SUPPLY CHAIN EXCELLENCE: FROM LEAN PRODUCTION TO LEAN CONSUMPTION

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SUPPLY CHAIN EXCELLENCEFROM LEAN PRODUCTION TO
LEAN CONSUMPTION

• Professor Daniel T Jones
• Chairman, Lean Enterprise Academy, UK
• www.leanuk.org

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Who am I?

• Co-author with Jim Womack of The Machine that
  Changed the World, Lean Thinking and the new
• Lean Consumption article and Lean Solutions book
• Chairman of the non-profit Lean Enterprise
  Academy in the UK - part of the Lean Global
  Network
• Researchers and publishers of the knowledge
  needed to build a lean business system
• Thought leaders in pushing forward the frontiers
  of lean thinking in our Lean Summits and
• Mentors to organisations seeking to implement
  lean in every type of activity

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Lean is Old not Japanese

• The Venetians understood flow production by
  1400 making one ship a day (so probably did the
  Chinese!)
• The French Army understood the need for
  interchangeable parts before 1789
• Brunel was making standardised parts in process
  sequence for the British navy by 1807
• Blanchard made rifles on automatically cycling
  machines laid out in cells in Springfield in1818
• Ford developed the first complete flow
  production system at Highland Park, Detroit in
  1914

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From Mass to Lean

• Ford went on to create mass production at the
  Rouge in 1927 - making huge volumes of parts for
  assembly globally using big machines, big
  batches, and complex coordination as pull became
  push
• Toyota extended flow production to cope with
  variety using simple machines with quick change
  tools, in process sequence pulled by customer
  demand
• TPS or Lean production was perfected by 1970
  and extended across the whole enterprise and
  across the whole of Toyota City as the Toyota
  Way

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Toyota - the Lean Model

• Most people now recognise that Toyota is setting
  the pace based on its Lean business system
• It leads in efficiency and quality around the
  world
• It also leads in time to market for new products
• And in introducing new technologies - like
  hybrids
• It is globalising assembly and localising parts
  supply
• It has overtaken Ford and plans to overtake GM!
• Superficially Toyotas functional organisation
  looks familiar!
• So what distinguishes the way it operates?

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Toyotas Lean Strategy

• Brilliant process management is our strategy.
• We get brilliant results from average people
  managing brilliant processes.
• We observe that our competitors often get
  average (or worse) results from brilliant people
  managing broken processes.
• Lean Thinking is Process Thinking

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Lean Thinking

• The objective is to manage the business backwards
  from the consumer definition of value - not
  forwards from your organisation and your assets
• To create lean primary processes to design,
  deliver and support this value - with minimum
  wasted effort and time and the necessary lean
  support processes
• And to build a lean management system to develop,
  sustain and improve these processes over time
• Be clear about consumer Purpose, before designing
  the Processes and then organising the People

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Lean Principles

• Specify value from the standpoint of the consumer
  - (not from your assets and organisation)
• Identify the value stream through the steps
  required to create each product - from concept
  to launch and order to delivery - and remove the
  wasted steps
• Make the process of value creation flow smoothly
  and quickly to the customer
• But only in line with the pull of the consumer
• While pursuing perfection by constantly improving
  the product and the value stream

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The Dynamics of Lean
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Implementing Lean
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Across the Value Stream
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Toyotas Supply Chains

• Toyota spent 30 years developing lean in house
  and spreading it up and down its supply chain
• The most impressive is their aftermarket parts
  system supplying 400,000 SKUs to dealers
• It operates as a series of tight replenishment
  loops dealers call off parts from Distribution
  Centres every day these shipments trigger daily
  orders to be picked up from suppliers the next
  day 60 of whom can also make every part that
  is required in a day every day
• The result is the highest availability, lowest
  stock levels and the smoothest order signals

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Lean in Grocery so Far
Supplier
RDC
Store
NDC
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Many Process Industries

• Are stuck in the world of short term plan changes
  
• And a need to respond flexibly to demands from
  customers
• Actually they are caught in a vicious circle
  data errors, forecast errors, demand
  amplification, constant rescheduling, expediting,
  loss of capacity, finished goods shortages and
  excess stocks etc
• The breakthrough is to see where you can flow and
  create stability and build on that to achieve
  increased responsiveness to demand

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Where and How to Flow?
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Where and How to Flow?
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Progression over time
SKUs Volume
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But this is just the start!

• There is a lot more to do to achieve the full
  potential of lean beyond what Tesco has done
• In many cases suppliers have only just begun
  their lean journeys making a growing range of
  products
• Other retailers are picking up on this logic so
  progress will continue
• The answer does not lie in technology but in
  rethinking the shared supply chain process
• The place to begin this journey is with the
  consumer

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Consumption

• Improvements in production and logistics have
  given consumers a growing range of higher quality
  products at lower prices through many different
  sales channels
• So why is consumption still so frustrating? Why
  does the new computer fail to work with the rest
  of our kit? Why do we have to waste so much time
  in hub airports and general hospitals? Why do we
  fail to find exactly what we are looking for on a
  trip to the supermarket?
• Why is it so difficult to connect consumption and
  provision? Why do we think and act differently as
  consumers to how we do in our lives as providers?

