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The Application of Lean Thinking to Supply Chain Management

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Title: The Application of Lean Thinking to Supply Chain Management


1
The Application of Lean Thinking to Supply Chain
Management
David Taylor Lean Enterprise Research
CentreCardiff Business School
  • 2004 Queensland Supply Chain Seminar Brisbane
    10 11 June

2
The Lean Enterprise Research Centre Cardiff
University Business School
  • Est. 1993 by Prof. Dan Jones
  • 25 staff
  • gt50 Lean projects in different sectors
    including-
  • Automobile Electronics Food
    retailing
  • Aerospace Consumer goods Steel
  • Public sector admin Food production
    Shipbuilding
  • Aim To develop and apply methodologies to assist
    companies in becoming Lean

3
David Taylor Senior Research Fellow
  • Joined Cardiff 1997
  • Various projects applying Lean Thinking to
    individual companies whole supply chains
  • 97 -00 - LEAP - Upstream automotive component
    supply chain
  • 98 -01 - Footwear - Global supply chain
    improvement
  • 00 -03 - MICE UK Metals Industry Competitive
    Enterprise
  • 01 -03 - SHOOT Lean in Shipbuilding
  • 02 -06 Agri-foods - Value Chain Analysis from
    Farm to Fork

4
Agenda
  • Today The Background The Theory
  • Lean Thinking v Mass Production
  • Understanding Waste
  • The Lean Principles
  • Tomorrow The Practice
  • Lean Tools Techniques
  • Case Studies of Lean Applications Benefits

5
What is Lean Thinking
  • A fundamental business logic, based on the
    approach developed by Toyota
  • It is focused on eliminating waste from business
    processes and thereby enhancing value to the
    customer
  • It aims to optimise the whole value stream for a
    product or service Not on optimising the
    activities of individual organisations,
    departments or assets

6
The Origins of LeanLean Thinking v Mass
Production
7
Ford Highland Park 1913 16Flow Production
RunningBoards
Commutators
Front Axles
Assembly
Radiators
Gas tanks
Rear Axles
250,000 Vehicles Per Year, One Model
8
But the Industry Lost the Plot
  • As customers wanted more choice and product
    variety
  • Car makers abandoned what Ford called Flow
    production
  • They adopted a process-village, process-facility,
    process-firm configuration
  • Ford adopted this at River Rouge - which he
    called Mass production.

9
Ford River Rouge Mass Production
Specialist departments (Process Villages)
Large expensive Machines
Annealing
Stamping
Painting
Assembly
Washing
Welding
Brazing
Lot of product movement
2.5 Million Vehicle Kits Per Year, Many Models
10
Spaghetti World
Internally in factories And externally with
supplier networks
Exacerbated by Globalisation
Assembly
Components
Piece Parts
Process
11
A Typical Value StreamWindscreen Wipers
10 FACILITIES 5 FIRMS
20,000 miles 3 COUNTRIES 42 DEPARTMENTS
12 SHIPPERS
SCHEDULE
ASSEMBLER SCHEDULE
SUPPLIER SCHEDULE
COMPOUND SCHEDULE
POLYMER SCHEDLE
CALL OFF
PHONE
RUBBER PLANT
RUBBER WHSE
RUBBER COMP
WIPER BLADE
WIPER ARM
WIPER ASS.
SUPPLIER WHSE..
PARTS WHSE.
ASSEMBLY
DEALER
AIR
SHIP
AIR
70 ACTIONS 188 days
THROUGHPUT TIME 7 VALUE CREATING STEPS
20 mins VALUE CREATING TIME
12
The Consequences of Mass
  • Long lead times
  • Lots of inventories
  • Poor customer fulfilment
  • It involves increasing amounts of waste
  • wasted time/effort, materials transport......
    all down the Value Stream
  • It needs ever more sophisticated forecasting,
    planning, scheduling, supplier co-ordination and
    marketing systems

