Materials Management Implementation Process Marek Piatkowski December 2010 1
Materials Management Strategy the Big Picture 1 Major Steps Create a Materials Management Organization Key Points Responsible for ALL aspects of Materials Management: Purchasing, Material Handling, Logistics, Production Control Reasons To centralize control of all aspects of materials management, flow, deliveries, logistics, storage and inventories. To clearly understand who is responsible for what 2 Develop an Implementation Plan for Materials Management Strategy - "The Big Picture" Identify Materials Management project boundaries Establish clear and measurable targets and objectives Create a Current State Value Stream map Identify material flow "Loops" Identify areas for improvement Create a Future State Value Stream map Each Company has their own individual Business needs and problems related to Materials Management. Identify these needs and prioritize them. The Implementation Plan must provided solutions to these needs and priorities. Focus in "fixing problems", not just implementing Materials Management Strategy. 3 Implement Materials Flow for each Loop Create a Current State Value Stream map for each Loop Establish clear and measurable targets and objectives The Current state Value Stream map will allow you to identify all delivery and material flow Loops. (Repeat this process for each Material Flow Loop identified in Step 2) Identify areas for improvement for each Loop Create a Future State Value Stream map for each Loop Create PFEP - Plan for Every Part, for each Loop Design and build Supermarkets and Mini-Markets Here are examples of some Material Loops: Supplier to Customer, Warehouse to the Work Cell, Finished Goods to Customer, etc There is a lot to do and you will be overwhelmed by a size of this project. If you focus on one Loop at a time you will get things done lot sooner. Design and build Parts Presentation and Delivery points Design and implement delivery routes Implement delivery pull signals 4 Maintain and sustain the New System Audit process frequently Manage the Inventory and the new process Change is difficult. People have a tendency to go back to their old way of doing things. You must stop that. It will take about three months to accept the "new" way of managing materials. 2
Supplier Pull and Purchased Parts Supermarket Part I Major Steps 1 Establish clear and measurable targets and objectives for the Supplier Pull 2 Create Product Family Matrix for all Purchased Parts - delivery loops from Suppliers to the Warehouse Key Points Quality (100% good quality) Delivery (100% on time, zero shortages) Costs (Inventory levels and operating costs) Frequency of deliveries and ordering process Lot sizes and standard packs Performance expectations Group parts by Suppliers or supplier types Identify product types by your own processes Major volumes in pieces per day or per month Major costs in $ - A B C product analysis Reasons Quality, delivery and costs are key performance indicators. You must create clear expectations with your Suppliers to avoid issues and minimize problems in the future. Many Suppliers like to deliver big lots once per moth. We have to reverse this thinking. Smaller lots, frequent deliveries and standard packs are keys to control your inventories You might have several Suppliers for the same product line Different Product Families will require different storage, handling and delivery methods. 3 Create PFEP (Plan for Every Part) data base for all Purchased Parts (Raw Material) Identify Runners, Repeaters or Strangers Major issues and problems Assign responsibility for the PFEP data base Start populating the PFEP data base Identify min/max inventory levels 5 day inventory count is a good start You want to make sure that your "money makers" - products class A are always available. But any shortage will stop the line. You need to have one (single) data base for all purchased parts. You will find that there are many versions of this data base. Every department (Purchasing, Engineering, Sales, Production, ) have their own lists of these products. Identify obsolete and active components This is your chance to clean up this data base 4 Create a Current State Value Family - delivery loops from Suppliers to the Warehouse Role of Takt Time or Cycle Times How is the material ordered? How frequently? Show lead times How is material delivered? Show how material is stored in the Warehouse How much material is stored. Is it enough? Who is responsible for the delivery of material You will discover that nobody really has a clear picture how each part is processed and delivered. You need to document this. Do not forget to include any outside secondary processes. For example: assembly, cleaning, painting, plating, etc Group parts in the Warehouse by either Suppliers or product families or production lines. All these are acceptable options. 3
Supplier Pull and Purchased Parts Supermarket Part II Major Steps Key Points Reasons 5 Identify areas for improvement for each Supplier and Product Family Frequency of deliveries and schedules More frequent deliveries less inventory Delivery methods, boxes, containers, etc Costs (Inventory levels) Eliminate obsolete parts One order one container one Kanban Keep only Runners and Repeaters Analyze if returnable containers are an option Minimum re-order quantities and Lead times Line ready containers and standard pack. Try to create 3 types of containers - small, medium and large. 