NECON LEAN-ERP - 1 Copyright Robert Abair Associates, Inc., 2005
INTEGRATING LEAN AND
ERP ON THE SUPPLIER’S
FACTORY FLOOR
Northeast Supply Chain Conference
NECON LEAN-ERP - 2 Copyright Robert Abair Associates, Inc., 2005
Lean/Agile Manufacturing is the
fundamental rethinking and radical
redesign of business and supply chain
processes to achieve dramatic
improvements in critical measures of
performance, such as speed, cost,
quality, and service.
LEAN/AGILE MANUFACTURING
NECON LEAN-ERP - 3 Copyright Robert Abair Associates, Inc., 2005
SUPPLY CHAIN MANAGEMENT
RawMaterial 2nd Tier Suppliers
3rd Tier Suppliers
Transportation
Direct Suppliers
Single Plant
Multiple Plants& Warehouses
CustomerWarehouses
Consumer
Retail
Transportation
Distribution
MES
APS
MRP II
ERP
SUPPLY CHAIN MANAGEMENT (SCM)
NECON LEAN-ERP - 4 Copyright Robert Abair Associates, Inc., 2005
YOUR MISSION
Radically change your supply chain processes…
both internally and at your suppliers
Establish
Seamless
Business
Processes!
Reduce
Lead time!
Reduce
Cost!
Reduce
Inventory!
�
�
�
�
��
��
Balanced Balanced Balanced Balanced
LeanLeanLeanLean
NECON LEAN-ERP - 5 Copyright Robert Abair Associates, Inc., 2005
LEAD TIME MAP-PIPELINE MODEL
34 weeks
Kanban
1 week
System
Test
AssemblyBoard
Test
Board
Repair
Sub contractor
or
Foundry
ComponentsASICS
� Test
� Burn
� pack
ASICS
FAB
3 weeks1 week1 week1 week8 weeks 2 weeks4-8 weeks8-9 weeks
Boards@ 8 weeks
Non-boards@ 5 weeks
Respond points
NECON LEAN-ERP - 6 Copyright Robert Abair Associates, Inc., 2005
SUPPLY CHAIN LOGISTICS
• Determine inventory levels by product based on an "A", "B", "C" Analysis of your inventory
• Limit the inventory liability in the entire Supply Chain
• Develop a process for pulling inventory through the suppliers to point of need
• Develop inventory management strategies:
- JIT II
- Vendor Managed
- Inventory
- Consignment Inventory
- KANBAN (Pull)
NECON LEAN-ERP - 7 Copyright Robert Abair Associates, Inc., 2005
SUPPLY CHAIN LOGISTICS ISSUES
• Make-to-Stock Strategy (MTS)
• Make-to-Order Strategy (MTO)
• Inventory Reduction Goals
• Inventory Processes to support Repair and Renovation Business
• Seasonal Demand Patterns
• Line Fill Rate Requirements
• Erratic Demand Requirements
• Variety and number of SKU's
• Lot size and Safety Stock Requirements
• Space Consideration
• Container Control
• Capacity Constraints
NECON LEAN-ERP - 8 Copyright Robert Abair Associates, Inc., 2005
THE ADVANCED PLANNER’S ROLE IN
MANAGING A LEAN - ERP SUPPLY CHAIN
1. Prepare ABC analysis
2. Identify business rules for customer service levels
3. Develop factory flow core principles
4. Develop inventory and shop floor philosophy
� Lead time � Lot sizes � Safety stock
5. Develop communication rules for supply chain (customers/suppliers)
6. Develop setup matrix
7. Develop order launch rules (priority planning)
8. Develop manufacturing loading strategies
� Certain products to certain lines
� Standard setup tools for "A" items
� Load leveling/final assembly scheduling rules
9. Develop customer allocation matrix
10. Load software order modifiers
11. Document all rules
12. Manage all exception messages
13. Post implementation review (quarterly)
NECON LEAN-ERP - 9 Copyright Robert Abair Associates, Inc., 2005
ABC ANALYSIS OF ADVANCED
MANUFACTURING STRATEGIES
Primary Purpose:
� Inventory philosophy
� Customer service philosophy
� Manufacturing strategy (mixed-model matrix)
