Lean Supply Chains Chapter 14 LO14–1: Explain what lean production is. LO14–2: Illustrate how lean concepts can be applied to supply chain processes. LO14–3: Analyze supply chain processes using value stream mapping. LO14–4: Apply lean concepts to service processes. 08- 01

Lean-Focused Supply Chain Components Lean suppliers Able to respond to changes Lower prices Higher quality Lean procurement Key is automation (e-procurement) Suppliers must see into the customers’ operations and customers must see into their suppliers’ operation Lean warehousing Eliminate non-value-added steps and waste in storage process Lean logistics Optimized mode selection and pooling orders Combined multi-stop truckloads Optimized routing Cross docking Import/export transportation processes Backhaul minimization Lean customers Understand their business needs Value speed and flexibility Establish effective partnerships with suppliers

What is a Lean System? Lean Systems Operations systems that maximize the value added by each of a company’s activities by removing waste and delays from them.

Lean Logic Lean is based on the logic that nothing will be produced until it is needed. A sale pulls a replacement from the last position in the system. This triggers an order to the factory production line. Each upstream station then pulls from the next station further upstream.

Toyota Production System Elimination of Waste Respect for People Waste from overproduction Waste of waiting time Transportation waste Inventory waste Processing waste Waste of motion Waste from product defects Lifetime employment for permanent positions Maintain level payrolls even when business conditions deteriorate Company unions Bonuses View workers as assets

Eight Types of Waste or Muda Overproduction Inappropriate Processing Waiting Transportation Motion Inventory Defects Underutilization of Employees Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

Principles of Lean Supply Chain Design Lean Layouts Group technology Quality at the source JIT production Lean Production Schedules Uniform plant loading Kanban production control system Lean Supply Chains Specialized plants Work with suppliers Building a lean supply chain

Lean Concepts Plant layout is designed to ensure balanced work flow with a minimum of WIP inventory Preventive maintenance is emphasized to avoid downtime. Operators perform much of the maintenance to keep equipment reliable.

Lean Concepts Group technology: a philosophy in which similar parts are grouped into families The processes required to make the parts are arranged in a manufacturing cell. Eliminates movement and queue time between operations, reduces inventory, and reduces employees. Instead of specialized workcenters Group technology manufacturing cells

Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall Group Technology Jumbled Flows without GT. Lines Flows with 3 GT cells Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

One-Worker, Multiple Machines Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

Quality at the Source Jidoka (line stop) Poka-Yoke (mistake proofing)

Quality at the Source Quality at the source: do it right the first time and if something goes wrong, stop the process immediately Workers are personally responsible for the quality of their output. Workers become their own inspectors. Workers are empowered to do their own maintenance.

Just-in-Time (JIT) Production JIT production: producing what is needed when needed and nothing more Anything over the minimum is waste. Typically applied to repetitive manufacturing. Ideal lot size is one. Vendors ship several times a day. JIT exposes problems otherwise hidden by inventory.

Lean Production – Pull System

Inventory Hides Problems

Lean Concepts summary Pull Method of Workflow- Customer demand activates the production of the service or item. Close Supplier Ties Small Lot Sizes

Lean Concepts summary Flexible Workforce Automation 5S Total Preventative Maintenance

5S

What is a Value Stream Mapping? a special type of flowcharting tool used to analyze where value is or is not being added as material flows through a process Requires a full understanding of the business, including production processes.

VSM: A Two Part Process Value stream mapping is a two-part process: Depict the “current state” of the process (see Exhibit 14.8: next slide) Map of the same process with suggested improvements (Exhibit 14.10: see two slides over) The “future state” map has been annotated using Kaizen bursts that suggest the areas for improvement. Kaizen bursts identify specific short-term projects that teams work on to implement changes to the process. Exhibit 14.10 is a totally redesigned process: The individual production operations have been combined into a workcell operated by three employees. In addition, rather than “pushing” material through the system based on weekly schedules generated by production control, the entire process is converted to a pull system that is operated directly in response to customer demand. Lead time in the new system is only 5 days, compared to the 34 days in the old system.

Manufacturing Process Map: Current State of a Process (Exhibit 14.8)

Value Stream Mapping – Symbols

Manufacturing Process Map: Possible Future State of a Process (Exhibit 14.10)

Example a.

