Value_Streams.ppt

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© 2004 Superfactory™. All Rights Reserved.
Value Streams
Superfactory Excellence Program™
www.superfactory.com

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Outline
 What are Value Streams?
 History - Toyota
 Identifying the Value Streams
 Value Stream Mapping
 The Current State
 The Future State
 Unique Situations
 Enhancing the Future State
 Implementing Change
 Roadblocks

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What Are Value Streams?
A Value Stream is the set of all actions (both value added
and non value added) required to bring a specific product
or service from raw material through to the customer.

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Types of Value Streams
•“Whenever there is a product (or service) for a customer,
• there is a value stream. The challenge lies in seeing it.”
• 3 enterprise value streams:
• Raw Materials to Customer - Manufacturing
• Concept to Launch - Engineering
• Order to Cash - Administrative Functions

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History of Value Streams - Toyota
 Toyota is one of the most efficient manufacturers in the
world
 Building 2 million cars a year outside Japan
 Aiming to become No 1 globally by 2010!
 Not because of brilliant products – but because of a
brilliant production system
 Called Lean Production or Lean Thinking

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 Toyota has probably the most efficient supply base in the
world
 300 1st tier suppliers - 2-3 per part
 Co-located and tightly synchronized by 2-4 hourly milk
rounds from Toyota
 Conducting joint process analysis together for 30 years
 As a result each supplier delivers each part 99.9995%
right first time on time!

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 Toyota has been building cars to order in Japan for 30
years
 Based on a continuing relationship with many of its
customers through door-to-door selling!
 Which it also uses to smooth orders on production
 Yes – buffered by long lead-time export orders

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 Toyota probably has one of the most efficient distribution systems
– for service parts
 Dealers pre-diagnose and pre-order parts they need – they do not
stock them!
 Local Distribution Centers deliver 2-3 times a day
 Regional Distribution Centers deliver daily
 Most of their parts suppliers can make and ship all the parts
required in a day by the next day
 The system copes with 400,000 part numbers and is being rolled
out across the globe

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 Toyota’s success is based on a different business logic: -
 Organized to manage the whole value stream for each product
family – rather than to manage and optimize each asset and
firm in isolation
 Pulling the right products through the system quickly as
required by the customer – rather than making to forecast and
selling from stock to strangers
 Based on operational capability and joint process analysis -
rather than relying on supplier auctions and big centralized
information systems

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Identifying the Value Stream
 The starting point is to learn to distinguish value creation
from waste in your whole value stream
 By putting on waste glasses!
 By choosing a product family
 By assembling the team and taking a walk together up the
value stream
 And drawing a map of what you find!

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Identifying the Value Stream
process level
single plant
(door to door)
multiple plants
across companies
Start Here

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Value Stream Improvement vs. Process
Improvement
Raw
Material
Finished
Product
Stamping
Process
Welding
Process
Assembly
Cell
Process
Customer
Value Stream

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Value Stream Mapping
 Helps you visualize more than the single process level
 Links the material and information flows
 Provides a common language
 Provides a blueprint for implementation
 More useful than quantitative tools
 Ties together lean concepts and techniques

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• Follow a “product” or “service” from beginning to end,
and draw a visual representation of every process in the
material & information flow.
• Then, draw (using icons) a “future state” map of how
value should flow.

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 Directly observing flows of information and physical goods
for a product family as they now occur
 Summarizing these flows visually
 Envisioning future states that leave out wasted steps while
introducing smooth flow and leveled pull

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Features to Include
 Total steps versus value creating steps
 Total time versus value creating time
 Noise (demand amplification) in order flow
 Quality/capability (defect damping) of each facility
 Availability of each facility
 Hand-offs, work-arounds and total logistics costs
Note: This is not a product costing exercise! Follow one
component path all the way back to raw material

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Information For A Process Data Box
(to be collected on the shop floor)
 Cycle time
 Changeover time
 Process reliability (uptime)
 Scrap/Rework/Defect rate
 Number of product variations
 Number of operators
 Production batch sizes
 Working time (minus breaks)
 Pack size

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Objective for Every Value Stream
 Correct specification of value
 Elimination of wasteful steps
 “Flow where you can”
 “Pull where you can’t”
 Management toward perfection

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Using the Value Stream Mapping Tool
Understanding how things
currently operate. Our Baseline!
Product/Service
“Family”
plan and
implementation
Designing a lean flow. Our Vision!
current state
drawing
future state
drawing
The goal of mapping!

