lean distribution - howard coleman, mca associates

Lean Distribution

A Change In Thinking;

Lean Forever

Howard Coleman

MCA Associates

• Principal, MCA Associates, a management consulting firm.

• Since 1986 providing operational excellence thought- leadership to Wholesale-Distributors & Manufacturers

• “Lean Thinking” & Continuous Improvement solutions; business process re-engineering, supply chain management, sales revenue development, information systems, and organizational assessment & development

• Frequent article contributors to industry & trade publications, invited speaker to industry associations

Who We Are?

Lean Distribution:

A Change In Thinking

Uh?

What am I going to do here?...

Lean Distribution:

A Change in Thinking

• “It’s not just about data, but useful data”

• “driving costs out of the supply chain”

• “how the electrical channel communicates”

• “quality data flowing between trading partners”

• “Collaboration must be based on a partnership between trading partners”

Lean Distribution:

A Change in Thinking

Some adjustments necessary!..

Lean Distribution:

A Change in Thinking;

Lean Forever

Agenda

• Lean Thinking…What Is It/Is Not? (Objectives,

Principles & Culture)

• Brief History

• Lean in Distribution & Supply Chain – Challenging

Old Assumptions

• Changes in Thinking

• What If? In Supplier Relationships

Lean Distribution:

A Change in Thinking

= Changing

Eating Habits

= Continuous

Improvement

X

Lean Distribution:

A Change in Thinking

Lean Thinking…What Is It?

Objective:

• Drive “waste” out of our processes

• By eliminating waste – create more value

Lean Distribution:

A Change in Thinking

A Brief History

• Let’s not forget Henry Ford!

• “Toyota Production System”

• Value-Stream based & employee collaborative

• A “tool kit” for assessing processes/corrective

actions

Lean Distribution:

A Change in Thinking

“The Seven Wastes”

• “Overproducing”

• “Waiting/delays”

• “Inappropriate processing”

• “Unnecessary inventory” (how much?)

• “Unnecessary motion”

• “Defects”

• “Unnecessary transport”

Lean Distribution:

A Change in Thinking

Lean Principles

• Specify value - Provide more value to customers

• Identify & Understand the “Value-Stream”

• “Flow” – activities move smoothly with little “dwell

time”

• “Pull” – Let the “customer” pull product

• Pursue perfection – “no end” to continuous

improvement

Lean Distribution:

A Change in Thinking

The “Barriers” to Improvement

• People

• Processes

• Technology

• Performance Measurement (lack of)

Lean Distribution:

A Change in Thinking

Yes It’s True!

• 10 to 15 percent increases in

measurable results

Lean Distribution:

A Change in Thinking

High

Low Hanging Fruit

Lean Distribution:

A Change in Thinking

Yes It’s True!

• As high as 50% !!

Lean Distribution:

A Change in Thinking

Lean…What Is It?

Lean Distribution:

A Change in Thinking

60% of activities – add no value to

your external or internal customers!

“Eliminating them represents your

greatest potential source of

performance improvement and

creating value”

Culture - It Takes “The Want” To Improve

• Leadership from the top…or nobody!

• “Overhaul” of culture & team dynamics

• Trust (“We” vs. “I”)

• Empowerment

• Training/Learning

Lean Distribution:

A Change in Thinking

Lean Distribution:

A Change in Thinking Your “Value Stream”

Sales/

Marketing

Order

Quotation

Order

Manage-

ment

Fulfillment

Purchasing

&

Inventory

Mgt.

Distribu-

tion/

Whse//DC

Finance/

Acct’g

Returns,

Corrections,

Etc.

“Post-Order

Activities”

Lean Distribution:

“Diagram” of A Process

Overall

Process Input Output

?

94% 98% 98%

Entire

System =

90%

100% 100%

2

3

1

Lean Distribution:

A Change in Thinking

Impact!