� Expediting or priority planning strategy
� Purchasing and supply chain strategy
� Distribution strategy
� Sales and Marketing strategy
Inventory Class
Dollar Volume
Number of Units
“A” 80% 20% “B” 15% 30% “C” 5% 50%
NECON LEAN-ERP - 10 Copyright Robert Abair Associates, Inc., 2005
KANBAN CONSIGNMENT VMI BREADMAN S.S. MRP JIT
Rating
3,2,1
Weight
3,2,1
1. Inventory
2. Liability
3. Lead time
4. Planner efficiency
5. Buyer efficiency
6. Effort to implement
7. IS support
8. Capital
9. ECN exposure
10. Affinities
11. Other risks
Catalog: _________________
Supplier: _________________
Date: _______________
SUPPLY CHAIN INVENTORY EXCELLENCE
SELECTION TEMPLATE
NECON LEAN-ERP - 11 Copyright Robert Abair Associates, Inc., 2005
1. Prepare ABC analysis
2. Identify business rules for customerservice levels (for both factories)
3. Develop factory flow core principles
4. Develop inventory and shop floor philosophy
� Lead time � Lot sizes � Safety stock
5. Develop communication rules for supply chain (customers/suppliers)
6. Develop setup matrix
7. Develop order launch rules (priority planning)
8. Develop manufacturing loading strategies
� Certain products to certain lines
� Standard setup tools for "A" items
� Load leveling/final assembly scheduling rules
9. Develop customer allocation matrix
10. Load software order modifiers
11. Document all rules
12. Manage all exception messages
13. Post implementation review (quarterly)
THE ADVANCED PLANNER’S ROLE IN
MANAGING A LEAN - ERP SUPPLY CHAIN
NECON LEAN-ERP - 12 Copyright Robert Abair Associates, Inc., 2005
CUSTOMER SERVICE LEVEL
BUSINESS RULES
A items:“A” items will be shipped same day – 95% of time“A” items not in stock will be shipped in 5 working days
B items“B” items will be shipped same day – 80% of time“B” items not in stock will be shipped in 10 working days
C items“C” items will be shipped same day – 70% of time“C” items not in stock – will quote delivery
NECON LEAN-ERP - 13 Copyright Robert Abair Associates, Inc., 2005
THE ADVANCED PLANNER’S ROLE IN
MANAGING A LEAN - ERP SUPPLY CHAIN
1. Prepare ABC analysis
2. Identify business rules for customer service levels
3. Develop factory flow core principles
4. Develop inventory and shop floor philosophy
� Lead time � Lot sizes � Safety stock
5. Develop communication rules for supply chain (customers/suppliers)
6. Develop setup matrix
7. Develop order launch rules (priority planning)
8. Develop manufacturing loading strategies
� Certain products to certain lines
� Standard setup tools for "A" items
� Load leveling/final assembly scheduling rules
9. Develop customer allocation matrix
10. Load software order modifiers
11. Document all rules
12. Manage all exception messages
13. Post implementation review (quarterly)15
NECON LEAN-ERP - 14 Copyright Robert Abair Associates, Inc., 2005
LEAN/AGILE MANUFACTURING
FACTORY FLOW CORE PRINCIPLES
1. Everything moves within four hours
� “Time is everything”
2. If the downstream center can’t use it – Don’t do it!
3. Everything moves to point of consumption
4. 50% improvement (year-on-year thinking)
� Scrap � Setup � Rework � Process steps
5. No paperwork
6. No material handling
7. No labor reporting
8. No computer transactions/systems
9. Assume “pipe line” flow (no backflow)
10. No inspection or testing (Robustness)
NECON LEAN-ERP - 15 Copyright Robert Abair Associates, Inc., 2005
LEAN/AGILE MANUFACTURING FACTORY
FLOW CORE PRINCIPLES (cont.)