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The Current State
 Completed in a day
 Performed by a cross functional team responsible for
implementing new ideas
 Resulting in a picture (and team observations) of what
we “see” when following the product

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The Current State
Typical Steps to Complete a Current State Drawing
 Document customer information
 Complete a quick walk through to identify the main
processes (i.e., how many process boxes)
 Fill in data boxes, draw inventory triangles, and count
inventory
 Document supplier information
 Establish information flow: how does each process know
what to make next?
 Identify where material is being pushed
 Quantify production lead time vs. processing time

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The Current State
 What product family will you map?
 Hint: Define the product family from the most
downstream point on your map
 Simple definition of a product family: A group of product
variants passing through similar processing steps using
common equipment just prior to shipment to the
customer
 Some examples: Medium sized electric drills or a family
of drill motors; a car platform or an alternator family; an
airframe or a product family of major subassemblies
(e.g., tails)
 Note that the concept is fractal: A product family is
composed of many components which can also be
product families – it all depends on where you start!

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The Current State
 Which part of the product will you follow upstream?
 Hint: Most novice mappers want to follow every part in
the product. But you actually learn much more by
following only one part on your first map!
 Remember: The first objective of mapping is to raise
consciousness of waste. (You may well want to follow
other parts later.)

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The Current State
 Who will be the members of your mapping team and the
team leader?
 The team ideally includes representatives of every firm
and every relevant function – operations, PC&L,
purchasing, sales, finance, engineering.
 The logical leader is from the lean team or supplier
development group in the most down-stream firm.
 Because the assets employed are owned by several
firms, the leader may feel responsible but will have little
authority and therefore must…lead!

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The Current State
 How many facilities up the value stream will you include?
 The ideal map goes from raw materials to customer.
 This will generally be too hard as you get started.

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The Current State
 How many individual actions (steps) on the product are
there, what is the total throughput time, and what is the
throughput distance?
Example: There are 73 steps, total throughput time is 44
days, and throughput distance is 5300 miles.
 Critical question: How do we know whether a step and its
attendant time create value?
Put yourself in the position of the customer and ask if you
would pay less for the product or be less satisfied if a given
step and its necessary time were left out.
Example: 8 of the steps and 55 minutes of throughput time
create value!

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The Current State
 What is the capability of each production facility (quality x
delivery) and its responsiveness (EPE?)
 Where are the delays in information flow, how lengthy are
they, and how much are orders amplified as they move
upstream?
Hint: Include the right information in the map. Distinguish
between forecasts & capacity plans and actual production
releases.

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The Current State
 Where and how large are the inventories in the physical
flow?
Hint: Carefully distinguish buffer stocks, safety stocks, and
shipping stocks. Then determine “standard inventory” for
current system design and capabilities.

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The Current State
 How reliable is each transport link (on-time delivery
percentage) and how many expediting trips per year are
needed?
Note: By multiplying quality data from by on-time delivery
data you can calculate the “fulfillment level” each facility as
perceived by the next downstream customer. This is a key
measure from a total value stream perspective.

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The Current State

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Extended Current-State Map
FORGE MACH ASSY
WHSE
Production
Control
ASSEMBLY COMPANY
CUSTOMER
Production
Control
MACHINE COMPANY
MATERIAL
SUPPLIER
DIST

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The Current State
 Typical Results
 80 – 90% of total steps are waste from standpoint of
end customer.
 99.9% of throughput time is wasted time.
 Demand becomes more and more erratic as it moves
upstream, imposing major inventory, capacity, and
management costs at every level.
 Quality becomes worse and worse as we move upstream,
imposing major costs downstream.
 Most managers and many production associates expend
the majority of their efforts on hand-offs, work-arounds,
and logistical complexity.

