Joel Sutherland Managing Director Center for Value Chain Research Lehigh University The Seven Deadly Supply Chain Wastes Applying Toyota Production System Principles to Create Logistics Value
Application of Toyota Production System (TPS) principles to identify and eliminate supply chain wastes - also referred to as Lean Supply Chain
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1. The Seven Deadly Supply Chain Wastes Applying Toyota
Production System Principles to Create Logistics Value Joel
Sutherland Managing Director Center for Value Chain Research Lehigh
University
2. The Seven Deadly Supply Chain Wastes
http://www.scmr.com/article/CA6578682.html& Author Information:
Joel Sutherland is managing director, Center for Value Chain
Research at Lehigh University, and past vice president of Denso
America (Toyota's largest supplier). Bob Bennett is president of
Lean Consulting Associates, LLC, and former group vice president of
Toyota Motor Sales USA, Inc. All rights reserved, Joel Sutherland,
2009
3. The Roots of TPS (Lean) 1920s: Ford applies Continuous Flow
concepts to assembly line processes Quality means doing it right
when no one is looking Henry Ford All rights reserved, Joel
Sutherland, 2009
4. The Roots of TPS (Lean) 1930s-1950s: Toyota expands concept
to create the Toyota Production System (TPS) Dr. Shigeo Shingo and
Taiichi Ohno were partners in developing the Toyota Production
System, now known as Lean. Taiichi Ohno provided the vision and the
drive; Dr. Shingo solved the practical problems and translated
Ohno's vision into reality. All rights reserved, Joel Sutherland,
2009
5. The Roots of TPS (Lean) 1980s: Motorola formalizes the Six
Sigma Discipline for Process Measurement 1991: MIT completes 5 year
study of auto industry, renames TPS Lean Production All rights
reserved, Joel Sutherland, 2009
6. Key Principles of TPS Muda = Anything that is wasteful and
doesnt add value Process Focus = Cross-organizational cooperation
to optimize total system performance Genchi Genbutsu = Collecting
facts and data at the actual site of the work or problem Kaizen =
Continuous and incremental process improvement Respect between
management, Mutual Respect = employees, and business partners All
rights reserved, Joel Sutherland, 2009
7. Muda Every activity in your organization does one of the
following: Adds value for your customersand should be maintained Is
waste (muda)and should be eliminated All rights reserved, Joel
Sutherland, 2009
8. Process Focus Most companies place the organization chart in
the foreground Managers think vertically to optimize their area,
department, or function. Purchasing Manufacturing Logistics Sales
Horizontal flow of value to customer gets lost. All rights
reserved, Joel Sutherland, 2009
9. Process Focus Purchasing Manufacturing Logistics Sales What
results do we need to achieve? (Vertical Coordination) What Process
are we going to use to get there? (Horizontal Coordination) All
rights reserved, Joel Sutherland, 2009
10. Organizational Alignment Support # Objective Target Jan Feb
Mar Apr May Jun Jul Aug Sep Oct Nov Dec Depts Implement Pull Sales
1 On-time 98% Make right part at right time delivery Purchase
improvement Logistics Problem Solving Mfg Quality 2 Product 20%
Qualify suppliers HR quality Data collection Mfg improvement
Purchase Solve two problems per month Deploy plan Mfg 3 Cost -15%
reduction Logistics Standardize Work, Kaizen, Line Balancing HR
Productivity improvement Finance All rights reserved, Joel
Sutherland, 2009
11. Genchi Genbutsu Its amazing how many opportunities you can
identify by carefully observing operations . All rights reserved,
Joel Sutherland, 2009
12. Kaizen Make problems visible so they can be identified and
solved then move on to the next opportunity. All rights reserved,
Joel Sutherland, 2009 12
13. Kaizen: Asking the Right Questions Dr. Shigeo Shingo was
walking through a factory with a group of engineers. He stopped in
front of a punch press and watched two workers loading and
unloading sheet metal. He looked at his stopwatch and asked,
quot;What percentage of the time are they adding value and what
percentage of the time are they adding waste? One engineer said,
quot;100%, they are always working.quot; Another said, quot;Only
70%.quot; Another said, quot;50%.quot; Dr. Shingo laughed and said,
quot;Only 14%. It is only when the press is bending the metal are
we adding value --the rest is waste. Source: www.lean-briefing.com
All rights reserved, Joel Sutherland, 2009
14. Kaizen: Asking the Right Questions Then Dr. Shingo asked,
quot;What can you do to improve the ratio? One engineer spoke
immediately, quot;You can put the blank sheets onto a leveler, like
dishes in a cafeteria, keeping the steel always at the height of
the press and reducing the bending time to pick up a sheet. Another
engineer said, quot;You can put a spring at the back of the press
to automatically reject the formed sheet after the operation so the
worker doesn't have to reach into the press. Dr. Shingos genius was
to understand what waste was and stay focused on its removal. He
knew there was real power in asking the right question --not
telling people what to do. Source: www.lean-briefing.com All rights
reserved, Joel Sutherland, 2009
15. KaizenThe Five Whys Problem: Washington Monument was
disintegrating Why is it disintegrating? Use of harsh chemicals Why
use harsh chemicals? To clean pigeon poop Why so many pigeons? They
eat spiders and there are a lot of spiders at the monument Why so
