEffectiveness
The Many Tools The Many Tools for for
Improving Improving EffectivenessEffectiveness
IncreaseReliability
EnhanceCoordination
Reduce Waste& Time
Total Quality, Six Sigma, Poka-Yoke, ISO
+ others
Lean Mfg., Just-In-Time, Quick Changeover (SMED),
Flow + others
Sales & Operations Planning, ERP, Kanban, VMI,
+ others
Blur the boundaries
X
Bob Stahl & Bill Kerber www.tfwallace.com
Lean & Executive S&OP Lean & Executive S&OP Do Different Do Different (Necessary)(Necessary)
ThingsThings
Lean & Executive S&OP Lean & Executive S&OP Do Different Do Different (Necessary)(Necessary)
ThingsThingsLean Manufacturing• Lean is a basic approach to manufacturing that
emphasizes/focuses on flow. • It also has a focus on eliminating waste from processes• Strong on execution• Short future horizon• Drives improvements to the operating environment• Flow works best with stable and linear demandExecutive S&OP • Tools for forward decision-making• Strong on planning• Long future horizon• Balances demand and supply across the supply chain• Executive Forum for establishing relevant strategy,
policy, and risk• Can be used in many different environments
Toyota Flow ModelToyota Flow ModelToyota Flow ModelToyota Flow Model
Toyota Assembly
Toyota Assembly
Customers
Customers
Dealers
Dealers
Demand PullDemand PullSchedule
(to dealer orders/ forecast)
Schedule(to dealer orders/
forecast)
FG Inv.BufferFG Inv.Buffer
VariableDemandVariableDemand
Suppliers
Suppliers
Plant
Plant
Push
Bob Stahl & Bill Kerber www.tfwallace.com
Demand-Supply AlignmentDemand-Supply Alignment(A second issue)(A second issue)
Demand-Supply AlignmentDemand-Supply Alignment(A second issue)(A second issue)
Markets
Large TrucksLarge Trucks
Small TrucksSmall Trucks
Large CarsLarge Cars
Small CarsSmall Cars
Line #1Large Trucks
Line #1Large Trucks
Production
Line #2Small Trucks
Line #2Small Trucks
Line #3Large CarsLine #3
Large Cars
Line #4Small CarsLine #4
Small Cars
Bob Stahl & Bill Kerber www.tfwallace.com
Takt Time . . .Takt Time . . .Takt Time . . .Takt Time . . .“Takt is a German word for rhythm or meter. Takt is the rate of customer demand -- the rate at which the customer is buying product.
. . . Takt can be used to set the pace of production.
Continuous flow and takt time are most easily applied in repetitive manufacturing . . .”
“The tool that balances demand and supply at the product level, as opposed to Executive S&OP which balances demand and supply at the aggregated Family level. It is the source of customer order promising, via its Available-to-Promise capability, and contains the anticipated build schedule for the plant(s) in the form of the Master Production Schedule.”
Sales & Opertations Planning-The How To Handbook, 3rd EditionWallace & Stahl, 2008
Bob Stahl & Bill Kerber www.tfwallace.com
What is Executive S&OP?What is Executive S&OP?What is Executive S&OP?What is Executive S&OP?
Sales & Operations Planningis a
Executive Decision-Making Processto
Balance Demand & Supply(at the volume level)
is
The forum for setting Relevant Strategy & Policyand
Integrates Financial & Operating Plans (update/validate the Annual Business Plan)
Top Management’s Handle on the Business
Bob Stahl & Bill Kerber www.tfwallace.com
The Family The Family Feud . . . Feud . . . The Family The Family Feud . . . Feud . . .
ResourceDepartmentEquipmentSupplier
Operations(Supply)
//
Definition - Executive S&OP FamiliesA grouping of end items whose similarity allow the markets to be best anticipated, and enables resources to be planned.
Mix Ratio Assumptions &
Resource Req. PlanVersus
Full Granularity
Sales &Marketing
(Demand)
MarketsSegments ChannelsCustomers
MarketsSegments ChannelsCustomers
Bob Stahl & Bill Kerber www.tfwallace.com
ForecastingForecastingForecastingForecasting
1. Reasoned2. Reasonable3. Reviewed Frequently
4. Represent Total Demand
1. Reasoned2. Reasonable3. Reviewed Frequently
4. Represent Total Demand
Forecasts that are:Current CustomersNew CustomersCompetition
Economic OutlookMarket TrendsNew Products
Pricing StrategyPromotionsBid Activity
Management DirectivesIntra-Company Demand
History (Data)Other
ProcessProcess
Inputs -- Process -- Output
Bob Stahl & Bill Kerber www.tfwallace.com
ForecastingForecastingForecastingForecasting
1. Reasoned2. Reasonable3. Reviewed Frequently
4. Represent Total Demand
1. Reasoned2. Reasonable3. Reviewed Frequently
4. Represent Total Demand
Forecasts that are:Current CustomersNew CustomersCompetition
Economic OutlookMarket TrendsNew Products
Pricing StrategyPromotionsBid Activity
Management DirectivesIntra-Company Demand
History (Data)Other
ProcessProcess
Inputs -- Process -- Output
Bob Stahl & Bill Kerber www.tfwallace.com
Executive S&OP FocusExecutive S&OP FocusExecutive S&OP FocusExecutive S&OP FocusMfg. Company
Markets
Customers
Shipments POS
Sales: 1-3 Mos
Master SchedulingDemand Pull
Marketing: 1-18 Mos
Executive S&OP
Mix
Volume
CustomerCentric
MarketCentric
Bob Stahl & Bill Kerber www.tfwallace.com
The Family The Family Feud . . . Feud . . . The Family The Family Feud . . . Feud . . .
