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Lean eManufacturing. Bob Reary Director, Supply Chain Product Strategy. Your ROI. From this session will be. to see how the best of traditional ERP should be coupled with Lean Manufacturing for increased response, market share, and return-on-assets

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Lean emanufacturing

Lean eManufacturing

Bob Reary

Director, Supply Chain Product Strategy


Your roi
Your ROI...

From this session will be...

  • to see how the best of traditional ERP should be coupled with Lean Manufacturing for increased response, market share, and return-on-assets

  • to learn some of the basics of eManufacturing

  • to gain an understanding of the opportunities and challenges presented by the Next economy


Historically,

there has been a trade-off between

  • setup and carrying costs


It went something like this

2AS

EOQ =

IC

It went something like this:

“EOQ = the square root of twice annual requirements times setup cost divided by item standard cost times carry rate”

source=APICS


Early

Manufacturing solutions

were characterized by:

Policies and practices of

isolation (Sales-to-Planning-

to-Materials Mgmt

. . . .

. . . .

Poor record accuracies

. . . .

High costs

. . . .

Redundancies


Station “A”

Station “B”

Station “C”

Sched: 100

Compl: 90

Sched: 100

Compl: 50

Sched: 100

Compl: 10

- Job for 100 units

- 3 Routing operations on the shop floor

- Schedule for 100 is released to the floor into WIP

For instance...

Let’s count WIP!


Station “A”

Station “B”

Station “C”

Sched: 100

Compl: 90

Sched: 100

Compl: 50

Sched: 100

Compl: 10

- Job for 100 units

- 3 Routing operations on the shop floor

- Schedule for 100 is released to the floor into WIP

10

WIP count...

by operation


Station “A”

Station “B”

Station “C”

Sched: 100

Compl: 90

Sched: 100

Compl: 50

Sched: 100

Compl: 10

- Job for 100 units

- 3 Routing operations on the shop floor

- Schedule for 100 is released to the floor into WIP

10

50

90

WIP count...

by operation

But, how can we have so many?


Station “A”

Station “B”

Station “C”

Sched: 100

Compl: 90

Sched: 100

Compl: 50

Sched: 100

Compl: 10

- Job for 100 units

- 3 Routing operations on the shop floor

- Schedule for 100 is released to the floor into WIP

10

Let’s look...

at this again!


Station “A”

Station “B”

Station “C”

Sched: 100

Compl: 90

Sched: 100

Compl: 50

Sched: 100

Compl: 10

- Job for 100 units

- 3 Routing operations on the shop floor

- Schedule for 100 is released to the floor into WIP

10

40

We have to consider...

what has moved on!


Station “A”

Station “B”

Station “C”

Sched: 100

Compl: 90

Sched: 100

Compl: 50

Sched: 100

Compl: 10

- Job for 100 units

- 3 Routing operations on the shop floor

- Schedule for 100 is released to the floor into WIP

10

40

40

So...

here’s the count!

But, where’s the other 10 units?


Demand

Forecast

Corporate

Master ProductionScheduling

Available - to-

Promise

MRP

CRP

Plant

Source/Make/Deliver

Then came “ERP”...

a formal solution

  • “dependent demand” concept

  • full accountability

  • planning and execution in synch

  • “What?” and “When?”


The along came

Dr. Taiichi Ohno

and Shigeo Shingo!

Why count WIP?

Why have WIP in the first place?


Philosophically:

ERP said...

  • You need to reconcile assets to the balance sheet

  • You need tools for status and control; for coping; for buffering to solve problems

  • You need to schedule and re-schedule; to prioritize and re-prioritize

…the desire to reconcileis insidious!!


Philosophically:

Ohno said...

  • “When production control is properly understood, inventory control is unnecessary!”

  • WIP is a target for problems to stick to… keep the target small!


So the trade-off was

improved on by

JIT!

the development of

  • Reduced inventories

  • Agile/Lean manufacturing

  • High throughput and efficiencies

  • Increased Stability and Quality


It was founded on this math
It was founded on this math:

“JIT means increased orderfrequency”

source=Reary

A

Frequency =

2AS

IC


Toyota Production System

founded on:

  • JIT (Kanban)

  • “Automation with a human touch” (Jidoka)

  • Smoothing (Heijunka)




Tricks of the trade

Grandpa's Wonder Pine Tar Soap 4.25 oz. bar


So, why would Toyota

buy an ERP package?

  • to gain Y2K compliance

  • to achieve lower IT costs through deployment of a common solution

  • adapt to constant change

  • proof-of-concept: facilitated by demonstrated success with “backoffice”


Fremont, CA

Cambridge, Ont.