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The Future State
Completed in a day with the same team
Focused on:
 Creating a flexible, reactive system that quickly adapts to
changing customer needs
 Eliminating waste
 Creating flow
 Producing on demand

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The Future State
 Activities aligned with our business strategy
 Efforts focused on NET improvements for the company
 Metrics supportive of fundamental change
 Simple, constant communication of our plans and
achievements as an enterprise

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The Future State

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The Future State
 Where can you introduce flow and pull within each facility?
 When we leave out wasted steps, create continuous flow,
and introduce pull in every plant the product passes through
we can achieve a striking reduction in steps and throughput
time. But note that demand amplification is not affected.

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The Future State
 How can you introduce smooth and level pull between
facilities while reducing shipment quantities and increasing
shipment frequencies?
 What is the rate of consumption by the end customer (and
what is takt time?) and how can the rate of demand be
communicated to all value stream partners?
 Where is the pacemaker process for the entire value stream
and how is it scheduled (build to order?, build to stock?,
build to ship?)
Critical issue: How to untangle simple demand loops from
facility to facility from high level MRP/ERP systems suited
for capacity planning.

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The Future State
 What is the production rhythm (takt time) for each
production facility needed to meet demand?
 How can orders be passed upstream more frequently with
minimum delays?
 Where and how will you level the mix and volume at each
facility?
 Where can you you introduce transport milk rounds?
Additional issue: Who should organize these loops –
suppliers or customers?
 What warehousing steps can you leave out completely?

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The Future State
 Where do you have freed up production space?
 What activities could you move over to the customer?
 What steps and transport links can you leave out by
compressing the value stream?
 What are the costs and benefits to each value stream
partner of compressing the value stream and how will these
costs and benefits be shared?
This is a hard question!

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The Future State
 What type of “right-sized’ tools could further speed flow in
co-located processes?
 How can you replicate and relocate integrated production
activities close to each major customer?
 What are the costs and benefits for each value stream
partner of pioneering right-sized technologies and relocating
activities, and how will these be shared?
This is the hardest question!

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The Future State
 Almost all value streams today pass through many
information processing points and facilities, owned by many
firms.
 Creating future states within the walls and information
systems of a single facility is difficult… but doable with a
small team.
 Creating future states across many facilities and firms
requires new methods going beyond traditional business
practices.

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Administrative Mapping
 Administrative activities are often a major percentage of the
total throughput time
 Goal: 400% improvement in productivity over 10 years
 Modest opportunities on the plant floor; Untapped
opportunities off the plant floor

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Administrative Mapping: Integrated
 Include functions such as engineering, purchasing, and
order entry for product families which have routine
activities prior to scheduling
 Place the process boxes between the customer and the
scheduling function
 Minimize the data collection to the basics of cycle time
or quality, and document the impact on leadtime

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Administrative Mapping: Separate Maps
 Better for redesigning overhead and administrative
support areas touching value streams
 Order processing
 Warranty activities
 Job quotes
 Not useful for activities outside a value stream
 Data boxes must have attributes focusing on cost,
quality, and service
 “Inventory” is typically paperwork
 Information flow is typically informal

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 Many shops have a combination of repetitive and non-
repetitive products (indicating product families)
 Product families might be difficult to see – focus on
machines/operations and work content time
 Engineering might be included in the information flow for
lead time impact, etc.
 Pitch is typically arbitrary to the manager
 Employment of pitch requires detailed knowledge of work
content and routings for jobs
Unique Situations
Make to Order and Engineer to Order Shops

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Unique Situations
Including Subassemblies
 Focus on major subassemblies first
 Select one or two which might represent different types
of situations
 Generic vs. specific to the product family
 Outsourced tasks within assembly
 Follow the format for parallel flow, and always include
the main assembly process!
 For large fabricating and assembly operations, consider
maps for each major subassembly with a “macro map”
indicating the entire product family

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Unique Situations
Different Changeover & Cycle Times, etc.
 Current state mapping might uncover:
 Several different machines performing the same
operation
 Different products within the family with different data
box characteristics for a specific process
 Capture the range of values as opposed to an average
value

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Unique Situations
Mapping Final Inspection/ Repair/Rework
 Judgment counts!
 Minimal repair/rework might be captured as a data
attribute at the final step.
 If nearly every part needs assessment or extra work,
consider a separate process box.

