Managing a Lean Supply Chain Valve Manufacturers Association Waterloo, Iowa April 2010 Michael Kuta, Partner
Managing a Lean Supply Chain
Valve Manufacturers AssociationWaterloo, IowaApril 2010
Michael Kuta, Partner
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
bulldoze the barriers!(wasn’t this way 20 years ago)
Mergers, divestitures, acquisitions, bankruptcies, off shore competition, globalization, housing market tanks, the big 3 slip and slide, financial abuse and the world’s economy goes in the tank!!
End of vertical integration
The reality of customization and Lean production
Go Green… Go Green… Go Green
X10
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
agenda…
What’s a Supply Chain anyway
Managing the Lean Supply Chain
Focus: extending Lean to suppliers
Top 5 Supply Chain strategic imperatives
A strategy for competitive advantage:the Supply Chain Quiz
Summary
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Delivering products and services quicklyto the end customer with minimum waste….
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
…the supply/value chain
Your suppliers supplierYour supplierYouYour customerYour customers customer
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Ultimate success of your business will be decided by your customers;
Customers buying decisions are based on quality, service, price and availability;
Customers expectations will change over time;
Must clearly define value and add value to what the customers perceive adds value!
in the beginning…
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Do you have standards?
Do you adhere to them?
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
A Supply Chain is an integrated set of key business processes involved in
the sourcing, procurement, and logistics activities from end user through
original suppliers within and across companies that add value to customers
and stakeholders.
… this includes integration, coordination and collaboration with channel
partners: suppliers, intermediaries, third party service providers, and customers.
Source: Council of Supply Chain Management Professionals and goldsby OSU
What is a Supply Chain anyway?
It’s a lot….
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
the Supply Chain: the new domain
Members of the OEM’s Supply Chain
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The OEM Company
Tier 1Customers
Tier 2Customers
Tier 3 toConsumers/
End-Customers
Tier 2Suppliers
Tier 1Suppliers
Tier 3 toInitial
suppliers
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thanks to Tom Goldsby and The Ohio State University
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
…what are we trying to do?
To have the right products in the rightquantities at the right place at the rightmoment at minimal cost translating intocustomer satisfaction.
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
making supply match demand
P
DI C
Where:
D = Demand I = Inventory
P = Plan C = Capacity
keep in mind:
• balance is more
easily achieved with a
shorter board
• not only can the boxes
be altered but so can the
position of the fulcrum
thanks to Tom Goldsby and The Ohio State University
…who hears the demand signal?
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P U S H
P U L LGuess
Knowthanks to Tom Goldsby and The Ohio State University
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Resiliency
Natural disastersTerrorist attacksThe economyPiracySwine Flu
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Volatility
An exceptionor
The Normor
Self induced
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
What happens when the signal is suppressed?
Time
Baseline forecast
Retail orders
from customers
+10%
Source: Forrester, Jay W. (1958), “Industrial Dynamics,” Harvard Business Review, Vol. 36 (July-August), p. 43.
Distributors’ orders
from retailers +16%DC orders from
distributors +28%
Manufacturing
output +40%
Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
…hey, buffer’s aren’t bad things!
Design compartments into ships
Circuit breakers into electrical networks
Minimum reserve requirements for banks
Air reserve in a SCUBA tank
Spare tire in trunk
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
so… Supply Chain Management
...is the planning, management, and integration of key business processes
involved in the sourcing, procurement, and logistics activities from end
user through original suppliers within and across companies that add value
to customers and stakeholders.
… this includes integration, coordination and collaboration with channel
partners: suppliers, intermediaries, third party service providers, and customers.
Source: Council of Supply Chain Management Professionals and goldsby OSU
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
agenda…
What’s a Supply Chain anyway
Managing the Lean Supply Chain
Focus: extending Lean to suppliers
Top 5 Supply Chain strategic imperatives
A strategy for competitive advantage:the Supply Chain Quiz
Summary
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
The practical realities…
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Cash is King
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Nobel Prize winning economist agree…
“A primary function of a company is reducing or eliminating transaction cost.”
Financial Times 2008
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
How do you make money?
How do you spend money?
Where’s the contribution?
Where’s the improvement focus?
