Intro to Supply Chain - Chapter 8 (LEAN)

LEAN History

- 1910s; Henry Ford's mass production line for the Model T (used continuous assembly and flow systems) - 1940s; Toyota Production System (TPS) (incorporated Ford's production system and other techniques to form the basis of LEAN) - 1988; The term LEAN was first coined by John Krafcik - 1990; Definition of LEAN is expanded in the book "The Machine that Changed the World"

LEAN elements incorporated into SCM

- Cross-training - Satisfying internal customer demand - Quickly moving products in the production system - Communicating demand forecasts and production schedules up the supply chain - Optimizing inventory levels across the supply chain - Channel integration = extending alliances to suppliers' suppliers and customers' customers

5.) Small Batch Scheduling

- Drives down costs by: 1. Reducing purchased, WIP, and finished goods inventories 2. Makes the firm more flexible to meet customer demand - Small Production batches are accomplished with the use of kanbans

a.) Pull Approach

- Each stage in the supply chain requests quantities needed from the previous stage - No excess inventory generated - Reduced inventory exposes problems

4.) Inventory and Setup Time Reduction

- Excess inventory is a waste - Reducing inventory levels can create production problems - Once problems are detected, they can be solved - The end result is a smoother running organization with less inventory investment

1.) Waste (Muda) Reaction

- Firms reduce costs and add value by eliminating waste from the productive system - Waste encompasses wait times, inventories, material and people movement, processing steps, variability, and any other non-value adding activity

LEAN...

- Is a culture - Provides value for customers through the use of the most efficient resources possible - Is a standard in many industries - Often results in large cost reductions, improved quality, and increased customer service

3.) LEAN Layouts

- Move people and materials when and where needed, and as soon as possible - Are very visual with operators at one processing center able to monitor work at another

LEAN Green Practices (Environment-Friendly)

- Reduce the cost of environmental management - Lead to improved environmental performance - Increase the possibility that firms will adopt more advanced environmental management

Results of Reducing Wastes:

- Reduced cycle times - Greater throughput - Better productivity - Improved quality - Reduced costs

2.) LEAN Supply Chain Relationships

- Suppliers and customers work to remove waste, reduce cost, and improve quality and customer service - JIT purchasing includes delivering smaller quantities, at right time, delivered to the right location, in the right quantities - Firms develop LEAN supply chain relationships with key customers.

3 elements of LEAN

1.) LEAN Manufacturing 2.) Total Quality Management 3.) Respect for People

Elements of LEAN Manufacturing

1.) Waste Reduction 2.) LEAN Supply Chain Relationships 3.) LEAN Layouts 4.) Inventory and Setup Time Reduction 5.) Small Batch Scheduling 6.) Continuous Improvement 7.) Workforce Empowerment

LEAN Manufacturing

A coordinated system producing the exact products desired, delivered in the right quantities, where need, and Just-in-Time (JIT) a.) The Pull System b.) Visual Signals c.) Small Lot Production d.) Uniform Plant Loading

Value Added Process

A process step that transforms or shapes a product or service which is eventually sold to a customer.

LEAN

An operating philosophy of waste reduction and value enhancement and was originally created as the Toyota Production System (TPS) by key Toyota executives.

b.) Visual Signals

Communication between workstations: - "kanban" = signal/card in Japanese - Contains information passed between stations - Authorizes production or the movement of materials to the next workstation

6.) Continuous Improvement

Continuous approach to reduce process, delivery, and quality problems, such as machine breakdown problems, setup problems, and internal quality problems

Role of Management

Create cultural change needed for LEAN to succeed: - Provide atmosphere of cooperation - Empower workers to take action based on their ideas - Develop incentive system for LEAN behaviors

The Eight Wastes ("DOWN TIME")

Defects = Anything that does not meet the acceptance criteria Overproduction = Production before it is needed, or in excess of customer requirements. Providing a service that is not needed Waiting = Elapsed time between processes when no work is being done Non-Utilized Talent = Underutilizing people's talents, skills, or knowledge. De-motivating the workforce by not asking for input or recognizing success. Transportation = Unnecessary movement of materials or products Inventory = Excess products or materials not being processed Motion = Unnecessary movement of people. Multiple hand-offs Extra-Processing = Unnecessary steps in a process. Redundancies between processes

Kanbans

Generate demand for parts at all stages of production creating a "pull" system

Push System (Traditional Approach)

Inventory is carried to cover up problems

Role of Supplier

LEAN builds long-term supplier relationships: - Partner with suppliers - Improve process quality - Information sharing - Goal is to have single-source suppliers

LEAN and Six Sigma complement each other;

LEAN focuses on eliminating wastes and improving efficiency while Six Sigma focuses on reducing defects and variations

7.) Workforce Commitment

Managers must support LEAN manufacturing by providing subordinates with the skills, tools, time, and other necessary resources to identify problems and implement solutions.

d.) Uniform Plant Loading

Problem before Uniform Plant Loading: - Demand exceeds capacity at points in the planning horizon. - Matching the production plan to follow demand exactly can contribute to inefficiency and waste. Uniform Plant Loading: - Planning up to capacity in earlier time periods to meet demand in later time periods. - Also called "front-loading" or "leveling" the plan - Production schedule is frozen in the up-front time period (e.g., month) - Helps suppliers better plan production

Non-Value Added Process

Process steps that take time, resources, or space, but do not add value to the product or service.

After Waste Removal

Processes are more streamlined, resulting in more satisfied customers

Before Waste Removal

Processes are often scattered, which negatively affect customers

Respect for People

Respect for all people must exist for an organization to be its best - Flatter hierarchy than traditional organizations - Ordinary workers given great responsibility - Supply chain members work together in cross functional teams ***Look at role of workers, management, and suppliers.

c.) Small Lot Production

Small amount of product produced at any one time: - Reduces inventory and excess processing - Increases flexibility - Responds to customer demands more quickly - Shortens manufacturing lead time - Setup time must be low

The Five S's

Sort = Keep only necessary items in the workplace Set in order = Arrange items to promote efficient workflow Shine = Clean the work area so it is neat and tidy Standardize = Set standards for a consistently organized workplace Sustain = Stick to the rules/Maintain review standards

Value

The inherent worth of a product as judged by the customer and reflected in its selling price and market demand - Anything for which the customer is willing to pay

Role of Workers

Workers perform different tasks and actively purse company goals: - Duties = improve production process, monitor quality, and correct quality problems - Work in teams = quality circles