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Unique Situations
Pull Within an MRP Environment
 A combination push and pull is usually just a push
system!
 Multiple production triggers typically lead to
overproduction.

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Unique Situations
Assemble-to-Order Options in a Future State
 Finished goods supermarkets can be expensive in value
streams which have many finished part numbers within
a product family
 To minimize inventory costs, try to find the upstream
location where the value stream has very few variations
and consider a supermarket of WIP at that point.
 Customers orders can “drop” to this location, with FIFO
lanes controlling production into shipping.

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Enhancing the Future State
 Create a new language for a civilized discussion about
optimizing entire value streams to create a “win-win-win”.
 By jointly drawing extended value stream maps.
 To stop focusing on each other’s margins – which are
typically very small – and start focusing on each other’s
waste which is typically very large.

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Create Flow & Pull in Plants
FORGE MACH ASSY
WHSE
Production
Control
ASSEMBLY COMPANY
CUSTOMER
Production
Control
MACHINE COMPANY
MATERIAL
SUPPLIER
DIST

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 Eliminates a quarter of the wasted steps.
 Reduces total throughput time by 50%.
But…
 Only a small effect on demand amplification and
workarounds.
 No effect on logistics and complexity costs.
A “price of admission” to the value stream team, requiring
little time and practically no capital.

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Leveled Pull Between Facilities
FORGE MACH ASSY
WHSE
Production
Control
ASSEMBLY COMPANY
CUSTOMER
Production
Control
MACHINE COMPANY
MATERIAL
SUPPLIER
OXOXOXO

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 50% of wasted steps are now eliminated.
 Total throughput time falls to 35% of current state.
 Demand amplification falls from +/- 30% to +/- 5%.
 Quality improves because of reduced time between creation
of defects and discovery downstream.
 Logistics costs may increase slightly but total value stream
costs fall substantially.
A logical next step that requires a lot of knowledge but not
much capital.

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Begin Value Stream Compression
Production
Control
ASSEMBLY COMPANY
FORGE MACH
Production
Control
MACHINE COMPANY
MATERIAL
SUPPLIER
ASSEMBLY
CUSTOMER
Same Site
Same Site

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 Another 5% of wasted steps disappear.
 Throughput time falls to 30% of current-state time.
 Demand amplification falls a bit further.
 Quality improves a bit further.
 Hand-offs and transport links begin to disappear.
Requires shared principles of collaboration, willingness to
spend capital at one point to reduce costs at another, and a
way for winners to compensate losers.

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Production
Control
ASSEMBLY COMPANY
Production
Control
MACHINE COMPANY
MATERIAL
SUPPLIER
ASSY
CUSTOMER
MACH
FORGE
Complete VS Compression
Same Site

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 75% of wasted steps are now eliminated.
 Throughput time shrinks to less than 10% of current-state
time and within acceptable wait time of the customer: The
entire value stream is now running make-to-order rather
than make-to-forecast!
 Demand amplification is eliminated.
 Quality is higher and consistent from start to finish.
 Transport links and information needs shrink dramatically.
A giant leap requiring strong principles of collaboration but
potentially a “game changer” for every participant in the
extended value stream!