Consider this…
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
…does the right hand know?
unknown internet source
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Billing Handling
Pickup
LTL Delivery
TL Delivery
Accessorial
Linehaul
Scheduling
Rehandling
Local delivery
Unloading
Maintenance
Claims
processing
Marketing
Office Labor
Dock Labor
Yard Labor Driver Labor
Licenses
Fuel
Maintenance
DepreciationInsurance
TerminalSupervision
Utilities
Customer A
Customer D
Customer E
Customer F
Customer GOthers
Customer C
Customer B
…know your cost…and thereare a lot!
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
…managing the chain
Financial Planning
Item Planning
Catalog Planning
Web Planning
Promotion Planning
Business Intelligence
Production Planning
Lean Production
Extended Lean
Demand Management
much to consider
Demand Planning
Promotion Forecast
Replenishment
Vendor Manage Inv.
Audit, Payment, Claims
IT solutions
Cust. Relationship Mgmt.
Sup. Relationship Mgmt.
Prod. Develm’t. Mgmt.
Returns Mgmt.
Distribution Mgmt.
Warehouse Mgmt.
Billing Mgmt.
Labor
Yard Mgmt.
Transportation Mgmt.
Fleet Mgmt.
Carrier Mgmt.
Reverse Logistics
The Lean Enterprise
Value Adding
Transformation Process
TECHNICAL
SOCIAL
RESPONSE AND FEEDBACK LOOP
MARKET IN
MARKET OUT
PULLFLOW
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
…managing the chain
Product flow
Information flow
Material flow
Financial flow
Strategic Focus
Location
Production
Inventory
Logistics
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
…managing the chain
Open communication of expectations plan, alignment, and deployment a direct communication program
A series of standardized processes waste elimination ideal and reliable methods experimentation
Building capabilities
Supplier Relations
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
…managing the chain
expectations:
Supplier Qualification
Standardized assessment of capabilities
Supplier Performance Requirements
KPI’s: quality, lead time, total cost, and participation
Supplier Development
OEM enablers to enhance competitive advantage
Supplier Relations
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Do you have standards?
Do you adhere to them?
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
building capabilities
Strive for perfect quality Reduce cost of quality Provide prompt feedback Increase flexibility Deliver supplies frequently Lean = Zero waste Make money
DFM/DFA/DFC Stable configurations Shorter lead times Zero incoming testing Minimized reporting Lean = Zero waste Make money
…managing the chain
Supplier Relations
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
agenda…
What’s a Supply Chain anyway
Managing the Lean Supply Chain
Focus: extending Lean to suppliers
Top 5 Supply Chain strategic imperatives
A strategy for competitive advantage:the Supply Chain Quiz
Summary
The Extended Lean Enterprise
Capital
Suppliers
Regulatory Bodies
Consortium Companies Environment and Energy
Value Adding
Transformation Process
TECHNICAL
SOCIAL
RESPONSE AND FEEDBACK LOOP
MARKET IN
MARKET OUT
PULLFLOW
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
an Extended Lean improvement perspective
...supply chain continuous improvement to cost, quality, delivery, and capability
…through the progressive identification and elimination of all non-value adding waste
…with the involvement of stakeholders at all levels: employees, customers, and suppliers
Extended Value Chain
The Customer
The OEM
Tier 1
Tier 2
The Supplier’s Supplier
Buffer
Buffer
Buffer
Buffer
Current State
Target
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
A Lean Transfusion
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Activities
• All work shall be highly specified as to content, sequence, timing and outcome. Reliable, ideal methods.
• Embed a test in every activity that signals if an activity has been performed in a non-standard way.
• The pathway for every product and service must be simple and direct.
• Embed a test in every pathway that signals when someone other than an expected supplier does a task.
Flows
• Every customer-supplier connection must be direct and their must be an unambiguous yes-or-no way to send requests and receive responses.
• Embed a test in every connection that signals that a delivery did not match customer request.
Connections• All improvements must be made in
accordance with the scientific method, under the guidance of a teacher, at the lowest possible level in the organization.
• Embed a test in every learning to show evidence of cause and effect.
