Download - Bob Stahl & Bill Kerber The S&OP/Lean Connection Making Lean work with demand variability Bob Stahl Bill Kerber October 20-24, 2008 Toronto,

Bob Stahl & Bill Kerber www.tfwallace.com

The S&OP/Lean ConnectionThe S&OP/Lean ConnectionMaking Lean work with demand variabilityMaking Lean work with demand variability

Bob StahlBill Kerber

October 20-24, 2008Toronto, Canada

AMEAMETOTONTOTOTONTO20082008FromFrom Good Good toto GreatGreat

AMEAMETOTONTOTOTONTO20082008FromFrom Good Good toto GreatGreat


Who are We?Who are We?Who are We?Who are We?

Bob StahlBill Kerber


The “4P Model” of the The “4P Model” of the Toyota WayToyota Way

The “4P Model” of the The “4P Model” of the Toyota WayToyota Way

Problem Solving

(Continuous Improvement &

Learning)

People & Partners(Respect, Challenge, & Growth)

Process(Eliminate Waste)

Philosophy(Long-Term Thinking)

Our Focus

“The Toyota Production System [TPS] is the basis for much of the ‘lean production’ movement that has dominated manufacturing trends for the last 10 years or so.”

Jeffrey LikerThe Toyota Way


“. . . many businesses in America are rushing to a build-to-order model of production. They want to make just what the customers want when they want it -- the ultimate lean solution. Unfortunately, customers are not predictable and actual orders vary significantly from week to week and month to month.”


“. . . many businesses in America are rushing to a build-to-order model of production. They want to make just what the customers want when they want it -- the ultimate lean solution. Unfortunately, customers are not predictable and actual orders vary significantly from week to week and month to month.”


Schedule(to dealer orders/

forecast)


forecast)

PushLinearity

Toyota Flow ModelToyota Flow ModelToyota Flow ModelToyota Flow Model

Toyota Assembly

Toyota Assembly

Customers

Customers

Dealers

Dealers

Demand PullDemand Pull FG Inv.BufferFG Inv.Buffer

VariableDemandVariableDemand

Suppliers

Suppliers

Plant

Plant

There is nothing illegal, immoral, or fattening with this approach, but many (most) companies can’t afford, or simply can’t follow, this approach to creating “linearity” with very large finished goods inventory. For Toyota, as we all know, it has worked very very well!

There is nothing illegal, immoral, or fattening with this approach, but many (most) companies can’t afford, or simply can’t follow, this approach to creating “linearity” with very large finished goods inventory. For Toyota, as we all know, it has worked very very well!


LEI’s LEI’s InterpretationInterpretation

LEI’s LEI’s InterpretationInterpretation

LEI’s Seven Characteristics of a Lean Value Stream:

1.Takt2.Finished goods strategy3.Flow4.Pull where can’t flow5.Scheduling at one point6.Pitch7.EPEI James P. Womack

Danie T. Jones


An Inconvenient An Inconvenient Truth . . .Truth . . .(with apologies to Al Gore)(with apologies to Al Gore)

An Inconvenient An Inconvenient Truth . . .Truth . . .(with apologies to Al Gore)(with apologies to Al Gore)

“In general, when you try to apply the Toyota Production System [TPS], the first thing you have to do is to even out or level the production. Leveling the production schedule may require some front-loading of shipments [push to dealers] or postponing [delaying] of shipments and you may have to ask some customers [dealers] to wait for a short period of time. Once the production level is more or less the same or constant for a month, you will be able to apply pull systems and balance the assembly line. But if production levels – the output – vary from day to day, there is no sense in trying to apply those other [pull] systems, because you simply cannot establish standardized work under such circumstances.”

Fugio ChoToyota President


Big Fat Question(s) . Big Fat Question(s) . . .. .

Big Fat Question(s) . Big Fat Question(s) . . .. .

What if it impossible or unaffordable to have

FG Inventory as a buffer?

How do you do Lean, if not exactly the Toyota Way?

That’s why we’re here!


