Logistics Strategy Leagile Thinking

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1 Logistics Strategy Leagile Thinking Kate Hughes & John Whiteley 1 Managing the Lead Time Frontier Time is a simple measure By following the flow through a process we can see where is lost. data can be translated into reduction and cost reduction opportunities can be use to measure the performance of a process within a company. can be use to measure supply pipeline performance. P- and D- are used to understand SC performance P- P- is the total it takes for a product to go through a pipeline: including procurement, manufacturing, and distribution lead. This measure starts when the order is made and includes all the needed to take a product/service (from make to delivery). The starting point is important for comparison with competitors and is when the order is raised. The needed to produce a batch of products will include the required to procure the longest lead parts and the manufacturing. The end of the process is the order fulfilment / order received by the customer. 3 1

2 D- D- is the a customer is willing to wait to have their demand fulfilled. depends on circumstances; e.g., a luxury hotel, the local MacDonalds, and a Ford car results differing customer expectations of D-. should be measured for each separate product group, as each have specific internal processes AND should be measured for each different market segment, as each have different needs and different s they are prepared to wait. P and D s should be mapped to see if there is a lead gap. 4 The Lead Time Gap This company is unable to make to order as the P- is longer than the D- procurement Manufacturing delivery Logistics Lead Time P- Customer s order cycle Order fulfilment D- Lead- gap 5 Time based mapping The methods we use to measure in a supply network In Supply Chain Mapping we track one actual process, or person, or order through the entire process with respect to. We create a process map, utilising the symbols for transport, storage, operation, inspection, delay. There are 6 stages of development to create SC mapping 6

3 Time based mapping The first 4 stages Stage 1: Create a task force - for all key functions Stage : Select the process to map organisational buy-in and generic set of customers. Stage 3: Collect data - walking the process with the interviewee and setting the level of detail Stage 4: Flow Chart the Process 7 Time Based mapping Stage 5: Distinguish between value adding and non-value adding activities Value added may be defined as: the processes physically changing the nature of the customers product. the change to the product that produces something that the customer values & may be willing to pay for Whether the process is right first Non-value added activity can be split into 4 categories: delay, transport, storage, and inspection. 8 Time Based Mapping Stage 6: Construct the based process map Use a Gantt chartto gain visibility of the process. Different categories of non value-adding can be represented on this. - See figure 5.4 Time Scale Business Processes Consumer Delivery Time Scale Managemen t indecision Managemen t indecision Time Scale Value adding Value adding Time Scale Queue Queue Time Scale Rework Rework Process activity mapping and sources of waste P.14 Van Hoek & Harrison This is the preparation reading for this Workshop Productio n Goods in 9 3

4 Example of Gantt Chart Time Consumer Delivery Management indecision Value adding Queue Rework Production Management indecision Value adding Queue Rework Goods in 10 The Electro-Coatings Ltd case study demonstrates the application of based mapping methods. Figures 5. to 5.9, pages , Van Hoek, Harrison Create a flow diagram form to show the linkages and dependencies between steps. This can be created from the interviews and data from walking the process. see figure 5.5 Walk the process 1 steps for Electro C. Ltd P.143 Van Hoek & Harrison goods in Book job in Job set up degrease etch plate Heat treat polish inspect Book out Figure 5.5 the walk through process shows the 1 key process steps in the companies internal supply chain. pack dispatch 11 Time Based mapping Stage 6 cont. Construct the based process map Figure 5.6 Identify every process step map out each process in detail Goods in Take goods of lorry Put goods on goods counter Sign for goods Give goods a work order no. Write out route card Move goods to inspection goods in shelf Book job in Give job a job card Put route card into progress rack Move job to awaiting processing shelf Identify every process step Job Set up Plan who will do the job Move job on to shop floor Sign off job card Go to jig store Check jigging Clean jigging 1 4

