Lean SCL Approach Differentiation is our pride!
Enterprise now demands New Approaches for Business Innovaion that are dynamically appealing and practically executing.It is an important part of doing business. Lean Enterprise Consulting can differentiate your company form the competition.
As fo 2009.09.
린 공급망 물류 접근방법
Page 2Postponement & Delayed Differentiation
Storage media manufacturer found that being able to offer CD/DVD media in many formats, speed, and packaging options was a competitive advantage. With a low-cost supplier in Taiwan they have implemented “Postponement Centers” in the U.S. that give them the ability to fulfill demand in a package to order scenario.
Inventory Value
Service Level
Optimized Postponement
Current Diskette
71% 98%Line Item Fill Rate:
On-time In-full Rate: 91%49%*
Better service, current business
model
Without postponement, OTIF goals would require very large Diskette inventories.
• Significant service improvements
• 27-point increase in service levels
• $Millions in service penalties eliminated
• Product line turned profitable
• 5% increase in revenue
• 20% reduction in total inventory investment
• Significant reduction in total supply chain cost
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• Customer interface – lead time vs frequency of demand
• Efficiency – demand volatility vs margin
• New products – market life vs design time
• Economies of scale – market size per plant vs transport % of price
• Power position – importance of supplier to customer vs customer to supplier
• Decoupling point– market lead time vs production lead time
What Should Your Supply Chain Be?
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The “dilemma of operations planning”
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The “dilemma of logistics management”
Inventory
Inventory
Level Service Quality
Service Quality
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Elements of the SCM Concept
Elements of Upstream SCM
• Sourcing strategies • Multivs. Single sourcing• Strategic partnerships• Supplier development• Vendor Managed Inventories
(VMI)• JIT deliveries and supplies• Open Calculations• Joint product development• Technology Management
Elements of Downstream SCM
• Inventory & warehouse management• Synchronized production• Demand Management• Third party logistics• Direct distribution• Efficient Consumer Response• Postponement• Continuous Replenishment• Cross Docking• POS
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The Demand-Supply Chain
Value Offering Point (VOP)•Defines customer decision making, i.e., how and when is customer demand allocated to the supplier
•Defines the economics of the customer
Order Penetration Point (OPP)•Determines supplier response, i.e., how and when is the product allocated to the customer
•Determines the economics of the supplier
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Order Penetration Point (OPP)
The OPP is the point in the SC at which customer demand is allocated to the product.
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Value Offering Point (VOP)
The VOP define show and why the customer makes the purchase decision.
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Integrating Demand and Supply
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Standard vs Special
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Standard vs Special
The Products are Different
•Low variability•High volume for each variant
•Low price•Small size•Impulsive purchase/ supplement
•High variability•Low volume for each variant
•High price•Bigger size (typical)•Investment
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Standard vs Special
Example: BeoDirect
• Value from “Instant Acquisition”
• Impluse purchase/gifts• Plug and Play
• Volume Flexibility• Flow/Kanban• Quality and Speed• Automatic Scheduling• Capacity Leveling
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Standard vs Special
Example: B1 Configured
• Value from Modification (mood) and “Instant Acquisition”
• Volume Flexibility• Postponement• Quality and Punctuality• Forecast Driven• Capacity Leveling
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Standard vs Special
Example: Custom
• Value through customization
• Home installation• Individualization
• Variant Flexibility• Postponement• Quality and Punctuality• Surpluses Capacity (quick assembly)
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Standard vs Special
VOP and OPP – 5 Basic Steps
1. Identify the customer´s demand chains.
(Note that a customer can have a number of different demand chains)
2. Define the potential linkage points for the supplier to the customer demand chains.
What are the potential VOP´s?
3. Identify your extended supply chains
4. Define the potential linkage points for the customer to the supply chains.
What are the potential OPPs?
5. Try out the possible configurations and evaluate the cost and benefit for your self and the customer.
Are there win-win solutions?