Agenda . . .Agenda . . .Agenda . . .Agenda . . .1)Introduction

• The many tools for improving effectiveness• Lean focus versus S&OP focus

2)How does the Toyota Production System work?

3)What are the problems?• Market Forecast versus Production Leveling• FG Inventory as the only buffer

4)What are the solutions?•Solve the Family Feud•Buffer without Finished Goods Inventory

Backlog buffer (Lead Time) Component Inventory - Postponement Flexible resources

5)Questions and Answers.


The New Worldof Manufacturing

The New Worldof Manufacturing

High Quality Low Cost (Low Inventory) Customer Service

Quick ResponseReliabilityWide Variety

Best in Class

Getting to AND . . . Diminishing ORGetting to AND . . . Diminishing OR


The Many Tools The Many Tools for for

Improving Improving EffectivenessEffectiveness



IncreaseReliability

EnhanceCoordination

Reduce Waste& Time

Total Quality, Six Sigma, Poka-Yoke, ISO

+ others

Lean Mfg., Just-In-Time, Quick Changeover (SMED),

Flow + others

Sales & Operations Planning, ERP, Kanban, VMI,

+ others

XX

X






IncreaseReliability

EnhanceCoordination

Reduce Waste& Time


+ others


Flow + others


+ others

XX

X

X






IncreaseReliability

EnhanceCoordination

Reduce Waste& Time


+ others


Flow + others


+ others

Blur the boundaries

X


Lean & Executive S&OP Lean & Executive S&OP Do Different Do Different (Necessary)(Necessary)

ThingsThings

Lean & Executive S&OP Lean & Executive S&OP Do Different Do Different (Necessary)(Necessary)

ThingsThingsLean Manufacturing• Lean is a basic approach to manufacturing that

emphasizes/focuses on flow. • It also has a focus on eliminating waste from processes• Strong on execution• Short future horizon• Drives improvements to the operating environment• Flow works best with stable and linear demandExecutive S&OP • Tools for forward decision-making• Strong on planning• Long future horizon• Balances demand and supply across the supply chain• Executive Forum for establishing relevant strategy,

policy, and risk• Can be used in many different environments

In a broad sense, they both get at culture!

They work best when they work together!








• Questions and Answers.


Production StrategiesProduction StrategiesProduction StrategiesProduction Strategies

• Level - Most often associated with Make to Stock. To achieve a level production, a buffer against variable demand must be used.

• Chase - Most often Make to order. Also could be called variable capacity.

• Hybrid - A combination.


Toyota StrategyToyota StrategyPart APart A

Toyota StrategyToyota StrategyPart APart A

F.G. Inventory = Variable

0

200

400

600

800

1000

1200

1400

1600

1800

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

Months

Unit Volume

Supply Demand Inventory


Toyota StrategyToyota StrategyPart BPart B

Toyota StrategyToyota StrategyPart BPart B

Backlog/Lead Time = Variable

0

200

400

600

800

1000

1200

1400


Months

Unit Volume

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

Lead Time in

Weeks

Supply Demand Lead Time


Why This Works?Why This Works?Why This Works?Why This Works?• Toyota’s high quality and market

acceptance allows limited variety

• With a limited number of end items:

– Schedule by end item

– Don’t configure (finish) to order

• Alignment of markets and resources


Product EnvironmentProduct EnvironmentProduct EnvironmentProduct Environment

In this ‘shape’ a few end items are made from many parts, materials, and components.

An example would be an equipment manufacturer such as automobiles, lawn mowers, capital equipment, etc. This shape lends itself to making to stock.

