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SCM Operations - Make

MakeThis is the manufacturing


step. Supply chain managers
schedule the activities necessary
for production, testing, packaging
and preparation for delivery. This
is the most metric-intensive
portion of the supply chainone
where companies are able to
measure quality levels, production
output and worker productivity.

Push System

Push system : In push system you


plan (demand forecast) first and push
the material down to all the facilities
Production and distribution decisions
based on long-term forecasts.
The difference between the push and
pull system lies in inventory
management technique

Advantages:
Stock Out risk reduction
Economies of Scale in production,
warehousing and transportation

Disadvantages
Reduced flexibility
Inventory carrying cost

Pull-Based Supply
Chains

Production and distribution demand


driven

Coordinated with true customer


demand rather than forecast demand

Advantages
Reduced Inventory Levels
Increased Flexibility

Disadvantages

Risk of stock out

Push VS Pull Strategy

Supply Chain Integration


Hybrid of push
and pull strategies to overcome
Push/Pull
Strategies

disadvantages of each
Early stages of product assembly are done in a
push manner

Partial assembly of product based on aggregate


demand forecasts (which are more accurate than
individual product demand forecasts)
Uncertainty is reduced so safety stock inventory is
lower

Final product assembly is done based on customer


demand for specific product configurations
PushPull determines push-pull
Supply chain timeline
Boundary
Generic Product
Customized Product
boundary
Push Strategy

Raw
Materials

Pull Strategy

Supply Chain Timeline

End
Consumer

Consider Two PC
Manufacturers:

Build to Stock

Forecast demand
Buys components
Assembles
computers
Observes demand
and meets demand
if possible.

A traditional push
system

Build to order

Forecast demand
Buys components
Observes demand
Assembles
computers
Meets demand

A push-pull system

Make-to-Stock (MTS)

Here, the product is built against a


sales forecast, and sold to the
customer from finished goods stock;
this approach is common in the
grocery and retail sectors, FMCG
companies,

Make-to-Stock
Environment

Make to forecast
Rapid delivery From
finished goods stock
Standard products
High volumes
Low variety
Typically lower profit
margins per unit

Business Impact

Finished goods are


stocked
Forecast error costs
money

Make To Order

Here, the product is based on a


standard design, but components
production and manufacturing of the
final product is linked to the order
placed by the final customer's
specifications

Make-to-Order
Environment

More variety than


Make-to-Stock (MTS)
Some repeat products
Long lead times
Low volumes
High end item variety
Large profit margins

Business Impact

Forecasted revenue
Raw material is
stocked in
anticipation of
future sales

Here, the product is based on a standard design, but components production and
manufacturing of the final product is linked to the order placed by the final customer's
specifications; Tailor made suits etc.

Characterist Make-to-Stock
ics
Product
Producerspecified
Low variety
Inexpensive
Objectives

Main
operations
problems

Balance
inventory,
capacity, and
service
Forecasting
Planning
production

Make-toOrder
Customerspecified
High variety
Expensive
Manage
delivery lead
times and
capacity
Delivery
promises
Delivery time

Make To Order

There are various models for Make To


Order. For example, in some cases, the
process of assembling prepared parts
starts when actual demand occurs
(Assemble to Order). Or, in other cases,
the production process starts with the
obtaining of materials and parts (Build To
Order) , or further back from development
designing (engineer to Order).

Assemble-to-Order
Environment

Fewer products than


MTO
Higher volume than
MTO
Some standard subassemblies
Build to forecast at the
option level
Configured to customer
order
Planning Bills

Business Impact

Limited finished
goods
Material is stocked
at a semi-finished
stocking point
Minimal
configuration time
Maximum product
flexibility

Here, the product is built to customer specifications from a stock of existing


components; a typical example for this approach is Dell's approach to customizing its
computers

Engineer-to-Order
Environment

Custom designed
products
Unique bills of material
Unique item numbers
Very long lead times
Low volumes
High product variety