11. No subassemblies
12. Carrier control
13. All parts and processes under SPC control
14. No holding containers
15. Direct ship from last operation
16. Direct receipt for first operation
17. No inventory
18. Standardized processes
19. Standardized components
20. Standardized tools
21 Universal packaging
22. Universal assembly lines
23. Universal equipment
NECON LEAN-ERP - 16 Copyright Robert Abair Associates, Inc., 2005
THE ADVANCED PLANNER’S ROLE IN
MANAGING A LEAN - ERP SUPPLY CHAIN
1. Prepare ABC analysis
2. Identify business rules for customer service levels
3. Develop factory flow core principles
4. Develop inventory and shop floor philosophy
���� Lead time ���� Lot sizes ���� Safety stock
5. Develop communication rules for supply chain (customers/suppliers)
6. Develop setup matrix
7. Develop order launch rules (priority planning)
8. Develop manufacturing loading strategies
� Certain products to certain lines
� Standard setup tools for "A" items
� Load leveling/final assembly scheduling rules
9. Develop customer allocation matrix
10. Load software order modifiers
11. Document all rules
12. Manage all exception messages
13. Post implementation review (quarterly)
NECON LEAN-ERP - 17 Copyright Robert Abair Associates, Inc., 2005
MIXEDMIXEDMIXEDMIXED----MODEL MATRIXMODEL MATRIXMODEL MATRIXMODEL MATRIX
(TOP DOWN)(TOP DOWN)(TOP DOWN)(TOP DOWN)
A B C D (BxC)
E F (.5xE)
G (BxF)
H (A÷Ex4)
# OF ITEMS
% OF TOTAL
WEEKS SUPPLY SAFETY SOCK
SAFETY STOCK WEIGHT-
ED
LOT SIZE
WEEKS SUPPLY
AVE CYCLE STOCK
LOT SIZE
WEIGHT-ED
# OF
SETUPS PER
MONTH
A ITEMS
50
80%
2.0
1.6
1
.5
.4
200
B ITEMS
500
15%
4.0
.6
4
2
.3
500
C ITEMS
1000
5%
8.0
.4
8
4
.2
500 TOTALS
2.6
.9
1200
TOTALTOTALTOTALTOTAL 3.5 WEEKS OF INVENTORY3.5 WEEKS OF INVENTORY3.5 WEEKS OF INVENTORY3.5 WEEKS OF INVENTORY
NECON LEAN-ERP - 18 Copyright Robert Abair Associates, Inc., 2005
THE ADVANCED PLANNER’S ROLE IN
MANAGING A LEAN - ERP SUPPLY CHAIN
1. Prepare ABC analysis
2. Identify business rules for customer service levels
3. Develop factory flow core principles
4. Develop inventory and shop floor philosophy
� Lead time � Lot sizes � Safety stock
5. Develop communication rules for supply chain customers and suppliers)
6. Develop setup matrix
7. Develop order launch rules (priority planning)
8. Develop manufacturing loading strategies
� Certain products to certain lines
� Standard setup tools for "A" items
� Load leveling/final assembly scheduling rules
9. Develop customer allocation matrix
10. Load software order modifiers
11. Document all rules
12. Manage all exception messages
13. Post implementation review (quarterly)
NECON LEAN-ERP - 19 Copyright Robert Abair Associates, Inc., 2005
THE ADVANCED PLANNER’S ROLE IN
MANAGING A LEAN - ERP SUPPLY CHAIN
1. Prepare ABC analysis
2. Identify business rules for customer service levels
3. Develop factory flow core principles
4. Develop inventory and shop floor philosophy
� Lead time � Lot sizes � Safety stock
5. Develop communication rules for supply chain (customers/suppliers)
6. Develop setup matrix7. Develop order launch rules (priority planning)
8. Develop manufacturing loading strategies
� Certain products to certain lines
� Standard setup tools for "A" items
� Load leveling/final assembly scheduling rules
9. Develop customer allocation matrix
10. Load software order modifiers
11. Document all rules
12. Manage all exception messages
13. Post implementation review (quarterly)
NECON LEAN-ERP - 20 Copyright Robert Abair Associates, Inc., 2005
JOB SEQUENCING SETUP/
CHANGEOVER MATRIX (HOURS)
EXAMPLES:
Sequence: D - A - C - B - E
S/U hours: 10 + 4 + 4 + 2 = 20 HOURS
Sequence: A - B - D - E - C
S/U hours: 1 + 1 + 3 + 3 = 8 HOURS
F R O M
TO A B C D E
A - 3 1 1 0 2
B 1 - 4 2 4
C 4 6 - 4 3
D 2 1 3 - 6
E 3 2 2 3 -
NECON LEAN-ERP - 21 Copyright Robert Abair Associates, Inc., 2005
THE ADVANCED PLANNER’S ROLE IN
MANAGING A LEAN - ERP SUPPLY CHAIN
1. Prepare ABC analysis
2. Identify business rules for customer service levels
3. Develop factory flow core principles
4. Develop inventory and shop floor philosophy� Lead time � Lot sizes � Safety stock