Levels # of Parts


Product EnvironmentProduct EnvironmentProduct EnvironmentProduct Environment

Schedulingis done here

Replenish Finished Goods

Customer

Lead Time


Linearity

Toyota Flow ModelToyota Flow ModelToyota Flow ModelToyota Flow Model

Toyota Assembly

Toyota Assembly

Customers

Customers

Dealers

Dealers

Demand PullDemand PullSchedule

(to dealer orders/ forecast)


forecast)

FG Inv.BufferFG Inv.Buffer


Suppliers

Suppliers

Plant

Plant

Push


Demand-Supply AlignmentDemand-Supply Alignment(A second issue)(A second issue)

Demand-Supply AlignmentDemand-Supply Alignment(A second issue)(A second issue)

Markets

Large TrucksLarge Trucks

Small TrucksSmall Trucks

Large CarsLarge Cars

Small CarsSmall Cars

Line #1Large Trucks

Line #1Large Trucks

Production

Line #2Small Trucks

Line #2Small Trucks

Line #3Large CarsLine #3

Large Cars

Line #4Small CarsLine #4

Small Cars


Takt Time . . .Takt Time . . .Takt Time . . .Takt Time . . .“Takt is a German word for rhythm or meter. Takt is the rate of customer demand -- the rate at which the customer is buying product.

. . . Takt can be used to set the pace of production.

Continuous flow and takt time are most easily applied in repetitive manufacturing . . .”

Jeffrey Liker

The Toyota Way


Takt Takt time . . .time . . .

Takt Takt time . . .time . . .

Demand rate?or

Production Rate?





3)What are the problems?• Market Forecasting versus Production Leveling• FG Inventory as the only buffer


1) Backlog buffer (Lead Time)2) Component Inventory - Postponement3) Flexible resources



A primer on A primer on S&OP . . .S&OP . . .A primer on A primer on S&OP . . .S&OP . . .

Plant Scheduling/PullPlant Scheduling/Pull

MSMS

Exec. S&OP / Rough CutExec. S&OP / Rough Cut

PTF

24MonthsTime

Most Detail Aggregate OnlyExac Config. . .Precise Mat’l. . .# People. . .Capital Equip . . .Factory Space

VolumeMix

Detailed Forecasting &Detailed Forecasting &

Master SchedulingMaster Scheduling• Lost in the woods- Detail• Engage Top Management?• Added Little Value outside

the Planning Time Fence

MarketingSales

Super MSSuper MS


The Four Fundamentals The Four Fundamentals of S&OP . . .of S&OP . . .The Four Fundamentals The Four Fundamentals of S&OP . . .of S&OP . . .

Demand Supply

Volume

Mix

•How Much?•Rates•The Big Picture•Families•Strategy/Policy/Risk•Monthly / 18 - 36 Mos•Executive Resp.

•Which Ones?•Timing/Sequence•The Details•Products/SKU’s/Orders•Tactics/Execution•Weekly/Daily 1-3 Mos•Middle Mgt. Resp.

“Plan the Volume; Schedule the Mix”


Suicide Suicide Quadrant . . . Quadrant . . .

Suicide Suicide Quadrant . . . Quadrant . . .

PTF

Horizon

Deta

il

1SuicideQuadrant

2Aggregate

OnlyQuadrant

Exec.S&OP

3Building toCustomerDemand


Sales & Operations PlanningSales & Operations PlanningSales & Operations PlanningSales & Operations Planning

Demand Supply

Volume

Mix

Executive S&OPExecutive S&OPExecutive S&OPExecutive S&OP

DemandPlanning

SupplyPlanning

Master SchedulingPull Methods


Master Schedule Master Schedule definition . . . definition . . . Master Schedule Master Schedule

definition . . . definition . . .

“The tool that balances demand and supply at the product level, as opposed to Executive S&OP which balances demand and supply at the aggregated Family level. It is the source of customer order promising, via its Available-to-Promise capability, and contains the anticipated build schedule for the plant(s) in the form of the Master Production Schedule.”

Sales & Opertations Planning-The How To Handbook, 3rd EditionWallace & Stahl, 2008


What is Executive S&OP?What is Executive S&OP?What is Executive S&OP?What is Executive S&OP?

Sales & Operations Planningis a

Executive Decision-Making Processto

Balance Demand & Supply(at the volume level)

is

The forum for setting Relevant Strategy & Policyand

Integrates Financial & Operating Plans (update/validate the Annual Business Plan)

Top Management’s Handle on the Business


The Family The Family Feud . . . Feud . . . The Family The Family Feud . . . Feud . . .