Learning
…a common theme
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
66% of started Projects fail
• Poorly defined deliveables and scope
• Poor buy-in and sponsor support
• Poor resource allocation
• Not linked to key objectives
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Importance of project management
• Your business is comprised of projects varying in scope and complexity
• Customer satisfaction is directly tied to project performance
• Company profits are directly tied to project performance
• All projects must align with strategic intent
• Achieve standard work
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
the attack…
the target…
waste… anything that addscost without adding value
collapse the time it takes to monitor,order, receive, process products, provide services, complete transactions,make decisions, and deliver the goods
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
A common theme: all lean methods and techniques are scientific
and reliable, based upon the principles of system, feedback,
and local control.
waste out: upstream-downstream
• Employee Involvement
• Value Stream Management
• 5S - Visual Display & Control
• Quick Changeover
• TPM/Equipment Reliability
• Mistake Proofing
• Cell Design – Process Flow
• Kanban
• Lean Administration
• Variation Reducton
• Process/Product Engineering
• High Performance Work Place
• Scientific Method – Cause & Effect
• Standard Work
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Making things…
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Doing things
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Movingthings
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Scientific Method
Identify opportunity
Determine measures
Determine targets
Gather & analyze data
Generate hypotheses
Test countermeasures
Standardize
Integrate
Adhere
6SSort
ShineSet in orderStandardize
SustainSafety
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Visual Display and Control
Quick Changeover
• The principles target the value stream
• Changeover reduction
controls WIP
increases flexibility
Do more changeovers, make-ready, set-up’s
enhance system utilization
allows Lean flow to happen
0
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20
Observed
1st Level
Target
TARGET
START
OUTCOME
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Mistake-Proofing
• Builds automatic feedback loops into critical, difficult, dirty, or dangerous operations
• Automates corrective action
buzzer
limit switch 1
limit switch 2
Switch 1 confirms
beginning of drilling
Switch 2 confirms
penetration
Product Flow
C
E
AB
D
Cell Design – Process Flow
• Value Adders control product flow to takt time
• A linked chain of value adding operations….
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Kanban
Literal translation is sign board. In the context of production, it refers to the signal or authorization from a customer to a supplier to produce….
A supermarket ties together two separate processes with a pull system.
It controls and levels production upstream.
It is used when continuous flow is brokendue to distance and/or process technology limitations, and right-sizing is not an option.
Downstream customers withdraw items from the front of each supermarket; upstream suppliers replenish the supermarket from behind.
The supermarket prevents over-production by upstream processes and replaces costly and inaccurate MRP systems.
Material moves only
when the customer
signals a need….
…what’s a supermarket?
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Lean Administration
The lean office goal: to flow the processes and reduce the probability of variances that prevent the organization from achieving its value adding objectives.
A systemic approach to integrating people, systems,processes, tasks, procedures, instructions, equipment,physical layouts, and the environment to reflect and build-off each other.
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Product/Process Engineering
A systematic approach to creating a product designthat considers all elements of the product life cyclefrom conception throughout disposal.
Multidisciplinary teams co-design all desired productcharacteristics producing a more robust design that is tolerant of manufacturing and use variation at a higher quality and at a lesser cost.
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Variation Reduction
• CEDAC
• PDCA
• DMAIC
• FMEA
Fact Idea Analysis
CATEGORY
Target: < 50%
Opportunity
Must experiment and have scientific methods for getting to root cause
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Standard Work
• Standardization of policy, sequence, timing, flows, method, skills, learning and outcomes for all we do
• Rules defining standards for how work is to be performed
• Improvement in the workplace begins with adherence to standard
• A standard is the documented
expression of the best method
known at a given point in time;
it enforces that method until
a better one comes along….
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
A common theme: all lean methods and techniques are scientific
and reliable, based upon the principles of system, feedback,
and local control.