5 Table 5.3 p.145 Van Hoek & Harrison. Summarises the total for each of the 1 key processes. then divides this into nonvalue added wasted and value added activity. Total is shown on a cumulative basis. Time Based mapping Stage 6 cont. Construct the based process map Time-based analysis data Time-based Analysis Data Time (hours) Wasted (hours) Activity (hours) Goods in Book job in Job set up degrease Etch & plate Heat treat Polish Inspect Book out Pack Dispatch Time Based mapping Stage 6 cont. Construct the based process map Time-based process map Shows the results of the Time based data analysis against total elapsed in hours Goods in Book job in Job set up degrease Etch & plate Heat treat polish inspect Book out pack dispatch Elapsed hours 0 0 Activity Wasted Wasted Figure 5.7 page 145 Van Hoek, Harrison Time Based mapping Stage 6 cont. Construct the based process map Cause and effect fishbone diagram (Figure 5.8, page 146 Van Hoek, Harrison) Used in a brainstorming session by Electro coatings to identify non value added and the effect on people. Machines, material, & methods. people Limited no. of people who can do job one person to pack orders Vat space Lack of communication machines Shortage of jigs Dirty jigs Non value added Time (the effect) Jobs late into factory Poor material from customer material Solution control inspection methods Custom & practice rework 15 5

6 Time based process map re-engineered The based process map has been re-engineered to incorporate the groups suggestions and result in a reduction of non-value added wasted of over 30 hours or a reduction of nearly 50% in the process. A number of operations methods can be used to generate solutions Goods in Book job in Job set up degrease Etch & plate Heat treat polish inspect Book out Jobs quickly dealt with Jobs booked in at goods in Operators multi skilled to pick up any job 4 basic set of opertations No separate inspection; operators self inspect Activity Wasted pack dispatch Elapsed hours (figure 5.9 page 146 Van Hoek, Harrison) 16 Practices to cope when P- is greater than D- Control by optimising throughput and improving process capability. Simplify by untangling the process flows and reducing product complexity. Compress by straightening process flows and reducing batch sizes. Integrate by improving communications and implementing teams. Co-ordinate by adding customer-specific parts as late as possible. Automate with robots and IT systems 17 Principles of Lean Thinking The principles of lean thinking and how they can be applied to removing waste out of supply chains. The term has grown out of the Japanese principles of Muda that originated in the manufacturing sectors with the Toyota Production System 18 6

7 Principles of Lean Thinking Muda Specify Value Muda Let customer Pull Perfection Identify the value stream Muda Create product flow Muda 19 Principles of Lean Thinking The four principles of lean thinking as described by Womack and Jones, Lean Thinking, 1996; Specify value, - primary & secondary support (transforming & distribution) identify the value stream, - identify the processes- based mapping make the value flow, - JIT- minimise delay, inventories, defects, down pull scheduling,- respond to customer orders not forecasts & make to order The role of these four principles, in the achievement of the fifth principle, described, as perfection should be addressed. 0 Concepts of the Seven Wastes Overproduction: making or delivering too early Waiting: shows up as operators, & customers waiting for the product / service Transporting: placing processes as close together as possible Inappropriate Processing: process incapable of meeting quality standards Unnecessary Inventory: hides problems, increases lead s and space requirements Unnecessary Motions: walking between processes, transferring materials Defects: producing defects cost and money the aim is prevention not detection 1 7

8 Lean Thinking and its Application Businesses schedule backwards from the customer; The key processes to address Order to production, respond to a make to order (MTO) throughout SC product development Order to replenishment, replace only what has been sold Utilise the methods of analysis used in lean thinking; Time based measures of lead. Value adding to reveal incidences of waste Application of quality control methods to identify root causes /develop solutions The end goals of lean thinking methods of analysis should be described; Minimise defects, Minimise down Maximise simplicity and visibility Small batch change over: Lean Practices and Organisational Practices large batches fail to consider cost of inventory small batches are more flexible & responsive to exact demand requirements small batches remove the cost of over production priority to specific demand help to deliver within expected lead s (D) Rapid change over : SMED - single minute exchange of dies - Toyota down to 5 minutes for changeover s for tools for large pressed units. Rapid changeovers allows a batches of different body panels to be produced each day in line with current demand instead of forecasting Small Batch Production: associated with rapid changeover allows productivity to be maintained by 3 taking advantage of economies of scope instead of economies of scale Lean Product and Facility Design Products can be designed with a number of lead attributes; reduction of parts and materials from which they are made. Features that aid assembly- parts can only be assembled in one way common core parts modular design that allow for easy upgrades over PLC Facilities for production and delivery should be designed with lead attributes Modular design of equipment for easy M&R. Modular design of layout for easy team assembly & dispersal Small portable machines which can be moved to meet demand for them. Open systems architectures for equipment that allows for easy fits and connectivity between machines when they are moved. 4 8

