LeanSCM

What is Lean
 A set of tools to reduce & eliminate waste
 A state of mind
 An operational model based on continuous
improvement
 A manufacturing method based on customer demand
 An organizational methodology designed to create a
Learning Organization
A philosophy based on lead time reduction from customer
order to delivery .
A set of tools that assist in the identification and then steady
elimination of waste (Muda), improved quality , production time
and reduced costs.
LEAN SUPPLY CHAIN
 A lean supply chain process is one that has been
streamlined to reduce and eliminate waste or non-value added
activities along the supply chain flow associated with the
movement of products

 It is meant to reduce excess inventory in the supply chain

 It should be demand driven, built on the “pull” approach of

customers pulling inventory in a flow as required, not by
suppliers pushing inventory.

 Anything that delays or impedes this flow must be analyzed

as a potential non-value added activity.

 Compressing cycle time and increasing inventory velocity are

the preferred results for lean supply chain management.
Why Lean
The purpose of a lean supply chain is to meet the 8 R's
of SCM

• Right Materials
• Right Quantity
• Right Time
• Right Place
• Right Source
• Right Service
• Right Price
• Right Quality
Changing Costing Methods
Principles of Cost Plus: SALES PRICE = COST+ PROFIT

Profit
SALES
Profit
Traditional Profit Mfg.
View Cost Sales
Sales Price
Mfg. Mfg.
Price
Cost Cost

Principles of Cost Reduction: PROFIT = SALES PRICE - COST

Profit Profit
Profit
Modern Mfg.
Sales
View Mfg.
Price Cost
Cost
Mfg.
Cost
The Lean Supply Chain
Best Quality - Lowest Cost - Shortest Lead Time
Through Shortening the Production Flow By Eliminating Waste

Just in Time
“The right part “Built in Quality”
at the right time
in the right amount” • Line Stop
- Manual
Preconditions - Automate
• Continuous Flow • Error Proofing
• Pull System • Visual Control
• Takt Time
Flexible, Capable,
• Level Production Highly Motivated
People

Operational Stability
Standardized Work Robust Products & Processes
Total Productive Maintenance Supplier Involvement
Types of Wastes

1) Over supply
2) Transportation
3) Inventory
4) Waiting
5) Movement
6) Defective Service or Product.
7) Over processing
Waste Reduction
• Stop defective products at their source

• Flow processes together or change the physical relationship of

components of the process
• Eliminate excess material handling or costly handling steps

• Eliminate or reduce pointless process steps

• Reduce the time spent waiting for parts, orders, other people, or
information
Results of Waste Reduction

• Reduced manufacturing cycle time

• Reduced labor expenditures
• Improved product quality
• Space savings
• Reduced inventory
• Quicker response to the customer

The net effect is the entire supply chain is

more efficient and responsive to customer
needs.
Components of the Lean Supply Chain

1. Lean Suppliers

• Able to respond to changes

• Their prices are generally lower due to the efficiencies of lean processes
• Their quality has improved to the point that incoming inspection at the
next link is not needed
• Deliver on time and
• Their culture is one of continuous improvement.

To develop lean suppliers,

• Include suppliers in their value stream
• Encourage suppliers to make the lean transformation and involve
them in lean activities
• Help their suppliers and set continually declining price targets and
increasing quality goals.
Lean Supply - Global Purchasing Strategies

Common Strategy (Intuitive)

• Buy Cheapest in the world
• Support with dual sourcing

Lean Strategy (Toyota) -

• Buy to achieve lowest total cost
• Buy in country where manufacturing is performed
• Minimize Number of Suppliers
• Keep supply chain short as possible
• Supply Chain is as strong as its weakest supplier
Components (Cont..)
2. Lean Procurement