Business Impact

No finished goods
Low levels of raw
material
Revenue forecasts
Difficult to forecast
Estimating is very
important

Here, the product is designed and built to customer specifications; this approach is
most common for large construction projects and one-off products, such as Formula 1
cars

High

The Product-Process
Matrix

Product Variety

Engineer-to-Order

Make-to-Order
Assemble-to-Order

Make-to-Stock
Low
Low

Product Volume

High

Customer Order De-coupling


(Based upon the Manufacturing Environment)

Inventory
Location

Supplier

Raw
Material

Engineer to
Order (ETO)

Make-toOrder (MTO)

WIP
Parts
& Matls

Finished
goods

Customer Order
De-coupling Point

Environment

Assemble to
Order (ATO)

Make-toStock (MTS)

Just-In-Time and Lean


Manufacturing

ITS ALL ABOUT


SPEED!
Mouse busting through maze
goes here!!! Too big of file.

What is Lean?
Producing what is needed, when it is needed,
with the minimum amount of materials,
equipment, labor, and space.

Definition of Value
Value Added Activity
An activity that changes the size,
shape, fit, form, or function of
material or information (for the first
time) to meet customer
requirements.
Examples: injection molding,
stamping, and forging

Non-Value Added Activity


Those activities that take time
or resources, but the customer
is not willing to pay for.
Example: travel between
stations

Lean Production / JIT


WHAT IT IS
Management philosophy
Pull system though the plant

WHAT IT REQUIRES

Employee participation
Industrial engineering/basics
Continuing improvement
Total quality control
Small lot sizes

WHAT IT DOES
Attacks waste
Exposes problems and bottlenecks
Achieves streamlined production

WHAT IT ASSUMES
Stable environment

Steps Towards JIT


Manufacturing

Reengineer the manufacturing system


Reduce setup
Integrate quality control
Integrate preventive maintenance
Level and balance the system
Integrate a pull system
Control inventory
Implement a vendor program
Utilize computer integrated
manufacturing (CIM) benefits

What is Waste Identification and Elimination?


A comprehensive understanding of Waste
Identification and Elimination is essential for the
successful transformation to Lean Enterprise.

DOTWIMP?

What is Waste Identification and Elimination?

Waste Identification
Waste: is anything that does not directly add value to the
final product or contribute to the products transformation.
Waste: only adds time and cost, no value.

Waste: is anything your customer would be unwilling to


pay you to do.

There are seven basic


types of waste known as

DOTWIMP

Processing Defects
Motion
Inventory

OverProduction

TYPES
OF
WASTE

Transportation
Waiting

What is Waste Identification and Elimination?

Waste of Defects: Definition

Inspection or
repair of a
product or
service to
fulfill
customer
requirements

What is Waste Identification and Elimination?

Waste of Defects: Root Causes


Weak

Process Control
Suspect Incoming Material
Product Design
Insufficient Preventative
Maintenance
Poor Workplace Organization
Lack of Boundary Standards
Poorly Trained Operators
Inadequate Tools / Equipment
Overproduction

What is Waste Identification and Elimination?

Waste of Defects: Example


Company reworks 10% of assemblies due to poor employee training
If it costs the company $4 for each assembly and 25,000 are created
annually, the cost of rework would be:

25,000 x 10% x $4 = $10,000

What is Waste Identification and Elimination?

Waste of Defects: Indicators and Techniques to Eliminate


Indicators:
Extensive receiving inspection
Gauging / inspection stations
Scrap / rework / sorting areas

Golden Rule
Defects must be traced
to their root cause for a
permanent solution.

Techniques to Eliminate:
Supplier quality built-in
Error proofing
Reduction of variation
Quality at source

Reducing Waste

What is Waste Identification and Elimination?

Waste of Overproduction: Definition

Producing more,
or sooner, than
is needed

Producing a larger amount


than is necessary.

Producing at a rate faster


than required.

What is Waste Identification and Elimination?