6 Create a Future State Value Family - delivery loops from Suppliers to the Supermarket 7 Create Supplier Pull 8 Design and build Purchase Parts (Raw Material) Supermarkets Explain the benefits of the future state map Identify areas to implement the pull system Design a new Supplier Pull Introduce Supplier Kanbans Design and implement Supplier Kanban Suppler deliveries - frequency and methods Design and build Supplier "Receiving Board" Create work instructions and conduct training Assign responsibility for the Supermarket Design fixed and variable locations Location addresses and supermarket layout Shelf labels (with Bar Code) and clear identification of min/max levels If you design the new process and get an agreement for your Supplier you will minimize the number of problems in the future Work out every single details. Make sure that you identify roles and responsibilities. This should be part of your contract. Pallet Master label - you need to know if the parts were received, entered into the system and stored in designated location. For every part we must have a clear signal for the Supplier - when to order, how many and when they should delivered. From the very beginning of the implementation process you need to assigned the ownership of the Supermarket. This individual will not be only in charge of the design phase of the Supermarket, but will be responsible for the day-to-day operation after the implementation. Standard pack quantities Visual management is a key "Line Ready" containers - re-pack or not Start moving and purging the inventory Fixed Locations ("Shopping Level" must be easy accessible for the "Milk Runner". 9 Manage the Inventory and the new process - maintain and sustain the New Organization Develop and start performing System Audit You need a person responsible for Information flow (Inventory Analyst) and Material storage and flow (Supermarket Supervisor). Use the new System to start reducing inventories The system was designed to reduce inventories. 4
Production Pull and Finished Goods Supermarket Part I Major Steps Key Points Reasons 1 Review Customer targets and expectations for the Finished Goods deliveries. 2 Create Product Family Matrix for all Finished Goods products - delivery loops from the Warehouse to Customers Quality (100% good quality) Delivery (100% on time, zero shortages) Costs (Inventory levels and operating costs) Frequency of deliveries and ordering process Lot sizes and standard packs Performance expectations Group parts by Customer or Customer types Identify product types by your own processes Major volumes in pieces per day or per month Major costs in $ - A B C product analysis Quality, delivery and costs are key performance indicators. You must meet Customer expectations to avoid issues and minimize problems in the future. Define Finished Goods policy and get an approval from your Customers. You might have several Customers for the same product line Different Product Families will require different storage, handling and delivery methods. 3 Create PFEP (Plan for Every Part) data base for all Finished Goods products. Identify Runners, Repeaters or Strangers Major issues and problems Assign responsibility for the PFEP data base Start populating the PFEP data base Identify min/max inventory levels 5 day inventory count is a good start You want to make sure that your key products are always available. But any shortage will create a problem with your Customer. You need to have one (single) data base for all finished goods. You will find that there are many versions of this data base. Every department (Purchasing, Engineering, Sales, Production, ) have their own lists of these products. Identify obsolete and active components This is your chance to clean up this data base 4 Create a Current State Value Family - delivery loops from the Warehouse to Customer Role of Takt Time or Cycle Times How is the material ordered? How frequently? Show lead times How is material delivered? Show how material is stored in the Warehouse How much material is stored. Is it enough? Who is responsible for the delivery of material You will discover that nobody really has a clear picture how each part is processed and delivered. You need to document this. Do not forget to include any outside secondary processes. For example: assembly, cleaning, painting, plating, etc Group parts in the Warehouse by either Customers or product families or production lines. All these are acceptable options. 5
Production Pull and Finished Goods Supermarket Part II Major Steps Key Points Reasons 5 Identify areas for improvement for each Customer and Product Family Frequency of deliveries and schedules More frequent deliveries less inventory Delivery methods, boxes, containers, etc Costs (Inventory levels) Line ready containers and standard pack. Try to create 3 types of containers - small, medium and large. Eliminate obsolete parts One order one container one Kanban Keep only Runners and Repeaters Analyze if returnable containers are an option Create pre-staging area for shipping To identify any potential shortages 6 Create a Future State Value Explain the benefits of the future state map If you design the new process and get an agreement for your Customer you will minimize Family - delivery loops from Identify areas to implement the pull system the number of problems in the future the Supermarket to Customer. Design a new Customer Pull system Work out every single details. Make sure that you identify roles and responsibilities. This Introduce Production Kanbans should be part of your contract. 7 Create Customer Pull System Design and implement Production Kanban system Shipping label can be used as a Production Kanban Customer deliveries - frequency and methods Design and build Supplier "Shipping Board" Create work instructions and conduct training Produce only what is needed and when it is needed 8 Design and build Finished Goods Supermarket Assign responsibility for the Supermarket Design fixed and variable locations Location addresses and supermarket layout Shelf labels (with Bar Code) and clear identification of min/max levels From the very beginning of the implementation process you need to assigned the ownership of the Supermarket. This individual will not be only in charge of the design phase of the Supermarket, but will be responsible for the day-to-day operation after the implementation. Standard pack quantities Visual management is a key "Shipment Ready" containers - re-pack or not Start moving and purging the inventory Fixed Locations ("Shopping Level" must be easy accessible for the "Milk Runner". 9 Manage the Inventory and the new process - maintain and sustain the New Organization Develop and start performing System Audit You need a person responsible for Information flow (Inventory Analyst) and Material storage and flow (Supermarket Supervisor). Use the new System to start reducing inventories The system was designed to reduce inventories. 6
Lean Transformation Solutions Marek Piatkowski F.S.P. Consulting Inc. VM: 416-235-2631 Cell: 248-207-0416 Marek.Piatkowski@rogers.com www.twi-network.com 7