Embed Size (px)
Citation preview
Richard BivinsPrincipal
Victor7, LLC
Session 11C
© Victor7, LLC All right reserved
October 21, 2014 1ASQ NEQC 60th Conference, Springfield, Massachusetts
How using Lean thinking in the design can reduce wastes throughout the chain
How Lean execution in the entire supply chain will put your company in position to delight.
You will begin to see how Lean thinking and its environmental impact can help your company increase its profits.
You will get a look at standardized supply chain structure.
A quick look at the metrics developed to measure how a supply chain is performing.
October 21, 2014 ASQ NEQC 60th Conference, Springfield, Massachusetts 2
Lean Supply Chains (LSC) improve response to shifting markets without relying on more accurate forecasts & distribution expenses
Focus of LSC on customer demand delivers orders while streamlining total distribution expense
LSC operates on actual demand & allows for normal variation; execution must be flawless
October 21, 2014 3ASQ NEQC 60th Conference, Springfield, Massachusetts
Globalization has made Supply Chain Management a prime consideration in the boardroom.
General Omar Bradley: “Amateurs think and talk strategy. Professionals talk logistics.”
In business today it is supply chains against supply chains.
October 21, 2014 4ASQ NEQC 60th Conference, Springfield, Massachusetts
“A global network used to deliver products and services from raw materials to end customer through an engineered flow of information, physical distribution and cash”
APICS Dictionary 13th Edition
October 21, 2014 ASQ NEQC 60th Conference, Springfield, Massachusetts 5
Supply Chains have four process flows:
1. Primary Product/Service
2. Information
3. Cash
4. Return Goods
Supplier
Producer/Provider
Customer
Product Service
Product Service
Information
Cash
Return
6
Three reasons to modify supply chain strategy
Change in the market:Zara introduces hot new style. What do you do?
Change in business direction:Convert from gasoline to electric
Anticipated change in market:Home building changes to modular
October 21, 2014 7ASQ NEQC 60th Conference, Springfield, Massachusetts
Supply Chain Management: “The design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand, and measuring performance globally.”
October 21, 2014 8ASQ NEQC 60th Conference, Springfield, Massachusetts
APICS Dictionary 13th Edition
October 21, 2014 ASQ NEQC 60th Conference, Springfield, Massachusetts 9
Lot Production
Less Expensive
Production too
Late
Production too
soonOverproduction
Needed items
cannot be
produced
Non-urgent
inventories
Unneeded
inventories
accumulate
Clients trust lostQuality information delays, early
consumption of raw materials,
storage operation losses, transport
losses, storage space losses,
interest increases
Low Business
Efficiency
Leveled
Production
More expensive
Produce in a timely
fashion only what is
actually sells
Only minimal
inventories needed
Only minimal
equipment capacities
& personnel needed
High Business
Efficiency
High Diversity
Low Volume
Production
JIT
Process
Uncontrolled
Process
“The determination of how to structure a supply chain. Design decisions include the selection of partners, the location and capacity of warehouses and production facilities, the products, the modes of transportation and supporting information systems.”
October 21, 2014 ASQ NEQC 60th Conference, Springfield, Massachusetts 10
APICS Dictionary 13th Edition
Product design–including supply chain partners in the design phase results in a more robust design with features that will lower costs, make the product easier to build, service and sell.
Customer value–Most Important
What mix of products and services are valuable to the customer (empathic design)
Develop customer metrics
Design the SC so that it enhances the customer value.
Information technology and decision support systems
What data to use
What data to analyze
IT integration
October 21, 2014 ASQ NEQC 60th Conference, Springfield, Massachusetts 11
“The determination of a set of policies and procedures that govern the operation of a supply chain. Planning includes the determination of marketing channels, promotions, respective quantities and timing, inventory and replenishment policies, and production policies. Planning establishes the parameters within which the supply chain will operate.”
APICS Dictionary 13th Edition
12October 21, 2014 ASQ NEQC 60th Conference, Springfield, Massachusetts
Supply Chain Operations Reference(SCOR®)
Planning
1. Resources must be balanced with requirements and lines of communication established for the entire supply chain.
2. Configuration management, business rules, data collection, chain performance evaluations, inventory and regulatory compliance and capital assets.
