Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive
•Download as PPTX, PDF•
3 likes•601 views
China is under increasing competitive pressure as costs rise rapidly. This presentation outlines the challenge for manufacturers of staying competitive in #China and outlines a practical #LeanManufacturing strategy to address this challenge. The presentation was presented by @TXMLean Managing Director, Tim McLean to the Fudan University School of Management on 19 March 2015
Recommended
More Related Content
What's hot
What's hot (20)
Similar to Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive
Similar to Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive (20)
Recently uploaded
Recently uploaded (20)
Why Chinese Manufacturers Must Adopt Lean Manufacturing to Stay Competitive
- 1. 1 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL MANUFACTURING IN CHINA - WHY YOU MUST CHANGE TO SURVIVE TIM MCLEAN 19 MARCH 2015
- 2. 2 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL COMPETING WITH CHINA • Introduction • The changing competitive landscape for China Manufacturing. • Lean Manufacturing – a strategy to compete. • Case Study – Harvest • Getting Started On Lean
- 3. 3 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL ABOUT ME • Australian – born and educated in New Zealand. • 27 Years in Manufacturing • Chemical Engineer and MBA • Operations and General Manager 16 years • Established TXM in 2004. • Worked with over 100 Manufacturing SMEs around Australia, China and South East Asia • Emphasis on implementation and outcomes not training courses • Lean Book Author.
- 4. 4 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL SO WHY IS CHINA SO SUCCESSFUL? Source: US Dept Of Labour 2004 Low-cost regions Large markets China $1.85 S. Korea $11.50 Thailand $1.50 India $0.95 E. Europe $5.70 W. Europe $34.00 Brazil $3.00 USA $23.10 Mexico $2.50 Australia $23.00
- 5. 5 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL * Source: National Bureau of Statistics, China Statistical Yearbook converted to $US TIMES ARE CHANGING 0 200 400 600 800 1000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 MonthlyWage$US Average Monthly Compensation Urban Manufacturing Employees in China*
- 6. 6 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL Source: “Farewell to the China Price, Steven Dickinson, China Economic Review, March 2011 WAGES MUST INCREASE Metric China World Average Ratio of Minimum Wage to GDP per capita 25% 58% Years to buy a home at average income 74 3-6 Ratio of Manager salary to minimum wage (SOE) 98 times 5 times Cost of 1000kWH electricity as proportion of average monthly income 31% 3-8% Wages must double over the next five years to bring them in to line with per Capita GDP”, Liu Xinrong, Independent Economist
- 7. 7 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL OTHER COSTS ARE INCREASING • Industrial Land • Construction Costs • Energy Costs • Regulatory Compliance Costs • Interest Rates
- 8. 8 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL COMPARISON OF A “TYPICAL” PRODUCT – EX WORKS COST 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 Western Supplier China Supplier Margin Overhead Direct Labour Material G a p $ 3 4 G a p $ 3 4 Gap $40
- 9. 9 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL ADD SEA FREIGHT COST 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 Western Supplier China Supplier Sea Freight Margin Overhead Direct Labour Material Gap $34
- 10. 10 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL ADD INVENTORY HOLDING COSTS 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 Western Supplier China Supplier Inventory Holding & Storage Sea Freight Margin Overhead Direct Labour Material Gap $29
- 11. 11 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL ADD COST OF POOR QUALITY 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 Western Supplier China Supplier Inventory Holding & Storage Sea Freight Margin Overhead Direct Labour Material Gap $24
- 12. 12 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL ADD SUPPLIER SUPPORT COSTS 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 Western Supplier China Supplier Supplier Support Costs Cost of Poor Quality Inventory Holding & Storage Sea Freight Margin Overhead Direct Labour Material Gap $20
- 13. 13 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL BUT CHINA STILL WINS Western total cost = 108 China total cost = 88 China Saving = 20
- 14. 14 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL BUT WHAT IS GOING TO HAPPEN IN THE FUTURE?