Waste of Overproduction: Root Causes


Incapable

Process

Long

Changeovers / Set-Ups

Lack

of Level Schedules

Redundant
Misuse

Inspections

of Automation

Insufficient

Preventative Maintenance

Just-In-Case

Thinking

What is Waste Identification and Elimination?

Waste of Overproduction: Example


Company produces 5,000 more parts than necessary, just in case

Extra parts not needed by customer take up


valuable aisle/storage space
Increased inventory increases overhead expense
Extra production reduces available time for orders
needed by other customers

What is Waste Identification and Elimination?

Waste of Overproduction: Indicators and Techniques to Eliminate


Indicators:
Excessive inventories
Make to Forecast
High scrap/rework
High Lead times

Golden Rule
Build what the customer
needs, when it is needed
in the quantity needed.

Techniques to Eliminate:
Small lot production (one-piece
flow when possible)
Make to Demand
Level Scheduling

What is Waste Identification and Elimination?

Waste of Transportation: Definition

Any movement
of material or
information that is
not required for
Just-In-Time
production

What is Waste Identification and Elimination?

Waste of Transportation: Root Causes


Multiple
Large
Poor

Storage Location

Lot/Batch Processing

Plant Layout

Redundant
Poor

Inspection

Housekeeping

Unleveled

Scheduling

Overproduction

What is Waste Identification and Elimination?

Waste of Transportation: Example


Employee walks 35 feet to next station 32 times per day

Avg. walking pace = .227 seconds per foot


.227 seconds x 35 feet = 7.9 seconds per trip
7.9 seconds x 32 times = 252.8 seconds per day
252.8 seconds x 260 working days = 18.3 hours per year
18.3 hours x $20 per hour = $366 per year spent for
employee to walk to next station

If stations were 6 feet apart, the amount paid to walk to


next station would only be $63

What is Waste Identification and Elimination?

Waste of Transportation: Indicators and Techniques to Eliminate

Indicators:
Lack of pull systems
Large lots
Double Handling

Golden Rule
Transportation adds
NO VALUE to any part.

Techniques to Eliminate:
Predetermined routes / frequent
delivery
Small (no) containers / kitting / decontainerization
Pull systems
Improve factory layout
Single piece flow

Minimizing Waste: Group Technology

Using
UsingDepartmental
DepartmentalSpecialization
Specialization (Job
(JobShop)
Shop)for
forplant
plant
layout
layoutcan
cancause
causeaalot
lotof
ofunnecessary
unnecessary material
materialmovement
movement
Note
Notehow
howthe
theflow
flowlines
linesare
aregoing
goingback
backand
andforth
forth
Saw

Saw

Saw

Grinder

Grinder

Heat Treat

Lathe

Lathe

Lathe

Press

Press

Press

Minimizing Waste: Group


Technology
Revising
Revising by
by using
using Group
Group Technology
Technology Cells
Cells can
can
reduce
reduce movement
movement and
and improve
improve product
product flow
flow
Grinder
Saw

Lathe

Lathe

Press

Lathe

Press

Heat Treat

Grinder
Saw

Lathe

What is Waste Identification and Elimination?

Waste of Waiting: Definition

Being idle
between
operations

What is Waste Identification and Elimination?

Waste of Waiting: Root Causes


Unbalanced

Work Loads

Insufficient

Preventative
Maintenance

Unplanned
Long

Down Time

Changeovers / Set-Ups

Upstream

Quality Problems

Overproduction

What is Waste Identification and Elimination?

Waste of Waiting: Example


Employee waits 20 seconds for previous operation to finish each part

20 seconds x 60 parts per hour = 20 minutes per hour spent


waiting for parts
20 minutes x 8 hours per day = 2.67 hours per day spent
waiting
2.67 hours x 260 days per year = 694.4 hours per year
spent waiting
694.4 hours x $20 per hour = $13,888 spent on employee
waiting for previous operation

What is Waste Identification and Elimination?

Waste of Waiting: Indicators / Techniques to Eliminate


Indicators:
Operators waiting for machine
Operators waiting for material
Operators faster than line
Golden Rule
Design machine and
process to support
operators; shift from
machine focus to
people focus.

