Colf Gutierrezcamacho Juanpablo Tesis

Beneficiario COLFUTURO 2012

UNIVERSITY OF NEW SOUTH WALES

SCHOOL OF MECHANICAL AND MANUFACTURING ENGINEERING

SEBEL

Value Stream Mapping

Project Final Report

Juan Gutierrez

Student ID: 3413601

Master of Engineering Science

Specialisation of Manufacturing Engineering and Management

Project 6 UOC (GSOE0006)

June 2013

University Supervisor: Associate Prof. Sami Kara (Director Postgraduate Research)

Industry Supervisors: Michael Huang (Plastics Manager)



CERTIFICATE OF ORIGINALITY

I hereby declare that this submission is my own work and to the best of my

knowledge it contains no materials previously published or written by another

person, nor material which to a substantial extent has been accepted for the

award of any other degree or diploma at UNSW or any other educational

institution, except where due acknowledgement is made in the thesis. Any

contribution made to the project by others, with whom I have worked at UNSW

or elsewhere, is explicitly acknowledged in the document.

I also declare that the intellectual content of this report is the product of my own

work, except to the extent that assistance from others in the project’s design

and conception or in style, presentation and linguistic expression is

acknowledged.

(Signed) ……………………………………….


ABSTRACT

This project was commissioned to study the feasibility of one of the most

complex and representative core products of Sebel Furniture (a well known

furniture manufacturing company, based in Sydney, Australia) by comparing its

current operations in a centralized model, to a future state in a de-centralized

logistics model. The method for doing this was Value Stream Mapping, a Lean

manufacturing methodology to identify non-value-added activities along the

processes, and reduce Lead Time (LT) and costs by removing those wastes.

It is important to mention that, although most of the information in this report

corresponded to real data, some assumptions were made, given constraints

such as time and the fact that, by the time this report was written, the company

was yet working on some of the projections for the future business model.

Through the development of the project, Value Stream Maps (VSM) for the

family product Postura Plus Shell range were documented on its centralized

and decentralized logistics, main wastes and non-value-added activities were

identified, as well as considerations for improvement were raised. This report

also shows a basic simulation model of how the VSM would looks like in an

improved state, and how each scenario differs from the others. Results showed

risks of the future decentralized logistic model of the company regarding

complexity of operations planning and inventory management, as well as it

describes how successful could it be in terms of a shorter lead time, if an action

plan were implemented.


ENDORSEMENT

This report has been reviewed by the company representative of Sebel

Furniture. It contains confidential information of Sebel Furniture.

Date: …………………………………….

…………………………………………….

Michael Huang

Plastic Molding Department Manager

Sebel Furniture


ACKNOWLEDGEMENTS

It has been great honor to perform this project at Sebel Furniture Company. I

am very thankful to Mr. Pat Varanasi (Operations Manager) for giving me the

opportunity of put into practice my knowledge, whilst I acquired a different

experience in a different sector of the industry.

I would like to take opportunity to express my gratitude to Mr. Paul Fiddling

(Engineering Manager), Michael Huang (Plastics Manager) and Armin Asadi

(Manufacturing Engineer) for providing all facilities and support to meet my

project requirements, as well as to my Project Supervisor Prof. Sami Kara

(Director Postgraduate Research UNSW) for his guidance.

I am also thankful to Graeme Love (Supply Chain Manager) and Jacky Chan

(Planning and Assembly Manager) for helping me to understand the project

better, and to all people I had the pleasure to meet and interview for their

willingness to help me completing the assigned tasks.

Although there may be many who remain unacknowledged in this humble note

of gratitude there are none who remain unappreciated.


TABLE OF CONTENTS

Glossary ............................................................................................................. viii

List of figures ........................................................................................................ ix

List of tables ......................................................................................................... x

List of abbreviations ............................................................................................. xi

List of appendices ............................................................................................... xii

INTRODUCTION ................................................................................................ xiii

1. COMPANY PROFILE .................................................................................... 1

2. PROJECT DESCRIPTION ............................................................................. 1

PROJECT BACKGROUND ............................................................................ 4

VSM PROJECT IMPACT OVER COMPANY’S STRATEGY ......................... 5

PROJECT PLAN ............................................................................................ 6

3. MATERIALS AND METHODS ....................................................................... 7

CURRENT STATE ......................................................................................... 8

FUTURE STATE .......................................................................................... 15

4. RECOMMENDATIONS ................................................................................ 21

IMPROVED STATE ..................................................................................... 21

5. CONCLUSIONS .......................................................................................... 25

6. REFERENCES ............................................................................................ 27

7. APPENDIcES .............................................................................................. 28


1. GLOSSARY

Kaizen: A Japanese word that means "change for the better." Kaizen is a

combination of maintenance, problem solving, and innovation that is

generally performed by a team.(4)

Lead Time (LT): The time spent between the original customer order for a

particular product and its final delivery to the customer.(3)

Lean manufacturing: An approach to manufacturing that seeks to reduce

the cycle time of processes, increase flexibility, and improve quality. Lean

approaches help to eliminate waste in all its forms.(3)

Order-to-cash cycle: Normally refers to the business process for receiving

and processing customer sales.(4)