ResourceDepartmentEquipmentSupplier

Operations(Supply)

//

Definition - Executive S&OP FamiliesA grouping of end items whose similarity allow the markets to be best anticipated, and enables resources to be planned.

Mix Ratio Assumptions &

Resource Req. PlanVersus

Full Granularity

Sales &Marketing

(Demand)

MarketsSegments ChannelsCustomers

MarketsSegments ChannelsCustomers


ForecastingForecastingForecastingForecasting

1. Reasoned2. Reasonable3. Reviewed Frequently

4. Represent Total Demand

1. Reasoned2. Reasonable3. Reviewed Frequently

4. Represent Total Demand

Forecasts that are:Current CustomersNew CustomersCompetition

Economic OutlookMarket TrendsNew Products

Pricing StrategyPromotionsBid Activity

Management DirectivesIntra-Company Demand

History (Data)Other

ProcessProcess

Inputs -- Process -- Output


Executive S&OP FocusExecutive S&OP FocusExecutive S&OP FocusExecutive S&OP FocusMfg. Company

Markets

Customers

Shipments POS

Sales: 1-3 Mos

Master SchedulingDemand Pull

Marketing: 1-18 Mos

Executive S&OP

Mix

Volume

CustomerCentric

MarketCentric


The Family The Family Feud . . . Feud . . . The Family The Family Feud . . . Feud . . .

• S&OP Families -- In Executive S&OP, Families are aggregate groups of products that are similar in the way that customers and/or markets view their use. Executive S&OP Families are used to develop a reasoned and reasonable forecast based on market trends, grounded in intrinsic and extrinsic leading indicators.

• Lean Families -- In Lean Manufacturing, the term Families is used to mean the grouping of products that are manufactured by the same resources. This is often called a ‘value stream.’ The idea is to create a ‘synchronous flow’ in manufacturing that allows products to be produced at a uniform and linear market driven rate – known as Takt Time.


Conclusion . . Conclusion . . . .

Conclusion . . Conclusion . . . .

• Executive S&OP families should be market determined

• Lean families should be manufacturing (process) determined

• They are different because they serve different purposes


Family Family Feud . . .Feud . . .When are they the same?When are they the same?

Family Family Feud . . .Feud . . .When are they the same?When are they the same?

Small WidgetsSmall Widgets

Medium WidgetsMedium Widgets

Large WidgetsLarge Widgets

Consumer MarketConsumer Market

Housing MarketHousing Market

Industrial MarketIndustrial Market

Supply

Demand

Typically NOT!

World Wide Widget CompanyWorld Wide Widget Company


Non-Aligned to MarketsNon-Aligned to MarketsNon-Aligned to MarketsNon-Aligned to Markets

Small WidgetsSmall Widgets

Medium WidgetsMedium Widgets

Large WidgetsLarge Widgets

Consumer MarketConsumer Market

Housing MarketHousing Market

Industrial MarketIndustrial Market

Supply

Demand

How, then, do you do Lean; Takt time, etc?

World Wide Widget CompanyWorld Wide Widget Company


Executive S&OP ProcessExecutive S&OP ProcessExecutive S&OP ProcessExecutive S&OP Process

Step #1Data

Gathering

End of Month

Sales Actuals, Statistical Forecasts

&Production Actuals

Step #5ExecutiveMeeting

Decisions &Game Plan

Step #4Pre-S&OPMeeting

Conflict Resolution, Recommendations &

Agenda for Exec. Mtg.

Step #2DemandPlanning Management Forecast

1st-pass spreadsheets

Step #3Supply

Planning Capacity constraints2nd-pass spreadsheets

HeavyLifting


Exercise #1Exercise #1Exercise #1Exercise #1

• Determine the families for Executive S&OP from the data provided.


