Seven Supply Chain Wastes

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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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Seven Supply Chain Wastes

  1. 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. 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. 3. The Roots of TPS (Lean) 1920’s: 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. 4. The Roots of TPS (Lean) 1930’s-1950’s: 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. 5. The Roots of TPS (Lean) 1980’s: 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. 6. Key Principles of TPS Muda = Anything that is wasteful and doesn’t 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. 7. Muda Every activity in your organization does one of the following: Adds value for your customers—and should be maintained Is waste (muda)—and should be eliminated All rights reserved, Joel Sutherland, 2009
  8. 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. 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. 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. 11. Genchi Genbutsu It’s amazing how many opportunities you can identify by carefully observing operations . All rights reserved, Joel Sutherland, 2009
  12. 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. 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. 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. Shingo’s 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. 15. Kaizen—”The Five Why’s” 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. 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. 17. The Seven Deadly Supply Chain Wastes Over- Delay/ production Waiting Space Inventory Errors All rights reserved, Joel Sutherland, 2009 17
  18. 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. 19. Overproduction--Example “Let’s load the trailers and let them wait until we get an order.” All rights reserved, Joel Sutherland, 2009
  20. 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. 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. 22. Space--Example The curse of the 60” x 60” Pallet All rights reserved, Joel Sutherland, 2009
  23. 23. Space--Solving the Problem Automobile Air Conditioner 52” 26” 26” All rights reserved, Joel Sutherland, 2009
  24. 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. 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. 26. Delay/Waiting--Example Strict labor union rules—29 job classifications Multiple handoffs vs. continuous flow—e.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. 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. 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. 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. 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. 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. 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. 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. 34. Inventory--Results Reduced network from 22 to 19 DC’s Clinical—19; Industrial—5 Slow moving—Central DC Reduced inventory by 30~35% Improved fill rate All rights reserved, Joel Sutherland, 2009
  35. 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. 36. Motion--Example “Because we’ve always done it this way.” All rights reserved, Joel Sutherland, 2009
  37. 37. Motion--Example One continuous flow Reduced storage Handled once Reduced inventory ~40% travel reduction JIT All rights reserved, Joel Sutherland, 2009
  38. 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
  39. 39. Errors Label: Part: P/N: Problem:12345 12346 12346 P/N Verification Sheet Solution: P/N: P/N: P/N: 12345 P/N: 12345 12345 P/N: 12345 12345 1 2 3 4 5 P/N: 12345 12345 P/N: 12345 12345 12345 12345 12345 5 units 7 labels 1 2 3 4 5
  40. 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. 41. Questions All rights reserved, Joel Sutherland, 2009

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