- 15. 15 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL ANNUAL INFLATION ASSUMPTIONS • Wage Inflation 2% • Other Costs 2% • Currency Appreciation 0% • Wage Inflation 10% • Other Costs 4% • Currency appreciation 5% China West
- 16. 16 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL COST TREND OVER 10 YEARS 0 20 40 60 80 100 120 140 160 180 200 TotalCostPerUnit Western Supplier China Supplier
- 17. 17 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL OUR COMPETITIVE PICTURE IN 2020 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 180 190 200 Western Supplier China Supplier Supplier Support Costs Cost of Poor Quality Inventory Holding & Storage Sea Freight Margin Overhead Direct Labour Material
- 18. 18 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL HOW CAN YOUR CHINESE OPERATION STAY COMPETITIVE?
- 19. 19 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL MOVE OUT OF CHINA? THAILANDINDIA
- 20. 20 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL CAN WE IMPROVE OUR CHINA OPERATIONS?
- 21. 21 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL HOW ARE YOU EXPERIENCING COMPETITIVE PRESSURE? WHAT ABOUT YOUR BUSINESS? DO YOU THINK YOUR BUSINESS HAS WASTE THAT YOU CAN REDUCE?
- 22. 22 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL WHAT IS LEAN? • A system of manufacturing management developed by Toyota over the past 50 years. • Also known as the Toyota Production System or TPS • Adopted by companies in industries all over the world in industries ranging from Aircraft manufacture to hospitals. • Popularised in the west by Jim Womack and Dan Jones in their book “Lean Thinking” and the “Learning to See” handbooks.
- 23. 23 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL THE LEAN APPROACH “All we are trying to do is shorten the lead time…” Taiichi Ohno Toyota Production System
- 24. 24 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL THE TOYOTA PRODUCTION SYSTEM Best Quality Lowest Cost Shortest Lead Time Just in Time One Piece Flow Best Quality Lowest Cost Shortest Lead Time
- 25. 25 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL FOUR KEY PRINCIPLES OF THE TOYOTA PRODUCTION SYSTEM • All work is highly specified in its content, sequence, timing and outcome • Each person knows who provides what to him, and when. • Every product and service flows along a simple, specified path • Any improvement must be made in accordance with a scientific method, under the guidance of a teacher, at the lowest possible level in the organization. Reference: Decoding the DNA of the Toyota Production System by Steven Spear and H. Kent Bowen, Harvard Business Review, Sept-Oct 1999
- 26. 26 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL KEY TOOL IS THE VALUE STREAM MAP It is all the actions, both value added & non value added required to bring a product through the main flows essential to every product: 1、Information management (order to delivery) 2、Operations management (raw materials to customer) Total Value Stream SUPPLIERS PLANT OR COMPANY CUSTOMER TO END USER
- 27. 27 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL WHAT IS VALUE? • Those activities that a customer is willing to pay for when they buy the product. • Everything else! WHAT IS WASTE?
- 28. 28 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL CAN ANYONE LIST THE SEVEN WASTES? TYPICALLY THERE ARE SEVEN TYPES OF WASTE WE LOOK FOR
- 29. 29 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL INVENTORY
- 30. 30 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL WAITING
- 31. 31 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL EXTRA-PROCESSING
- 32. 32 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL REJECT PRODUCT AND MATERIAL.
- 33. 33 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL MOVEMENT Total Travel Distance=1030m
- 34. 34 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL OVER PRODUCTION - COMPLETING MORE WORK THAN IS NEEDED OR SOONER THAN IS NEEDED.
- 35. 35 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL TRANSPORTATION
- 36. 36 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL THREE TYPES OF ACTIVITIES Incidental Work Pure Waste Value Typical target area - Often leads to more capacity to create waste
- 37. 37 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL WHY LEAN?? • Typically 50%-80% lead time reduction • Lower inventory/working capital • Faster response • better service to customers. • At least 30% reduction in space for given output • Reduce movement, storage and select smaller, cheaper more agile equipment. • Up to 30% productivity improvement • Eliminate wasted operator time • Level workload in production. • Significant quality and safety improvements
- 38. 38 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL SO HOW CAN LEAN KEEP OUR CHINA SUPPLY CHAIN COMPETITIVE?