13
Toyota Returned to Flow...
  • Over twenty years Taiichi Ohno at Toyota overcame
    the obstacles to producing a variety of products
    in process sequence
  • Toyota built a business system based on-
    compressing time near perfect capability
    close proximity build to order.
  • And synchronised the whole supply chain
  • Increasing productivity by 50 while cutting
    defects and lead times by 90

14
The Wake Up Call 1990
  • Lean Thinking was born from a world wide auto
    industry benchmarking programme
  • Highlighted huge gaps in performance between
    Toyota other Japanese Lean producers
    Western Mass producers

Jim Womack Dan Jones Daniel Roos
15
How far has Lean spread?
  • Widespread adoption in automotive in 1990s
  • Aerospace
  • Grocery and FMCG ( Efficient Consumer Response)
  • Consumer electronics
  • Raw materials Aluminum Steel
  • Construction
  • Healthcare
  • Public Sector
  • Agri- foods

16
Key Features of LeanWaste Elimination
17
Muda
  • Any activity which absorbs resource but creates
    no value for the user of the product or service
  • Examples
  • Mistakes which require rectification
  • Production of items which no one wants
  • Unnecessary movement of products
  • or employees round a workplace

18
Toyotas Seven Wastes
19
Waste of Overproduction
Toyota see this as the worst waste
Producing too much or too soon Resulting in poor
flow of goods information and excess inventory
20
Over ProductionCorus Steel Plant South Wales
Key Driver Volume of steel produced Keep the
factory busy Sweat the assets Minimise unit
costs of production Large batches avoid lost
production due to changeovers
21
Waste of Waiting
Materials or information are waiting to proceed
to the next process. They are not moving or
having value added.
  • Goods waiting to be processed
  • Machines or men waiting for goods to arrive from
    upstream processes
  • Paperwork waiting to be processed
  • People waiting to be processed or served

22
Waste of WaitingTexon Shoe Component
Manufacturer UK
  • Inner soles take 8 hours on 5 different machines
    to make
  • Product spends a total of 20 days waiting in
    queues
  • in the factory
  • Factory quotes 5 weeks - Order to despatch
    lead time
  • Result Lost business to competitors


23
Waste of Transport
Materials (or information) transported into, out
of, or around the factory.
24
Waste Of Transport Talent Engineering
Automotive component manufacturer NE England
Product transported 3.5 km around the site in
the course of production Each movement on a
fork-lift truck
25
Waste of Inappropriate Processing
Using machinery and equipment which is
inappropriate in terms of capacity or
complexity
26
ComplexityThe Space Race
  • NASA spent a great deal of money in encouraging
    the US pen manufacturer, Fisher, to develop and
    produce a pen for use in space. It had to be
    able to write upside down and function in zero
    gravity situations...

Managers oftenlook to spend their way out of a
problem
...The Soviets came up with a simpler solution to
the same problem - They used pencils !!
27
Waste of MotionInappropriate Ergonomics layout
of the workplace
4 metres
Tools
Parts
3 metres
Organise the work place so tools materials
located conveniently to minimise motion
physical stress
28
Waste of MotionSheffield Forge MastersProduce
Rollers for Steel mills
  • Changeover Time 2.5 hours
  • Feet 75 mins !

29
Waste of Making Defects
Rectification
Poor Customer Service
Costs Delays
In 1990 VW spent more time rectifying defects at
the end of the Golf production process Than the
time it took to build a Toyota Corolla !
30
Waste of Inventory
The Obvious Issue Cost Capital tied up Space
Obsolesence Damage Deterioration Insurance
The Really Big Issue Inventory hides problems
31
Toyotas View of Inventory
  • Delays action with machine breakdowns
  • Delays actions dealing with product defects
  • Reduces the need to face up to tool / process
    changeover time improvements
  • Conceals imbalance in the capability of the
    facility