• S&OP Families -- In Executive S&OP, Families are aggregate groups of products that are similar in the way that customers and/or markets view their use. Executive S&OP Families are used to develop a reasoned and reasonable forecast based on market trends, grounded in intrinsic and extrinsic leading indicators.
• Lean Families -- In Lean Manufacturing, the term Families is used to mean the grouping of products that are manufactured by the same resources. This is often called a ‘value stream.’ The idea is to create a ‘synchronous flow’ in manufacturing that allows products to be produced at a uniform and linear market driven rate – known as Takt Time.
Bob Stahl & Bill Kerber www.tfwallace.com
Conclusion . . Conclusion . . . .
Conclusion . . Conclusion . . . .
• Executive S&OP families should be market determined
• Lean families should be manufacturing (process) determined
• They are different because they serve different purposes
Bob Stahl & Bill Kerber www.tfwallace.com
Family Family Feud . . .Feud . . .When are they the same?When are they the same?
Family Family Feud . . .Feud . . .When are they the same?When are they the same?
Small WidgetsSmall Widgets
Medium WidgetsMedium Widgets
Large WidgetsLarge Widgets
Consumer MarketConsumer Market
Housing MarketHousing Market
Industrial MarketIndustrial Market
Supply
Demand
Typically NOT!
World Wide Widget CompanyWorld Wide Widget Company
Bob Stahl & Bill Kerber www.tfwallace.com
Non-Aligned to MarketsNon-Aligned to MarketsNon-Aligned to MarketsNon-Aligned to Markets
Small WidgetsSmall Widgets
Medium WidgetsMedium Widgets
Large WidgetsLarge Widgets
Consumer MarketConsumer Market
Housing MarketHousing Market
Industrial MarketIndustrial Market
Supply
Demand
How, then, do you do Lean; Takt time, etc?
World Wide Widget CompanyWorld Wide Widget Company
Bob Stahl & Bill Kerber www.tfwallace.com
Executive S&OP ProcessExecutive S&OP ProcessExecutive S&OP ProcessExecutive S&OP Process
• Determine the families for Executive S&OP from the data provided.
Bob Stahl & Bill Kerber www.tfwallace.com
Product/Process Product/Process Matrix Matrix
Product/Process Product/Process Matrix Matrix
P/N Name CastDeburrInjection MoldLatheTrimSandNotchPlatePaintFinal AssemblyPackFamilyMT1001 Plastic Wagon, Red X X X XMT1002 Plastic Wagon, Yellow X X X XMT1003 Plastic Wagon, Green X X X XMT1004 Wood Wagon, Red X X X X X XMT1005 Wood Wagon, Brown X X X X X XMT1006 Wood Wagon, Green X X X X X XMT2001 Plastic Sled 1 X X X XMT2002 Plastic Sled 2 X X X XMT2005 Plastic Sled 3 X X X XMT2010 Wood Sled 1 X X X X X XMT2015 Wood Sled 2 X X X X X XMT2020 Wood Sled 3 X X X X X XMT2400 Die Cast Vehicle; Car X X X X X XMT4005 Die Cast Vehicle; Airplane X X X X X XMT4008 Die Cast Vehicle, Bus X X X X X XMT4100 Die Cast Vehicle; Truck/Lorry X X X X X X
aggregate groups of products that are similar in the way that customers and/or markets view their use. Executive S&OP Families are used to develop a reasoned and reasonable forecast based on market trends, grounded in intrinsic and extrinsic leading indicators.
• Lean Families -- In Lean Manufacturing, the term Families is used to mean the grouping of products that are manufactured by the same resources. This is often called a ‘value stream.’ The idea is to create a ‘synchronous flow’ in manufacturing that allows products to be produced at a uniform and linear market driven rate – known as Takt Time.
Bob Stahl & Bill Kerber www.tfwallace.com
Determining Lean Determining Lean product product
familiesfamilies
Determining Lean Determining Lean product product
familiesfamiliesCreate a Product Family Matrix:
Separate processes based on capability (ex. “The machines are the same, but Part ‘A’ can only be produced on this one.”)