Techniques to Eliminate:
Improve work distribution
Cross train operators
Pull systems / frequent
deliveries
Improved changeovers

What is Waste Identification and Elimination?

Waste of Inventory: Definition

Any supply
in excess
of one piece
flow

Inventory Hides Problems !!


Inventory Hides Waste !!

Company

INVENTORY LEVEL

WATER = INVENTORY

VARIATION
LONG
CHANGEOVERS

LARGE
LOT SIZES

POOR
LAYOUT

EQUIPMENT
DOWNTIME

ROCKS = PROBLEMS

SUPPLIER
QUALITY

What is Waste Identification and Elimination?

Waste of Inventory: Root Causes


Local

Optimization

Unreliable

Processes

Unreliable

Suppliers

Unleveled

Schedules

Poor

Communication

Long

Changeovers

Poor

Operational
Availability

Overproduction

What is Waste Identification and Elimination?

Waste of Inventory: Example


Company rents warehouse space to hold extra inventory

Need 4,000 square feet to hold inventory


Warehouse space costs $4.00 per square foot per month
4,000 square feet x $4.00 = $16,000 per month
$16,000 x 12 months = $192,000 per year for storage

What is Waste Identification and Elimination?

Waste of Inventory: Indicators and Techniques to Eliminate


Indicators:
Storage / holding areas
Large buffers between
operations
Golden Rule
Inventory is a symptom of
the other forms of waste
and will hide this waste if
allowed. Eliminate the
waste and the inventory
will not be needed.

Techniques to Eliminate:
Small Lot Production
Level Scheduling
Pull systems

What is Waste Identification and Elimination?

Waste of Motion: Definition

Any
movement
that does
not add
value

What is Waste Identification and Elimination?

Waste of Motion: Root Causes


Inconsistent

Work Methods

Poor

Equipment, Office
or Plant Layout

Poor

Workplace Design
(Parts Presentation)

Lack

of Workplace Organization

Overproduction

What is Waste Identification and Elimination?

Waste of Motion: Example


Employee walks to tool crib 100 feet away 3 times a day to retrieve equipment

Costs $98.37 per year for employee to make the trip


(per transportation calculation)

High chance of tools getting lost or misplaced due to


proximity of storage location
Reduced productivity from employee due to travel for
equipment

Waste of Motion: Example

Waste Example

Bricklaying, through late


Nineteenth Century

The brick weighs


about five pounds
(2.3 kg). How
much is the
worker actually
raising and
lowering every
time he bends over
for another brick?

Source: Levinson Productivity Systems,


P.C.

Bricklaying, after Frank


Gilbreth

The joke about the underachievers and the light bulb


isn't so funny any more.
Lesson: waste can, by long habit ("living with it,"
"working around it") become built into a job.

Source: Levinson Productivity Systems,


P.C.

What is Waste Identification and Elimination?

Waste of Motion: Indicators and Techniques to Eliminate


Indicators:
Excessive reaching / bending
Excessive walking
Cluttered work area

Golden Rule
The focus MUST be on
the operator.

Techniques to Eliminate:
Improved workstation design
Design for flow
Designate / label storage area

What is Waste Identification and Elimination?

Waste of Processing: Definition

Effort which
adds no
additional
value in the
eyes of the
customer.

Using a Hammer to Crack a Nut

What is Waste Identification and Elimination?

Waste of Processing: Root Causes


Just-In-Case

Logic

True

Customer
Requirements
Undefined or Unclear

Redundant
Lack

Steps

of Operator Training

Overproduction

What is Waste Identification and Elimination?

Waste of Processing: Indicators and Techniques to Eliminate


Indicators:
Variation between operators
Unnecessary heat treat
Machine cutting air
Redundant / Unnecessary
Labeling

Golden Rule
Understand customer
specifications.

Techniques to Eliminate:
Compare current state
processes to customer
requirements
Product design improvements
Process improvements