32
Focus of Improvement Mass v Lean
33
Key Features of Lean
  • Waste Elimination
  • The Five Lean Principles

34
The Five Lean Principles
  • Specify what creates value from the customers
    perspective
  • Identify all steps across the whole value stream
    for every product family
  • Make those actions that create value flow
  • Only make what is pulled by the customer
  • Strive for perfection by continually removing
    successive layers of waste

35
1 Specify Value
  • Specify VALUE by product or product family
  • Through the eyes of the customer
  • Not from the standpoint of the department,
    function or firm

Most companies claim to be adding value But few
have really understood value from the point of
view of the customer
36
Value Adding v Non-Value Adding Activities
  • Value Adding Activities
  • An activity or process that the customer would be
    willing to pay for
  • Eg Assembling components of a washing machine
  • Non Value Adding ActivityActivities that in the
    eyes of the final customer do not make a product
    or service more valuable they would rather not
    pay foreg Transferring components from one
    sized container to another to move them round a
    factory

37
2 Identify the Value Stream
Identify all the steps along the VALUE STREAM
for each product family
- From customer order through to delivery
38
Value Streams
39
The Cola Can Complete Value Stream
  • Total time 319 days
  • Value Adding 3 hours

40
Identify the Value Stream Then Challenge Every
Step !
  • Is this step really necessary? Would the
    customer think this product is worth less if
    this step could be left out?
  • Many steps are only necessary because the
    way firms are organised and because of previous
    decisions about technologies and assets

41
Remove Non-Value Adding Steps
Store
42
3 Aim for Flow Line up all of the steps that
truly create value so that they occur in rapid
sequence
43
4 Only make what is Pulled by the customer
  • Only make what is needed, when it is needed
    and in the quantities wanted
  • Move away from making to forecast
  • Use Kanbans JIT
  • Eliminate making to stock and PUSH thinking

44
5 Perfection
  • Relentlessly Pursue Perfection
  • Develop an attitude of continuous improvement
  • Set ambitious improvement targets

Western Mass producers Typically measure defects
in percentages Aim to reduce defects from 5 to
3 to 1
1 10,000 ppm
Lean Automotive Producers Typically measure
defects in parts per million 2001 Nissan
suppliers must achieve lt 200ppm 2003 Nissan
suppliers must achieve lt 100ppm
45
The Metrics of Perfection
  • Your rate of improvement in
  • Eliminating Wasted Steps Defects
  • Speeding Flow
  • Reducing Inventories
  • Reducing Volatility Instability
  • Cutting management time devoted to fire-fighting
    and negotiating

46
What have we Got So Far ?
  • Mass Production Thinking
  • V
  • Lean Thinking

47
What are the gains?
48
GH White Volkswagon Dealership LondonRepair
Shop
Small Company
  • 20 people Turnover 3m
  • Lean thinking applied 2 year project

49
Lantech Stretch Wrap Equipment
Medium Company
50
TescoLean Supply Chain Improvement 1997..
Large Company
  • Benefits Improved product replenishment
    system Savings 100m reported in1998/9
    Accounts Product availability increased from 95
    to 98.5 Improved customer service
    satisfaction
  • Total supply chain costs targeted to fall by 15
    - 20
  • Application of Lean now one of the 3 key
    strategic drivers of the company

51
Toyotas Relentless March..
The Lean Model
  • 1948 Virtually no output
  • 2000 10 share of world market
  • 2001 No 3 in USA market share overtook
    Chrysler
  • 2004 No 2 in world market share overtook Ford
  • 2010 Aim to be No 1 in world - 15
    market share
  • The most profitable car producer in the world (
    except for Porsche)
  • 10 billion profit on 125 billion sales. 
    With a return on sales of nearly 8,

52
Agenda
  • Today The Background The Theory
  • Lean Thinking v Mass Production
  • Understanding Waste
  • The Lean Principles
  • Tomorrow The Practice
  • Lean Tools Techniques
  • Case Studies of Lean Applications Benefits
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