Takt time: The rate at which the customer requires your company to

manufacture products.(3)

Third Party Logistics (3PL): A firm that provides service to its customers

of outsourced (or "third party") logistics services for part, or all of their

supply chain management functions.(4)


List of figures

Figure 1. Sebel’s strategy vs VSM impacts 5

Figure 2. Project’s Gantt Chart 6

Figure 3. Pareto analysis for sales margin of core family products 7

Figure 4. Postura Plus Shell chair 8

Figure 5. Plastic molding process 9

Figure 6. Assembly process 9

Figure 7. Postura Plus Shell VSM – Current (Centralised) State 10

Figure 8. Receiving/Dispatching Process 12

Figure 9. Seats WIP 12

Figure 10. Die change 13

Figure 11. Frames’ sorting 13

Figure 12. PMD Manual operation 14

Figure 13. Assembly sequence 14

Figure 14. Sebel new business model 15

Figure 15. Postura Plus Shell VSM – Future (Decentralised) State 17

Figure 16. Postura Plus Shell VSM – Improved (Centralised) State 22

Figure 17. Postura Plus Shell VSM – Improved (Decentralised) State 23

Figure 18. Comparison of proportional value-added time 25


List of tables

Table 1. Product – Process Matrix 7

Table 2. Cost-benefit analysis (Monthly operating cost comparison) 18

Table 3. Opportunities for improvement 19


List of abbreviations

3PL: Third Party Logistics

ATO: Assembly-to-Order

BOM: Bill of Materials

C/T: Cycle Time

CPPD: Concurrent Product and Process Development

DFX: Design for Everything

DIFOT: Delivered in full on time

DS: Direct Selling

EOQ: Economic Order Quantity

ERP: Enterprise Resource Planning

LT: Lead Time

MRP: Material Requirements Planning

MTO: Make-to-Order

MTS: Make-to-Stock

MTTF: Mean Time to Failure

MTTR: Mean Time to Repair

NSW: New South Wales

OEE: Overall Equipment Effectiveness

PFD: Process Flow Diagram

PMD: Plastic Molding Department

QA/QC: Quality Assurance / Quality Control

S&OP: Sales and Operations Planning

SA: South Australia

TPM: Total Productive Maintenance

VSM: Value Stream Mapping

WA: Western Australia

WIP: Work-in-Process

WO: Work order


List of appendices

Appendix 1. Sources and calculations matrix 28

Appendix 2. Warehouse receiving PFD 29

Appendix 3. PMD Seat PFD 30

Appendix 4. PMD Plug PFD 32

Appendix 5. PMD Pin PFD 33

Appendix 6. Assembly PFD 34

Appendix 7. Warehouse dispatch PFD 36

Appendix 8. Masterbatch purchasing order data and receiving date 37

Appendix 9. Frames purchasing order data and receiving date 38

Appendix 10. Postura Plus Shell Sled Charcoal BOM 39

Appendix 11. Polypropylene inventory 40

Appendix 12. Masterbatch inventory 41

Appendix 13. Seat inventory 42

Appendix 14. Plug inventory 43

Appendix 15. Pin inventory 44

Appendix 16. Finished goods inventory 45

Appendix 17. Seat PMD WO, packing list and production sheets 46

Appendix 18. Plug PMD WO and packing list 50

Appendix 19. Pin PMD WO and packing list 51

Appendix 20. Assumed PFDs for Improved VSM 52


INTRODUCTION

Sebel Furniture was going through radical transformations as a company by

restructuring its business model to optimize their operations and moving to a

new site location. One of organization’s existing problems was the enormous

amount of products and product families, reason why the future model was

looking to reduce and optimize the product families.

The aim of this project was to examine the feasibility of Postura Plus Shell

range (Figure 4), one of the most significant (in terms of sales margin) and

complex family products of the firm (in terms of operations), from the

perspective of its current centralized state and the projected future

decentralized logistics model, as well as identify possible wastes along the

processes by using Value Stream Mapping (VSM), a lean manufacturing

principle focused on detect non-value-added activities to eliminate/reduce

them, shortening thus, the "order-to-cash cycle" of a product. The challenge

was to adopt the new concept of value stream provisions so that the mapping

not only captures material and information flow on a factory level, but

encompasses material and information flow pre/after factory. This exercise was

an essential input for the company to make simulations and benefit/cost

analysis about reducing its lead times and freight cost in two of its main sales

points (Western Australia, WA and Queensland) by decentralizing its assembly

and warehousing operations in these hubs as well as acquiring the figure of a

Third Party Logistics (3PL) for consolidation of its core components in China.

This report briefly describes the company’s profile, project scope and how the

VSM analyses contribute to the company's strategy. Following, a depiction of

the VSM was made for its current and future state, as well as potential Kaizens

were identified. Next, an improved state based on the implementation of

pointed considerations for improvement was made for both, a centralized and a

decentralized logistics model and finally, results and main findings of the

project are mentioned.


2. COMPANY PROFILE

“Sebel began in 1951 with the production of Mobo toys and a new furniture

range based around the innovative Stak-a-Bye chair. In the late 1960s the

decision was made to drop the toy side of the business and concentrate

entirely on the furniture range.

