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SUPPLY CHAIN EXCELLENCE: FROM LEAN PRODUCTION TO LEAN CONSUMPTION

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Toyota extended 'flow production' to cope with variety using simple machines ... And in introducing new technologies - like hybrids ... – PowerPoint PPT presentation

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Title: SUPPLY CHAIN EXCELLENCE: FROM LEAN PRODUCTION TO LEAN CONSUMPTION


1
SUPPLY CHAIN EXCELLENCEFROM LEAN PRODUCTION TO
LEAN CONSUMPTION
  • Professor Daniel T Jones
  • Chairman, Lean Enterprise Academy, UK
  • www.leanuk.org

2
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

3
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

4
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

5
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?

6
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

7
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

8
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

9
The Dynamics of Lean
10
Implementing Lean
11
Across the Value Stream
12
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

13
Lean in Grocery so Far
Supplier
RDC
Store
NDC
14
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

15
Where and How to Flow?
16
Where and How to Flow?
17
Progression over time
SKUs Volume
18
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

19
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?

20
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

21
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

22
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

23
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

24
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

25
Car Repair Before Lean
26
Lean Car Repair
27
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

28
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

29
Alternative Shopping Trips
Total Travel Time Cost 195 m
12.00 160m 12.00 95m 5.00
50m 4.00 15m ----- 25m
------
30
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

31
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

32
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

33
SUPPLY CHAIN EXCELLENCEFROM LEAN PRODUCTION TO
LEAN CONSUMPTION
  • Professor Daniel T Jones
  • Chairman, Lean Enterprise Academy, UK
  • www.leanuk.org
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