- 39. 39 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL OUR COMPETITIVE PICTURE IN 2020 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 180 190 200 Western Supplier China Supplier Supplier Support Costs Cost of Poor Quality Inventory Holding & Storage Sea Freight Margin Overhead Direct Labour Material
- 40. 40 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL STEP 1 – SIMPLIFY THE SUPPLY CHAIN
- 41. 41 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL WHAT PROBLEMS HAVE YOU EXPERIENCED? ARE YOU INVOLVED IN AN INTERNATIONAL SUPPLY CHAIN?
- 42. 42 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL EXAMPLE OF SIMPLIFIED PARTS REPLENISHMENT FLOW FROM CHINA TO AUSTRALIA
- 43. 43 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL KEY BENEFITS • Clear accountabilities at every step. • Routine reduces cost and complexity. • Regular cycle keeps down logistics cost and minimizes unplanned delays (one delay in 20 weeks) • Reduced supply and quality risk and inventory through shorter replenishment interval. • Lead time from order to delivery in store around three weeks. • Suppliers adopt kanban process internally on own initiative!!
- 44. 44 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL HOW WILL THIS AFFECT OUR TOTAL COST EQUATION? • Tendering all our freight and logistics requirements to a single provider lead to a 20% freight cost reduction. • Inventory at our customer was reduced by around 50%. • Cost of poor quality was reduced by half as the amount of inventory in the supply chain was reduced by half. • Simplified Ordering process reduced supplier support costs by around 25%
- 45. 45 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL OUR COMPETITIVE PICTURE IN 2020 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 180 190 200 Western Supplier China Supplier Lean China Supply Chain Supplier Support Costs Cost of Poor Quality Inventory Holding & Storage Sea Freight Margin Overhead Direct Labour Material
- 46. 46 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL STEP 2 – MAP THE CHINA FACTORY’S PROCESS AND IMPROVE QUALITY AND PRODUCT FLOW
- 47. 47 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL WHAT KIND OF WASTE HAVE YOU SEEN IN CHINESE FACTORIES?
- 48. 48 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL MAPPING THE SUPPLIER’S PROCESS • Set improvement objectives. • Provide coaching resources. • Map the supplier’s end to end process – Value stream mapping to “see the waste”. • Agree an action plan. • Coaching support to implement the plan. • Improve internal processes at the supplier to manage the flow of production. • Focus on “right first time” rather than quality through inspection
- 49. 49 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL CASE STUDY – SOUTH CHINA SUPPLIER TO ELECTRONICS INDUSTRY Improvement Benefit 35% reduction in customer returns Reduce cost of poor-quality 18% reduction in scrap 1% material cost reduction On time delivery increased from 85% to 99% Reduced customer inventory 34% reduction in downtime Reduce maintenance overhead Increase productivity 35% reduction in WIP and lead time Reduced customer inventory
- 50. 50 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL OUR COMPETITIVE PICTURE IN 2020 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 180 190 200 Western Supplier China Supplier Lean China Supply Chain Supplier Support Costs Cost of Poor Quality Inventory Holding & Storage Sea Freight Margin Overhead Direct Labour Material
- 51. 51 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL STEP 3 CHANGING THE SHOP FLOOR CULTURE IN CHINESE FACTORIES
- 52. 52 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL ALIGNING FOR LEAN SUCCESS
- 53. 53 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL WHAT KIND OF CULTURAL AND LEADERSHIP BARRIERS DO YOU SEE IN YOUR BUSINESS?
