Lean Supply Chains Chapter Fourteen McGraw-Hill/Irwin Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.

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.

Lean Production – Pull System

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

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 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

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.

Inventory Hides Problems

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

Other Kanban Approaches Kanban squares Marked spaces on the floor to identify where material should be stored Container system The container is used as a signal device Colored golf balls Appropriate golf ball signals production

Kanban System Kanban system – A production control approach that uses containers, cards, or visual cues to control the production and movement of goods through the supply chain. Key characteristics: Uses simple signaling mechanisms to indicate when specific items should be produced or moved. Can be used to synchronize activities either within a plant or between different supply chain partners. Are not considered planning tools, but rather control mechanisms that are designed to pull parts or goods through the supply chain based on downstream demand.

Kanban System Two-card kanban system – Uses one card to control production and another card to control movement of materials.

Kanban System for Two Work Centers Figure 13.5

Release of Finished Materials from Work Center B Figure 13.6

Pulling of Raw Materials into Production at Work Center B Figure 13.7

Removal of Finished Materials from Work Center A Figure 13.8

Two-card System Summary A downstream system station pulls finished material out of work center B. Work center B pulls raw material into production. Demand for more raw material in work center B pulls finished material out of work center A.

Pull System Pull system – A production system in which actual downstream demand sets off a chain of events that pulls material through the various process steps. A kanban system is also called a pull system.

Value Stream Mapping 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 Value Stream Mapping A common “lean systems” tool Examines entire value stream for waste

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)

Lean Waste Lean Waste – Any activity that does not add value to the good or service in the eyes of the consumer. Called “muda” in Japanese Identification of lean wastes began with Taiichi Ohno, a Toyota engineer.

Eight Lean Wastes Overproduction Waiting Unnecessary transportation Inappropriate process Unnecessary inventory Unnecessary/excess motion Defects Underutilization of employees

Lean Perspective on Inventory Triangles represent inventory between work centers A, B, and C. The buildup of inventory hides problems (at a cost) that may occur. Figure 13.2

Lean Perspective on Inventory After a Lean transformation, wasted movement and space are eliminated and work centers are moved closer together. Inventory levels are reduced dramatically and work centers make only what is needed when it is needed. Figure 13.3

Lean Perspective on Inventory Process of reducing inventory leads to reduction of the other “wastes” and exposes problems in order of severity (‘water and rocks’ analogy) Figure 13.4