lean supply chain management - canbyoregon.gov

MANUFACTURING GROWTH THROUGHINNOVATION

LEAN SUPPLY CHAINMANAGEMENT

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OMEP Organization

• Nationwide

• 60 MEP Centers

• 373 field locations

• Over 1,300 staff

• Contracting with over 2,300third party service providers

OMEP delivers best-in-class solutions.


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MISSION: Create a stronger Oregon economy by helpingsmall to mid-sized Oregon manufacture transform theway they do business to become more competitive in theglobal marketplace.

Uncorrupted Information Flow

Goods & Services Process Flow

Suppliers PrimaryManufactures

SecondaryManufactures

RegionalWarehouse

Distributor Retailer Customer

SCOPE – From Suppliers to Customers

SUPPLY CHAIN MANAGEMENT SCOPE

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The goal of the lean supply chain is to

deliver products at the lowest total cost

while developing value-added processes

(as defined by the customer).

LEAN SUPPLY CHAIN MANAGEMENTGOAL

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• Minimal or no inventories in the system

• Minimal amount of warehousing space

• Optimized shipments to reduce the cost of moving inventory

• Long-term, stable supply contracts with the lowest cost

• Consistent product flow

• Single tier suppliers

• Little or no changes to production quantities

• No changes to delivery destinations

• No defects – no quality issues

IDEAL LEAN SUPPLY CHAIN

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Agile Supply Chain•Fluctuating product demand

•Short life cycle

•Short order lead time

•Make/build to order

•Inventory in parts, components orsub-assemblies

•Suppliers with flexibility, fastdelivery, high-performance designquality

•Volatile market demand.

Efficient Supply Chain•Constant product demand

•Long product life cycle

•Long fulfillment order lead time

•Make to stock products

•Inventory at finished goods level

•Suppliers provide low cost,consistent quality, and on-timedelivery

•Predictable market demand.

SUPPLY CHAINS NEED TO FIT THECOMPANY

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• What does the customer want/need?

• What is the risk aversion level of thecompany?

• What do the competitor’s offer?

• What are the supply chain cost as apercentage of sales revenue?

• How close to “Efficient” supply chaincan we move to, without sacrificingcustomer demands?

• What is the company willing to do toassure sustainable resources?

BUSINESS STRATEGY DRIVES THESUPPLY CHAIN

Vision &Strategy

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Sustainability

Env

ironm

enta

l

Soci

al

Econom

ics

Supply chain sustainability is themanagement of environmental, social andeconomic impacts, and theencouragement of good governancepractices, throughout the lifecycles ofgoods and services.

WHAT IS SUPPLY CHAINSUSTAINABILITY?

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• Is the company committed to thechanges required?

• How comfortable is the company insharing information?

• What is the tolerance for collaborationwith suppliers?

• How well do employees trustmanagement?

• Are employees willing to change roles?

• What new incentives need to be put inplace?

ALIGN THE ORGANIZATION FOR CHANGE

Vision &Strategy

ChangeManagement

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• Upper management does not stay involved

• Strategy message is not clearly defined

• Measurement are not put in place (or monitored)

• Lack of supplier trust (info)

• Employees fear of change

• Key employees not “incentivized” correctly

REASONS FOR FAILURE

ChangeManagement

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• Start with the vision (based oncustomer needs)

• Develop support policies

• Transfer the vision & strategyto the organization.

• Manage the requiredorganizational changes

• Insure key suppliersunderstand and concur.

KNOWLEDGE MAKES THE CHANGEPOSSIBLE

Vision &Strategy

ChangeManagement

KnowledgeTransfer

PolicyDeployment

12Company Vision Policy Incentives Change

• Analyze current practices

• Analyze risk assessment

• Implement supplier qualifications

• Determine communication vehicle

• Collaborate with suppliers

• Establish production rules

• Establish measurements

DEVELOP THE SUPPLY CHAIN PROCESS

Vision &Strategy

ChangeManagement

ProcessDesign

PolicyDeploy-

ment

KnowledgeTransfer

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• Value – Define value from the perspectiveof the customer

• Responsiveness – Be able to respond tochange

• Pull – Initiate work only when requested bythe customer

• Flow – Understand the process and clear anyobstacles that don’t add value

• Perfection – Continuously refine theprocess to improve efficiency, cycle times,costs and quality

KEY PRINCIPLES OF LEAN SUPPLYCHAINS

ProcessDesign

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CHALLENGES OF LEAN SUPPLY

ProcessDesign

• Improved demand management

• Cost and waste reduction

• Process standardization

• Industry standards adoption

• Cultural change agent

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RegionalWarehouse


Traditional supply chains amplify instability ofdemand at each stage.