Look at the ‘Downstream’ processing steps
Approximately 80% of the similar processing steps
Custom products look ‘Upstream’ at the fabrication steps
Fill in Product Family Matrix with ‘X’
Bob Stahl & Bill Kerber www.tfwallace.com
Product Process MatrixProduct Process MatrixProduct Process MatrixProduct Process Matrix
Bumper Brackets
Seat
Rail
Instrument Panel Brace
RH Steering Bracket
LH Steering Bracket
Electronic
Test
Fixtures
Ass ’y
Manual
Ass ’y
PaintFlash
Remove
Robot Weld
Spot
Weld
Bumper Brackets
Seat
Rail
Instrument Panel Brace
RH Steering Bracket
LH Steering Bracket
ElectronicTest
FixturesAss’y
ManualAss’y
PaintFlashRemove
Robot
WeldSpotWeld
Pro
duct
s
Process Steps and Equipment
X X X X
X X X X
X X X
XX
X X X
Bob Stahl & Bill Kerber www.tfwallace.com
Product/Process Product/Process Matrix Matrix
Product/Process Product/Process Matrix Matrix
P/N Name CastDeburrInjection MoldLatheTrimSandNotchPlatePaintFinal AssemblyPackFamilyMT1001 Plastic Wagon, Red X X X XMT1002 Plastic Wagon, Yellow X X X XMT1003 Plastic Wagon, Green X X X XMT1004 Wood Wagon, Red X X X X X XMT1005 Wood Wagon, Brown X X X X X XMT1006 Wood Wagon, Green X X X X X XMT2001 Plastic Sled 1 X X X XMT2002 Plastic Sled 2 X X X XMT2005 Plastic Sled 3 X X X XMT2010 Wood Sled 1 X X X X X XMT2015 Wood Sled 2 X X X X X XMT2020 Wood Sled 3 X X X X X XMT2400 Die Cast Vehicle; Car X X X X X XMT4005 Die Cast Vehicle; Airplane X X X X X XMT4008 Die Cast Vehicle, Bus X X X X X XMT4100 Die Cast Vehicle; Truck/Lorry X X X X X X
• Determine the Lean product families based on the data given
Bob Stahl & Bill Kerber www.tfwallace.com
Product/Process Product/Process Matrix Matrix
Product/Process Product/Process Matrix Matrix
P/N Name CastDeburrInjection MoldLatheTrimSandNotchPlatePaintFinal AssemblyPackFamilyMT1001 Plastic Wagon, Red X X X XMT1002 Plastic Wagon, Yellow X X X XMT1003 Plastic Wagon, Green X X X XMT1004 Wood Wagon, Red X X X X X XMT1005 Wood Wagon, Brown X X X X X XMT1006 Wood Wagon, Green X X X X X XMT2001 Plastic Sled 1 X X X XMT2002 Plastic Sled 2 X X X XMT2005 Plastic Sled 3 X X X XMT2010 Wood Sled 1 X X X X X XMT2015 Wood Sled 2 X X X X X XMT2020 Wood Sled 3 X X X X X XMT2400 Die Cast Vehicle; Car X X X X X XMT4005 Die Cast Vehicle; Airplane X X X X X XMT4008 Die Cast Vehicle, Bus X X X X X XMT4100 Die Cast Vehicle; Truck/Lorry X X X X X X
Bob Stahl & Bill Kerber www.tfwallace.com
Product/Process Product/Process Matrix Matrix
Product/Process Product/Process Matrix Matrix
Name CastDeburrInjection MoldLatheTrimSandNotchPlatePaintFinal AssemblyPackFamilyWood Sled 1 X X X X X X 1Wood Sled 2 X X X X X X 1Wood Sled 3 X X X X X X 1Wood Wagon, Red X X X X X X 1Wood Wagon, Brown X X X X X X 1Wood Wagon, Green X X X X X X 1Plastic Wagon, Red X X X X 2Plastic Wagon, Yellow X X X X 2Plastic Sled, Black X X X X 2Plastic Sled, Orange X X X X 2Plastic Wagon, Green X X X X 2Plastic Sled, Blue X X X X 2Die Cast Vehicle; Car X X X X X X 3Die Cast Vehicle; Airplane X X X X X X 3Die Cast Vehicle, Bus X X X X X X 3Die Cast Vehicle; Truck/Lorry X X X X X X 3
Bob Stahl & Bill Kerber www.tfwallace.com
Lean Process FlowLean Process FlowLean Process FlowLean Process Flow
Market DemandsMarket DemandsMarket DemandsMarket Demands• In this ‘shape’ many end items are
made out of a few sub assemblies or intermediates that are made out of many unique raw materials and parts.
• An example of this would be a pharmaceutical manufacturer with many package types from standard product (aspirin), personal computers, packaged chemicals
• This shape lends itself to a postponement strategy.
Bob Stahl & Bill Kerber www.tfwallace.com
How Lean fits in : How Lean fits in : PostponementPostponement
How Lean fits in : How Lean fits in : PostponementPostponement