LEAN VS AGILE SUPPLY CHAIN NETWORKS

Group No. 2

Animesh

Ankit Dubey

Devdeep Das

Prerna Gupta

Saurabh Sharma

Saurup Somwanshi

Debate

OUTLINE

1. Introduction to Lean Supply Chains2. What is a Lean Supply Chain?3. Components of Lean Supply Chains4. Benefits of Lean Supply Chains 5. Moving Toward a Lean Supply Chain6. Seven Steps for Building a Lean Supply Chain7. Critical Success Factors8. Summary

COMPONENTS

Lean Suppliers

Lean Procurement

Lean Manufacturing

Lean Warehousing

Lean Transportation

Lean Customers

LEAN WAREHOUSING

Warehousing waste can be found throughout the storage process including: Defective products which create returns Overproduction or over shipment of products Excess inventories that require additional space and reduce

warehousing efficiency Excess motion and handling Inefficiencies and unnecessary processing steps Transportation steps and distances Waiting for parts, materials and information Information processes

Each step in the warehousing process should be examined critically to see where unnecessary, repetitive, and non-value-added activities might be so that they may be eliminated.

LEAN TRANSPORTATION

Lean concepts in transportation include: Core carrier programs Improved transportation administrative processes and

automated functions Optimized mode selection and pooling orders Combined multi-stop truckloads Crossdocking Right sizing equipment Import/export transportation processes Inbound transportation and backhauls

The keys to accomplishing the concepts above include mapping the value stream, creating flow, reducing waste in processes, eliminating non-value-added activities and using pull processes.

COMPETITIVE WEAPON

• The synthesis enables even small firms to participate in the results of lean efforts

• Competitive advantage and leadership in the global marketplace can only be gained by applying lean principles to the supply chain

• These elements are required for success:▫ Thought▫ Commitment▫ Planning▫ Collaboration▫ Path Forward

A strong supply chain enables the member companies to align themselves with each other and to coordinate their continuous improvement efforts.

PATH FORWARDThe challenge is to bring all of these areas out of their traditional silos and make them work together to reduce waste and create flow.

Development

Quality

HR

Marketing

FinancePurchasing

Distribution

Reduce Waste &

Create Flow

SEVEN STEPS

Develop Systems Thinking Understand Customer Value Value Stream Mapping Benchmark Best Practices Design to Manage Demand Volatility Create Flow Performance Metrics

There are seven steps to developing lean supply chains.

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

Principles of Cost Reduction: PROFIT = SALES PRICE - COST

ModernView

TraditionalView

ProfitProfit

Profit

Mfg.Cost

Mfg.Cost

Mfg.Cost

SalesPrice

SalesPrice

SALES

Profit

Profit

Profit

Mfg.Cost

Mfg.Cost

Mfg.Cost

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

LEAN APPROACH AGILE APPROACH

Stock is held at multiple echelons, often based on organisational and legal ownership considerations

Stock is held at the fewest echelons, if at all, with finished goods sometimes being delivered direct from factory to customer

Replenishment is driven sequentially by transfers from one stocking echelon to another

Replenishment of all echelons is driven from actual sales/usage data collected at the customer interface

Production is planned by discrete organisational units with batch feeds between discrete systems.

Production is planned across functional boundaries from vendor to customer, through highly integrated systems, with minimum lead times

Majority of stock is fully finished goods, dispersed geographically, waiting to be sold.

Majority of stock is held as work in progress awaiting build/configuration instructions

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

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

Implementing the Lean Supply Chain

FORCES THAT LEAD TO DISINTEGRATION OF LEAN SUPPLY NETWORK

Globalization : globalization has led to extremely fragile supply chains.

Natural disasters, geopolitical turmoil, cyber security threats, and pandemics threaten ability of logistics providers to maintain a state of business continuity.

Greater Exposure to supply chain disruptions

Leaner inventories

More single sourcing

More outsourcing

Tightly meshed global communication

networks

Longer supply lines

Failure Mode Description

Disruption insupply

Delay or unavailability of materials from suppliers, leading to a shortage of inputs that could paralyze the activity of the company.

Disruption inTransportation

Delay or unavailability of the transportation infrastructure, leading to the impossibility to move goods, either inbound and outbound.

Disruption atFacilities

Delay or unavailability of plants, warehouses and office buildings, hampering the ability to continue operations.

Freight breaches Violation of the integrity of cargoes and products, leading to the loss or adulteration of goods (can be due either to theft or tampering with criminal purpose, e.g. smuggling weapons inside containers).