The company went on to introduce many innovations, from being the first to

replace wooden chairs at schools with Polypropylene, to classic ergonomic

designs. Since then, and still behind each Sebel product today, is a genuine

manufacturing culture which is focused on making products that have the latest

ergonomics (Form), work at a practical level (Function) and are built to last

(Quality).

In 2011, the organization became part of KI www.ki.com the leading furniture

supplier in the USA for education, healthcare, corporate and government

markets. KI has sales offices and licensed manufacturing facilities throughout

the world, including now Australia, the United States, Canada, Latin America,

Europe, India, China and other Asian countries.”(The website of Sebel)

3. PROJECT DESCRIPTION

WHAT IS VALUE STREAM MAPPING?

“Developed during the work conducted by Taiichi Ohno at Toyota in the 1960’s

and 70‘s, at its basic level VSM is a systematic methodology to identify wasted

time and actions in a manufacturing process. In more recent times VSM it has

been used to re-engineer businesses because it identifies unnecessary effort

and resources to permit simplification and streamlining of operations

processes. It is useful to explain the meaning of several key concepts used in

VSM. These are: what waste is, what constitutes value-adding, along with what

is needless non-value-adding and what is necessary non-value-adding. VSM is

used to investigate processes to identify improvement opportunities lying in

their wastefulness and lack of fluidity.


Waste is one of the seven wastes identified by Toyota. These are:

Overproduction: Producing items for which there are no orders.

Waiting Time: Employees standing about. Inventory at stand-still.

Unnecessary Transport: Moving material unnecessarily or long distances.

Over-processing: Using more steps to produce a product than necessary.

Excess Inventory: Retaining unnecessary inventory between process steps.

Unnecessary Movement: Any wasted motion by man or machine.

Defect: Making incorrect product.

Value is from the customer’s perspective, the customer being the person who

uses the output. Value-adding actions and resources are those which create

value for the customer. Non-value-adding is everything done in the process

which contributes no value for the customer but which they are forced to pay for

when they buy the product or service. Necessary non-value-adding are those

actions in a process that must be done to make the product but create no value

for the customer. Unnecessary non-value-adding is removed and necessary

non-value-adding is minimized to the least possible.

Value Stream Mapping Methodology

In VSM we follow a process from start to finish monitoring and measuring what

happens within, and between, each process step. For each process step we

record the variety of resources used in the step, the amount of their usage and

the range of times each resource is in use as a block of information specific to

that step. The measured variables are collected together in a ‘variable block’.

From the information collected during data gathering the process is drawn as a

flow diagram showing the times and resources used at each step and the time

delay between each step. This diagram is called the ‘current state map’.

Inventory movements between steps are identified by the ‘I’ inside a triangle.

Under the triangle is noted the range of times the inventory can take to be

moved. A visualization of the location of value-add and non-value-add steps is

presented as a line across the bottom of the page which jumps up during a


value-adding step and stays low for all other times. The current state map is

scrutinized step by step to identify which of the functions and actions performed

in the step/process add ‘customer-value’ and which do not. The non-value-

adding actions and resources are analyzed to find where they can be

minimized through time-saving and cost-saving improvements. A secondary

benefit of timing the process steps and measuring the rate of throughput is

identification of the bottleneck steps. The bottlenecks can be redesigned to lift

their capacity and so increase the output rate of the whole process. The

reengineered process is drawn on a new flow chart known as the ‘future state

map’. It shows all the steps and information flows in a redesigned, simplified

and more efficient process.

Investigation

VSM requires spending time in the workplace recording the details of people,

product, equipment and information movements. It is necessary to record and

time the range of variables that occur in each process step during the

operation. It also requires viewing written records related to the process in

order to record dates, quantities, delays, stoppages, breakdowns, operating

decisions, absentees, etc that impacted on the performance of the operation

during the period being analyzed. The believability of the analysis is only as

good as its completeness of its content and the truthfulness and honesty it

contains. When there are provable facts extracted from documented evidence

and recorded site observation there can be belief in the findings from the

investigation.

Analysis

The worth of VSM becomes self-evident during the analysis phase. Once a

business or manufacturing process is drawn as a series of steps and described

in numerical terms, the inherent oddities and inconsistencies become evident.

The first analysis performed is to compute a ratio of total customer-value-

adding time to total process time to see how customer-effective the process is.

Often this figure is in the single digits. A low customer-value-adding ratio


indicates a process design without the customer’s wishes being considered.

The fortunate aspect of non-customer-oriented processes is the great scope

offered to cut big amounts of waste and cost from them. Other important factors

to identify during the analysis are the variability between good and poor

performance in each of the process steps and the time that inventory is

standing still between steps. Poor inventory speed is an indicator of too much

work-in-progress not leveled to the bottleneck rate. The problems identified in

the process are quantified in terms of the customer-non-value-adding time they

take.