3. Bring the supply chain physical plan into agreement with the financial plan.
13October 21, 2014 ASQ NEQC 60th Conference, Springfield, Massachusetts
14
Supply Chain Process Model (SCOR®)
Deliver
Return
Source
Plan
Plan
Plan
Return
Deliver
Return
MakeSource
Return
Deliver
Return
Make
Source
Return
Deliver
Return
MakeSource
Return
Suppliers’
Supplier
Supplier -
Internal or ExternalYour Company
Customer -
Internal or External
Customers’
Customer
October 21, 2014 ASQ NEQC 60th Conference, Springfield, Massachusetts
Multiple dysfunction Nucleus company has no structure or goals; “fly by the seat of
their pants”
Semi-functional enterprise Nucleus company begins to organize into departments but no
cross-functional overlap
Integrated enterprise Nucleus company internal functions work together; sales and
operations planning (S&OP), demand management
Extended enterprise Nucleus company connects their internal networks with key
supplier internal networks
October 21, 2014 15ASQ NEQC 60th Conference, Springfield, Massachusetts
Knowledge is gained when work is done to improve a process or situation. The challenge is to not wait for service failures to occur, but to monitor processes continuously, isolate best practices and share this knowledge throughout the organization.
October 21, 2014 16ASQ NEQC 60th Conference, Springfield, Massachusetts
Achieve end-to-end visibility
Adopt an integrated planning and execution platform
Focus on delivery expense management: Total Landed Expense is all expenses from raw materials to final delivery.
Focus on financial supply chain management.International trade requires a mastery of import /export finance.
Business information demands accelerate constantly. Ensure needed technology is available & usable across entire chain
Adapted from “The Supply Chain Digest Letter ™ May 2008
October 21, 2014 17ASQ NEQC 60th Conference, Springfield, Massachusetts
Commit to total identification. Participate in voluntary efforts such as the Customs-Trade Partnership Against Terrorism (C-TPAT) to avoid delays in shipping.
Embrace variability management. Use advanced information & communication systems to shorten lead times; ensure excess safety stocks do not choke the global supply chain
Maintain transportation flexibility. Maintain alternate logistical plans including multiple carriers, routes, etc.
Adapted from “The Supply Chain Digest Letter ™ May 2008
October 21, 2014 18ASQ NEQC 60th Conference, Springfield, Massachusetts
Levels of Communication:
Transaction and information sharing–single source of information; forecasts, transactions and process flow.
Shared processes and partnershipcollaborate on some processes such as design; share knowledge across network.
Linked competitive vision and strategic alliance–high level of trust, social and cultural understanding, information sharing, very long term relationships
Backward integration (mergers & acquisitions)–work to form complementary organization, or suffer clashes of personality and culture.
October 21, 2014 19ASQ NEQC 60th Conference, Springfield, Massachusetts
Jonathan Byrnes of MIT writes in the Business School’s “Working Knowledge” that firms need multiple supply chains.
Divides products into three categories:
Staples: Razor blades, white underwear,
Seasonal: repeatable and known cycles
Fashion: Short lead times, short life cycle.
This implies that each of these different categories require separate, though sometimes interweaving, supply chains.
October 21, 2014 20ASQ NEQC 60th Conference, Springfield, Massachusetts
Build A Collaborative Relationship:
Information exchange subject to audit
Connecting communication technology
Contracts that put proper behavior as the prime interest of all parties
Long term plans with constant communications that build trust
Leaders with authority aligned to the relationship
Focus on the entire chain
Visibility of inventories and the impact of fluctuations
Knowledge sharing
Each partner shares the benefits and burdens
October 21, 2014 21ASQ NEQC 60th Conference, Springfield, Massachusetts
Features and Benefits of Collaboration
Features Benefits
Joint development shared processes Lower costs
Sharing of information and Knowledge Improved quality
Jointly developed performance metrics Improved customer service
Two way communication Reduced inventory
Network wide visibility Rapid project results
Established roles and responsibilities Reduced cycle and lead times
Joint problem solving Improved working relationships
Commitment to the relationship Commitment to each other
October 21, 2014 22ASQ NEQC 60th Conference, Springfield, Massachusetts
Barriers:
Sub-optimization in processes
Incentive programs conflict with organizations’ goals
Work with competitors
Bottlenecks caused by the weaker members
Technology limitations
Power-based relationships
Underestimated benefits
Culture conflicts
October 21, 2014 23ASQ NEQC 60th Conference, Springfield, Massachusetts
Reasons for collaboration: Strategic importance: critical to avoid mistakes. Either
make in house or if expertise can only be found outside then build alliances with few firms.
