Lean and Sustainable Supply Chains Chapter 13 Lean and Sustainable Supply Chains

Learning Objectives Describe how Green and Lean can complement each other. Explain how a production pull system works. Understand Toyota Production System concepts. Summarize important attributes of a lean supply chain. Analyze a supply chain process using value stream mapping. Know the principles of supply chain design.

Lean Production Lean production: an integrated set of activities designed to achieve high-volume production using minimal inventories (raw materials, work in process, and finished goods) Lean Production also involves the elimination of waste in production effort Lean Production also involves the timing of production resources (i.e., parts arrive at the next workstation “just in time”) LO 1 3

Lean Production Continued Value chain: each step in the supply chain should create value If it does not create value, it should be removed Customer value: something for which the customer is willing to pay Waste: anything that does not add value from the customer’s perspective LO 1

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 LO 1

Lean Production Pull System LO 2

Features of Lean Production Management philosophy “Pull” system through the plant WHAT IT IS Attacks waste Exposes problems and bottlenecks Achieves streamlined production WHAT IT DOES Employee participation Industrial engineering/basics Continuing improvement Total quality control Small lot sizes WHAT IT REQUIRES Stable environment WHAT IT ASSUMES

The Toyota Production System (TPS) Based on two philosophies Elimination of waste Respect for people Rules of TPS All work shall be highly specified as to content, sequence, timing, and outcome Every customer-supplier connection must be direct, and there must be an unambiguous yes-or-no way to send requests and receive responses The pathway for every product and service must be simple and direct Any improvement must be made in accordance with the scientific method, under the guidance of a teacher, at the lowest possible level in the organization LO 3 5

Elimination of Waste Waste from overproduction—producing more or faster than needed Waste of waiting time—idleness, e.g., doctor’s office Transportation waste—conveyors Inventory waste Processing waste—avoidable processing Waste of motion—avoidable movements Waste from product defects LO 3 6

Elimination of Waste Focused factory networks Group technology Quality at the source JIT production Uniform plant loading Kanban production control system Minimized setup times

Respect for People Lifetime employment for permanent positions Maintain level payrolls even when business conditions deteriorate Cooperative employee unions Equitable distribution of bonuses View workers as assets Quality circles (Small Group Improvement Activities (SGIA)) LO 3

Lean Supply Chains Value stream: the value-adding and non-value-adding activities required to design, order, and provide a product or service Waste reduction: the optimization of the value-adding activities and the elimination of non-value-adding activities LO 4

Components of a Lean Focused Supply Chain 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 LO 4

Components of a Lean Focused Supply Chain Continued 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 LO 4

Value Stream Mapping Value stream mapping: a special type of flowcharting tool for development of lean processes Used to visualize product flows through various processing steps Need a full understanding of the business including production processes LO 5

Manufacturing Process Map LO 5

Value Stream Mapping Symbols LO 5

Lean Supply Chain Design Principles 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—better control, less bureaucratic Work with suppliers Building a lean supply chain LO 6

Lean Layouts Plant layout 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 LO 6

Group Technology Group technology: a philosophy in which similar parts/machines are grouped into families/cells The processes required to make the parts are arranged in a manufacturing cell Eliminated movement and queue time between operations, reduces inventory, and reduces employees LO 6

Group Technology versus Departmental Specialty

Quality at the Source Quality at the source: do it right the first time and if something goes wrong, stop the process immediately Workers become their own inspectors Limited use of QC departments Workers are empowered to do their own maintenance Quality before quantity LO 6

JIT Production JIT production: producing what is needed when needed and nothing more Anything over the minimum is waste Typically applied to repetitive manufacturing Idea lot size is one Vendors ship several times a day JIT exposes problems otherwise hidden by inventory LO 6

Inventory Hides Problems LO 6

Lean Production Schedules Level schedule: one that requires material pulled in a pattern uniform enough to allow production to respond to pull signals Freeze windows: that period of time during which the schedule is fixed and no changes are possible Backflush: where parts that go into each unit are periodically removed from inventory and accounted for paged on production Uniform plant loading: smoothing the production flow to dampen the reaction waves that normally occur from schedule variations LO 6

Plant Loading (heijunka) Uniform Plant Loading (heijunka) Suppose we operate a production plant that produces a single product. The schedule of production for this product could be accomplished using either of the two plant loading schedules below. Not uniform Jan. Units Feb. Units Mar. Units Total 1,200 3,500 4,300 9,000 or Uniform Jan. Units Feb. Units Mar. Units Total 3,000 3,000 3,000 9,000 How does the uniform loading help save labor costs?

Kanban Production Control Systems Kanban means “sign” or “instruction card” in Japanese—signaling system Cards or containers are used Make up the kanban pull system Authority to produce comes from downstream It is a form of information system Production kanban—can be single card if move distance is short Move (withdrawal, conveyance) kanban LO 2

Kanban Production System Objectives Lead time reduction Lot size reduction Waste elimination One of several tools of Lean Mfg. Ineffective without others Prerequisites must be met

Rules of Kanban Production System Withdraw only the quantity needed Produce only the quantity given by kanban Kanban is withdrawal/production authority Move only good parts Smooth and level production Decrease number of cards to reduce inventory

Kanban Pull System 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 This authorizes the movement of the container to the assembly line The freed production kanban is placed on a rack by the machine center, which authorizes the production of another lot of material A similar process is followed for part B The cards on the rack become the dispatch list for the machine center LO 2

CUTTING ANY CELL WAREHOUSE SUPPLIER CUSTOMER BOX UPPER/LOWER COMBO P-KANBAN STATION W-KANBAN STATION SUPPLIER W-KANBAN STATION CUTTING P-KANBAN STATION ANY CELL W-KANBAN STATION P-KANBAN STATION CUSTOMER UPPER/LOWER COMBO BOX

Other 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 LO 2

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 LO 2 16

The Number of Kanban Card Sets LO 2 17

Example A switch assembly is assembled in batches of 4 units from an “upstream” assembly area and delivered in a special container to a “downstream” control-panel assembly operation The control-panel assembly area requires 5 switch assemblies per hour The switch assembly area can produce a container of switch assemblies in 2 hours Safety stock has been set at 10% of needed inventory

Example: continued Always round up!

Minimized Setup Time 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 LO 2

Minimized Setup Time Consequences of long setup times? Long manufacturing/service lead times Increased cost Reduced capacity A requirement for small-lot-size, mixed-model production? Practice more setups to reduce time/setup Fixed production quantity—improves setup SMED

Relationship between Lot Size and Setup Cost

Lean Supply Chains Specialized plants Work with suppliers Small specialized plants rather than large vertically integrated manufacturing facilities Can be constructed and operated cheaper Work with suppliers Important part of process Share projections with suppliers Link with suppliers online LO 6

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 so overall target cost and ROI targets are met When cost targets are met, the 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 LO 6

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 LO 6

Performance Measurement Lean Performance Measurement Quality levels Customer satisfaction Equipment effectiveness Supplier performance Throughput time Inventory levels Setup/lead time reduction Layout efficiency

Other Tools: Visual Control (5s) Sort—Seiri (organization; find what’s not needed) Set in order—Seiton (place for everything) Shine—Seiso (cleanliness) Standardize—Seiketsu (develop/maintain standards.) Sustain—Shitsuke (self-discipline)