5. Develop communication rules for supply chain (customers/suppliers)
6. Develop setup matrix
7. Develop order launch rules (priority planning)8. Develop manufacturing loading strategies
� Certain products to certain lines� Standard setup tools for "A" items� Load leveling/final assembly scheduling rules
9. Develop customer allocation matrix
10. Load software order modifiers
11. Document all rules
12. Manage all exception messages
13. Post implementation review (quarterly)
NECON LEAN-ERP - 22 Copyright Robert Abair Associates, Inc., 2005
PRIORITY PLANNING
(EXPEDITING)
W hen an item fa lls be low sa fe ty s tock leve l:
C lass C overage A c tion /E xped ite
A B e low 100% W ith in lead tim eA Be low 50% Today
B Be low 100% Focus w eek /dayB Be low 50% Ins ide lead tim e
C Be low 100% No ac tionC Be low 50% Focus w eek /dayC Be low 25% Ins ide lead tim e
NECON LEAN-ERP - 23 Copyright Robert Abair Associates, Inc., 2005
THE ADVANCED PLANNER’S ROLE IN
MANAGING A LEAN - ERP SUPPLY CHAIN
1. Prepare ABC analysis
2. Identify business rules for customer service levels
3. Develop factory flow core principles
4. Develop inventory and shop floor philosophy� Lead time � Lot sizes � Safety stock
5. Develop communication rules for supply chain (customers/suppliers)
6. Develop setup matrix
7. Develop order launch rules (priority planning)
8. Develop manufacturing loading strategies (both factories)
���� Certain products to certain lines
���� Standard setup tools for "A" items
���� Load leveling and final assembly scheduling rules9. Develop customer allocation matrix
10. Load software order modifiers
11. Document all rules
12. Manage all exception messages
13. Post implementation review (quarterly)
NECON LEAN-ERP - 24 Copyright Robert Abair Associates, Inc., 2005
THE ADVANCED PLANNER’S ROLE IN
MANAGING A LEAN - ERP SUPPLY CHAIN
1. Prepare ABC analysis
2. Identify business rules for customer service levels
3. Develop factory flow core principles
4. Develop inventory and shop floor philosophy
� Lead time � Lot sizes � Safety stock
5. Develop communication rules for supply chain (customers/suppliers)
6. Develop setup matrix
7. Develop order launch rules (priority planning)
8. Develop manufacturing loading strategies
� Certain products to certain lines
� Standard setup tools for "A" items
� Load leveling/final assembly scheduling rules
9. Develop customer allocation matrix
10. Load software order modifiers
11. Document all rules
12. Manage all exception messages
13. Post implementation review (quarterly)
NECON LEAN-ERP - 25 Copyright Robert Abair Associates, Inc., 2005
CUSTOMER
CAPACITY ALLOCATION
Customer
Hours allocated
by Product Fam ily
Hrs. Total
Required
Capacity
Capacity
Used Last
4 Weeks
A B C D E
Jones Co.
Arbor M fg.
Post Processing
W ilson Ind.
Dumont Ltd.
Can be done weekly or monthly
NECON LEAN-ERP - 26 Copyright Robert Abair Associates, Inc., 2005
THE ADVANCED PLANNER’S ROLE IN
MANAGING A LEAN - ERP SUPPLY CHAIN
1. Prepare ABC analysis
2. Identify business rules for customer service levels
3. Develop factory flow core principles
4. Develop inventory and shop floor philosophy
� Lead time � Lot sizes � Safety stock
5. Develop communication rules for supply chain (customers/suppliers)
6. Develop setup matrix
7. Develop order launch rules (priority planning)
8. Develop manufacturing loading strategies
� Certain products to certain lines
� Standard setup tools for "A" items
� Load leveling/final assembly scheduling rules
9. Develop customer allocation matrix
10. Load software order modifiers (both systems)
11. Document all rules
12. Manage all exception messages
13. Post implementation review (quarterly)
NECON LEAN-ERP - 27 Copyright Robert Abair Associates, Inc., 2005
THE ADVANCED PLANNER’S ROLE IN
MANAGING A LEAN - ERP SUPPLY CHAIN
1. Prepare ABC analysis
2. Identify business rules for customer service levels
3. Develop factory flow core principles
4. Develop inventory and shop floor philosophy
� Lead time � Lot sizes � Safety stock
