LEAN MANUFACTURING IMPLEMENTATION -- Lean Supply Chain University of Michigan Manufacturing...

LEAN MANUFACTURING IMPLEMENTATION -- Lean Supply Chain

University of MichiganManufacturing Strategies IOE 425

October 18, 1999Ronald L. Turkett

2Lean Supply Chain Ronald L. Turkett

PorschePorsche

FordWorldwide

FPS

FordWorldwide

FPS

Why Lean Supply Chain?

GM 2 Plts. Europe

Saturn

GM 2 Plts. Europe

Saturn

Implementing Lean Production Enables Seamless Connectionwith Customers and Suppliers

NummiTPS

NummiTPS

PeugeotPeugeotBMWBMW

MercedesMercedes

ChryslerCOS

ChryslerCOS

RenaultRenault

ToyotaIndiana

ToyotaCambridge

ToyotaGeorgetown

SuppliersSuppliers


The Lean Supply Chain

Just in Time“The right part

at the right time in the right amount”

Preconditions• Continuous Flow

• Pull System• Takt Time

• Level Production

Best Quality - Lowest Cost - Shortest Lead TimeThrough Shortening the Production Flow By Eliminating Waste

“Built in Quality”

• Line Stop- Manual- Automate

• Error Proofing• Visual Control

Operational StabilityStandardized Work Robust Products & ProcessesTotal Productive Maintenance Supplier Involvement

Flexible, Capable,Highly Motivated

People


““Lean Vs.Traditional””

Half the hours of engineering effort Half the product development time Half the investment in machinery, tools and equipment Half the hours of human effort in the factory Half the defects in the finished product Half the factory space for the same output A tenth or less of in-process inventories

Source: The Machine that Changed the World, Womack, Jones, and Roos, 1990.


“Lean Vs Traditional”

99.9% Customer Schedule Attainment 15 PPM or Better 4-6 Inventory Days of Supply 92%+ Operational Availability Leveled, Sequenced Production Order to Customer Use - 4 1/2 Hours Functioning Supplier Partnership Strong Production Control Function

Examples: Tier 1 Suppliers: Johnson Controls Seating, Litens Automotive Partnership, Cadimex, Denso Manufacturing, Toyota Motor Corporation.


Principles of Cost Reduction: PROFIT = SALES PRICE - COST

ModernView

TraditionalView

ProfitProfit

Profit

Mfg.Mfg.CostCost

Mfg.Mfg.CostCost

Mfg.Mfg.CostCost

SalesPrice

SalesPrice

SALES

Profit

Profit

Profit

Mfg.Mfg.CostCost

Mfg.Mfg.CostCost

Mfg.Mfg.CostCost

SalesPrice

Changing Costing MethodsPrinciples of Cost Plus: SALES PRICE = COST+ PROFIT


Lean Supply - Global Purchasing Strategies

Common Strategy - Buy Cheapest in the world

- Support with dual sourcing

Toyota Strategy - Buy to achieve lowest total cost

- Buy in country where manufacturing

is performed

- Minimize Number of Suppliers

- Keep supply chain short as possible

- Toyota is as strong as its weakest supplier


Consequences of Cheapest Price

Long Distance Supply - Long lead times

- increases structural cost: people, travel, premium freight, packaging, obsolete material, scrap due to handling damage

Buying cheapest restricts buying from best supplier and achieving total lowest cost

VS.

Buying from best supplier, then get lowest cost


Consequences of Long Supply Chains

Long Value Streams Result in:

High Risk

- Quality Spills

- Availability of Supply

- Engineering Changes

High Cost

- Transportation (Premium and Standard)

- Engineering Support/Supplier Development

- Plant Overtime


Automotive Supply Chain

RetailCustomer

OEM Tier # 1 Tier # NOre in

Ground

Supply Chain = Value Chain

Objectives: Highest QualityLowest CostShortest Lead Time


TraditionalManufacturing

& Support Functions

Lean SupplyChain

Implemented

Full Benefits ofLean Supply Chain

Lean Enterprise Leap

Lean Enterprise Leap

Operations, P

C&L, Engr

Operations, P

C&L, Engr

Purchasing, Finance,

Purchasing, Finance,

Quality

Quality

World Class

The Lean Enterprise

Lean Supply Chains are not just a MaterialsManagement Effort


Automotive Customers

GM

Ford

Chrysler

Toyota

Honda

NUMMI

Saturn

Nissan

??

Which group drives lean supply chains?


Planning/Scheduling System Mechanics: Push Scheduling

PRODUCTION FLOW

Supplier Machining AssemblyCustomeCustomerr

Schedule

Schedule

ProductionProductionSchedulingScheduling

Schedule

Schedule Sch

ed

ule

Sch

ed

ule

Schedule

Schedule

All production operations receive same schedule

Reaction to Changes Occurs Only Weekly

Demand/Schedule Variance Causes


OEM Tier# 1

Tier# 2

Traditional Scheduling Systems1. Demand and schedule are usually different2. Noise increases moving down stream3. Affected most by changes in order quantity, delivery time and lead time

Schedule

Actual Demand

Typical Demand/Scheduling Model

06/07/98SME Lean Supply Chain

RawMaterial Machining Assembly

CustomerLeveled Production

Plan

Ship

Pull Schedule Assembly Schedule

Ship Ship

Pull Schedule

Lean Supply Chain - Pull Production System


OEM’s Lead Supply Chain Management Process

Process: Smoothing Production to Reduce Supply Chain Cost

O.E. Tier 1 Tier 2Ship

PullSignal

PullSignal

Ship

Leveled SequencedProduction

Leveled SequencedProduction

1. Smooth production build and communicate plan to suppliers2. Maintain daily production levels as planned (maintains smooth flow)3. Minimize parameter changes in system (lot size, quantity, & lead time)4. Convert from push scheduling to pull scheduling5. Maintain open communications with supplier - Provide Supplier access or view of actual demand

Action Steps-All Customers


Takt Time Vs. Cycle Time - An Important Distinction

Takt Time = Time (Available seconds per working day)Volume (Daily production requirement)

Cycle Time = Actual time required for a worker to

complete one cycle of his job process

Sets pace of production tomatch pace of sales.


Level Sequenced Production– producing a repeatable pattern by volume

and mix within each day of the monthly production plan

– Characterized by: a smoothed production plan over an

extended time every model made every day daily adjustment can be made a predictable production process

Implementing the Lean Supply Chain


Summary– Find the best supplier and engage early in the

design process– Partner with key suppliers that have high capability

for design and supply– Suppliers should be located in the country where

you build your product– Shorten the supply chain by having suppliers close,

frequent deliveries, and leveled production plans – Develop pull systems with suppliers– Know production capacity by comparing effective

cycle times with Takt times.

Implementing the Lean Supply Chain

LEAN MANUFACTURING IMPLEMENTATION -- Lean Supply Chain University of Michigan Manufacturing...

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