Lean thinking refers to the elimination of waste in all aspects of a business to enrich value from the customer perspective. It identifies nine types of waste, including overproduction and waiting, and promotes practices like small-batch production, rapid changeovers, lean product and facility design. The goal is to reduce total cost across the supply chain.

1. Distribution Management
Concluding Session

8. VMI does not stand for
•The passing of the customer’s consumption history for a specific item,
•from the customer over to the supplier,
• who on the basis of this, will follow-up the customer’s stock level
•and at the moment of the stock having reached a specific threshold,
generates a purchasing order so as to replenish the stock.
VMI in fact stands for
•Granting inspection of the sales profile of a specific item to the supplier,
•who on the basis of this, will optimize the replenishment policy
•and ensure the pre-defined service level towards the end users of his
customer.

9. Third Party Logistics

10. 3rd Party Logistics
If logistics requirements are outsourced to a service provider,
that service provider is called a third party logistics provider.
These service providers are also referred to as 3PL.
What Services Does a 3PL Provide?
A full service 3PL takes care of all logistics requirements.

11. 3rd Party Logistics
Warehousing
•Physical goods need to be stored at some location.
•A 3PL will take care of warehousing requirements.
•It offers space and technology required to efficiently run a
warehouse.
•Warehousing by a 3PL is more cost efficient, as it is able to
spread its overheads over multiple clients.

12. 3rd Party Logistics
Consolidation Service
•Merchants often need to ship small quantities of goods to the a
location.
•For a merchant the shipping costs on these small shipments –
very high
•3PL service provider can have several merchant clients who
need to ship small quantities to the same locations
•These are consolidated into one shipment by the 3PL, thus
lowering the shipping costs
•A service provider sending several small packages as one large
package is referred to as a consolidation service
•It is one of the many services provided by a third party logistics
provider.

13. 3rd Party Logistics
Order Fulfillment
•The goods that reach the customer must be the right goods;
•They must reach on time, and in good condition.
•A good third party logistics service provider takes care of order
fulfillment requirements.

14. Enterprise Resource Planning
ERP) is an industry term for the set of activities that helps a
business manage the important parts of its business.
The information made available through an ERP system provides
easy monitoring of key performance indicators (KPIs) required
for meeting corporate objectives.
ERP software applications can be used to manage product
planning, parts purchasing, inventories, interacting with
suppliers, providing customer service, and tracking orders.
ERP can also include application modules for the finance and
human resources aspects of a business.
The deployment of an ERP system can involve considerable
business process analysis, employee retraining, and new work
procedures.

15. SAP
SAP, started in 1972 by five former IBM employees in Mannheim,
Germany
It is the world's largest inter-enterprise software company and the
world's fourth-largest independent software supplier, overall.
The original name for SAP was German: Systeme, Anwendungen,
Produkte, German for "Systems Applications and Products."
The original SAP idea was to provide customers with the ability to
interact with a common corporate database for a comprehensive range
of applications
SAP applications, provide the capability to manage financial, asset, and
cost accounting, production operations and materials, personnel,
plants, and archived documents
As of January 2007, SAP, a publicly traded company, had over 38,4000
employees in over 50 countries, and more than 36,200 customers
around the world.

16. Efficient Consumer Response
It is a strategic concept created by the processed food
distribution industry in the U.S. aiming to recover competitive
strength.
Whether a company can survive depends on whether the
company can provide customers with higher values.
ECR is a strategy to increase the level of services to consumers
through close cooperation among retailers, wholesalers, and
manufacturers.
By aiming to improve the efficiency of a supply chain as a whole
they can gain larger profits than each of them pursuing their own
business goals.
"ECR" is a strategic concept compiled by a consulting firm "Kurt
Salmon Associates " at the request of organizations concerning
the U.S. processed food distribution industry

17. Quick Response (QR)
QR is a management concept created to increase consumer
satisfaction and survive increasing competition from new
competitors.
It intends to shorten the lead time from receiving an order to
delivery of the products and increase the cash flow.
The QR (Quick Response) system, a production and distribution
system for quick response to the market, was developed for the
U.S. textile industry to survive the global competition with low-
cost foreign companies.
VICS (Voluntary Inter-industry Commerce Standards Association)
is the organization that is promoting QR.