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Standard vs Special
Case: Dell´s Direct Model
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Standard vs Special
Case: Baxter´s ValueLink
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Standard vs Special
Before: Transactional business
Transactional business: supplier offers spare parts and maintenance services as requested by customer
Maintenance planning
Inventory mgmt / maintenance
Purchasing
Local service center
Manufacturing Regional supply center
Demand chain
Supply chain
• Customer’s VOP located at purchasing, 3 demand types• Supplier’s performance measured in lead-time, on-time delivery etc.• Supplier’s OPP typically located at local service center to meet strict
lead-time requirements, large inventories at local level
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Standard vs Special
Current: Maintenance service agreement
Increased supplier responsibility: customer’s maintenance planning and operations outsourced to supplier
• Customer’s VOP located at maintenance planning: reduces work (less unplanned production shutdowns, smaller spare part consumption) and allows customer to take advantage of supplier’s expertise
• Supplier’s changed role. => Supplier’s performance measured in process uptime
• However, supplier’s OPP has not been moved
Maintenance planning
Inventory mgmt / maintenance
Purchasing
Local service center Manufacturing
Regional supply center
Demand chain
Supply chain
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Standard vs Special
Future: New opportunities to benefit operationally (1/3)
Opportunity to increase supplier’s operational efficiency
• The reduced number of emergencies, earlier access to demand information and new performance measures provide the supplier with an opportunity to move the OPP upstream to the regional supply center or even to manufacturing
• The operational efficiency comes from reduced inventories
Maintenance planning
Inventory mgmt / maintenance Purchasing
Local service center Manufacturing
Regional supply center
Demand chain
Supply chain
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Standard vs Special
Future: New opportunities to benefit operationally (2/3)
• Moving the OPP is not the only opportunity• Planning and organizing the customer’s maintenance operations offers an
opportunity to affect demand– equipment and part standardization increases inventory efficiency and
reduces risk of stocking the wrong product• Demand information being passed on by the supplier’s own experts improves
quality of demand information– fewer errors mean reduced hassle for both customer and supplier
• Moving of the VOP brings an opportunity to increase service and operational efficiency simultaneously
• However, the supplier needs to develop its supply chain management skills to be able to realize the opportunity
– supplier needs to actively change performance measures– supplier needs to learn how to utilize earlier, more accurate demand
information– supplier needs to assess the time-criticality of its equipment and spare
parts and organize warehousing accordingly– supplier needs to actively promote equipment standardization
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Process optimisation
Moving VOP backwards
Efficiency
Customer service
Less errors
Easier to meet the targets
Changeperformance measures
ReduceSKU’s to becontrolled
Capture betterquality ofdemandinformation
Capture earlieraccess to demand information
Use supplier’spossibility toinfluence todemand
Use demandinformation toimprove planningaccuracy
Utilise increasedplanningpossibilities
REQUIRED MANAGEMENT ACTIONS BENEFITOPPORTUNITY
Standard vs Special
Future: New opportunities to benefit operationally (3/3)
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• Supply chain processes fall into one of two categories depending on the timing of their execution relative to customer demand
– Pull: execution is initiated in response to a customer order(reactive)– Push: execution is initiated in anticipation of customer orders(speculative)– Push/pull boundary separates push processes from pull processes
Push/Pull View
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Push/Pull View
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• “decoupling points : The locations in the product structure or distribution network where inventory is placed to create independence between processes or entities. Selection of decoupling points is a strategic decision that determines customer lead times and inventory investment. See: control points.”
• “control points : In the theory of constraints, strategic locations in the logical product structure … Detailed scheduling instructions are planned, implemented, and monitored at these locations…”
• “order penetration point : The key variable in a logistics configuration; the point (in time) at which a product becomes earmarked for a particular customer. Downstream from this point, the system is driven by customer orders; upstream processes are driven by forecasts and plans. Syn: principle of postponement.”
• “postponement : A product design strategy that shifts product differentiation closer to the consumer by postponing identity changes, such as assembly or packaging, to the last possible supply chain location.”
Definitions from APICS Dictionary, 11th Edition
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Types of Supply Chain Model(or Production Process)
“i”
Basic linear production
Example?
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Types of Supply Chain Model(or Production Process)
“T”
Many simple product orpackaging variations ordistribution points
Example?
Low variety of products
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Types of Supply Chain Model(or Production Process)
“V”
Many end products
Example?
Few raw materials
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Types of Supply Chain Model(or Production Process)
“A”
Few end products
Example?
Many raw materialsand sub-assemblies
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Types of Supply Chain Model(or Production Process)
“X”
Many end products
Example?
Many raw materialsand sub-assemblies
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Types of Supply Chain Model(or Production Process)
Which One?
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Generic Customer Order Decoupling Points
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Generic Customer Order Decoupling Points
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Tradeoffs
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A familiar example – MTS vs ATO
Example 1
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A familiar example – MTS vs ATO
Example 2
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A familiar example – MTS vs ATO
Example 3
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1980’s : 1990’s :
120 day planning horizon, 60 days frozen Make-to-Order project
Growing inventories Kanban project
75% fill rate 95% customer satisfaction
Labor-intensive forecast process 30 families, less detailed forecast
120 day production cycle 3 day order turnaround
12 week supply of elec wires (externalsupply)
3 day supply of elec wires (externalsupply)
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A familiar example – MTS vs ATO
Example 4
Camco – Montreal (owned by GE Canada)Washers, Dryers, and Dishwashers450 models, $500 million sales
2004: still Canada’s #1 appliance maker, and #1 supplier of GE dryers; inventory turnswere about 12 (vs sales), and the company credits their Six Sigma program for reducedquality costs and enabling other changes
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Baseline CODP model
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Types of CODP model
Concurrent CODPs per product or product-market combination
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Types of CODP model
Multiple CODPs per product component
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Types of CODP model
Multiple CODPs per level of customer commitment
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Types of CODP model
Multiple CODPs per interface in the chain network
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Types of CODP model
Example of a chain network configuration with multiple CODPs in dairy
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Types of CODP model
Example of a chain network configuration in Parquet Industry
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Types of CODP model
Example of a chain network configuration in Parquet Industry
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Types of CODP model
Example of TFT-LCD manufacturing process
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Types of CODP model
Example of Details in a Control Model with CODP
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Types of CODP model
The challenge of mass customization for the wood furniture sector in Quebec (Lihra et al., 2005; Poulin et al., 2006)
Retailing Distribution Packaging Finishing Componentmanuf.Assembling Supply
Sale-2O
Ship-2O
Pack-2O
Finish-2O
Assembly-2O
Make-2O
Supply-2O
Popularizing
Engineering Design
Engineer-2O
Design-2O
Configuring MonitoringAdjustingServicingTailoringAccessorizingVarietizing
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CODP and customer order lead-time in MTS/ATO/MTO
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Postponement
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4 Generic Postponement Strategies
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4 Generic Postponement Strategies
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