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 Achieving a responsive Flow through your plant is only possible
when each step is:-
 Available when needed with no interruptions (TPM)
 Can be changed over quickly enough to make every product
every cycle (SMED)
 Is capable of making the required volumes with no errors (6
Sigma)
 Is aligned with other steps in the process (right sized tools)
 And when orders vary within agreed limits (covering peaks
with co-managed off-line buffers)

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Don’t Wait!
You need a plan!
• Tie it to your business objectives.
• Make a VS Plan: What to do by when.
• Establish an appropriate review frequency.
• Conduct VS Reviews walking the flow.
Implementing Change

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Implementing Change
 Remember the other two value streams!
 Administrative activities are often a major percentage of the
total throughput time
 Goal: 400% improvement in productivity over 10 years
 Modest opportunities on the plant floor; Untapped
opportunities off the plant floor

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Implementing Change
Critical Success Factors
 Management must understand, embrace, and lead the
organization into lean thinking
 Value stream managers must be empowered and
enabled to manage implementations
 Improvements must be planned in detail with the
cross functional Kaizen teams
 Successes must be translated to the bottom line
and/or market share

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 Continuously improving fundamentally flawed processes
will yield limited results.
 Simply automating existing manual processes can also
yield limited results.
 Seriously challenging old practices will provide the
dramatic results desired.
Implementing Change

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Implementing Change
 We’ve only recently introduced the idea of “value stream
management” within facilities and companies.
 No one currently devotes mind-share to (or has any
authority for) extended value streams.
 Purchasing departments typically lack credibility, both
internally and externally, for initiatives beyond traditional
“bargaining”.
 Lean improvement groups typically lack a mandate to go
beyond isolated techniques for “supplier development”.

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Implementing Change
 The lead can come from anywhere along the value stream.
 The initial need is a collective decision by senior
management in every participating firm to give extended
value stream mapping a try.
 The next need is for multi-firm, multi-function value stream
teams to identify and remove obvious waste.
 The continuing need is for longer-term collective value
stream analysis moving toward ideal states.
 An amazing thought: Is there a role for consultants as
honest-broker advisors to value stream teams?

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Implementing Change
 Manufacturing recession focuses everyone’s mind.
 We have already done experiments with hyper margin
squeezing in 1991-92; everyone knows it leads to lose-
lose-lose outcomes.
 Consciousness is steadily rising about value stream
thinking; many managers are now ready to tackle extended
value streams.

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Implementing Change
 The map is just a picture of ideas!
 The fundamental change is in how we choose to manage the
value stream as an integrated system of decisions and tasks.

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Implementing Change
Each Value Stream needs a Value Stream Manager
The conductor of implementation:
•Focused on system wins
•Reports to the top dog
Process 1 Process 2 Process 3
“Customer”
The Value
Stream Manager
Kaizen

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Implementing Change
 Use your strategic plan as a guide
 Find the gaps in necessary performance
 Improve value streams to meet the performance
 Create new metrics to support new ways of thinking and acting
 Understand true product family costs
 Manage operations by the value stream data
 Always have a future state

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Implementing Change
Typical Results
 Throughput time falls from 44 days to 6 (87%)
 Wasted steps fall from 65 to 27 (60%)
 Transport distance falls from 5300 miles to 1100 miles
 Demand amplification is reduced from 20% to 5%
 Inventories shrink by 90% percent
 Defects are reduced to the same rate at the start of the
process as at the end
 Throughput time shrinks to within customer wait time,
meaning all production is to confirmed order

74
Roadblocks
 75 years of bad habits
 Financial focus with limited cost understanding
 A lack of system thinking and incentives
 Metrics supporting a 75 year old model
 Limited customer focus
 Absence of effective operating strategies

75
Roadblocks
 Traditional approaches do not focus on the value stream
 Create “perfect competition” at the next level of supply
upstream, by attracting many bidders.
 Improve bargaining power through scale economies in
raw materials buys as well.
 Turn up the competitive pressure with reverse auctions
where possible.
 Demand continuing price reductions in multi-year
contracts whatever happens to volume.
 Note the lack of process analysis of the value stream!
 “Market will insure lowest costs & highest efficiency!”

76
Roadblocks
 Margin squeezing rather than true cost reduction.
 Persistent shortfalls in quality and delivery reliability.
 Low-ball bidding and the engineering change game.
 Collapse of “partnership” and “trust” in economic downturns
(2001!), replaced by “survival of the fittest”.

77
Wrong Ways to Address Roadblocks
 Programs of the month (band aids)
 Meetings, meetings, meetings, meetings
 Silo optimization

78
THINK LEAN!

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