many spiders? They eat gnats and there are a lot of gnats at the
monument Why are there so many gnats? They are attracted to the
light at dusk Solution: Turn on the lights at a later time All
rights reserved, Joel Sutherland, 2009
16. Mutual Respect Trust Employee Organizational Satisfaction
is Mutual Prosperity is realized through Respect achieved through
Continuous Continuous Continuous Improvement Process Improvement
Improvement All rights reserved, Joel Sutherland, 2009
17. The Seven Deadly Supply Chain Wastes Over- Delay/
production Waiting Space Inventory Errors All rights reserved, Joel
Sutherland, 2009 17
18. 1. Overproduction Delivering products before needed
Requesting a quantity greater than needed for end use. Requesting
products or components earlier than needed. All rights reserved,
Joel Sutherland, 2009
19. Overproduction--Example Lets load the trailers and let them
wait until we get an order. All rights reserved, Joel Sutherland,
2009
20. Overproduction--Results Firm orders = 10,000~12,000/day
16,000~20,000/day Overproduction = 4,000~10,000/day Problem:
Inaccurate demand forecasting Solution: Demand forecasting process
improved to include weather thereby aligning production with demand
Results: 35% improvement in sales forecast accuracy All rights
reserved, Joel Sutherland, 2009
21. 2. Space Less than optimal use of space Less than
full/optimal trailer/container loads Cartons not filled to capacity
Inefficient use of warehouse space All rights reserved, Joel
Sutherland, 2009
22. Space--Example The curse of the 60 x 60 Pallet All rights
reserved, Joel Sutherland, 2009
23. Space--Solving the Problem Automobile Air Conditioner 52 26
26 All rights reserved, Joel Sutherland, 2009
24. Space--Results Packaging redesigned for 40 x 48 pallets
Reduced transportation costs 30~40% More efficient use of dock
doors Pallet costs reduced significantly All rights reserved, Joel
Sutherland, 2009
25. 3. Delay/Waiting Any delay within a process or between the
end of one activity and the start of the next activity Waiting for
a dock to clear Waiting for loading/unloading Delay between
receiving customer order and fulfilling the order All rights
reserved, Joel Sutherland, 2009
26. Delay/Waiting--Example Strict labor union rules29 job
classifications Multiple handoffs vs. continuous flowe.g.,
receiving/put-away & picking/shipping Significant delays
incurred from one process to the next Joint genchi genbutsu with
union & management All rights reserved, Joel Sutherland,
2009
27. Delay/Waiting--Results Reduced job classifications from 29
to 18 >30% improvement in receiving/shipping productivity
Improved order to delivery cycle times All rights reserved, Joel
Sutherland, 2009
28. 4. Transportation/Conveyance Unnecessary transport that
results in added cost Out-of-route stops Excessive backhaul
Locating fast moving inventory to the back of the warehouse All
rights reserved, Joel Sutherland, 2009
29. Transportation/Conveyance--Example Shippers had excessive
deadhead 5 Retail Shippers Matched/balanced freight patterns (10
loads/week) Selected regional carriers Arranged committed capacity
Established lower rates 1 Paper Shipper (10 loads/week) All rights
reserved, Joel Sutherland, 2009
30. Transportation/Conveyance--Results Reduced deadhead from
16% to 3% Reduced number of carriers by 80% On-time pickup &
delivery >98% Cost savings of 10% to 15 % per shipper All rights
reserved, Joel Sutherland, 2009
31. 5. Inventory Any logistics activity that results in more
inventory being positioned than needed or in a location other than
where needed Too much inventory due to early deliveries Receiving
quantity greater than needed Inventory in the wrong DC All rights
reserved, Joel Sutherland, 2009
32. Inventory--Example (Curtin Matheson Scientific) But we need
to have all our inventory close to the customer. All rights
reserved, Joel Sutherland, 2009
33. Inventory--Example Market segmentation Clinical (doctors
offices) Industrial (Fortune 500) Purchasing patterns/processes
Clinical (out-of-stock) Industrial (monthly purchase orders) Lead
time requirements Clinical (1 day) Industrial (5 days) Network
adjustment All rights reserved, Joel Sutherland, 2009
34. Inventory--Results Reduced network from 22 to 19 DCs
Clinical19; Industrial5 Slow movingCentral DC Reduced inventory by
30~35% Improved fill rate All rights reserved, Joel Sutherland,
2009
35. 6. Motion Unnecessary movement of people Walking, reaching,
and stretching Caused by poor storage arrangement or poor ergonomic
design of packaging work areas All rights reserved, Joel
Sutherland, 2009
36. Motion--Example Because weve always done it this way. All
rights reserved, Joel Sutherland, 2009
37. Motion--Example One continuous flow Reduced storage Handled
once Reduced inventory ~40% travel reduction JIT All rights
reserved, Joel Sutherland, 2009
38. 7. Errors Any activity that causes rework, unnecessary
adjustments or returns, or warranty claims Damage, defective
Inventory discrepancies & adjustments Billing errors Quantity
or labeling errors All rights reserved, Joel Sutherland, 2009
40. Key Takeaways Culture must be fully understood, embraced
and practiced. Ensure metrics and targets are aligned with the new
lean behaviors you want. Necessary to utilize full human potential
of every employee. Requires top-down approach. Senior executives
must demonstrate commitment. All rights reserved, Joel Sutherland,
2009
41. Questions All rights reserved, Joel Sutherland, 2009