Identifying Improvements

Opportunities for improvement readily present themselves as the analysis is

conducted. When developing proposals it is ideal if that the users of the

process are included in identifying the solutions so they take ownership for the

future implementation. During the analysis simplifications in process steps are

identified, procedural changes to stop wasted actions show themselves, and

equipment and process modifications needed to increase throughput rates

become evident. The selected improvements are included in the redesigned

‘future state map’ of the process.” (Sondalini.2009)

PROJECT BACKGROUND

Sebel was drastically modifying its business model, which between others,

included a reduction of its products range in order to simplify its operations, a

downsizing of its production facilities and a re-design of its supply chain for its

core products. This reengineering process implied a study of the core products

in the current state Value Stream compared to a future state Value Stream in a

centralized and decentralized logistics model.

The project consisted of analyzing the manufacturing operations of the

company as well as its process flows and supply chains, to define its different

type of wastes and actual value-added time, in order to identify potential


Kaizens for the company to improve its performance and reduce its costs and

total Lead Time.

Expected outcomes from the project were as follows:

1 Identified organizational processes or activities as potentially wasteful

2 The value chain broken down into its constituent processes/activities

3 Established relationship between processes/activities

4 Estimated average working time required to complete each process/activity

5 Identified average waiting time between processes/activities

6 Calculated total working time, wasted time, and efficiency

7 Analysis of current and future state model

8 Optional: A "what if?" alternative (a second such picture, "optimal future

state threshold" Value Stream Map). If one or more changes were

instituted, what would the future state look like in terms of total working

time, wasted time, and efficiency?

VSM PROJECT IMPACT OVER COMPANY’S STRATEGY

A relationship between the main aspects of Sebel strategy and the VSM

analysis can be seen in Figure 1.

Figure 1. Sebel’s strategy vs VSM impacts


PROJECT PLAN

Figure 2. Project’s Gantt Chart


4. MATERIALS AND METHODS

During the development of this project an office space with a desktop

computer, as well as office supplies were assigned for Sebel.

Figure 3. Pareto analysis for sales margin of core family products

The choice of Postura Plus Shell range as the core product to focus on, was

based on a Pareto analysis of the most representative family products in terms

of sales margin (see Figure 3) as well as on the analysis of processing

complexity for a pre-selection of family products (Table 1).

Table 1. Product – Process Matrix

0%

5%

10%

15%

20%

25%

30% 27%

11%8% 7%

4% 4% 3%2% 2% 2%

30%

Upholstery Basic

Hobnob chair

Postura Plus Shell range

Postura Plus 460

OP Desk

Postura Plus 260/310

PRODUCT

REQUIRED PROCESS

ReceivingPlastic

MouldingDespatch

Assembly


The method for the construction of the VSM analysis was as follows:

1 Brief explanation of the situation through interview with functional

managers (as shown in Appendix 1).

2 Data collection: For collection of times and distances data at the plant, I

adapted the standard tool of Process Flow Diagram (PFD) to the specific

needs of the company and the project (see Appendices 2 to 7) to use it for

on-site inspections. Other information was obtained from the MFG-Pro

(organizational MRP software) consultations, functional performance

reports, documented records, photos, videos, interviews with processes

responsible and finally, some assumptions were made, mainly regarding

future projections and an improved state (Appendix 1).

3 Process analysis and Mapping: Collected data were typed into

spreadsheets as well as the drawing of the VSM. I decided to utilize MS

Excel, given the ease to link processes data from PFDs to the VSM as well

as between the different scenarios of the VSM through the formulation of

the cells. Therefore not only VSM picture, but a basic model was created to

modify according to the business needs and to be used on upcoming

events and other core family-products. Nevertheless, this information could

be easily incorporated into a MS Visio file or an Arena simulation.

4 Review and validation: Periodical reports for review were e-mailed to

Sebel's Supervisors, as well as several meetings were held for progress

validation.

CURRENT STATE

In an attempt to have a whole picture of the different possible

scenarios for the organization, Sebel’s management decided

for this project to involve the mapping of a current, future and

a improved state, if possible. For this, a decision was made of

focusing in only one of the core family-products of the

company: Postura Plus Shell range; however, this was a

very representative product to work given its financial Figure 4. Postura

Plus Shell


significance and the comprehensiveness of its operations (as shown on Figure

3 and Table 1). Apart from upholstery, this product encompasses all the

internal operative processes of Sebel:

Receiving:

Local plastic raw

materials and basic

supplies such as

screws and materials

for packaging, and

critical components

such as metal frames

from overseas

(China).

Plastic Molding: This product contains 3 different plastic parts: one seat,

two plugs and two pins (Appendices 3 to 5), all of which are produced in-

house, in an injection process which commonly implies a mix of 97% of

Polypropylene (PP) and 3% of Masterbatch (color base). See Figure 5.

Assembly: Postura plus Shell requires manual assembly of frame plugs

and pins into the seat (as shown in Figure 6 and Appendix 6).

Dispatch: Sebel ships finished goods to its local (New South Wales – NSW

- metro and country areas)

and interstate customers

(Queensland, Western

Australia – WA -, Victoria,

South Australia – SA - and

Tasmania) as well as to

clients from overseas

(mainly New Zealand and

Honk Kong).

