LEAN MANUFACTURING IMPLEMENTATION --

Lean Supply Chain

University of Michigan
Manufacturing Strategies IOE 425

October 18, 1999

Ronald L. Turkett
 Why Lean Supply Chain?
Toyota GM
GM
22 Plts. Nummi
Nummi
Indiana Plts. Europe
Europe
Saturn TPS
TPS Ford
Ford
Saturn
Worldwide
Worldwide
Renault
Renault FPS
FPS
Toyota
Georgetown
Suppliers
Suppliers
Chrysler
Chrysler
COS Porsche
Porsche
COS

Toyota
Mercedes
Mercedes Peugeot
Cambridge
Peugeot
BMW
BMW

Implementing Lean Production Enables Seamless Connection

with Customers and Suppliers
Lean Supply Chain Ronald L. Turkett
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 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

Lean Supply Chain Ronald L. Turkett

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 “Lean Vs.Traditional”

 Half the hours of engineering effort

 Half the product development time
 Half the investment in machinery, tools and equipment
 Half the hours of human effort in the factory
 Half the defects in the finished product
 Half the factory space for the same output
 A tenth or less of in-process inventories

Source: The Machine that Changed the World, Womack, Jones, and Roos,
1990.
Lean Supply Chain Ronald L. Turkett
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 “Lean Vs Traditional”

 99.9% Customer Schedule Attainment

 15 PPM or Better
 4-6 Inventory Days of Supply
 92%+ Operational Availability
 Leveled, Sequenced Production
 Order to Customer Use - 4 1/2 Hours
 Functioning Supplier Partnership
 Strong Production Control Function

Examples: Tier 1 Suppliers: Johnson Controls Seating, Litens Automotive

Partnership, Cadimex, Denso Manufacturing, Toyota Motor Corporation.
Lean Supply Chain Ronald L. Turkett
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 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

Lean Supply Chain Ronald L. Turkett

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 Lean Supply - Global Purchasing Strategies

 Common Strategy - Buy Cheapest in the world

- Support with dual sourcing
 Toyota Strategy - Buy to achieve lowest total cost
- Buy in country where manufacturing
is performed
- Minimize Number of Suppliers
- Keep supply chain short as possible
- Toyota is as strong as its weakest
supplier

Lean Supply Chain Ronald L. Turkett

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 Consequences of Cheapest Price

 Long Distance Supply - Long lead times

- increases structural cost: people, travel,
premium freight, packaging, obsolete material,
scrap due to handling damage
 Buying cheapest restricts buying from best
supplier and achieving total lowest cost
VS.
 Buying from best supplier, then get lowest cost

Lean Supply Chain Ronald L. Turkett

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 Consequences of Long Supply Chains

Long Value Streams Result in:

 High Risk
- Quality Spills
- Availability of Supply
- Engineering Changes
 High Cost
- Transportation (Premium and Standard)
- Engineering Support/Supplier Development
- Plant Overtime
Lean Supply Chain Ronald L. Turkett
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 Automotive Supply Chain

Supply Chain = Value Chain

Retail Ore in
OEM Tier # 1 Tier # N
Customer Ground

Objectives: Highest Quality

Lowest Cost
Shortest Lead Time

Lean Supply Chain Ronald L. Turkett

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 The Lean Enterprise

eap r
e L ng
p ris L, E ce, World Class
t er PC& nan
E n s, Fi
n tion ng, y Lean Supply
a
Le ra asi alit
e h Chain
Op urc Qu Implemented
P

Full Benefits of
Lean Supply Chain
Traditional
Manufacturing
& Support
Functions

Lean Supply Chains are not just a Materials

Management Effort
Lean Supply Chain Ronald L. Turkett
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 Automotive Customers

Which group drives lean supply chains?

Toyota

GM Honda

Ford
? NUMMI

Chrysler Saturn

Nissan

Lean Supply Chain Ronald L. Turkett

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 Demand/Schedule Variance Causes

Planning/Scheduling System Mechanics: Push Scheduling

PRODUCTION FLOW

All production operations receive same schedule

Supplier Machining Assembly

Customer
Schedu le

Sc
he
e du
le
d u le
du h e
le Sc
Sch
Production
Scheduling

Reaction to Changes Occurs Only Weekly

Lean Supply Chain Ronald L. Turkett
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 Typical Demand/Scheduling Model

OEM Schedule Tier Tier

#1 #2

Actual Demand

Traditional Scheduling Systems

1. Demand and schedule are usually different
2. Noise increases moving down stream
3. Affected most by changes in order quantity, delivery time and lead time

Lean Supply Chain Ronald L. Turkett

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 Lean Supply Chain - Pull
Production System

Ship Ship Ship

Raw Customer
Material Machining Assembly Leveled Production
Plan

Pull Schedule Pull Schedule Assembly Schedule

06/07/98
SME Lean Supply Chain
 OEM’s Lead Supply Chain
Management Process
Process: Smoothing Production to Reduce Supply Chain Cost

Ship Ship
O.E. Tier 1 Tier 2
Leveled Sequenced Pull Leveled Sequenced Pull
Production Signal Production Signal

Action Steps-All Customers

1. Smooth production build and communicate plan to suppliers
2. Maintain daily production levels as planned (maintains smooth flow)
3. Minimize parameter changes in system (lot size, quantity, & lead time)
4. Convert from push scheduling to pull scheduling
5. Maintain open communications with supplier - Provide Supplier
access or view of actual demand

Lean Supply Chain Ronald L. Turkett

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 Takt Time Vs. Cycle Time -
An Important Distinction
Time (Available seconds per working day)
Takt Time =
Volume (Daily production requirement)

Sets pace of production to

match pace of sales.

Actual time required for a worker to

Cycle Time = complete one cycle of his job process

Lean Supply Chain Ronald L. Turkett

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 Implementing the Lean Supply Chain

● Level Sequenced Production

– producing a repeatable pattern by volume
and mix within each day of the monthly
production plan
– Characterized by:
● a smoothed production plan over an
extended time
● every model made every day
● daily adjustment can be made
● a predictable production process

Lean Supply Chain Ronald L. Turkett

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 Implementing the Lean Supply Chain

Summary
– Find the best supplier and engage early in the
design process
– Partner with key suppliers that have high capability
for design and supply
– Suppliers should be located in the country where
you build your product
– Shorten the supply chain by having suppliers close,
frequent deliveries, and leveled production plans
– Develop pull systems with suppliers
– Know production capacity by comparing effective
cycle times with Takt times.

Lean Supply Chain Ronald L. Turkett

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