waste out: upstream-downstream
• Employee Involvement
• Value Stream Management
• 5S - Visual Display & Control
• Quick Changeover
• TPM/Equipment Reliability
• Mistake Proofing
• Cell Design – Process Flow
• Kanban
• Lean Administration
• Variation Reducton
• Process/Product Engineering
• High Performance Work Place
• Scientific Methods - Cause & Effect
• Standard Work
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
agenda…
What’s a Supply Chain anyway
Managing the Lean Supply Chain
Focus: extending Lean to suppliers
Top 5 Supply Chain strategic imperatives
A strategy for competitive advantage:the Supply Chain Quiz
Summary
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
2010 – 2011
the top 5
supply chain strategic imperatives
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
1) Strategic alignment
2010 - 2011supply chain strategic imperatives
• theme: change ready and risk robust • focus: demand driven value network• balance: people, profits, planet • systemic approach to planning and deployment• project management
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
2) B2B technology and software
2010 - 2011supply chain strategic imperatives
• controlled use of RFID, GPS, and Voice [Speech] Recognition• general Purpose ERP• supply Chain Network Modeling• internet technology• seamless cross-referencing and integration of data
o order processing to cash collection: buy signal, entry, requisition, schedule, production, logistics, warehousing
radio frequency ID technology and global positioning systems
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
3) Carbon management
2010 - 2011supply chain strategic imperatives
• green work place: up-stream and down-stream• inter and intra transportation [logistics]• production and packaging• warehousing and distribution• utilities• green metrics on every manager’s scorecard
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Green Supply Chain Management…
"the process of using environmentally
friendly inputs and transforming these
inputs into outputs that can be reclaimed
and re-used at the end of their lifecycle
thus, creating a sustainable supply chain”.
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
4) Production flexibility and execution
2010 - 2011supply chain strategic imperatives
• enterprise wide Lean capabilities• focus: activities, connections, flows and learning• readiness for mass customization• modular production
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
5) Extended lean enterprise
2010 - 2011supply chain strategic imperatives
• globalization and localization• risk management and assessing supplier health• inventory visibility and responsiveness • mantra: cost reduction and control through waste elimination
o information flow, material flow, process flow
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
1) Strategic alignment
2) B2B technology and software
3) Carbon Management
4) Production flexibility and execution
5) Extended lean enterprise
2010- 2011The top 5
supply chain strategic imperatives
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
2010 - 2011… what is it going to take tostay a head of the competition?
Thanks, mike donovan, donovan asso., framingham, ma
The million dollar Supply Chain question:
answer: Plenty
Xbillion
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
agenda…
What’s a Supply Chain anyway
Managing the Lean Supply Chain
Focus: extending Lean to suppliers
Top 5 Supply Chain strategic imperatives
A strategy for competitive advantage:the Supply Chain Quiz
Summary
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
The Supply Chain Quiz
Consider the alternatives!
10 attributes to competitive advantage
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
agenda…
What’s a Supply Chain anyway
Managing the Lean Supply Chain
Focus: extending Lean to suppliers
Top 5 Supply Chain strategic imperatives
A strategy for competitive advantage:the Supply Chain Quiz
Summary
Thanks, mike donovan, donovan asso., framingham, ma
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
1) Strategic alignment
2) B2B technology and software
3) Carbon Management
4) Production flexibility and execution
5) Extended lean enterprise
2010- 2011The top 5
supply chain strategic imperatives
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
…managing the chain
Financial Planning
Item Planning
Catalog Planning
Web Planning
Promotion Planning
Business Intelligence
Production Planning
Lean Production
Extended Lean
Demand Management
much to consider
Demand Planning
Promotion Forecast
Replenishment
Vendor Manage Inv.
Audit, Payment, Claims
IT solutions
Cust. Relationship Mgmt.
Sup. Relationship Mgmt.
Prod. Develm’t. Mgmt.
Returns Mgmt.
Distribution Mgmt.
Warehouse Mgmt.
Billing Mgmt.
Labor
Yard Mgmt.
Transportation Mgmt.
Fleet Mgmt.
Carrier Mgmt.
Reverse Logistics
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
…managing the chain
Open communication of expectations plan, alignment, and deployment a direct communication program
A series of standardized processes waste elimination ideal and reliable methods experimentation
Building capabilities
Supplier Relations
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Our Supply Chain attributes
Our company has developed Supply Chain Management to a core competency level.
Yes No
Thanks, mike donovan, donovan asso., framingham, ma
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
an Extended Lean improvement perspective
...system-wide continuous improvement to cost, quality, delivery, and capability
…through the progressive identification and elimination of all non-value adding waste
…with the involvement of stakeholders at all levels: employees, customers, and suppliers
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
agenda…
What’s a Supply Chain anyway
Managing the Lean Supply Chain
Focus: extending Lean to suppliers
Top 5 Supply Chain strategic imperatives
A strategy for competitive advantage:the Supply Chain Quiz
Summary
Managing a Lean Supply Chain
Valve Manufacturers AssociationWaterloo, IowaApril 2010
Michael Kuta, Partner