• Lean procurement processes are e-procurement and automated

procurement
• E-procurement conducts transactions, strategic sourcing, bidding,
and reverse auctions using Web-based applications
• Automated procurement uses software that removes the human
element from multiple procurement functions and integrates with
financials
• The key to lean procurement is visibility. Suppliers must be able to
"see" into their customers' operations and customers must be able
to "see" into their suppliers' operations
• Organizations should map the current value stream, and together
create a future value stream in the procurement process.
• They should create a flow of information while establishing a pull of
information and products.
 Components (Cont..)
3. Lean Manufacturing
• Produce what the customer wants
• In the quantity the customer wants
• When the customer wants it
• And with minimum resources

• Applying lean concepts to manufacturing

typically presents the greatest opportunity
for cost reduction and quality improvement
Components (Cont..)
4. Lean Warehousing

Eliminating non-value added steps and waste in product storage processes.

• Warehousing waste can be found throughout the storage process

including:
• Defective products which create returns
• Overproduction or over shipment of products
• Excess inventories which require additional space and reduce
warehousing efficiency
• Excess motion and handling
• Inefficiencies and unnecessary processing steps
• Transportation steps and distances
• Waiting for parts, materials and information
• Information processes
Components (Cont..)
5. Lean Logistics

• Implementation of a production-synchronization, flexible supply

• Elimination of handling stages and tape stocks

• Implementation of consequent controls

• Realization of flow-bases concepts

• Reduction of the variance

• Shortening of times and increase of the tempo

• Synchronization of the up- and downstream chain

• Orientation on the Total Cost of Ownership

 Lean Logistics

• The realization of Lean Logistics principles

starts at the interface between the
assembly/production and logistics
Components (Cont..)
6. Lean Transportation
• Lean concepts in transportation include:

4. Core carrier programs

5. Improved transportation administrative processes and
automated functions
6. Optimized mode selection and pooling orders
7. Combined multi-stop truckloads
8. Cross docking
9. Right sizing equipment
10.Import/export transportation processes
11.Inbound transportation and backhauls

• The keys to accomplishing the concepts above include mapping the

value stream, creating flow, reducing waste in processes,
eliminating non-value-added activities and using pull processes
The Lean Enterprise
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Full Benefits of
Lean Supply Chain
Traditional
Manufacturing
& Support
Functions

Lean Supply Chains are not just a Materials

Management Effort
Components (Cont..)
7. Lean Customers
• Understand their business needs and therefore can
specify meaningful requirements
• Value speed and flexibility and expect high levels of
delivery performance and quality
• Interested in establishing effective partnerships—
Seeking methods of continuous improvement in the
total supply chain to reduce costs.
• Lean customers expect value from the products they
purchase and provide value to the consumers who
they interact with.
Ten ways to get Lean
• Make your supply chain more compact.
• Reduce stock at point-of-use
• Balance the receipt and delivery of goods
• Reduce capital expenditures by closely managing your
empty container flow
• Balance the work so your cycle time hits close to Takt
Time
• Optimize transportation routes.
• Optimize delivery
• Standardize warehouse processes
• Use visual management aids for information flow.
• End and correct line stoppages.
Source: Ian Truesdale and Glen Clark of CEVA Logistics, a Jacksonville, Fla.-based global logistics company
Lean Tools
Benefits of Lean Systems

• Speed and Responsiveness to Customers

• Reduced Inventories

• Reduced Costs

• Improved Customer Satisfaction

• Supply Chain as a Competitive Weapon

Path Forward to a Lean Supply Chain
• Lean is a cooperative process for survival and for success
• Lean concepts require an attitude of continuous improvement with a
bias for action
• The concepts of lean apply to all elements of the supply chain,
including support departments such as product development,
quality, human resources, marketing, finance, purchasing, and
distribution
• A lean supply chain is proactive and plans for the unexpected by
positioning all resources for effectiveness
• Leaning "other" areas presents a larger challenge than it does in
manufacturing.
• In the hierarchy of support areas, it is more challenging for the
people to understand how lean can benefit them
• Companies should have a sense of urgency about adopting lean
concepts because the Internet provides us with unprecedented
opportunities
• Supply chain leaders should not delay—it's urgent to act now to
implement lean concepts in the supply chain.