Need to “get out” – 600 lines/sku’s per day

Our overall “process system effectiveness” =

90%

Assume 80% of our activity is “value-added”

600/.90 = 667 lines (capacity we must plan for)

667/.80 = 834 (capacity to account for “waste”)

Lean Distribution:

A Change in Thinking

More Lean Thinking…in

Distribution

Lean Distribution:

A Change in Thinking

“The Eighth Waste”

“More inventory than meets customer’s

needs”

• excess inventory (not “dead”)

• excess production (more than what’s needed)

Lean Distribution:

A Change in Thinking

The Lean Supply Chain Challenge

• Your channel partners are part of the “lean

equation”

• Suppliers can help you reduce waste – cost –

in your supply chain activities.

• Suppliers can be lean(er) also

Lean Distribution:

A Change in Thinking

Challenging Old Assumptions

“More Inventory Than Meets Customer’s Needs”

• “Push” to “Pull” SCM?

• “Where” is more important than “How Much”

• Collaborative Supplier Relationships?

Lean Distribution:

A Change in Thinking

Challenging Old Assumptions

“More Inventory Than Meets Customer’s Needs”

• How much inventory to order from suppliers?

• How much inventory at DC’s

• How much inventory at branch/warehouses?

• How do I communicate “buy signals” (?) to

my suppliers?

Pull Inventory Levels

Pull Push

Lean Distribution:

A Change in Thinking

Push vs. Pull

C

28

Push Model

Supplier

Distribution Center

Branch Branch Branch Branch Branch

Lead Time Variability Order Sizes

Cost Trade-

Offs

Forecasts Forecasts

500/490

100/50 50/100 200/140 150/100 0/100

Customers

The Effects of Demand

Variability

Lean Distribution

Pull: A Change in Thinking

Lean Distribution:

A Change in Thinking

The Basic Pull Principles

• Aggregate inventory at distribution center

• Pull inventory based on customer buy signal

• Replenish as frequently as possible - foster “continuous flow” & increase velocity

• Develop/maintain “target inventory levels” (buffers)

• Develop “new” relationships with suppliers

Challenging Old Assumptions

Target Inventory Levels (Buffer) • Amount of inventory you “shoot for” in the supply chain

• Demand x Lead-time + Safety Stock”

• Manage the target inventory level

• Target inventory - a measure and a priority signal

Lean Distribution:

A Change in Thinking

Target Inventory Levels (Buffer Utilization)

Zones: Green, Yellow, Red

• Levels of target penetration

– Green – less than 33% “TIL” penetration

– Yellow – between 33% and 67% “TIL” penetration

– Red – Between 67% and 100% “TIL” penetration

Lean Distribution:

A Change in Thinking

Customer requirements are being

met

“TIL” Gage

Danger zone, on the verge of not satisfying

customer requirements

“TIL” Gage

Target Inventory Levels (Utilization,

Measures & Signals)

• Company, location, SKU, A-B-C Ranking

• Time in A Zone

• Number of products in a zone

“TIL” Measures

• Suppliers “Push”

• “Disconnected functional silos”

• “Economy of scale” as opposed to “Economy of time”

Challenging Old Assumptions

Supplier Relationships

What If?

• Distributors & supplier share

“consumption” data?

• Win-Win, Aligning of Interests

Challenging Old Assumptions

Supplier Relationships

Supplier

Red, Yellow, Green Zones

Challenging Old Assumptions

Supplier Relationships

Pull

Continuous Flow

Challenging Old Assumptions

Supplier Relationships

Lean Distribution:

“Pull” - A Change in Thinking

Customer Service

Policy

Target

Inventory

Level

Lot Sizes

Replenish

-ment

Cycles

Pull

Approach

Operations +

Sourcing Capabilities

Linkage to Pull

(customer orders,

replenishment

triggers, inventory

zones)

Isolate Variability

(Forecast & Lead-

time

Lead Time Variability Cost

Trade-Offs

• The Challenge: Change in thinking

• Look at what others have done (outside your four walls)

• Each organization will have to ask; what adds value to our supply chain – or only cost to what we do.

• What should you be doing now?

Lean Distribution:

A Change in Thinking

• Receive a copy of:

– “Lean Principles in

Wholesale Distribution

Supply Chains – Do You

Pull or Push?”

hcoleman@mcaassociates.com

White Paper

Lean Distribution

A Change In Thinking;

Lean Forever

Thank You! Howard Coleman

MCA Associates

www.mcaassociates.com

203-732-0603