- 54. 54 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL KEY ELEMENTS OF LEAN SUPPLIERS • Lean Leadership Process • Drive changed leadership behaviors • Focus on key metrics • Plant Layout Improvement • Improve space utilization • Work cell design • “One piece flow” at the production cell level • Eliminate WIP. • Standardized Work • Standardize manufacturing processes
- 55. 55 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL CASE STUDY – GARMENT MANUFACTURING IN JIANGSU PROVINCE Previou s Status Current Status % 1. Total Lead Time 84 Days 70 Days 16.7% 2. Ironing and Packaging Utilization Area 1302.4M2 475.2M2 63.6% 3. WIP Inventory 130K pcs 60K pcs 53.8% 4. Labor Efficiency 44.5% 55.7% 25.2%
- 56. 56 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL OUR COMPETITIVE PICTURE IN 2020 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 180 190 200 Western Supplier China Supplier Lean China Supply Chain Supplier Support Costs Cost of Poor Quality Inventory Holding & Storage Sea Freight Margin Overhead Direct Labour Material
- 57. 57 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL GETTING STARTED ON LEAN • Identify clear business objective. • Usually start with Value Stream Mapping to “see the waste”. • Work with cross functional team: • Individuals from end to end supply chain. • Develop action plan • Key metrics and actions • A3 Plan • Coaching to implement plan • Build Lean foundations • Expect dramatic impovement
- 58. 58 © TXM Lean Consulting (Shanghai) Co., Ltd. 2014 CONFIDENTIAL SUMMARY • Relative competitiveness of Chinese manufacturing changing quickly. • In less than 5 years total cost of sourcing many products from China will be higher than sourcing locally in the west. • Improving your supply chain through lean manufacturing can reverse this trend. • Lean can help you and your suppliers get there..
Editor's Notes
- 8.02 TIM
- Over the past 9 years, average hourly labour costs have tripled. While they are still low by western standards,
- Lets start this year. We have outsourced a product to China based on a 40% ex-works unit cost saving. Assumptions: We have assumed that material costs are the same as our western supplier at a fairly typical 40% of sell price, direct labour is 30% of sell price for the western supplier and 5% for the Chinese supplier while overheads are 20% for the western supplier and 9% for the Chinese. We have allowed both suppliers an EBIT margin of 10%.
- The Chinese product needs to be transported to the Western market, so based on the bulk of the product involved the cost of sea-freight worked out at 6%. Direct costs and freight are probably costs you already consider, however supplying a Western market from China involves many hidden costs, mostly associated with the extended supply chain and longer lead times. The first of these is additional inventory.
- Inventory levels required to support a longer export supply chain are much higher than those for a local supplier with shorter and more reliable lead times. Therefore inventory levels will be higher for China sourced product, which will increase working capital interest payment, storage costs and the costs of obsolete stock.
- For this exercise we assumed that the quality supplied by the local and Chinese supplier was the same. However the consequences of a quality problem are much greater with an extended supply chain as all the stock in the chain is potentially affected
- Your western customer will probably not have a professional purchasing office with a team of 20 buyers and quality engineers supporting his local suppliers. The customer also usually doesn’t need a 12 hour flight to get to his supplier. The location along with language and cultural differences mean that transactional and supplier support costs for China are inevitably much higher for a Chinese supplier than for a local western supplier.
- Your western customer will probably not have a professional purchasing office with a team of 20 buyers and quality engineers supporting his local suppliers. The customer also usually doesn’t need a 12 hour flight to get to his supplier. The location along with language and cultural differences mean that transactional and supplier support costs for China are inevitably much higher for a Chinese supplier than for a local western supplier.
- Images are of pedestrian bridge collapse at Delhi Commonwealth Games and the red shirt protestors in Bangkok Issues are poor infrastructure, bureaucracy, corruption and government incompetence in India, while Thailand continues to suffer from deep seated political instability (and corruption) Relocation is also highly costly and risky.