Figure 5. Plastic molding process

Figure 6. Assembly process



This general view about the business corresponded to the first part of the

project, a general induction for a basic understanding of the business. After

this, data collection and analysis stage began in the order in which Sebel

executed its processes/activities; as a result, a description of the current state

of the company’s VSM for Postura Plus Shell (Figure 7) was as follows:

1. A customer accepted, commonly by email or fax, a quote from Sebel and

during the course of the day, the Sales Rep enters the accepted quote into

Direct Selling, DS (organizational software for Sales and Customer Service

processes). Usually the next day, Customer service department carries out

a double-checking of basic data (product codes, etc.) uploaded from Sales

and places an official order on the system. However, given corporate

policies, orders were accepted indiscriminately regardless type of

customer, product or quantity ordered, normally offering 6 weeks or less of

LT to the customer, which resulted in low service levels and represented

high inefficiencies for the firm.

2. There is an overnight interface process between DS and MFG-Pro

(corporate MRP software), which groups and incorporates new sales orders

into MFG-Pro as new material requirements. This process represented one

more waiting day.

3. Planners release purchasing orders according to stock level and suppliers'

LT. It could take around 1 to 2 days for obtain a response from

suppliers, depending on the component. Parallel to it, internal Work Orders

(WO) can be released for scheduling of Plastic Molding Department (PMD),

assembly or dispatch. Purchasing orders are not only placed as a result of

sales orders but also depending on a minimum safety-stock and suppliers

usually deliver partial shipments. For purposes of this exercise, I tracked an

specific order for which the total supplier' LT was 6.5 weeks (Appendices

8 and 9), which represented an overdue on the time promised to the

customer and 64% of the total LT on the VSM for this order, as well as a

significant volume of Work-in-Process (WIP), since production of plastic

seats for this order was scheduled and ran regardless the lack of metal


frames for assembly of the chairs. Additionally, it seems that one of the

reasons for this order of frames to take such a long time was also a special

event (Chinese year celebrations), which should have been considered

in advance for Sebel on its MRP process.

4. Warehouse receives supplies

(components and finished goods),

unloads containers/trucks and stores

them; this operation could take an

average of 8 hours if performed by one

operator, with similar values for a

loading operation. After this, there is a transfer movement of the

merchandise on the MFG-Pro to the respective department, which implies

one day for the total LT of the VSM for receiving and one more for

dispatch, given that this area operates on a single shift of 8 hours per day

(Figure 8).

5. According to the VSM principle of “taking a picture of a specific moment”,

by the time this exercise was carried out, the level of stock for the various

components of the product was taken into account (Appendix 10), all of

them personally checked on the store. From these quantities (Appendices

11 to 16), inventory LT were calculated, in the case of plastic raw materials

assuming a proportion of PP on silos and masterbatch on store,

correspondent to the sales margin of the family-product (7%). For WIP of

plastic parts, metal frames and finished goods, inventory LT was calculated

as a relationship of the quantity and its real rate of production (as shown in

Appendix 1). However, even when

inventory LT for the seat was roughly

2 days, there was around 5 stillages

of physical WIP during weeks

(Figure 9), which demanded a

considerable storage space. More

details can be seen in the respective

PFD (appendices 2 to 7).

Figure 8. Receiving/Dispatching Process

Figure 9. Seats WIP


6. Once PMD's MRP is planned and production scheduled, a WO is released

to the shop floor, as shown in Appendices 17 to 19. There, plastic injection

molding processes take place for each of the required parts, whose details

can be seen in the respective PFD as well as explanation about some

calculations is given in Appendix 1. During the analysis of this process,

there was a long die change time (Figure 10), particularly for the seat (3

hours), which added to 2 hours of waiting

time caused by a breakdown, plus 1 hour

till the first good part was obtained,

represents a total Changeover time

(C/O) of 6 hours for an order of barely

260 units, a low uptime rate of 78%

and 65% of performance.

Although there are queue times between most of the activities along the

VSM, there is a relevant queuing time for a part as a result of the way

the process flows in batches. For instance, Postura Plus Shell was

temporarily kept in a stillage with capacity of 168 units; given that the Cycle

Time (C/T) is 225 seconds, it means that the first part on the batch waits

almost 11 hours (around 1.5 shifts of production) to go to the next process

(assembly).

It is also important to mention that, although volumes of scrap material are

relatively high on PMD (around 11% for the seat), most of it could be reused

for some products after a simple reprocessing.

7. In regards to the assembly process, the total setup time includes the

activity of frames' sorting (Figure

11), which consists of the separation

of different items from the stillages

when containers are received at the

warehouse. It usually takes around 1

shift of 8 hours (1 day) for two

Figure 10. Die change

Figure 11. Frames’ sorting


people to classify a container (6 stillages). Given that the analyzed WO was

for only 96 units, the assumed time corresponds to one stillage, which is

almost one hour and a half. This time plus the real time spent to setup the

assembly line for a new product, represents a total C/O time of 2 hours,

which, once again, given such as small WO, has a negative impact on

the process uptime rate (57%) and performance (55%).

The design of the chair is complex and,

even when during the molding process

seats require, between others, manual

operations such as putting a timber block at

the back during the cooling time to avoid

deformations (as shown in Figure 12), the

assembly liaisons (frame, plugs and pins) are not simple and demands

excess of handle time and tooling such as hammers to align components.

