Lean Principles in Manufacturing & Supply Chain

Philosophies on Supplier Relationships

• Lecture 5
• Objectives: Students should understand traditional, lean, and agile supply philosophies.
• Introduction: This unit covers different manufacturing approaches and their impact on relationships, emphasizing manufacturing but applicable to services and the public sector.

Manufacturing Types

• Traditional: Focuses on economies of scale, maximizing physical, material, and human resources to produce goods at the lowest possible cost.
• Lean: Produces goods based on customer needs and perceived value. Quality is driven by customer expectations. Parts that don't add value are eliminated.
• Agile: Finished products are not produced until orders are placed, allowing for customization based on customer orders.

Traditional Manufacturing Processes

• Machines/facilities operate in economically sized batches in long production runs.
• Inventory/stock is considered essential, with holding stock just in case (JIC).
• Business processes prioritize cost reduction in production to optimize efficiency.
• Conflicts frequently arise between different production processes.

Lean Manufacturing Processes

• Focuses on eliminating waste, including stock.
• Produces goods only when customers order them.
• Prioritizes customer value.
• Aims to remove organizational layers.
• Employs continuous improvement.
• Batch sizes ideally are only one item.
• Quality and right-first-time approaches are core principles.

Agile Manufacturing Processes

• Customer focus is paramount.
• Quick response to customer needs is critical.
• Adaptability to changing product mixes is essential.

Lean Supply

• Developing a value stream to eliminate all waste, including time.
• Promotes innovation and enables a level schedule.
• 5 key lean thinking principles, according to CIPS:
  • Define value from customer perspective.
  • Map value stream.
  • Ensure every action in the value stream flows.
  • Produce only what the customer needs just-in-time.
  • Strive for perfection through continuous waste removal.

Lean Thinking for the Supply Chain

• Lean concepts are applicable to any process to improve, including the entire supply chain.
• A lean supply chain produces only what is needed, when it's needed, and where it's needed.
• Lean thinking aims to produce more with fewer resources while meeting customer demands.

Lean Thinking for the Supply Chain (Creating Value)

• An understanding of which activities truly create value is necessary.
• Focus on eliminating waste and optimizing value in all processes.
  • Specify value from the customer perspective.
  • Identify all steps within the value stream.
  • Enable value flow via process improvement.
  • Only produce what is needed, just-in-time.
  • Striving for perfection through ongoing waste removal

Specify Value as Seen from the Customer's Perspective

• Understanding the customer's perception of value is crucial to effective lean implementation.
• Differences in value perceptions can arise between the organization and the customer. E.g., packaging quality, or difficulty of opening consignments

Identify All Steps within the Value Stream

• The value stream encompasses activities for designing, ordering, and delivering a product.
• Mapping sequences of steps creates the current-state map.
• Identifying and analyzing bottlenecks, waste, and inefficiencies are critical for subsequent adjustments and improvements.
• This process creates a future-state map, visualizing the desired process flow.

The Concepts of Value and Waste

• Value represents something the customer would pay for.
• Non-value-adding activities don't contribute directly to customer needs.
• Waste is anything that doesn't add value (defect, overproduction, inventory, motion, etc.).

An Example of Process Waste

• Consider a flight as an example of value creation vs non-value creation.
• The actual flight is value-adding; travel time to/from airport, security checks, etc, is non-value adding.
• Optimization focused on the non-value-added steps is critical.

Definition of Waste

• "Waste" refers to anything not directly enabling customer-desired value.
• Muda's is Japanese term for waste.
• A Toyota engineer identified 7 types of waste, further expanded to 8.

The Eight Wastes

• Overproduction: producing items before needed.
• Waiting: idle time due to lack of timely processing.
• Transporting: movement of products without inherent value.
• Inappropriate Processing: using unsuitable equipment or processes.
• Inventory: excess inventory ties up capital.
• Excess Motion: unnecessary movements from humans.
• Defects: flawed products needing rework or scrapping
• Unsafe Practices: processes that are unsafe to staff

"Waste" Reduction

• Begin by asking "What can we do to improve?"
  • Stop defective items at the source.
  • Realign processes and eliminate costly handling and unnecessary steps.
  • Minimize waiting time for parts, orders, people or information

Benefits of Lean Systems

• Reduced manufacturing cycle time
• Reduced labor costs
• Improved product quality
• Space savings
• Reduced inventory
• Faster response to customers

Impact of Lean Approach on Supply Chain Relationships

• Implementation of lean approaches can have a major impact on supplier relationships.
• Suppliers might face cost reductions, reduced acceptable failures and lead times demands.
• Suppliers needs clear and communicated value proposition for the partnership.

Lean Warehousing (Components)

• Eliminating non-value-added steps in product storage.
  • Receiving, Put Away/Storing, Replenishment, Picking, Packing, and Shipping are typical warehousing functions.
• Identifying and eliminating waste in the warehousing process. Ex. defects, overproduction, excess inventory, motion.

Lean Transportation (Components)

• Centralized carrier programs, improved administrative processes, optimized transportation choices and combining multi stop truckloads are examples.
• Key is to eliminate unnecessary steps in transport and increase efficiency.

Lean Customers (Components)

• Understanding their business needs to define meaningful requirements.
• Expect value, speed, flexibility, performance and quality in their dealings with suppliers.
• Often actively interested in partnerships.

Components of the Lean Supply Chain (Summary)

• Lean suppliers need to react to changes in demand and quickly respond to deliver quality products on time. Lower prices, fewer defects and easier inspection.
• Lean procurement and warehousing mean reducing non-value added steps and minimizing wasted space, stock etc.
• Lean customers understand requirements and expect high levels of delivery quality. Lean customers participate in partnership to benefit both parties financially