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Debate

LEAN VS AGILE SUPPLYCHAIN NETWORKSGroup No. 2 Animesh Ankit Dubey Devdeep Das Prerna Gupta Saurabh Sharma Saurup Somwanshi

OUTLINE1. 2. 3. 4. 5. 6. 7. 8.

Introduction to Lean Supply Chains What is a Lean Supply Chain? Components of Lean Supply Chains Benefits of Lean Supply Chains Moving Toward a Lean Supply Chain Seven Steps for Building a Lean Supply Chain Critical Success Factors Summary

COMPONENTS

Lean SuppliersLean Procurement Lean Manufacturing

Lean WarehousingLean 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-valueadded 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 WEAPONA strong supply chain enables the member companies to align themselves with each other and to coordinate their continuous improvement efforts.

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

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.

Quality Distribution HR

Development

Reduce Waste & Create FlowMarketing Purchasing Finance

SEVEN STEPSThere are seven steps to developing lean supply chains.

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

THE LEAN SUPPLY CHAINBest Quality - Lowest Cost - Shortest Lead Time Through Shortening the Production Flow By Eliminating Waste

Just in TimeThe right part at the right time in the right amount

Built in Quality Line Stop - Manual - Automate Error Proofing Visual ControlFlexible, Capable, Highly Motivated People

Preconditions Continuous Flow Pull System Takt Time Level Production

Operational StabilityStandardized Work Total Productive Maintenance Robust Products & Processes Supplier Involvement

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

SALESSales Price

Traditional ViewSales Price

Profit Mfg. Cost Mfg. Cost

Mfg. Cost

Principles of Cost Reduction: PROFIT = SALES PRICE - COST

Profit

Profit Profit

Modern View

Sales Price

Mfg. Cost

Mfg. CostMfg. Cost

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 APPROACHStock is held at multiple echelons, often based on organisational and legal ownership considerations Replenishment is driven sequentially by transfers from one stocking echelon to another Production is planned by discrete organisational units with batch feeds between discrete systems.

AGILE APPROACHStock is held at the fewest echelons, if at all, with finished goods sometimes being delivered direct from factory to customer Replenishment of all echelons is driven from actual sales/usage data collected at the customer interface Production is planned across functional boundaries from vendor to customer, through highly integrated systems, with minimum lead times Majority of stock is held as work in progress awaiting build/configuration instructions

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

Lean Supply Chain - Pull Production SystemShip Ship Ship

Raw Material

CustomerMachining AssemblyLeveled Production Plan

Pull Schedule

Pull Schedule

Assembly Schedule

06/07/98

SME Lean Supply Chain

Implementing the Lean Supply Chain

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

FORCES THAT LEAD TO DISINTEGRATION OFLEAN 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.

Leaner inventories

Longer supply linesGreater Exposure to supply chain disruptions

More single sourcing

Tightly meshed global communication networks

More outsourcing

Failure Mode

Description

Disruption in supply Disruption in Transportation Disruption at Facilities Freight breaches

Delay or unavailability of materials from suppliers, leading to a shortage of inputs that could paralyze the activity of the company. Delay or unavailability of the transportation infrastructure, leading to the impossibility to move goods, either inbound and outbound. Delay or unavailability of plants, warehouses and office buildings, hampering the ability to continue operations. 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). 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 in communications

Disruption in demand

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 INSUPPLY CHAIN NETWORKS

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

Operational StrategyStockpile Inventory

DescriptionHold inventory that can be used to fill customer demand even if supply is interrupted. Source product from multiplevendors/facilities so that a problem at one vendor/facility does not affect the entire supply. Have an emergency supplier (or logistics provider) that is not normally used but that can be activated in the event of a supply problem. 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 supplyconstrained Work with suppliers to reduce the frequency and/or severity of supply problems.

Example(s)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 Nokias multiplesupplier strategy reduced the impact of the 2000 Philips Semiconductor disruption.Chiquitas multiple growerlocation strategy reduced the impact of the 1998 Hurricane Mitch disruption. Nokia responded to the Philips Semiconductor disruption by temporarily increasing production at alternative suppliers.New Balance responded to the 2002 westcoast dock disruption by rerouting ships to the east coast and by air freighting supplies. Dell responded to the disruption in memory supply caused by the 1999 Taiwanese earthquake by shifting customer demand to lowermemorycomputers.

Diversify Supply

Backup Supply

Manage Demand

Strengthen supply chain

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

INDUSTRIES SUITABLE FOR LEAN

The basic elements are w