Product/Process Product/Process Matrix Matrix


P/N Name CastDeburrInjection MoldLatheTrimSandNotchPlatePaintFinal AssemblyPackFamilyMT1001 Plastic Wagon, Red X X X XMT1002 Plastic Wagon, Yellow X X X XMT1003 Plastic Wagon, Green X X X XMT1004 Wood Wagon, Red X X X X X XMT1005 Wood Wagon, Brown X X X X X XMT1006 Wood Wagon, Green X X X X X XMT2001 Plastic Sled 1 X X X XMT2002 Plastic Sled 2 X X X XMT2005 Plastic Sled 3 X X X XMT2010 Wood Sled 1 X X X X X XMT2015 Wood Sled 2 X X X X X XMT2020 Wood Sled 3 X X X X X XMT2400 Die Cast Vehicle; Car X X X X X XMT4005 Die Cast Vehicle; Airplane X X X X X XMT4008 Die Cast Vehicle, Bus X X X X X XMT4100 Die Cast Vehicle; Truck/Lorry X X X X X X

Can’t do it ---

No “market” data provided


Market DriversMarket Drivers(Leading Indicators)(Leading Indicators)

Market DriversMarket Drivers(Leading Indicators)(Leading Indicators)

• Birth Rate

• Consumer confidence index

• Housing starts

• NASCAR TV ratings

• Price of gasoline

•

•


Correlation DataCorrelation DataCorrelation DataCorrelation DataA correlation study revealed the following results (1.0 = high correlation):

Wagons Sleds Vehicles•Housing Starts 0.5 0.4 0.2•Birth Rate 0.8 0.75 0.4•New Unemp. Claims -0.4 -0.6 -0.4•Personal Income 0.5 0.4 0.6•NASCAR Viewers -0.2 -0.3 0.7


S&OP Families . . S&OP Families . . . .

S&OP Families . . S&OP Families . . . .

What are the S&OP Families?

•Wagons•Sleds•Vehicles


Families . . . Families . . . Families . . . Families . . . • S&OP Families -- In Executive S&OP, Families are

aggregate groups of products that are similar in the way that customers and/or markets view their use. Executive S&OP Families are used to develop a reasoned and reasonable forecast based on market trends, grounded in intrinsic and extrinsic leading indicators.

• Lean Families -- In Lean Manufacturing, the term Families is used to mean the grouping of products that are manufactured by the same resources. This is often called a ‘value stream.’ The idea is to create a ‘synchronous flow’ in manufacturing that allows products to be produced at a uniform and linear market driven rate – known as Takt Time.


Determining Lean Determining Lean product product

familiesfamilies

Determining Lean Determining Lean product product

familiesfamiliesCreate a Product Family Matrix:

Separate processes based on capability (ex. “The machines are the same, but Part ‘A’ can only be produced on this one.”)

Look at the ‘Downstream’ processing steps

Approximately 80% of the similar processing steps

Custom products look ‘Upstream’ at the fabrication steps

Fill in Product Family Matrix with ‘X’


Product Process MatrixProduct Process MatrixProduct Process MatrixProduct Process Matrix