PRODUCT DEMAND MANAGEMENT

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RegionalWarehouse


IMPROVE PRODUCT DEMANDMANAGEMENT

Design the supply chain to produce as close to theend customer as possible to smooth production.

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IMPROVE PRODUCT DEMANDMANAGEMENT

Plan and produce as close to the end customer aspossible to smooth production.

“Pull vs. Push”



RegionalWarehouse


Plan & produce

Communicate needs to all players ASAP

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Apply the right tools totransform to a Lean company.

VISUALWORKPLACE

TEAMS

QUICK SET-UP

BATCH SIZEREDUCTION

QUALITY AT THESOURCE

FLOW

PULL / KANBAN

LAYOUT

POUS

TPM

STANDARD WORK

5S

ACT

PLAN

CHECK

DO

Analysis Tools:

•Process Activity Mapping

•Supply-Chain Response Matrix

•Production-Variety Funnel

•Quality-Filter Mapping.

•Demand-Amplification

•Value-Analysis Time Profile

COST AND WASTE REDUCTIONTHROUGH LEAN

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• Improved demand management

•Cost and waste reduction “Lean”

• Process standardization

• Industry standards adoption

• Cultural change agent

THE LEAN SUPPLY FOCUS

ProcessDesign

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KnowledgeTransfer

• Leadership drives the plan

• All levels of the organization mustbe involved.

• Sustainability is the charge of topmanagement.

• Measure and post results for all tosee.

• Share results with suppliers.

• Purchasing personnel move towards“suppler manger” responsibilities.

LEADERSHIP SUSTAINS THE PLAN

Vision &Strategy

ChangeManagement

Sustainability

ProcessDesign

Leadership

PolicyDeploy-

ment

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• Inventory turns 11 – 47%

• On Time Shipments (Out) 75.2% to 97.3%

• On Time Shipments (In) 77.2% to 96.3%

• Logistics Cost 18 – 20 %

• Days Sales Outstanding (A/R) 19 – 24%

• Total Supply Chain Costs 9.6%

• Reduction in Suppliers 23% to 38%

OBTAINABLE SUPPLY CHAIN RESULTS

ProcessDesign

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• Goals and measurements

tie the strategy together

with the achieved

performances.

GOALS AND MEASUREMENTS -STRATEGY

KnowledgeTransfer

Vision &Strategy

ChangeManagement

Sustainability

Leadership

ProcessDesign

ClassPerformance

GoalDevelop.

PolicyDeploy-

ment

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Vision &Strategy

Sustainability

ProcessDesign

The measurements usually cover 4 areas:

1. Financial – Total cost of goods,manufacturing, warehousing, transportation

2. Customer - Order Fill Rate, BackorderLevels, On-Time Delivery to Customer

3. Internal Business - Adherence-To-Plan,Forecast Error , Defect Rate

4. Supplier – On-time Delivery, Sharing ofCost Reductions, Consolidation of Services

TYPICAL SUPPLY CHAINMEASUREMENTS

Leadership

GoalDevelop.

ClassPerformance

GoalDevelop.

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SUPPLY CHAIN SOFTWARE PROVIDERS

SAP Oracle

JDA Software RedPrairie

Manhattan Associates i2 Technologies

Retalix IBS

Epicor Aldata

HighJump Swisslog

CDC Software Descartes

Servigistics Infor

QAD Applied Materials

19 Sterling Commerce IFS

Vision &Strategy

ProcessDesign

Leadership

GoalDevelop.

ClassPerformance

Sustainability

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PEOPLE MAKE THE SUPPLY CHAINWORK

KnowledgeTransfer

Vision &Strategy

ChangeManagement

Sustainability

Leadership

ProcessDesign

ClassPerformance

GoalDevelop.

PolicyDeploy-

mentPeople

Trust

Mutual Respect

Integrity

Strength

Confidence

RelationshipExperience

Loyalty

Dependability

People

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Chris SchererPresident - OMEPTel: (503) [email protected]

Jim WehrsConsultantCell: (503) [email protected]

Larry PedersonBusiness Development ManagerTel: (503) [email protected]

OMEP CONTACTS – SUPPLY CHAINIMPLENTATION

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mailto:[email protected]



lean supply chain management - canbyoregon.gov

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