Complexity: where product is sophisticated or highly technical, alliances may be necessary to obtain reliable components on schedule. Example would be aircraft or automobiles.
Number of suppliers: where few providers exist, probably wise to form a close alliance to ensure availability.
Uncertainty: how secure is the supply chain?
October 21, 2014 24ASQ NEQC 60th Conference, Springfield, Massachusetts
Evolution of Collaboration:
Level 1) Supply and distribution decisions are not coordinated, simplistic use of MRP
Level 2) Organization organized with functional thinking/ department(silos). MRP II replaces MRP; limited interdepartmental communication
Level 3) Interdepartmental teams begin to open communication and measure performance. ERP replaces MRP II, culture of continuous improvement begins.
Level 4) Information used to integrate activities across functions. Partnerships appear within the organization and between suppliers & customers
October 21, 2014 25ASQ NEQC 60th Conference, Springfield, Massachusetts
Speed compliments location
Clustering reduces logistics expense
Concurrent processes replace sequential processes
Bits...not pieces
Modeling and simulation, not hardware
Rapid prototyping
Seamless multi-media communication between players
Relationships
Learning
Compete on innovation, not cost!
October 21, 2014 26ASQ NEQC 60th Conference, Springfield, Massachusetts
Know your core competencies
Leverage your partners’ capabilities
Always work on communication
Give your partners all the information they need to succeed Remember that they usually don’t know your business
Tell them everything they need to know...plus some!
Always ask for your partners’ inputs and feedback Do it a lot...then do it again!
Make everybody understand honest answers and candor are in everyone’s best interests
Cherish your complainers...they’re the ones telling you the truth!
October 21, 2014 27ASQ NEQC 60th Conference, Springfield, Massachusetts
Reduce waste in supply chain
Maximize values
Develop agile enterprise
Benchmark for best processes/ideas
October 21, 2014 28ASQ NEQC 60th Conference, Springfield, Massachusetts
Synchronization of supply and demand: critical to achieving service and expense goals
Capacity in supply chain must be managed strategically
Critical capacity constraints must be top-of-mind management
Decoupling of supply from demand normally occurs immediately downstream of the supply chain bottleneck
October 21, 2014 29ASQ NEQC 60th Conference, Springfield, Massachusetts
Differentiation of products should be postponed until last possible moment
Significant supply chain improvement is always a major organizational challenge
Keep in mind that..
However...NONE OF THIS IS EASY!
THE COMPETITIVE BENEFITS OF SUPPLY CHAIN IMPROVEMENT ARE ENORMOUS!
October 21, 2014 30ASQ NEQC 60th Conference, Springfield, Massachusetts
Lack of management commitment
Lack of understanding of Lean Six Sigma, agility, modern manufacturing, distribution and scheduling methods
Lack of training and understanding of SCE
Lack of partnerships with suppliers
Inadequate computerized systems
October 21, 2014 31ASQ NEQC 60th Conference, Springfield, Massachusetts
Two methods for developing supply chain metrics:
Balanced scorecard: developed 1992 by Robert S. Kaplan and David Norton (HBS). This approach requires expertise and one should obtain experienced guidance initially.
SCOR™ process Model: maintained by the Supply-Chain Council
Applicable between processes and companies
Formula based allowing for best in category comparisons
Tested by SCC members
October 21, 2014 32ASQ NEQC 60th Conference, Springfield, Massachusetts
Balanced scorecard
Customer perspective: on time delivery and customer satisfaction
Business process perspective: productivity, efficiency, etc.