- The Lean Approach Has been developed over the past 40 years by the Toyota Motor Company. It is central to Toyota’s ongoing success as the world’s most successful car manufacturer. The essence of lean is summarised in this simple message by the acknowledged father of the Toyota Manufacturing System, Taichi Ohno. “All we are trying to do is shorten lead time” In Lean terms the lead time is the time for a unit of raw material to proceed all the way through a process from receipt until it is delivered to the customer as a finished good. Lead time therefore includes both process time and days of inventory. By reducing this lead time in the supply chain greater levels of flexibility can be achieved, lot sizes can be reduced and customer service improved. Lean enterprise focuses on identifying the value added and non value added activities in a process. Value added is simply defined as the steps that add value to the customer. Non value added time or “muda” is typically categorised into the “seven wastes”. These include things such as inventory or movement of materials as well as the obvious wastes such as over production or scrap. Once the non-value added time is identified then a range of lean tools are used to eliminate or minimise this time and thereby reduce the lead time. These include such well known tools as 5S, smarter changeovers or TPM.
- The Value Stream Map To bring all these various tools together, the central tool in lean implementation today, is the Value Stream map. The value stream map shows all the actions, both value added and non value added required to bring the product through the main process flows. The value stream map typically will show the physical flows of material from the supplier to the customer and the information flows required to enable the material flow to occur. The value stream map can also be used to map the product development flow from concept to launch.
- 5 – 10% is usually value in manufacturing 50% is usually waste. Ask - Where do companies usually focus on improvements? (How many here have heard of the ACE program? Ace is Achieving Competitive Excellence. It is a great program. However, where it it’s focus?) It is in the 5 – 10%, trying to improve these processes.
- Your western customer will probably not have a professional purchasing office with a team of 20 buyers and quality engineers supporting his local suppliers. The customer also usually doesn’t need a 12 hour flight to get to his supplier. The location along with language and cultural differences mean that transactional and supplier support costs for China are inevitably much higher for a Chinese supplier than for a local western supplier.
- This is a real supply chain from a relatively unsophisticated Chinese sheetmetal manufacturer to an Australian high technology manufacturer. First Click: The process starts with a daily pull signal from the factory floor in Melbourne via the SAP system to the 3rd Party logistics warehouse in Melbourne. Inventory in the 3PL warehouse is owned by the Chinese supplier and payment is only made once the parts are delivered to the customer. Therefore our Melbourne customer’s inventory is limited to around 1 week on hand with around 4-6 weeks in the 3PL warehouse. Second Click: This triggers daily supply from the 3PL warehouse to the supplier’s manufacturing site. Third Click: Weekly orders are then generated to replenish the Melbourne warehouse based on usage. Fourth Click: the supplier then has three weeks to manufacture and ship the goods. Fifth Click: The entire logistics process from the supplier’s door to the customers dock is managed by a single third partly logistics provider. Sixth Click: The supplier retains ownership of the parts all the way to the customer’s door. This just effectively shifts the supplier’ inventory from his own factory to the warehouse in Melbourne. In this case, an external warehouse was used as our customer had limited space on site, but in other projects supplier owned inventory has been stored on site in our Australian customer’s warehouse.
- Your western customer will probably not have a professional purchasing office with a team of 20 buyers and quality engineers supporting his local suppliers. The customer also usually doesn’t need a 12 hour flight to get to his supplier. The location along with language and cultural differences mean that transactional and supplier support costs for China are inevitably much higher for a Chinese supplier than for a local western supplier.
- Reductions in material costs, overhead, inventory and cost of poor quality now bring our 2020 China supplier down to within 15% of the cost of our western supplier.
- 9.26 TIM
- 30% improved productivity translates directly to a 30% labour saving. Reduced supplier lead time allows a further reduction in inventory at the customer. A smaller factory and simpler layout means lower overheads. Finally the combined impact of the lean improvements will make the supplier easier to manage leading to reduced supplier support costs. As a result our Chinese supplier in 2020 now has a total cost of 129, 10% below our western supplier.
- This might need fine tuning.