18. Quick Response (QR)
Both QR and ECR are suggested by Kurt Salmon Associates, a US
consulting firm.
They aim to increase the speed of product flow at the manufac-
turing floor, shorten lead times, and improve throughput.
QR, ECR, have different names, they all have the motive of
"survival" in common.

19. Kanban

20. Kanban
A system of continuous supply of components, parts and supplies, such
that workers have what they need, where they need it, when they need
it.
The word Kan means "visual" in Japanese and the word "ban" means "card". So
Kanban refers to "visual cards".

21. Kanban
Production of a machine
•Needs 4 inch bolts
•Bolts sent from production to assembly station
•Sent on pallets. 100 on each pallet
•When all bolts on pallet used,
•The assembler takes a card attached to the pallet
•Sends it to bolt production area
•Production starts making bolts on receipt of this card
4 inch bolt
•Another pallet of bolts is made and sent to assembly area
•The new pallet of bolts is not made till the card is
received from assembly

22. Kanban
More realistic example
•Will involve at least two pallets of bolts
•The assembler works off the bolts from the first pallet
•Production working to refill second pallet wit bolts
•In a high volume assembly scenario, each assembler will
consume a pallet in minutes
•Several such assemblers
•Continuous flow of cards from assembly area to
production 4 inch bolt
•This will trigger continuous flow of pallets from
production to assembly

23. Kanban
Kanban is a ‘PULL’ type of production system.
The number of bolts made depends on the customer demand
In other words on the number of cards received by the bolt producing
area.
4 inch bolt

24. JIT
•JIT was originally developed by taking a hint from the way that
U.S. supermarkets do product replenishment.
•JIT in the Toyota Production System gave the Japanese auto
industry an edge in the market
•It has been adopted by many companies in the manufacturing
industry.
•"JIT (Just-in-Time)" is said to be a model system of the
manufacturing industry that was formulated by Taiichi Ohno as
the Toyota Production System.
•Behind the creation of JIT was the issue of whether the
Japanese auto industry could survive after the war

25. JIT
If the replenishment cycle time is shortened, the number of
products to replenish will be reduced
There will be fewer inventories held for a long time.
Also, the time that raw materials and work-in-process items are
held in the factory, i.e. the lead time, will shorten.
This JIT operation is designed as an automatic system that reacts
to information called "Kanban“
Kanban is issued from previous processes to later processes

33. Lean Thinking
Lean thinking refers to the elimination of waste in all
aspects of a business and thereby enriching value from the
customer perspective.
Muda means waste, specifically any human
activity which absorbs resources but creates
no value.”

34. Lean Thinking
Nine wastes
• Watching a machine run
• Waiting for parts
• Counting parts
• Overproduction
• Moving parts over long
distance
• Storing inventory
• Looking for tools
• Machine breakdowns
• Rework

35. Lean thinking
Lean practices
Small-batch production
Reduce total cost across a supply chain, such as removing the waste of
overproduction.
Rapid changeover
Rely on developments in machinery and product design
Provide the flexibility to make possible small-batch production that responds
to customer needs

36. Lean thinking
Lean practices
Lean product design
A reduction in the number of parts they contain and the materials from which
they are made
Features that aid assembly, such as asymmetrical parts that can be assembled
in only one way
Redundant features on common, core parts that allow variety to be achieved
without complexity with the addition of peripheral parts
Modular designs that allow parts to be upgraded over the product life

37. Lean thinking
Lean practices
Lean facility design
•Modular design of equipment to allow prompt repair and
maintenance
•Modular design of layout to allow teams to be brought together with
all the facilities they need
•Small machines which can be moved to match the demand for them
•Open systems architectures that allow equipment to fit together and
work when it is moved and connected to other items