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The Consumption Process

• The answer begins by seeing consumption not as an
  isolated transaction between strangers
• But by seeing consumption as a process of steps
  to solve a consumers problem involving
  researching, selecting, obtaining, integrating,
  maintaining, upgrading, disposing and replacing
  many items over time interacting with several
  providers of goods and services in a parallel
  provision process
• Add this up and you realise that managing the
  household consumption processes is complicated
  and takes a lot of unpaid time and mind share

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The Consumers Dilemma

• We all have more and more choices to make and
  more and more products to manage
• but less time and energy to do so
• This situation creates a major opportunity for
  providers
• and a major win-win opportunity for collaboration

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Principles of Lean Consumption

• Solve the consumers problem completely
• Dont waste the consumers (or the providers)
  time
• Provide exactly what the consumer wants
• Deliver it where its wanted
• Supply it when its wanted
• Continually aggregate solutions to reduce the
  consumers time and hassle

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Solve my Problem

• It is not the object we are buying but the use we
  get from the object or service in relation to
  its context
• Has it solved my problem completely? What was I
  trying to do exactly? What else did I have to do
  to solve the problem completely? Was that a
  hassle?
• Fujitsu Services reversed the logic of outsourced
  customer service and technical support getting
  experienced staff to ask about customer purpose,
  offer a fix, redesign to eliminate the root cause
  and discover additional value for future products
• We need a dialogue to discover purpose and hassle

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Dont Waste my Time

• The assumption is my time is free so I can do
  more!
• In reality customers and providers time is
  wasted by a poorly designed and disconnected
  consumption and provision processes
• Mapping both processes and their interactions
  reveals this wasted time and cost and identifies
  opportunities for win-win collaboration to cut
  time and cost for both
• By creating a dialogue with consumers to
  pre-diagnose the problem, planning and preparing,
  separating job types and creating standardised
  lean processes

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Car Repair Before Lean
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Lean Car Repair
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What I want

• Fulfilment levels are poor in most systems
• 98.5 availability drops to 92 on the shelf and
  55 for a basket of 40 items in the grocery store
• 80 availability for the shoe with 150 day order
  window leads to 40 being remaindered
• 52 of consumers get the cars they wanted on time
  and 64 of service jobs are completer RFTOT
• Better IT, RFID and stocks are not the answer
  but rapid, reflexive, replenishment loops back
  upstream
• And compressing the length of the supply chain

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Where I want it

• We all use many formats depending on our
  circumstances and time pressure places a
  growing premium on convenience which signals
  the end of the big box dominant mass retailing
  format
• Scale economies do not derive principally from
  production economies or store size but buying
  power
• The key to serving multiple channels is a common
  fulfilment system and a water spider
  replenishment system for all formats including
  local stores and home shopping
• Which requires much more accurate fulfilment

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Alternative Shopping Trips
Total Travel Time Cost 195 m
12.00 160m 12.00 95m 5.00
50m 4.00 15m ----- 25m
------
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When I want it

• Is everything purchased on impulse? Is there any
  incentive to plan ahead?
• The consequence is that production must be
  infinitely flexible, every event must be planned
  and we have to dispose of unwanted stock
• Reversing this logic How can we plan ahead with
  most consumers while offering price incentives to
  smooth the demand for production slots? This
  stability creates the possibility of responding
  to the got-to-have-it-now consumers at much
  lower cost?
• This realistically takes us beyond build to
  order

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Aggregate Solutions

• Why are consumers increasing the number of
  suppliers often one off strangers to acquire
  the elements of the solution to their problems?
• While lean producers are decreasing the number of
  suppliers, each with a deeper knowledge to solve
  bigger problems on a continuing basis?
• Why cant someone provide continuing solutions to
  integrate the elements to solve my bigger
  problems? Such as communications, mobility,
  shelter, healthcare, financial management and
  routine shopping

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A New Era

• We are moving beyond the era of Mass Consumption
  in which one format fits all at ever higher scale
  bigger boxes as ever increasing variety is
  substituted for true consumer desire
• To a world of Lean Consumption in which
  consumption and provision become a shared process
  that is clearly visible to everyone and in which
  problems are jointly defined and resolved with
  minimum time and cost

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SUPPLY CHAIN EXCELLENCEFROM LEAN PRODUCTION TO
LEAN CONSUMPTION

• Professor Daniel T Jones
• Chairman, Lean Enterprise Academy, UK
• www.leanuk.org