Innovation and learning perspective: staff training and novel approaches to the business
Financial perspective: return on investment (ROI) and debt-to-equity ratios measure financial performance
October 21, 2014 33ASQ NEQC 60th Conference, Springfield, Massachusetts
Goals Measures Goals Measures
Goals Measures Goals Measures
Innovation and Learning
PerspectiveCustomer Perspective
Business Process
Perspective Financial Perspective
October 21, 2014 34ASQ NEQC 60th Conference, Springfield, Massachusetts
Performance
AttributePerformance Attribute Definition Level 1 Metric
Supply chain
reliability
The performance of the supply chain
delivering the correct product, to the
correct place, at the correct time, in the
correct condition and packaging, in the
correct quantity, with the correct
documentation to the correct customer.
Perfect order fulfillment
Supply chain
responsiveness
The speed at which a supply chain
provides products to the customer
Order fulfillment cycle
time
Supply chain
flexibility
The agility of the supply chain in
responding to marketplace changes to
gain or maintain competitive advantage
Upside supply chain
flexibility
Upside supply chain
adaptability
Downside supply chain
adaptability
October 21, 2014 35ASQ NEQC 60th Conference, Springfield, Massachusetts
Performance
AttributePerformance Attribute Definition Level 1 Metric
Supply chain
costs
The costs associated with operating the
supply chain
Supply chain
management cost:
Cost of goods sold
Supply chain
asset
management
The effectiveness of an organization in
managing assets to support demand
satisfaction; includes the management of all
assets: fixed and working capital
Cash-to-cash cycle
time
Return on supply
chain fixed assets
October 21, 2014 36ASQ NEQC 60th Conference, Springfield, Massachusetts
Reliability: percent of perfect orders delivered on time
Perfect Order Fulfillment = (Total perfect orders/Total orders)*100
Responsiveness: the amount of time needed to deliver an order
Order Fulfillment Cycle Time = Order fulfillment process time + Order fulfillment dwell time
Average Actual Cycle Time = Sum of actual cycle times of all delivered orders/Orders delivered
Flexibility: the ability to accommodate unexpected orders, earlier/later, more/fewer SKUs, new delivery location…
Upside & downside SC adaptability: the amount of increased or decreased production the SC will sustain with in 30 days
October 21, 2014 37ASQ NEQC 60th Conference, Springfield, Massachusetts
Supply chain management cost (SCMC): All expenses both direct and indirect in the supply chain except production
Measures
Level 1
Level 2
TSCMC
Cost of
Planning +
Cost of
Sourcing+ 0 +
Cost of
Delivering +
Cost of
Returning
Level 3
Level 4
Supply chain management costs (SCMC)
Breakdown each level 2 cost
Detail costs
Formula
October 21, 2014 38ASQ NEQC 60th Conference, Springfield, Massachusetts
Cost of Goods Sold (COGS): all the production (to make) expenses both direct and indirect
Measures
Level 1
Level 2
TSCMC 0 + 0 + Making + 0 + 0
Level 3
Level 4
Formula
Cost of Goods Sold (COGS)
Breakdown each level 2 cost
Detail costs
October 21, 2014 39ASQ NEQC 60th Conference, Springfield, Massachusetts
Cash-to-Cash Cycle Time: the time for a purchase of production items to be received back by the company Cash-to-Cash cycle time = inventory in days + sales outstanding
in days – payables outstanding in days
Return on supply chain fixed assets: the revenue return on the supply chain equipment Return on supply chain fixed assets = (Supply Chain Revenue –
COGS – Supply Chain Management Costs)/Supply Chain Fixed Assets
October 21, 2014 40ASQ NEQC 60th Conference, Springfield, Massachusetts
To wrap-up this presentation, the objective of the Lean Supply Chain is give an organization a comparative advantage by delivering:
the Perfect Order (the right thing, the right time, theright place, the right condition and the rightprice) better than the competition
October 21, 2014 41ASQ NEQC 60th Conference, Springfield, Massachusetts
Questions?
October 21, 2014 ASQ NEQC 60th Conference, Springfield, Massachusetts 42
Richard BivinsVictor7, LLC
39 Monroe StreetNorwood, MA 02062-4262
781.775.4462
© Victor7, LLC All right reserved
October 21, 2014 43ASQ NEQC 60th Conference, Springfield, Massachusetts
