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CHAPTER 13 LEAN and Sustainable Supply Chains Learning Objectives 1. 2. 3. 4. 5. 6. 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. What is Lean? Is it skinny? Is it less people? Is it working harder? Is it making less? What is Lean? What is Lean? Why no Sir! Lean is none of those things. Lean is an ever evolving philosophy based on proven principles and practices aimed at the elimination of wastes. What is Lean? Lean is a continuing process of change involving everyone in the organization. Designing processes for your business 1. 2. 3. 4. 5. Deliver exactly what the customer needs (defect free) Be able to deliver customized value to each individual customer Deliver on demand exactly as requested Respond immediately to problems or changes Have no waste LEAN in general Value chain: each step in the supply chain should create value Continued 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 Activity Understanding Value-Added Understanding Value-Added What would you be willing to pay for when ordering a hamburger? ___ Meat ___ Dough ___ Cost of radio, TV, web ads ___ Ketchup ___ Cost of delivery truck signs ___ Electricity to run ovens ___ Cost of store manager ___ Electricity to run outdoor lights left on accidentally ___ Cost of cleaning ___ Person paid to inspect takeout orders ___ Employee training ___ Cost of hamburgers not sold ___ Distribution Center ___ Cost of menus ___ Profit TOYOTA PRODUCTION SYSTEM The “4P” model PROBLEM SOLVING (Continuous Improvement And Learning) 1P 2P 3P 4P The “4P” model 1P PROCESS (Eliminate Waste) 2P 3P 4P The “4P” model 1P PEOPLE AND PARTNERS (Respect, Challenge, and Grow Them) 2P 3P 4p The “4P” model PHILOSOPHY 1P (Long-Term Thinking) 2P 3P 4P Understanding Waste Waste: anything that adds cost or time without adding value Understanding Waste Overproduction – producing work prior to it being required is waste and is the greatest of all the wastes • Producing reports no one reads or needs • Making extra copies • E-mailing, faxing same document • Entering repetitive information on documents • Ineffective meetings multiple Understanding Waste Waiting – for people, signatures, and information is waste. This is “low hanging fruit” which is easy to reach and ripe for the taking. • Excessive signatures or approvals • Dependency of others to complete tasks • Delays in receiving information • Computer program revision problems • Cross-departmental resource commitments • Not a priority for someone to complete Understanding Waste Motion - any movement of people, paper, electronic exchanges that does not add value is waste • Searching for computer files • Searching for documents in file cabinets • Repeatedly reviewing manuals for information • Hand carrying paper to another process • Cross-departmental resource commitments • Not a priority for someone to complete Understanding Waste Transport - affects the time of delivery of any work within an office • Delivering unneeded documents • Excessive filing of work documents • Over-addressed e-mail distribution lists • Hand-carrying paper to another process • Cross-departmental resource commitments • Mis-prioritization Understanding Waste Overprocessing - putting more work or effort into the work required by internal or external customers is waste • Duplicative reports or information • Repetitive data entry • Incorrect information being shared • Constantly revising documents • Ineffective meetings and no agendas • Duplicative documentation • Lack of accurate project planning Understanding Waste Inventory (Time) - work piles, excessive supplies, and excessive signature requirements are waste • Files awaiting signatures or approvals • Work awaiting task completion by others • Obsolete files • Obsolete office equipment • Not sufficient training of back-ups • Purchasing excessive office supplies. Understanding Waste Defects (or mistakes) - refers to all processing required creating a defect or mistake and the additional work required to correct it • Data entry errors • Pricing errors • Forwarding incomplete documentation • Incorrect information on document • Inefficient file system on PC or in cabinet • Not appropriate staffing to service customer Understanding Waste Underutilization of People - is a result of not placing people where they can (and will) use their knowledge, skills, and abilities to the fullest (8th Waste) • Project deadlines not being met. • Work loads not evenly balanced due to lack of cross-training • High absenteeism and turnover • Inadequate performance management system • Incomplete job skill assessment prior to hiring JIT PULL SYSTEM Minimizing Waste: Kanban Production Control Systems Once the Production kanban is received, the Machine Center produces a unit to replace the one taken by the Assembly Line people in the first place Machine Center Withdrawal kanban Storage Part A Production kanban The process begins by the Assembly Line people pulling Part A from Storage Storage Part A This puts the system back were it was before the item was pulled Assembly Line Material Flow Card (signal) Flow 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 The Number of Kanban Card Sets k Expected demand during lead time Safety stock Size of the container DL (1 S ) C k Number of kanban card sets (a set is a card) D Average number of units demanded over some time period L lead time to replenish an order (same units of time as demand) S Safety stock expressed as a percentage of demand during leadtime C Container size LO 2 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 Work Center 1 Work Center 2 Flag or signal marker Container with 2 parts (lot size = 2) Work Center 3 JIT ‘Pull’ System Simulation © 1997 Prentice-Hall, Inc. 11- 20 Lean Supply Chains Value stream: the value-adding and nonvalue-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 Lean procurement Able to respond to changes Lower prices Higher quality Key is automation (e-procurement) Suppliers must see into the customers’ operations and customers must see into their suppliers’ operation Lean warehousing LO 4 Eliminate non-value-added steps and waste in storage process Components of a Lean Focused Supply Chain Lean logistics Continued Optimized mode selection and pooling orders Combined multi-stop truckloads Optimized routing Cross docking Import/export transportation processes Backhaul minimization Lean customers LO 4 Understand their business needs Value speed and flexibility Establish effective partnerships with suppliers 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 ART of OBSERVATION “If you can't describe what you are doing as a process, you don't know what you're doing.” W. Edwards Deming Clip Manufacturing Process Map LO 5 Service Process Current Map SUPPLIERS INFORMATION FLOW PROCESS STEPS DATA COLLECTION CUSTOMERS Lean Implementation Requirements: Total Quality Control Worker responsibility Measure SQC Enforce compliance Fail-safe methods Automatic inspection Lean Implementation Requirements: Work with Vendors Reduce lead times Frequent deliveries Project usage requirements Quality expectations Any Questions?