Additionally, this is a modular design which obtains different product

references using same components by only changing the frame; however,

plugs and pins are not required for the product functionality of this particular

reference (sled), so their incorporation into the product means overdesign

and overproduction, with all the respective costs' implications. Moreover,

chairs are grouped in stacks of 5 units, which, depending on the order, are

covered with a plastic bag tied on the

bottom, and heated into an oven. However,

given the dimension of the containers, this

operation is frequently undone at the

warehouse in order to fit more chairs per

stack, which means a waste of time,

energy, material and money.

Unlike the PMD C/T of almost 11 hours for a batch of 168 seats of Postura

Plus Shell, assembly works in batches of around 40 units (C/T of barely 47

min) which depicts a lack of production rhythm (Takt time) and could

represent a bottleneck.

Figure 12. PMD Manual operation

Figure 13. Assembly sequence


8. After the internal operations of the company, which represents barely

20% of the total LT, exists again a transportation activity for delivering the

finished goods to local, interstate and overseas customers, that could

encompasses truck transportation from Sebel to wharf or rail, shipping time

(on rail or on the water) and then, truck again to pick up products and

deliver them to clients. This transit times are quite variable depending on

the exact location of the customer (see Figure 7) with an average of 3 days

for NSW, 10 days for interstate, 23 days for overseas, and accounts for an

average of 17% of total LT on the VSM.

As a result of the exercise, for a Current State of the VSM, there is an

average of 71 days of total LT (10 weeks) for Postura Plus Shell, from which

2% (1.4 days) correspond to activities that add value to the product and for

which customers would be willing to pay for, and the rest 98% (70 days)

represents Non-value-added time. 80% of this LT stands for external

operations, with 46 days of supplying transportation time (64%), an average of

12 days shipping time (17%) and 14 days of internal operations (20%).

FUTURE STATE

Figure 14. Sebel new business model

IT system to support the

New model

Product Portfolio

rationalisation

New factory layout,

readiness and relocation

Supply Chain for all

"outsource" products and

setting up consolidation

(3PL) in China

New Sales office model

(warehouse, assembly,

order entry, orders

management)

Logistics requirements and

systems/process design to

support order fulfilment

Organisation structure to

support the new model


In the future, Sebel will change in many aspects (as shown in Figure 14) such

as the rationalization of its product portfolio, a downsizing and new layout of its

NSW operations facilities from 20.000 m2 to around 6000 m2, as well as a

redesign of its supply chain logistics, from a centralized to a decentralized

model, which implies to transfer its assembly and warehousing operations to

two of its main sales points: Queensland and WA. The objective of this strategy

is to reduce transit time and cost for those two new operation hubs, by

receiving components directly from China to be assembled (at least for core

products which does not require upholstery) and shipping finished goods from

the hub, instead of receiving and processing at Sydney to return final products

to each state.

The future state of the VSM for Postura Plus Shell range is based on its current

one, and mostly considers changes on the Supply Chain' Logistics of Sebel, as

the most critical aspect in terms of LT and given that the company was still

working on many other projections about its future business model. According

to this, the future VSM shows a summarized graphic representation of the

current state for Sebel locations at NSW, Victoria, SA, Tasmania and New

Zealand, since their operations will remain centralized on the Sydney facilities,

while for Queensland and WA, a figure of a 3PL on China was included for

consolidation of overseas components to be shipped directly to each of the

hubs (Hong Kong included) and plastic components are to be send from the

manufacturing facilities in NSW (see Figure 15).

For purposes of the exercise, operations of molding, assembly and warehouse

at Sebel NSW and its dependent locations, are considered to remain the same,

whilst an additional day for the expected response from 3PL to new orders, has

been included, as well as warehousing, inventories and/or assembly operations

were calculated according to the respective proportion of sales; for instance,

warehousing and assembly at the 3PL correspond to 33% of the current values

(12% for Queensland, 11% WA, 10% Hong Kong). Additionally, transit time of

overseas components between NSW and the hubs, was eliminated and direct

shipping times from China to hubs were incorporated.



As a result of the transition of the supply chain logistics to a decentralized

model for the two new hubs, a projection of Future State of the VSM shows

significant reductions on the LT for Queensland (-10 days) and WA (-18 days);

however, given that operations at the rest of the sales points was considered to

remain as it currently is, there is just an slight increase of 0.2% in terms of total

average value-added time (from a current 2% to 2.2% in the future). Taking this

into account, the challenge for the company was to carry out a cost-benefit

analysis to evaluate in what extend it is worth to establish a 3PL to decentralize

assembly and warehouse for those two markets, to save some money and

transit times for the hubs.

