lean supply chains terminology elements of being lean ways we can reduce waste besides just having...
Post on 22-Dec-2015
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Lean Supply Chains
Terminology Elements of being lean Ways we can reduce waste besides just
having no inventory Lean chains can be fragile chains Toyota case
Terminology Lean / JIT / Toyota Production System (TPS) are
terms that are often used interchangeably. You can produce just in time and not necessarily
be lean – I have previously talked about car production. Many services fit this bill as well – think of a hospital. They have lots of inventory, excess capacity, and so on. Or Harley Davidson.
TPS is a JIT system that continuously improves to have no waste of any form (not just inventory)
A truly lean system is a waste free system
Getting beyond terms They key to Lean / JIT / TPS tends to be
behaviors as opposed to names. Lean is both a philosophy and a tool box.
Even if there are tools that don’t work in your setting – others will
For instance JIT production with no inventory– requires steady demand patterns – generally of standardized goods. This is not going to work in a job shop – which
are bound to have WIP. Yet preventive maintenance works in all settings.
Key elements of a lean system
Continuously improve to reduce waste. The ultimate production system from the
Toyota perspective is one with the minimal amount of resources needed for production available at all times. Extra resources are a cost To few resources stop production Does not mean no inventory (or other buffers) – it
means the lowest amount possible All forms of waste – capacity, skills,
redundant tasks, and so on. Don’t fixate on the inventory
Other elements of lean Workforce commitment and involvement –
the people in the supply chain who know the most about key supply chain processes are the ones who perform them. Managers get this within their own company
and then drop the ball with suppliers Causes of non-conformance Payless shoes
Deming’s 85% rule and the supply chain Focus on customer – let customers define
value and waste.
More elements of lean
Zero defects – fixing defects is a form of waste – This is why “quality is free”. This is arguably even more important in
services with no ability to inventory. Think health care!
This is the part of lean thinking that Harley Davidson inexplicably misses.
Prevention verses abatement – don’t fix a problem if you can prevent it- this is absolutely critical – why?
Leaning out a supply chain
Removing buffers – many (most) chains have just in case buffers of inventory, capacity, and or time. Inventory is the one you are most familiar
with – rock metaphor ? Additional lead time is another buffer that is
often used to cover inefficiencies Just in case our project is late we schedule
slack – and then what happens? Excess capacity – this room, extra people
called in JIC we are busy and so on.
Reducing the number of suppliers
What does the number of suppliers per input have to do with being lean?
Are there sometimes good reasons to have more than one supplier for an input? Are you using the secondary supplier to mask a
problem?
Number used need not equal number who bid / are qualified
Reducing the number of activities in a chain
Redundant steps add waste and the opportunity for error This is one of the important reasons for
ERP, EDI and so on. Single entry of data Minimizing number of touches / steps.
WinCo and no back room Centralized purchasing Giving employees credit cards (huh – this is
decentralized)
More process / step reductions
Reduce movement - goods Cross docking is an obvious example Direct shipping
Reduce movement - services My recent course change proposal – that
was made better through IT Processing stuff at the social security
administration They may have more WIP than any organization
I know
The whole point of smart car
The smart production system is designed to reduce the total number of steps and significantly eliminate movement.
Similar to system being used by GM in Brazil
Pollution prevention verses abatement
In the 80’s the main focus of waste reduction was fixing quality problems- we worked at reducing variance in our processes.
In the 90’s the focus was on moving from variance free to waste free.
The next step for most organizations is redefining waste to include pollution.
What are environmental issues ?
I talk to lots of managers who claim they have no environmental issues because they don't have to deal with the EPA and or don’t release toxic chemicals.
OSU is a service but we have massive environmental concerns / impacts / costscosts Energy and water use – reductions go right to bottom
line Just beginning to monitor at the building level this year
Many MRO items –especially cleaning products are toxic Coastwode labs in the MU
Paper – we use and then dispose of incredible amounts of paper
E-waste – we invested in lots of technology to reduce paper use – now we have to dispose of the computers
OK- that is wasted resources- but pollution prevention ?
Interfaces case Louisiana Pacific Using less plastic and cardboard at
Earth2O GP and ink recovery GPS / GIS and fertilizing crops Risk reduction – whose name is on the
box? Services – go back a slide
Some of the empirical evidence
Pollution prevention pays – in general the publicly traded companies with the best environmental performance have better financial performance
Investing in EMS leads to higher operational performance
Small and family owned firms (in OR) who ignore these issues in strategic planning have lower economic performance than those who consider them.
To put this another way
Should you be paying a supplier to use more energy than they need?
Should you be paying a supplier to throw out a resource (this is what pollution is) ?
Should you be buying something toxic from a supplier that you may one day have to deal with?
Given the vagrancies of environmental regulation (some of which has been retroactive) do you want the risk?
Lean tools lead to prevention
Prevent quality defects Prevent waste of all types Preventative maintenance Prevent supplier failures Prevent employee failures Prevent pollution (some of it)
Does not lead to abatement – JIT organizations and environmental performance
Yet – lean chains are fragile?
A lean chain with a single supplier for most inputs and few if any buffers is: Efficient Effective Going to stop dead if there is a major
disruption Supplier goes out of business Ship sinks (or a container falls off a ship) And so on
A simple way to think about risk
Disruptions can usually be described along two dimensions: Frequency – from rare to frequent
Number of occurrences Impact – from minimal to catastrophic
Business impact
So what do we do?
Should buffers be reinserted?
Are the savings from being lean more than worth the occasional disruption? Last years snow storm
How do you mitigate risk?
Risk mitigation
One area of growing interest is risk of non-conformance due to financial conditions of the supplier – in many cases supplier selection now requires commercial credit reports as well Customer selection to mitigate risk at
Umpqua Bank
More risk mitigation
Know your own risks and the costs associated with them (nice place to simulate) Develop contingency plans for identified risks Know trade-offs associated with risks you have
decided are worth taking Create exception management systems – return to
reading one and the hurricane response Require key suppliers to:
Identify possible risks during calculations of total cost
Have a contingency plan for these risks
Even more mitigation
Buffers are the most common tool used Often for high frequency / low impact risks Would they be more appropriate for low
frequency high impact risks? A back-up generator at WinCo or in a Hospital
might get used once a year (capacity buffer)
Increased information flow / transparency is a risk reduction tool
A final thought on risk
Most companies are just starting to deal with this.
Many of them never really achieved lean supply chains- and are using this as an excuse to go back
The Lean leaders are not!
Conclusion
JIT / TPS / Lean – all about being waste free
Lean chains have the minimal amount of resources needed for production – but they usually have small strategic buffers WinCo example of back-up generating.
As a chain gets leaner it often becomes more fragile
Toyota case
Main goal- derive a solution to the seat problem Include recommendations for the short and
long term Consider
Use of TPS principals for this problem Root cause of defects Supplier’s role in causing / solving the
problem