Agenda

LEAN SUPPLY CHAIN MANAGEMENT

In tro d u c tio n s
SESSION Lean Definitions

Build and sustain lean culture in supply chain - History of Lean

management Practical approach to Lean - Supply Chain deployment

Deployment discussion
Wrap up and questions

Instructor: Dr. Nguyen Thi Duc Nguyen, SIM-HCMUT 1 Instructor: Dr. Nguyen Thi Duc Nguyen, SIM-HCMUT

Introductions Lean Definitions

• Why have a Chief Operating Officer of a Human Resource Consulting

Company speak on Lean and Supply Chain?

It is not Supply chain on a diet

Background

Principles created from desire to improve Manufacturing Operations

Finite ability to streamline operations It is not a stand alone process

• Systems
• Measure results

Continuous Improvement initiatives Requires a cultural change within most organizations

- Examples

Instructor: Dr. Nguyen Thi Duc Nguyen, SIM-HCMUT Instructor: Dr. Nguyen Thi Duc Nguyen, SIM-HCMUT

Instructor: Dr. Nguyen Thi Duc Nguyen 1

 Lean Definitions Traditional vs. Lean

Lean Traditional Perspective Lean Perspective

Production practice that considers the expenditure of resources for any

goal other than the creation of value for the end customer to be wasteful, ·Some defects are acceptable
and thus a target for elimination •Errors wi 11 be caught by inspect ors
·Defects are fixed later
·Higher quality = higher cost
·Suppliers are adversaries
Value ·Quality results from inspection
·Buy from lowest bidder
Any action or process that a customer would be willing to pay for ·Low quality is caused by people
·Quality is a function of the shop floor
·Quality is the responsibility of QC
·Management must discover problems
·Statistics constitute a complex tool
Create "More Value with Less Work"
·Defects are never acceptable
·Employees catch mistakes
·Defects are fixed now
·Higher quality = higher profits/lower costs
·Suppliers are trusted team members
•Quality built into the product/process
·Buy for quality/reliability
·Low quality is caused by poor process
management
·Quality is a function of all functions
·Quality is everyone's responsibility
·Employees discover problems
·Statistics can be used by anyone

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Instructor: Dr. Nguyen Thi Duc Nguyen, SIM-HCMUT Instructor: Dr. Nguyen Thi Duc Nguyen, SIM-HCMUT

Why deploy Lean ? History of Lean - Summary

Base year Base +5 % improvement

Inventory Turns 15 50 333 • Foundation built in United States in early 1900's
On-time ship % 97 99.99 3
Customer order ship time 8 4 50 • After world war II concepts expanded in Japan - Toyota
Sales Base$ Base X2$ 100
• Industrial Revolution in United States masked impending quality and cost Tsunami
Defects (PPM) so 2 96
Data entry (hrs/week) y .25y 75
PO release Hours 1Min 99 • 1980's saw the rebirth of the United States quality programs
Mat'I Mgt work week (hrs) 60+ 40+ 33
• Late 1990's early 2000's began Holistic movement of quality to back office
operations

Automotive manufacturing company results from a 5 year period • Key concept:

Lean is focused on getting the RIGHT things to the RIGHT place at the RIGHT time in the RIGHT
quantity - while minimizing waste and implementing continuous improvement
By focusing on the Value Proposition your organization has to offer in the
marketplace, the reward is virtually unlimited

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Instructor: Dr. Nguyen Thi Duc Nguyen, SIM-HCMUT Instructor: Dr. Nguyen Thi Duc Nguyen, SIM-HCMUT

Instructor: Dr. Nguyen Thi Duc Nguyen 2

 Lean & Supply Chain：Key Tenet Types of Waste Defined

• Muri
• Unreasonable work management imposes on people and machines
• Key Tenet of Lean is Elimination of Waste • Ask for higher performance than person or machine can achieve with out
taking shortcuts
• Usual cause of variations in product qua lity and output
• To eliminate - Must first understand • Focuses on the preparation and planning of the process -what work can be
avoided by design