Table 2. Cost-benefit analysis (Monthly operating cost comparison)

A very basic analysis based on assumptions, was performed considering some

of the monthly operating costs which could be subject to change (Table 2),

such as rent (given the downsizing of the current Sydney facility from 20000 to

6000m2 and 2 new warehouses for the hubs, assuming 800m2 each),

transportation costs (given changes on the supply chain logistics), direct labor

and energy. This comparison shows that, even when there is a cost reduction

regarding decentralization, most of the savings corresponds to the downsizing.

current future difference %

$/h nsw 30

$/h outsource 43

PMD (labour) 20

Assembly (labour) 10

Rent Rent/month 170,000 64,600 -105,400 -62%

Freight cost/month 250,000 230,000 -20,000 -8%

Trucks costs 45,000 67,500 22,500 50%

Labour Direct 144,000 113,616 -30,384 -21%

Energy Energy $/month 60,000 60,000 0 0%

669,000 535,716 -133,284 -20%

-1,599,408 year

Material handling

OPERATING MONTHLY COST ANALYSIS

Sub-tot




5. RECOMMENDATIONS

During the documentation of the current state and projection of the future VSM,

wastes and non-value-added activities were identified, as well as main

opportunities for improvement (Kaizens highlighted in purple on the maps) and

suggestions were raised on the following action plan based on the 5W2H

methodology (What?, Why?, When?, Who?, Where?, How?, How much?)

shown in Table 3. Assumptions for prioritization were made regarding costs-

benefit for the organization and it is recommended for the company to establish

project teams to work on each of the considerations.

IMPROVED STATE

Considering the elimination/mitigation of the main non-value-added activities

and wastes after implementation of the Kaizens, an improved state of the VSM

was projected for a centralized and decentralized logistics model in Figures 16

and 17, and data modifications were highlighted on purple on the maps and

respective PFDs (Appendix 20). Assumptions were made as follows:

Planning of the operations would be immediately after a customer places an

order, given that double-checking at customer service would not be

necessary, and there is a comprehensive and robust ERP software that

avoids overnight interfaces and make easier the planning task.

Suppliers LT could be reduced in at least 4 weeks given that Sebel would

plan its demand based on accurate forecasts, which would be periodically

updated and shared with 3PL and suppliers, so that, they could plan their

production and inventories in advance to respond to weekly orders from the

company.

Receiving and dispatching times are halved at the warehouse as a result of

less merchandise volume (not shipment of finished goods from NSW to

Queensland and WA) and better packaging and loading methods.




As a result of better preventive maintenance and setup practices at PMD,

C/O time and breakdowns would be reduced to half, while setup time for

assembly would disappear once frames' sorting is eliminated by linking

components to orders directly from supplier/3PL site.

Value-added time would increase if potential bottlenecks are prevented by

balancing the process flow (batch sizes).

As a result, for an Improved state of the VSM if Sebel decides to keep its

operation centralized, there is an average of 35 days of total LT (5 weeks) for

Postura Plus Shell, from which 5% (1.7 days) correspond to activities that

add value to the product, and the rest 95% (33 days) represents Non-value-

added time. 74% of this LT stands for external operations, with 14 days of

supplying transportation time (40%), an average of 12 days shipping time

(35%) and 9.2 days of internal operations (26%).

On the other hand, if Sebel goes for the decentralized model, in an Improved

state of the VSM there would be an average of 27 days of total LT (less than 4

weeks) for Postura Plus Shell, from which 7% (1.7 days) correspond to

activities that add value to the product and for which customers would be

willing to pay for, and the rest 93% (25 days) represents Non-value-added time.


6. CONCLUSIONS

According to previous researches, a common value-added time for most of

the companies regardless the industry sector, is around 5% of the total LT;

however, for world-class manufacturing companies such as Toyota, 20% of

its LT corresponds to value-added time (Figure 18). Sebel’s VSMs

describes how, barely 2% of the total LT represents value-added time, by

just changing from a centralized to a decentralized model, in the future the

company would have 2.2% of value-added time. Nevertheless, through the

parallel improvement of some other aspects, in the short-medium term, the

value-added time of the organization could account for between 5 and 7%

of the LT and place the firm on track towards a world-class performance in

the medium-long term.

Figure 18. Comparison of proportional value-added time

Findings on this report are the result of the construction not only of VSM

diagrams, but a parameterized model which could be used for any family-

product and/or different scenarios by simply changing data.

A future decentralized supply chain logistics would be successful to the

extent that Sebel is able to handle the complexity that this model depicts;

0% 5% 10% 15% 20%

Sebel

Common

World Class

Proportional Value-added time

Ideal

Improved

Future

Current


that is, the company’s Sales and Operations Planning (S&OP) should be

carried out based on its demand planning by forecast techniques. Moreover,

based on the S&OP and forecast periodic updates, the MRP process for

each of the operative locations should be accurate in order to match at the

hubs, components from different sources, as well as not to lose the saved

time and cost as a result of idle times and overstock, which involves a

reassessment of inventory policies regarding Safety Stock and Safety Lead

Times for every sales point. All this, requires a comprehensive, robust and

reliable ERP software, which additionally, facilitates to have handy

information for the management, to expedite the decision making process.

The 3PL figure would play a critical role in the decentralized model as it

could represent the inventory's trade-off for the hubs, as a result of

fluctuations on demand.