What is a Kanban? Kanban A Japanese word meaning “card” or “visible record” that refers to cards used to control the flow of production through a factory

Kanban Systems Kanban means “sign” or “instruction card” in Japanese Worker takes the first part A from a full container. Worker takes the withdrawal Kanban from the container and takes the card to the machine center storage area. In machine center, worker finds a container of part A. Worker removes the production Kanban and replaces it with the withdrawal Kanban. The freed production Kanban is placed on a rack by the machine center, which authorizes the production of another lot of material. The cards on the rack become the dispatch list for the machine center. Kanban means “sign” or “instruction card” in Japanese Cards or containers are used Make up the Kanban pull system

Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall The Kanban System Each container must have a card. Assembly always withdraws from fabrication (pull system). Containers cannot be moved without a kanban. Containers should contain the same number of parts. Only good parts are passed along. Production should not exceed authorization. Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

The Kanban System Receiving post Kanban card for product 1 Storage area Empty containers Full containers Assembly line 1 Assembly line 2 Fabrication cell O1 O2 O3

Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall The Kanban System Receiving post Kanban card for product 1 Storage area Kanban card for product 2 Assembly line 1 Assembly line 2 Empty containers Fabrication cell O1 O2 O3 Full containers Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall The Kanban System Receiving post Kanban card for product 1 Storage area Kanban card for product 2 Assembly line 1 Assembly line 2 Empty containers Fabrication cell O1 O2 O3 Full containers Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall The Kanban System Receiving post Kanban card for product 1 Storage area Kanban card for product 2 Assembly line 1 Assembly line 2 Empty containers Fabrication cell O1 O2 O3 Full containers Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall The Kanban System Receiving post Kanban card for product 1 Storage area Kanban card for product 2 Assembly line 1 Assembly line 2 Empty containers Fabrication cell O1 O2 O3 Full containers Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall The Kanban System Receiving post Kanban card for product 1 Storage area Kanban card for product 2 Assembly line 1 Assembly line 2 Empty containers Fabrication cell O1 O2 O3 Full containers Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall The Kanban System Receiving post Kanban card for product 1 Storage area Kanban card for product 2 Assembly line 1 Assembly line 2 Empty containers Fabrication cell O1 O2 O3 Full containers Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

Determining the Number of Kanbans Needed Setting up a Kanban system requires determining the number of Kanbans cards (or containers) needed. Each container represents the minimum production lot size. An accurate estimate of the lead time required to produce a container is key to determining how many Kanbans are required. K = DL(1+S)/C   k = number of Kanban card sets D = average number of units demanded over a given time period L = lead time to replenish an order (in same time units as demand) S = safety stock expressed as a percentage of demand during lead time C = container size

Example 14.1 Average number of units demanded over a given time period (D ) = 8 per hour Lead time to replenish an order (L ) = 4 hours Safety stock (S ) = 10% Container size (C) = 10 units   Round up to 4 containers

Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall Problem 11 Transmissions are delivered to the fabrication line 4 at a time. It takes 1 hour for transmissions to be delivered. Approx. 4 vehicles are produced each hour, and 50% of expected demand should be maintained as safety stock. D = 4 transmissions per hour L = 1 hour S = .50 C = 4 transmissions K = DL(1+S)/C K = 4(1)(1+0.50) / 4 = 1.50  2 Kanban card sets Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall Problem 12 D = 2,400 bottles every 2 hours S= 0.1 of demand L = 40 minutes C= 120 bottles Find K (number of Kanban cards needed) K = DL(1+S)/C D = 2,400 bottles/2 hours = 1200/60 minutes = 20 bottles per minute K = 20(40)(1+0.10) / 120 = 7.33  8 Kanban cards Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall

Setup Times Reductions in setup and changeover times are necessary to achieve a smooth flow. Kanban significantly reduces the setup cost. The organization will strive for a lot size of one.

Lean Supply Chains Specialized plants Collab-oration with suppliers Small specialized plants rather than large vertically integrated manufacturing facilities Can be constructed and operated more cheaply Collab-oration with suppliers Important part of process Share projections with suppliers Link with suppliers online

Lean Supply Chains Building a Lean Supply Chain Value must be defined jointly for each product family based on the customer’s perception. All firms along the value stream must make an adequate return on their investments. Firms must work together to eliminate waste (muda). When cost targets are met, firms will conduct new analyses to identify remaining waste and set new targets. Every participating firm has the right to examine every activity relevant to the value stream as part of the joint search for waste.

Lean Services Organize problem-solving groups Upgrade housekeeping Upgrade quality Clarify process flows Revise equipment and process technologies Level the facility load Eliminate unnecessary activities Reorganize physical configuration Introduce demand-pull scheduling Develop supplier networks