• Shigeo Shingo noted • Mura

• Only the last turn of the bolt tightens it - the rest is just • Focus on implementation of work design
• Eliminat ion of fluct uat ions at scheduling or ope rat ions level - i.e. qualit y or
movement volume

• Toyota defined 3 types of waste • Muda

• Results of the design and implementation of the process (Muri & Mura)
- Muri • Managements role to investigate causes of variations caused by Muri and
- Mura Mura
• Feedback to the Muri
- Muda 16 17
Instructor: Dr. Nguyen Thi Duc Nguyen, SIM-HCMUT Instructor: Dr. Nguyen Thi Duc Nguyen, SIM-HCMUT

Typical Example Waste Elimination

• Quarter end•
"make the numbers" edict comes out Three underlying Waste Elimination methods
Demand is increased to make plan (Mura)
System is stressed causing extra capacity to be squeezed from the process
• Standards relaxed
• Short-cuts taken
• Pull Scheduling
Make what the customer is buying today
Muri -- Focus on shipping product at all cost - leading to downtime, mistakes,
wait ing, rework - Wast e

Leads to Muda • Takt time

• Transportation (Moving products not required to perform the process)
• Inventory (not all WIP being processed)
• Motion (excess movement of people and materials)
• Waiting (Queue times extend)
• Overproduction ( build to stock)
• Over Processing ( equipment & process not geared for increased volume)
• Defects (Increase in rework and inspection)
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Instructor: Dr. Nguyen Thi Duc Nguyen, SIM-HCMUT
Change processes to run at rate which output is required
• Flow Production
Rearrange processes to eliminate batch processing
Strive for most efficient way to process one (1)
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Instructor: Dr. Nguyen Thi Duc Nguyen, SIM-HCMUT

Instructor: Dr. Nguyen Thi Duc Nguyen 3

 Best In Class Misperception Focus shift

• Best in Class Companies

- 96% of orders delivered to customers complete and on

time
-- 96% of orders received from suppliers complete and on
time
- Decreased by 3% total landed costs per unit in past year
- Decreased by 3% supply chain execut ion cost relat ive t o
revenue

Instructor: Dr. Nguyen Thi Duc Nguyen, SIM-HCMUT Instructor: Dr. Nguyen Thi Duc Nguyen, SIM-HCMUT

Guiding Principles For Implementation 5 Guiding Principle

s
Stepping back -- Why are we interested in Lean Supply Chain?

1. Value
• In business to maximize profits by selling what the customer wants
• Everything that a company does must add value
• Timely- Accurate - Meaningful -Actionable information • Every activity must be aligned or changed or
eliminated
• Set in marketplace •
• How do we do that? -- 5 Principles • Not cost plus markup to get selling price
1. Value • i.e. Postal Service vs FedEx
2. Value Stream
3. Flow
4. Pull
5. Perfection
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Instructor: Dr. Nguyen Thi Duc Nguyen, SIM-HCMUT Instructor: Dr. Nguyen Thi Duc Nguyen, SIM-HCMUT

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 5 Guiding Principles. 5 Guiding Principles..
2. Value Stream
• All items from raw materials to customer delivery
4. Pull
• Determined at Product/Service design
• Traditional ERP systems (Push) build to forecast (Inventory build)
• Includes Invoicing - field service -etc....
• Only build what Customers want - (small inventory)
• When Lean is implemented - traditionally this is where folks begin
• Dynamic re-assignment of personnel to other tasks not related to
building products
3. Flow • Will require change to performance benchmarks
• Products & Information should flow from inception to completion - Efficiency & Utilization become obsolete terms
with no stops - One of the quickest ways to "Kill" a lean implementation
• Prime example of non continuous flow - leaf floating down a • All downstream processes are driven by upstream demand
mountain stream
• One Piece Flow
• Control systems must be updated when moving from Job-shop
(batch) to flow-i.e. no longer have materials sitting in queues •
no standard lot sizes -etc.... 24 25
Instructor: Dr. Nguyen Thi Duc Nguyen, SIM-HCMUT Instructor: Dr. Nguyen Thi Duc Nguyen, SIM-HCMUT