Bumper Brackets

Seat

Rail

Instrument Panel Brace

RH Steering Bracket

LH Steering Bracket

Electronic

Test

Fixtures

Ass ’y

Manual

Ass ’y

PaintFlash

Remove

Robot Weld

Spot

Weld

Bumper Brackets

Seat

Rail

Instrument Panel Brace

RH Steering Bracket

LH Steering Bracket

ElectronicTest

FixturesAss’y

ManualAss’y

PaintFlashRemove

Robot

WeldSpotWeld

Pro

duct

s

Process Steps and Equipment

X X X X

X X X X

X X X

XX

X X X


Batch ManufacturingBatch ManufacturingBatch ManufacturingBatch Manufacturing

Stock

Room

Sand Notch

Paint

Room

Deburr Trim Final Assembly

Pa

cka

gin

g

Fin

ish

ed G

oo

ds

Pla

te

Inje

ctio

n M

old

Die

Cas

t

A

B C


Exercise #2Exercise #2Exercise #2Exercise #2

• Determine the Lean product families based on the data given




Name CastDeburrInjection MoldLatheTrimSandNotchPlatePaintFinal AssemblyPackFamilyWood Sled 1 X X X X X X 1Wood Sled 2 X X X X X X 1Wood Sled 3 X X X X X X 1Wood Wagon, Red X X X X X X 1Wood Wagon, Brown X X X X X X 1Wood Wagon, Green X X X X X X 1Plastic Wagon, Red X X X X 2Plastic Wagon, Yellow X X X X 2Plastic Sled, Black X X X X 2Plastic Sled, Orange X X X X 2Plastic Wagon, Green X X X X 2Plastic Sled, Blue X X X X 2Die Cast Vehicle; Car X X X X X X 3Die Cast Vehicle; Airplane X X X X X X 3Die Cast Vehicle, Bus X X X X X X 3Die Cast Vehicle; Truck/Lorry X X X X X X 3


Lean Process FlowLean Process FlowLean Process FlowLean Process Flow

Pa

cka

gin

g

Fin

ish

ed

Goo

ds

Sto

ckro

om

A Die Cast Deburr Plate Paint

B Injection Mold Trim Final Assembly

C SandLathe Notch Paint


Lean Lean Families . . . Families . . .

Lean Lean Families . . . Families . . .

What are the Lean (Value Stream) Families?

•Plastic Toys•Wooden Toys•Die Cast Toys


Solving the Family Solving the Family FeudFeud

Solving the Family Solving the Family FeudFeud

Plastic ToysPlastic Toys

Wooden ToysWooden Toys

Die Cast ToysDie Cast Toys

SupplyWagonsWagons

SledsSleds

VehiclesVehicles

Demand

Typically NOT!

LeanExec. S&OP


Non-Aligned to Non-Aligned to MarketsMarkets

Non-Aligned to Non-Aligned to MarketsMarkets

Better than Job Shop!

Rough Cut on “Pacemaker” only!




SupplyWagonsWagons

SledsSleds

VehiclesVehicles

Demand

LeanExec. S&OP


Job Shop . . Job Shop . . . .

Job Shop . . Job Shop . . . .

MarketFamilies

ProductionResources

AA BB CC

332211

Aligned

DD EE FF

665544

77 88

Non-Aligned


Market Forecasts toMarket Forecasts toLean ProductionLean Production

Market Forecasts toMarket Forecasts toLean ProductionLean Production




WagonsWagons

SledsSleds

VehiclesVehicles

LeanExec. S&OP

100%

30%

40%

70%

60%


Managing Managing Assumptions . . .Assumptions . . .

(Control Charts)(Control Charts)

Managing Managing Assumptions . . .Assumptions . . .

(Control Charts)(Control Charts) Wooden Wagons

20

25

30

35


Monthly History

% of Total Wagons

Wooden Wagons UCL LCL Linear (Wooden Wagons)


Demand ForecastsDemand ForecastsDemand ForecastsDemand ForecastsMarket Forecasts

0

200

400

600

800

1000

1200

1400


Future Months

Units

Wagon Forecast Vehicle Forecast


Wooden Demand RateWooden Demand RateWooden Demand RateWooden Demand RateWooden Capacity in Units

0

100

200

300

400

500

600

700

800

900

1000


Months

Volume in Units

30% Wooden Wagons 60% Wooden Vehicles


Rough-Cut Capacity PlanningRough-Cut Capacity PlanningRough-Cut Capacity PlanningRough-Cut Capacity Planning

Wooden Capacity in Units

0

100

200

300

400

500

600

700

800

900

1000


Months

Volume in Units

Wooden Demo Capacity With Overtime30% Wooden Wagons 60% Wooden Vehicles


Production StrategiesProduction StrategiesProduction StrategiesProduction Strategies

• Level - Most often associated with Make to Stock. To achieve a level production, a buffer against variable demand must be used.

• Chase - Most often Make to order. Also could be called variable capacity.

• Hybrid - A combination.


Primer on Takt Time . . Primer on Takt Time . . . . Primer on Takt Time . . Primer on Takt Time . . . . • Sets the “Beat” in the form of pitch for

production. • Determines how many people work in

assembly jobs.• Provides “the bar” for operator

balance charts for line balancing.• For all of these, takt would be better

represented by the production rate from S&OP.