9 Managing the lead frontier, P & D, the lead gap. How to measure & implement based strategies Time based mapping How to construct a based process map Practices to cope when P- is greater than D- The principles of lean thinking The seven wastes Summary: Logistics Strategy Lean Thinking What is lean thinking and its application to logistics? Lean Practices, organisational practices, lean product & facility design 5 Agile Supply Chains Agility is a supply chain capability that aligns organisational structures, information systems, logistics processes and mindsets. Applicable where demand is volatile and customer requirement variety is high. Grew out of flexible manufacturing systems (FMS), hybrid automated rapid change over/reduced set up s providing greater responsiveness to changes in product mix/volume. Definitions Agility means using market knowledge and a responsive supply network to exploit profitable opportunities in a volatile marketplace. Lean means developing a value stream to eliminate all waste including, and to enable a level schedule. 6 Market winners- market qualifiers matrix for agile versus lean The connection between the concepts of qualifiers and winners and lean and agile is critical. Agile Supply 1.quality cost 3 lead 1. Service level customer value Lean Supply 1. lead service level 1 cost quality Market qualifiers Market winners 7 9

10 Market Qualifiers and Winners for Lean and Agile SC s At its simplest the lean paradigm is most powerful when the winning criteria are cost and quality. However, when service and customer value enhancement are the main order winners, then it is likely that agility will become the critical dimension An example of the transition from lean to agile supply chain factors as market winners is demonstrated in example by Van Hoek and Harrison p. 168 Table 7.1 summary of the transition in the personal computer supply chain from product driven to customer driven operations 8 Comparison of lean supply with agile supply: the distinguishing attributes Lean supply chains: Agile supply chains: Typical Products commodities fashion goods Market Place Demand predictable volatile Product Variety low high Product Life Cycle long short Customer Drivers cost availability Profit Margin low high Dominant Costs physical costs marketability costs Stock-out Penalties long-term contractual immediate/volatile Purchasing Policy buy materials assign capacity Information Enrichment highly desirable obligatory Forecasting Mechanism algorithmic consultative In the volatile unpredictable marketplace for fashion goods both stock-out and obsolescence cost are punitive (Nike). Consequently, purchasing priorities change from placing orders upstream for products that move in a regular flow (lean supply chains) to assigning capacity so that products can be made rapidly to meet demand that is difficult to forecast (agile supply chains) 9 Practical ways to combine lean and agile mind-sets : Pareto distribution affects strategy Pareto Curve Approach: 80% inventory predictable in 0% of products, lends to lean principles of manufacturing and distribution. 80% of products accounting for 0% of inventory is less easy to predict and require a more agile mode of SCM. Make to forecast 80% of total demand manage inventory centrally seek economies of scale lean AGILE Make to order forecast for capacity execute to demand 0% of products 80% of products 30 10

11 Decoupling point approach: for product / material customisation, the concept of postponement. Up to the decoupling point lean methods can be utilised: forecasting at generic level, economic batch quantities, maximise efficiencies. From the decoupling point agile methods may be utilised: demand driven, localised configuration, maximise effectiveness. A parallel concept is for the information decoupling point to move further upstream to allow for maximisation of real information, basing supply upon real demand flows, as opposed to reorder points and quantities The decoupling point lean agile Forecast at generic level economic batch quantities maximise efficiencies Demand driven localised configuration maximise effectiveness Strategic inventory 31 Separation of Base and Surge Demands Base demand based on past history can utilise lean methods. Base demand may be met using low cost supply areas such as China. Surge demand is met using more flexible processes. Surge demand may be topped-up closer to the market, the higher cost being out weighed by product availability. Separation in space using separate production lines or factories. Separation in using slack periods to produce future base demand demand surge For base Smooth scheduling For surge Capacity usage base TIME 3 Integrated Approach to SC Design The following strategies could be applied in the following conditions: 1. Pareto curve: may be applied to conditions where there is a high level of variety and demand is non-proportionate across the range.. Decoupling point strategies: may be applied to conditions where there is a possibility of modular production or intermediate inventory; delayed final configuration or distribution. 3. Surge/base demand separation: may be applied where base level of demand can confidently be predicted from past experience and where local manufacturing, small batch capacity is available

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