5 Guiding Principles.. How do we do it?

• Starts with the product and/or service being offered

5. Perfection
• People are the foundation - Empowered employee program must be
• Perfect quality underway
- No inventory buffers- can't afford defects
• 5s methodology in-place
- Quality programs and Lean Programs go hand-in-hand
• Sort
- Not just physical product quality - but right product at right place at • Set in Order
right time (subassemblies) • Shine
- Toyota Tundra plant - door glass example • Standardize
• Continuous improvement • Sustain
- Goes beyond the shop floor • Just in Time manufacturing based only on customer demand
- Focus on driving waste out of the "system" • Quality designed into product and processes -not inspected in
• Suppliers included in design process
• Visual performance tracking
• Continuous improvement
• Cells vs traditional work centers
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Instructor: Dr. Nguyen Thi Duc Nguyen, SIM-HCMUT Instructor: Dr. Nguyen Thi Duc Nguyen, SIM-HCMUT

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 Some Common Misconceptions
Regarding Lean Analyze the work flow

• It is a management program to lay off workers

• It is a management ploy to bust the union

• It is a management ploy to make workers work harder for

same pay

• Management will lose control of the operation

• It is to difficult to put in

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Instructor: Dr. Nguyen Thi Duc Nguyen, SIM-HCMUT Instructor: Dr. Nguyen Thi Duc Nguyen, SIM-HCMUT

Redesig the Deploying Lea

n workplace/process n
• I've captured the low hanging fruit - now what?

• The vision is to dr ive down transact ion processing cost s, while driving the work
towards more value added analysis

• Reduce overproduction with end goal to eliminate it

• High setup costs
• Making the numbers
• Poor quality - high scrap rates
• "Clean the plate" mentality
3rdFloor I
3rdFloor
- - - - 3rd Floor • Everything is running well - hate to stop
• Work to drive production cycle times to match customer consumption
• Make versus Buy analysis on every component
• Attempt to Continuous flow everything
• Be selective in areas where inventory buffers are created
Measure & Refine Metrics • Tie customer trigger to pacing manufacturing item
• Educate the customers on your activities to help normalize demands
• Educate your suppliers to reduce variations and minimize outages

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Instructor: Dr. Nguyen Thi Duc Nguyen, SIM-HCMUT Instructor: Dr. Nguyen Thi Duc Nguyen, SIM-HCMUT

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 Post Deployment Discussion Post Deployment Discussion

• Continuous process - does not end

• Remember why you are in business
• To make a profit
• Lean implementations tend to become self serving

• Tools are a means to the end -not the end

• Over measurement - not every variable is important
• Be Patient • Tendency to take tools beyond their practical application
Earth wasn't made in a day • i.e. value stream mapping good at flows, but poor in metrics

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Instructor: Dr. Nguyen Thi Duc Nguyen, SIM-HCMUT Instructor: Dr. Nguyen Thi Duc Nguyen, SIM-HCMUT

Post Deployment Discussion Deployment Discussion

Things to consider
• Have we communicated to all involved parties? - are they committed?
• Management Techniques • Senior Management
• Board of Directors
• Shareholders
• Employees
- Cultural change - employees must pull change not
• Unions
management push • Banks/financial institutions/Investment community
Train the management team - then the employees • Auditors
• Suppliers
- Get buy in at mid management level - hardest for them to • Customers
give up authority • Do we have a clear vision of why we want to implement Lean? --"program
- Practice what you preach of the day"
• Who is going to lead down in the trenches?
• Where and how much help will we need?
• Are we in it for the long haul?
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Instructor: Dr. Nguyen Thi Duc Nguyen, SIM-HCMUT Instructor: Dr. Nguyen Thi Duc Nguyen, SIM-HCMUT

Instructor: Dr. Nguyen Thi Duc Nguyen 7

 Wrap up

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Instructor: Dr. Nguyen Thi Duc Nguyen 8