Demand versus Production Rate?Demand versus Production Rate?Demand versus Production Rate?Demand versus Production Rate?

• Current Lean definition has Takt time as effective working time divided by demand rate

• In most circumstances, we would be better off making it effective working time divided by Production rate (from S&OP plan)


People vs. Takt People vs. Takt TimeTime

People vs. Takt People vs. Takt TimeTime

75 min

85 min

95 min

105 min

115 min

125 min

65 min

55 min

45 min

35 min

25 min

15 min

Time = 480 minUnits = 16Takt = 30 minOperators = 2

In

OutLead time = 60 min

B A

Balanced Line

65 min

55 min

45 min

35 min

25 min

15 min

75 min

85 min

95 min

105 min

115 min

125 min

Time = 480 minUnits = 24Takt = 20 minOperators = 3

In

Out

C B A

Lead time = 60 min

Balanced Line


Operator1

Operator2

Operator3

Operator4

Operator5

1.78 1.78 1.78 1.78Takt TimeBetter

Improvement

2.5 1.5 1.25 1.75Takt Time

Example ofUnbalanced

Line

Values in Bars = Cycle Time; Takt Time = 1.78 Minutes

1.78 1.78 1.78 1.78Takt Time

MoreImproevment

0.5

0.21

Operator Balance ChartOperator Balance ChartOperator Balance ChartOperator Balance Chart


Make-to-Order FlowMake-to-Order FlowMake-to-Order FlowMake-to-Order Flow

Assembly

Assembly

Demand PullDemand Pull

Schedule(to forecast/customer order)

Schedule(to forecast/customer order)

Order Backlog

Order Backlog

BacklogBuffer

BacklogBuffer

Customers

Customers


Suppliers

Suppliers Plant

Plant

Standard

Parts

Standard

Parts

Unique

Parts

Unique

Parts

Plant

Plant


Market DemandsMarket DemandsMarket DemandsMarket Demands• In this ‘shape’ many end items are

made out of a few sub assemblies or intermediates that are made out of many unique raw materials and parts.

• An example of this would be a pharmaceutical manufacturer with many package types from standard product (aspirin), personal computers, packaged chemicals

• This shape lends itself to a postponement strategy.


How Lean fits in : How Lean fits in : PostponementPostponement

How Lean fits in : How Lean fits in : PostponementPostponement

SchedulingHere

Pull or Schedule Components based

on usage

Assemble to order

Customer

Lead Time


Finish-to-Order Finish-to-Order FlowFlow

(Postponement)(Postponement)

Finish-to-Order Finish-to-Order FlowFlow

(Postponement)(Postponement)

Assembly

Assembly

Customers

Customers

Order Backlog

Order Backlog

Demand PullDemand Pull

Schedule(to forecast)

Schedule(to forecast)

BacklogBuffer

BacklogBuffer


Suppliers

Suppliers

Plant

Plant

Standard

Parts

Standard

Parts

Schedule(to Order)

Schedule(to Order)

Planning BOM’sPlanning BOM’s







1) Backlog buffer (Lead Time)2) Component Inventory - Postponement3) Flexible resources



BOM ShapeBOM ShapeBOM ShapeBOM Shape

In this ‘shape’ many end items are made from a few raw materials.

An example would be an injection molding company

This shape suggests a make to order strategy.


How Lean fits inHow Lean fits inHow Lean fits inHow Lean fits in

Make to Order

Make to Order

Schedule here

You must make the lead time fit market requirements!

Speed

Customer

Lead Time


Chase StrategyChase StrategyProduction

Demand

Inventory (Backlog)


This requires:This requires:This requires:This requires:• Cross training of everyone• A way to know when to switch jobs during the

workday (controlling flow)• Adding or subtracting labor by using

– Temporary employees– Overtime

• Subcontractors

alternatively• Staff for peak periods and work on improvements

when slow


ConclusionConclusionConclusionConclusion

S&OP and Lean work best when

they work together!


Thanks for ListeningThanks for ListeningThanks for ListeningThanks for Listening

Bob [email protected]

508-226-0477

Bill [email protected]

609-781-4830