7. REFERENCES

1. “Sebel’s corporate website”. Viewed 4 March 2013,

http://sebelfurniture.com/aboutus/aboutus-corporate.php

2. Mike Sondalini. “How to do Value Stream Mapping”. Viewed 8 March 2013,

http://www.lifetime-reliability.com/free-articles/lean-management-

methods/How_to_do_Value_Stream_Mapping.pdf

3. “Toolingu, Quality training, Lean Manufacturing”. Viewed 7 June 2013,

http://www.toolingu.com/class-900130-lean-manufacturing-overview.html

4. “Wikipedia”. Viewed 7 June 2013, http://en.wikipedia.org/

http://sebelfurniture.com/aboutus/aboutus-corporate.php

http://www.lifetime-reliability.com/free-articles/lean-management-methods/How_to_do_Value_Stream_Mapping.pdf

http://www.lifetime-reliability.com/free-articles/lean-management-methods/How_to_do_Value_Stream_Mapping.pdf

http://www.toolingu.com/class-900130-lean-manufacturing-overview.html

http://en.wikipedia.org/


8. APPENDICES

DATA/INFORMATION SOURCE SUPPORT / DEFINITION APPENDIX CALCULATION

Times for Sales Rep to entry

data on Direct Selling after

customer approve the quote

and Customer Service to

double-check it and officially

release the order

Customer Service

Management

Time for interface between

Direct Selling and MFG-ProPlanners

Time to perform the planning

and purchasing processes for

the daily requirements from

MFG-Pro

Planners

PMD Production schedule

timePMD Management

Assembly schedule time Assumption

Bill of Materials (BOM) MFG-Pro report 13.6 (Product structure inquiry) 10

Average LT for plastic raw

material from the time an order

is placed to the time it is

received

PlannersMFG-Pro reports 5.7 (Purchase order maintenance) and

5.9.18 (Supplier performance)8

Average LT for overseas

components from the time an

order is placed to the time it is

received

PlannersMFG-Pro reports 5.7 (Purchase order maintenance) and

3.21.2 (Transactions item by item inquiry)9

Warehouse receiving

(unloading) and despatch

(loading) times

Warehouse

Supervisor and Clerk

Cycle time (C/T) On-site inspection Effective operation time (Operation run time / piece) x batch size

Changeover time (C/O)

On-site inspection,

Daily day register

excel file

Setup time to prepare the Work Station (WS),

independent of batch size

Downtime of machine from last product (last

order) to first good product (next order)

Actual production time PFDs Total time spent to complete a work order Total production time per order

Available time PFDs

Actual production time that does not include downtime

events (planned maintenance, breakdowns, lunch

periods and breaks)

Actual production time - C/O time

Uptime (%) PFDs Proportion of the net available working time Actual prod t / Available time

Performance (%) PFDs Proportion of the real time in producing of an order(Tot units produced * C/T) / Actual production

time

Shifts PMD Management

Quality (%)

PFDs, Work order

packing list, PMD

Operator production

sheet

2 to 7, 17

to 19

Good parts prod / Tot parts prod or 1 -

Defectives %

Batch On-site inspection # of operators involved on the process

People On-site inspection

Defectives rate

PFDs, Work order

packing list, PMD

Operator production

sheet

# defective products / tot prod

ProductivityOn-site inspection,

PFDsGood parts / Total production time per order

Transportation PFDs

Movement of product between processes, normally

using a fork lift truck to manoeuvre product around the

factory

Waiting time PFDs

t spent waiting to be processed at a WC, which

depends on workload and schedule. waiting for

machines (breakdowns), products, people, information,

etc

Inventory quantities

On-site inspection,

MFG-Pro reports 3.2

(Inventory detail by

item inquiry) and

3.21.2 (Transactions

by item inquiry)

Inventory lead timeUnits in stock represented in terms of the required time

to produce themInventory quantity / productivity

Shipping/delivering average

times

Warehouse Clerk /

Credit ManagerAverages

Takt timeRate (rhythm) at which the company should produce to

satisfy the demand

Tot yearly time available for production /

Demand

DemandFinancial statement

Sales 2011-2012

Average sales 2011-2012 for postura plus

chair

Expected response time from

suppliers to 3PL in a future

state

Planning and

assembly

management

Suppliers production LT Planners

Sales composition per marketAccount

management

Shipping LTsSupply Chain

Management

Projected cost of outsourced

assembly

Account

management

2 to 7

Appendix 1. Sources and calculations matrix


Appendix 2. Warehouse receiving PFD


Appendix 3. PMD Seat PFD



Appendix 4. PMD Plug PFD


Appendix 5. PMD Pin PFD


Appendix 6. Assembly PFD



Appendix 7. Warehouse dispatch PFD


Appendix 8. Masterbatch purchasing order data and receiving date


Appendix 9. Frames purchasing order data and receiving date


Appendix 10. Postura Plus Shell Sled Charcoal BOM


Appendix 11. Polypropylene inventory


Appendix 12. Masterbatch inventory


Appendix 13. Seat inventory


Appendix 14. Plug inventory


Appendix 15. Pin inventory


Appendix 16. Finished goods inventory


Appendix 17. Seat PMD WO, packing list and production sheets





Appendix 18. Plug PMD WO and packing list


Appendix 19. Pin PMD WO and packing list


Appendix 20. Assumed PFDs for Improved VSM






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