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LeanCor Consulting Webinar: The Path to Inventory Reduction

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In an ideal lean supply chain, everything would be produced and consumed at the rate of end-customer demand. Unfortunately, it’s necessary to forecast demand and build inventory into stock.

In this 1-hour webinar, learn why we need inventory, what drives it in our supply chain, and how to reduce it for real.

We will explore best practices and strategies in:

Inventory visibility
Inventory stratification and stability
Inventory replenishment
*This webinar is part of a special “Go to the Gemba” series where we interview different industry supply chain professionals about how they use lean principles and tools to solve their challenges.

Published in: Business
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LeanCor Consulting Webinar: The Path to Inventory Reduction

  1. 1. June 24, 2015
  2. 2. Copyright LeanCor Supply Chain Group Regional Vice President, LeanCor Supply Chain Group Principle, LeanCor Board of Directors Career Focus: Focused entire career on third party logistics, sourcing, materials management, transportation, and consulting. Experience includes multiple international operational launches: Green and brown field start-ups at Toyota Motor Manufacturing Indiana Jabil Circuit manufacturing plants in Hungary and China Currently Responsible For: Deploying lean solutions and operational implementations for LeanCor Consulting customers Providing strategic vision and organizational leadership on LeanCor’s Board of Directors Co-Author: Building a Lean Fulfillment Stream (Lean Enterprise Institute, 2010)
  3. 3. Copyright LeanCor Supply Chain Group Strategy Manager, - Manufacturing and Global Supply Chain Division, Bose Corporation Lean Six Sigma Black Belt Career Focus: Joined Bose Corporation in 2004 as a new products and commodity specialist, focused on various mechanical and electrical commodities. In 2008, Katie led the SAP source-to-pay team for the global implementation of SAP in Japan. Her roles since then have focused on driving operational excellence within the division and the supply base. Currently Responsible For: Driving the Lean Fulfillment Stream strategy for the Global Supply Chain division and developing overall lean maturity for Bose
  4. 4. Copyright LeanCor Supply Chain Group  Lean, supply chain, six sigma, and leadership courses delivered in public, private, and online settings that develop people capability and build a culture of operational excellence.  Project-based, end-to-end supply chain solutions that improve your processes, reduce inventory and Total Cost, and optimize your network.  Custom, outsourced transportation management and warehousing solutions that optimize material flow and exceed your business goals. Trusted supply chain partner that specializes in lean principles to deliver operational improvement.
  5. 5. Copyright LeanCor Supply Chain Group Why has your organization struggled to reduce inventory?
  6. 6. Copyright LeanCor Supply Chain Group
  7. 7. Copyright LeanCor Supply Chain Group Build to Order = No Overproduction…So what’s the problem? Supply LT + < = Inventory MLT + OL+ < Customer LT= BTOSupply LT Customer LTMLT + OL …Here comes the “F” word
  8. 8. Copyright LeanCor Supply Chain Group
  9. 9. Copyright LeanCor Supply Chain Group • Customer Fill Rate (SLA) • # of DC’s (Lead Time to Customer) • Production Frequency • Supplier Sourcing • Transportation Modes • Replenishment Frequencies • Purchasing Contracts • Metrics – What We Measure • Transportation Modes
  10. 10. Copyright LeanCor Supply Chain Group
  11. 11. Copyright LeanCor Supply Chain Group • Cycle Stock – inventory needed to cover demand during replenishment interval • Buffer Stock – inventory needed to cover demand due to common cause variation in the supply chain • Safety Stock – inventory needed to cover demand due to special cause variation in the supply chain
  12. 12. Copyright LeanCor Supply Chain Group  Sell Less – reduce our demand between replenishments  Increase velocity – replenish more frequently  There is no third optionX
  13. 13. Copyright LeanCor Supply Chain Group  What is the rhythm of your supply chain?  All supply chain activity should match this rhythm  Are you leveraging your current velocity?  Every part/product every interval  What is the impact to transportation cost?  Do we have the ability to measure Total Cost?
  14. 14. Copyright LeanCor Supply Chain Group How are we performing? What are we measuring?  Customer Demand Variation  Transportation Variation  Lead Time Variation  Supplier Fill Rates  Consumption Variation  Inventory Discrepancies  Poor Quality We hold inventory to protect our business against this variation. The only way to reduce inventory is to improve in these areas. What source of supply chain variation causes you to hold the most inventory?
  15. 15. Copyright LeanCor Supply Chain Group How are we performing? What are we measuring?  Customer Demand Variation  Transportation Variation  Lead Time Variation  Supplier Fill Rates  Consumption Variation  Inventory Discrepancies  Poor Quality
  16. 16. Copyright LeanCor Supply Chain Group  How much you hold is a business decision.  The longer your lead times, the more safety stock you should hold.  You need to have visibility to the use of safety stock and determine root cause.  Look to reduce safety stock over time. Attention! Attention! You have used safety stock. Special cause variation has occurred in your supply chain.
  17. 17. Copyright LeanCor Supply Chain Group Katie Jenkins, Strategy Manager Manufacturing Global Supply Chain Bose Inventory Challenge
  18. 18. Copyright LeanCor Supply Chain Group Bose business is Changing – Customers are more demanding, frequent product refreshes, complex product offerings, global customer base, increase need for flexibility – Challenge: Reduce inventory and increase inventory turns SoundLink® Color Bluetooth® speaker SoundLink® Bluetooth® speaker III – NFL Collection SoundDock® XT QC®25 headphones CineMate 15
  19. 19. Copyright LeanCor Supply Chain Group What prevents us from turning our inventory 50x a year? o The Bose supply chain is setup to operate under a weekly cadence o Lack of end-to-end visibility of supply chain performance o Complexities are managed with Inventory o High Instability in Supply Plan Signal o Evidence of poor supplier on-time, right quantity delivery o All Products Planned the same o Metrics Align to Direct Cost not Total Cost
  20. 20. Copyright LeanCor Supply Chain Group What Bose is doing about it o Examine long lead-times with our supply base o Gain Control of Supply base -Fill Rate o Plan for every part and a plan for every product o Stability in our Supply Signal o Re-examine supplier shipping methods and practices o Postponement capabilities to manage the complexity o Total Cost Decision Making
  21. 21. Copyright LeanCor Supply Chain Group 1. Education and awareness. Inventory is a result of business decisions. 2. Put it in piles. Cycle Stock, Buffer Stock and Safety Stock. 3. Get rhythm. Understand the natural rhythm of your supply chain and work to get all supply chain activities to match that rhythm. Begin to measure Every Part/Product Every Interval. 4. Reduce variation. Improve the stability and performance of all supply chain activities to reduce the need for Buffer Stock. 5. Determine safety stock. Make sure you know when it is used. When it is used, make sure you know why. This is your business informing you that something out of the ordinary has happened.
  22. 22. Copyright LeanCor Supply Chain Group Kevin von Grabe kevinv@leancor.com 859.803.3858 Let’s connect on Katie Jenkins Let’s connect on
  23. 23. Copyright LeanCor Supply Chain Group Supplier Performance: The Keys to Collaboration TUE, July 14 | 11:00 – 12:00 EDT Register: http://www.leancor.com/event/supplier- performance-the-keys-to-collaboration/

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