5. Develop communication rules for supply chain (customers/suppliers)
6. Develop setup matrix
7. Develop order launch rules (priority planning)
8. Develop manufacturing loading strategies
� Certain products to certain lines
� Standard setup tools for "A" items
� Load leveling/final assembly scheduling rules
9. Develop customer allocation matrix
10. Load software order modifiers
11. Document all rules
12. Manage all exception messages
13. Post implementation review (quarterly)
NECON LEAN-ERP - 28 Copyright Robert Abair Associates, Inc., 2005
THE ADVANCED PLANNER’S ROLE IN
MANAGING A LEAN - ERP SUPPLY CHAIN
1. Prepare ABC analysis
2. Identify business rules for customer service levels
3. Develop factory flow core principles
4. Develop inventory and shop floor philosophy
� Lead time � Lot sizes � Safety stock
5. Develop communication rules for supply chain (customers/suppliers)
6. Develop setup matrix
7. Develop order launch rules (priority planning)
8. Develop manufacturing loading strategies
� Certain products to certain lines
� Standard setup tools for "A" items
� Load leveling/final assembly scheduling rules
9. Develop customer allocation matrix
10. Load software order modifiers
11. Document all rules
12. Manage all exception messages
13. Post implementation review (quarterly)
NECON LEAN-ERP - 29 Copyright Robert Abair Associates, Inc., 2005
THE ADVANCED PLANNER’S ROLE IN
MANAGING A LEAN - ERP SUPPLY CHAIN
1. Prepare ABC analysis
2. Identify business rules for customer service levels
3. Develop factory flow core principles
4. Develop inventory and shop floor philosophy
� Lead time � Lot sizes � Safety stock
5. Develop communication rules for supply chain (customers/suppliers)
6. Develop setup matrix
7. Develop order launch rules (priority planning)
8. Develop manufacturing loading strategies
� Certain products to certain lines
� Standard setup tools for "A" items
� Load leveling/final assembly scheduling rules
9. Develop customer allocation matrix
10. Load software order modifiers
11. Document all rules
12. Manage all exception messages
13. Post implementation review (quarterly)
NECON LEAN-ERP - 30 Copyright Robert Abair Associates, Inc., 2005
Company 1 (RA) Lean Supply Chain
Results Matrix
15 days
12 days
2 days
33 parts
3.5 wks
3
$88.5K
Future State
Lean Process
50%Sub Supplier Lead Time 39 Components
30 days
50%Production Cycle Time25 days
60%Order Entry Cycle Time5 days
48%Number of Custom Materials60 parts
71%Oracle Lead Time12 wks
SameNumber of Systems in Pipeline3
67%Liability$267K
Percent
ImprovementPerformance Metric
Current State
MRP Push
Process
NECON LEAN-ERP - 31 Copyright Robert Abair Associates, Inc., 2005
Company 2 (OLP) Lean Supply Chain
Results Matrix28
$0 Liability
$37.1K
6 weeks
3 items
4.6 days
2 weeks
14
$144.2K
Future
State
Lean
Process
-Cost Down-
Block Assy Liability Eliminated13 wk L/T @ $.5K per unit
42%Value of Power Controller Reduction$64.9K
57%Power Controller L/T Reduction14 weeks
40%Reduced unique parts over 55 days L/T5 items
29%Manufacturing Lead Time6.5 days
86%Lead Time 14 weeks
SameNumber of Systems in Pipeline14
47%Liability$270.2K
Percent
ImprovementPerformance Metric
Current
State
MRP Push
Process
NECON LEAN-ERP - 32 Copyright Robert Abair Associates, Inc., 2005
Company 3 (BP) Lean Supply Chain
Results Matrix
1 line / 3 shifts
Integrated
½ day
3 days
3 to 0
1 to 3 weeks
11 to 17
$539K
Future State
Lean Process
-Cost Down-
Capacity2 lines / 1 shift
Supply ChainNot integrated
90%Order Cycle Time6 days
SameTransit Time3 days
SameSafety Stock3 to 0
80%Lead Time11 to 12 weeks
29%Number of Systems in Pipeline11 to 12
17%Liability$647K
Percent
ImprovementPerformance Metric
Current State
MRP Push
Process
NECON LEAN-ERP - 33 Copyright Robert Abair Associates, Inc., 2005
Company 4 (CON) Lean Supply Chain
Results Matrix
14 days
17
2 weeks
15
$38.6K
Future State
Lean Process
-Cost Down-
35%Process Time Improvement20
62%Number of Unique Components37
71%Lead Time 7 weeks
114%Number of Systems in Pipeline7
28%Liability$53.9K
Percent
ImprovementPerformance Metric
Current State
MRP Push
Process