1 u supplier management issues u supplier development outreach program: video: the case for toyota u...
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Supplier management issues Supplier Development Outreach Program:
Video: The case for Toyota JIT
Just-in Time ManagementSupplier Partnerships
B7801 April 17, 1998
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Supplier Partnerships: Organizational Culture and Strategy Issues
Feeling of trust
Management attitude/outlook for the future
Strategic fit
Top management compatibility
Compatibility across levels and functions of buyer and supplier firms
Supplier's organizational structure &personnel
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Supplier Partnerships: Technology Issues
Assessment of current manufacturing facilities/capabilities
Assessment of future manufacturing capabilities
Supplier's design capabilities
Supplier's speed in development
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Supplier Partnerships:Other Factors
Safety record of the supplier
Business references
Supplier's customer base
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Supplier DevelopmentOutreach Program:The case for ToyotaThe case for Toyota
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Supply management statistics Purchased inputs as percentage of total manufacturing costs
(‘87)Japan 69%
U.S. 58%
External sourcing percentages at the big three (Dyer 1993)GM 30%
Ford 50%
Chrysler 70%
Percentage of major corporations pursuing outsourcing initiatives (A.T. Kearney survey)
1992 58%
1996 86%
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Practical mechanisms for achieving cooperation
Reputation for “honest dealing” (e.g. past behavior of the buyer/supplier)
Proximity/personnel relationships Preferred supplier programs
– numerical performance ratings (“score cards”)» delivery performance
» quality
» cost
– signals how suppliers will be viewed in upcoming negotiations
“Soft” penalties for poor performance (e.g. less business in subsequent rounds)
Equity ownership
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Changing role of purchasing Competitive bidding
– solicit large number of bids
– “winner takes all” contracts
Cooperative supplier management– learn suppliers costs
– monitor supplier performance
– signal prospect of future business
– disseminate best practices among supplier pool
– develop new supplier capabilities as needed
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Just-In-Time Production Systems
JIT
Underlying philosophy is elimination of waste and variability
through synchronized “pull”type production systems
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JIT Purchasing--Requirements
Reduced lot sizes
Frequent and reliable delivery schedules
Reduced and highly reliable lead times
Consistently high quality levels for purchased materials
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JIT Purchasing--Suppliers Fewer, nearby suppliers
Repeat business
Support suppliers’ competitiveness
Clusters of remote suppliers
Limit competitive bidding to new parts
Resist vertical integration
Encourage suppliers to implement JIT purchasing
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Just-In-Time
• Management philosophy• Pull system though the plant
WHAT IT IS
• Employee participation• Industrial engineering/basics• Continuing improvement• Total quality control• Small lot sizes
WHAT IT REQUIRES
• Attacks waste• Exposes problems and bottlenecks• Achieves streamlined production
WHAT IT DOES
• Stable environment
WHAT IT ASSUMES
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JIT: Part Philosophy - Part Technique
“Big JIT” (Lean Production)– Focus on elimination of all sources of waste and
variability through synchronized “pull” type operation systems.
“Little JIT”– Focuses more narrowly on scheduling goods
inventories and providing service resources where and when needed
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Waste Reduction (“Big JIT”)
Waste Reduction
Material & Inventory
Management
VendorRelations
Human Relations
Technology
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Pull System (“Little JIT”)
Sub
Sub
Fab
Fab
Fab
Fab
Customers Final Assy
Vendor
Vendor
Vendor
Vendor
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Waste--Operations
(1) Waste from overproduction
(2) Waste of waiting time
(3) Transportation waste
(4) Inventory waste
(5) Processing waste
(6) Waste of motion - setup reduction
(7) Waste from product defects
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Minimizing Waste: Group Technology
Departmental Specialization
Saw Saw
Lathe PressPress
Grinder
1
2
3
4
5
6
LatheLathe
Saw
Press
Heat Treat
Grinder
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Minimizing Waste: Group Technology
Group technology cells
Press
Lathe
Grinder
Grinder
A
1 2
BSaw
Heat Treat
LatheSaw Lathe
PressLathe
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Minimizing Waste: Quality at the Source
Self-inspection
Automated inspection
Line-stopping empowerment
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Inventory Hides Problems
Work in
process
queues
(banks)
Change
orders
Engineering design
redundancies
Vendor
delinquencies
Scrap
Design
backlogs
Machine
downtime
Decision
backlogsInspection
backlogs
Paperwork
backlog
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Minimizing Waste: JIT Production
Produce
what is needed
when it’s needed
NOTHING MORE!
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Minimizing Waste: Uniform Plant Loading
This does not mean building a single product.
We need to maintain a stable mix of products,
and firm monthly schedules
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Scheduling example
Four different forecast for four different products
A 400
B 300
C 200
D 100
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Lumpy Master Production Schedule
Week
Product 1 2 3 4
A 250 150
B 100 200
C 50 150
D 100
Totals 250 250 250 250
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Smooth Master Production Schedule
Week
Product 1 2 3 4
A 100 100 100 100
B 75 75 75 75
C 50 50 50 50
D 25 25 25 25
Totals 250 250 250 250
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Setup Time Reduction
Shift internal elements to external Learning and training Better tools Product standardization, product line
simplification Equipment automation Common sense solutions
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Setup reduction: an industrial example
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HOW-TO: Design Flow Process
Link operations
Balance workstation capacities
Relayout for flow
Emphasize preventive maintenance
Reduce lot sizes
Reduce setup/changeover time
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HOW-TO: Total Quality Control
Worker responsibility
Measure Statistical Quality Control
Enforce compliance
Fail-safe methods
Automatic inspection
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HOW-TO: Stabilize Schedule
Level schedule
Underutilize capacity
Establish freeze windows
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HOW-TO: Work with Vendors
Vital Few
Evaluation & certification
Proximity
Reduce lead times
Frequent deliveries
JIT Technology transfer
Inter-firm teams
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HOW-TO: Improve Product Design
Standard product configuration
Standardize and reduce number of parts
Process design with product design
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Applying JIT Concepts
Organize Problem-Solving Groups
Upgrade Housekeeping
Upgrade Quality
Clarify Process Flows
Revise Equipment and Process Technologies
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Applying JIT Concepts
Level the Facility Load
Eliminate Unnecessary Activities
Reorganize Physical Configuration
Introduce Demand-Pull Scheduling
Develop Supplier Networks
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Benefits of JIT Reduced inventories Reduced lead times Simplified production control Better quality Increased labor efficiency & effectiveness Increased space utilization Lower overall costs Better working conditions Improved flexibility Increased responsiveness
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Common obstacles to JIT implementation
Management complacency Short-term vision Inability to recognize waste Focus on surface rather than source Inventory perceived as convenient Unions Suppliers “Theory X” management