Disruption incommunications

Delay or unavailability of the information and communication infrastructure, either within or outside the company, leading to the inability to coordinate operations and execute transactions.

Disruption indemand

Delay or disruption downstream can lead to the loss of demand, temporarily or permanently, thus affecting all the companies upstream.

A US$400 million lightning bolt in Mexico (March 2000)

A lightning bolt sets fire to a Philips semiconductor manufacturing plant in Mexico which supplies Ericsson with vital components for its hand phones, setting the company back by an estimated US$400 million in lost sales.

Katrina strangles global supply chain (September 2005)

Hurricane Katrina hit the Gulf Coast of the US, affecting global oil supplies and spurring global business snares over food-related product availability and warehouse storage. Many logistic providers’ ability to meet schedules was completely thrown out for up to three weeks after the event.

STEPS TO OVERCOME DISRUPTIONS IN SUPPLY CHAIN NETWORKS

Build a resilient communication network Enterprise Resource Planning (ERP) Warehouse, Management Systems (WMS) Transport Management Systems (TMS).

Operational Strategy

Description Example(s)

Stockpile Inventory

Hold inventory that can be used to fill customer demand even if supply is interrupted.

In 2004, United Technologies Corporation temporarily increased its inventory buffer to protect against a potential supply disruption due to financial difficulties at a key supplier

Diversify Supply

Source product from multiplevendors/facilities so that a problem at one vendor/facility does not affect the entire supply.

Nokia’s multiple‐supplier strategy reduced the impact of the 2000 Philips Semiconductor disruption.Chiquita’s multiple grower‐location strategy reduced the impact of the 1998 Hurricane Mitch disruption.

Backup Supply Have an emergency supplier (or logistics provider) that is not normally used but that can be activated in the event of asupply problem.

Nokia responded to the Philips Semiconductor disruption by temporarily increasing production at alternative suppliers.New Balance responded to the 2002 west‐coast dock disruption by rerouting ships to the east coast andby air freighting supplies.

Manage Demand

Influence demand to better match the actual supply by, for example, adjusting prices or offering incentives to encourage customers to purchase products that are less supply‐constrained

Dell responded to the disruption in memory supply caused by the 1999 Taiwanese earthquake by shifting customer demand to lower‐memorycomputers.

Strengthen supply chain

Work with suppliers to reduce the frequency and/or severity of supply problems.

Unlike its competitor Xilinx, Altera does not source from multiple semiconductor foundries but works closely with its foundry partner (UMC) to minimize yield‐related supply disruptions.

INDUSTRIES SUITABLE FOR LEAN

The basic elements are waste elimination, continuous one piece workflow, and customer pull.

Every system contains waste, i.e. something that does not provide value to your customer. Whether you are producing a product, processing a material, or providing a service, there are elements which are considered 'waste

http://www.youtube.com/watch?feature=endscreen&v=oA_YSyBkhiM&NR=1

Lean supply chain management is for many companies. It is not just for manufacturers who practice lean management. It is also for non-manufacturers, wholesalers, distributors, retailers and others. 

WHAT MAKES IT CLICK

Exchange best practices with suppliers Source each component from two or three

vendors Commit to coprosperity with your suppliers Net-Inspect Solution.

EXAMPLE: ENGINE PARTS CASTINGSUPPLIER WORKED WITH CUSTOMER COMPANY TOACHIEVE SYNCHRONIZED FLOW

MAJOR LEAN LESSONS FOR AEROSPACE INDUSTRY Supply chain design linked to corporate strategic

thrust Fewer first-tier suppliers Greater supplier share of product content

Strategic supplier partnerships with selected suppliers Trust-based relationships; long-term mutual commitment Close communications; knowledge-sharing.

Self-enforcing agreements for continuous improvement Sharing of cost savings

EVOLUTION OF EARLY SUPPLIER INTEGRATIONIN THE AEROSPACE INDUSTRY

“Old” Approach “Current” Lean

“Emerging” Lean

Arm’s length; interfaces totally defined and controlled

Collaborative; but constrained by prior workshare arrangements

Collaborative and seamlessly integrated, enabling architectural innovation

LEAN DIFFERENCE: AUTO INDUSTRY

Lean Difference: Significantly lower development cost and shorter cycle time

Average engineering hours per new car (millions of hours)

Average development

cycle time per new car

(months)Prototype lead

time(months to first

engineering protoype)

Source: Clark, Ellison, Fujimoto and Hyun (1995); data refer to 1985-89.

Thank you