Princeton, IN

Georgetown, KY

Background

TMMNA Vehicles


Background

Toyota Parts Manufacturing

Delta, BC

Long Beach, CA

Buffalo, WV

St. Louis, MO


Facts figures based on 1999 data

About

Toyota

In

North America

Worldwide

Size

4th Largest

3rd Largest

Number of Plants

10

55 in 26 Countries

Employment

30 Thousand

183 Thousand

Number of Models

7

N/A

Investment

$11 Billion

$127.5 Billion

Production 1999

1 Million Vehicles

4.6 Million Vehicles

Sales 1999

1.65 Million Vehicles

4.6 Million Vehicles

Background

Facts & Figures (Based on 1999 Data)


1

0.8

Million

Vehicles

0.6

0.4

0.2

0

87

91

95

99

North American Vehicle Production


$10.0

$8.0

Billion

$6.0

$4.0

$2.0

$0.0

87

91

95

99

North American Parts Purchases


Service Parts

Export Parts

B2B

Background


So, what did Toyota do

to make ERP TPS-friendly?

  • elimination of PO’s feeding assembly (logistics and replen signals are pre-established)

  • no production orders (control is built into the process)

  • no inventory functions (2-hour inventory!)

Keep the target small!


Where did ERP

Kanban Planning

Demand Planning

add value?

  • Level-by-level production planning (proprietary)

    • to systematize Heijunka smoothing and capacity management

    • to drive planned replenishment signals

  • link Customer orders to production kanbans

  • electronic poka yokesaka “quality pictures”


Other key

differentiators of TPS:

  • Customer demand mgmt to offset legacy system minimal functionality

    • order process

    • parts shipping schedule to Customer

    • visibility of part production

  • emphasize TAKT, notorders

  • stability, not reaction


But how about this “APS”???

Advanced Planning &

Scheduling

  • Optimization of key “constraints”

  • PeopleSoft was a pioneer in this technology


Supply Chain optimization

By Constraints

Capacity

Inventory

Delivery

Cost


Fast forward some pro s and con s of aps

PRO’s

fast memory-resident modelling

good at complex sequencing

CON’s

implementation too long and complex

loading the model is a “setup” cost that impedes frequency

Fast forward… some pro’s and con’s of APS


So what??

Why does it matter?

Let’s take stock...

ERP was for accounting

and provided a foundation

TPS is the chain

So how does APS fit in?


TPS vs APS

TPS founded on:

  • smoothing (averaging?)

  • stability

The bus...

APS founded on:

  • responsiveness

  • event-driven planning

and the elevator!


Then there was…

Demand Flow Technology!

  • John Constanza Institute of Technology

  • Very similar to TPS

    • demand-driven execution

    • stable operations

    • stable patterns of supply


Tps and flow

TPS

assumption of complex operations and transfer lines

preference for overtime to meet demand fluctuations

Demand Flow

assumption of light assembly

preference for line re-balancing to meet demand fluctuations

TPS and Flow

Costanza’s Quality Stick is aShingo Poka Yoke


The attributes of …

Solution soup!

  • Bom depth (DFT)

  • Levelling (TPS)

  • Sequencing (APS)

  • Release (OPT-we ignored this one!)

  • Event-driven (APS)

  • Record keeping and Capacity management (ERP)


APS + TPS =

FPS!

Flow Production System


Four wall flow
Four-Wall Flow

Turns are about 12/year


No wall flow
No-Wall Flow

Result: turns are now about 36/year!


The key is cross web sharing
The key is cross-web sharing

Planning simplification

Collaborate by Rate


So what
So what?

Taking stock:

if you know you have to

  • respond to actual demand

  • keep your asset base low

  • use JIT principles

  • avoid unnecessary trade-off’s

what should be your course of action?

Then...


A given

Richness

Reach

A given:

This trade-off...


A given1

Richness

Reach

A given:

… is exploding!


And reach
And “reach”

is driving

commoditization!

  • law of 95-5

  • high reach = high availability

  • high availability = low differentiability

So the focus should be

on the Supply web!


From…

The age of reason

where success meant

  • improve on the operational trade-offs

  • improve quality, change-over

  • stabilize operations

    • reduce number of suppliers

    • tightly connect to large Customers

  • increase market share through cost improvement

  • search downward opportunities


To…

The age of “access”

where success means

  • Search upward opportunities

  • leverage access

  • increase share through response to actual demand

  • keep flexibility at lowest point


Flexibility...

The wrong way!

Yet another trade-off to solve!


Scattered buffers

Demand mgmt?

How much worse can it get?


Looking through
Looking through...

...that car up ahead


Flexibility

at lowest level

  • using law of large numbers

  • eliminates the buffers

  • requires strong fulfillment backbone


eManufacturing?

What is it?

What is it’s promise?

  • Tactically: ease of training and deployment

  • Strategically: interconnectedness to reduce time and buffers

  • Improve responsiveness in:

    • design

    • demand management

    • replenishment


The “Next”

Economy

Transitioning

  • From “What and When” to “Where” (the reach of e)

  • Metcalf’s Law

  • “New” was B2C and B2B

  • “Next” is C4B


4

The “Next”

Economy

To be characterized by...

  • “Compadres for Business”

  • The Internet has infinite capacity

  • We have to stop thinking in hierarchies!


Down on

the shop floor ,

Manufacturing wants

  • better demand

  • input on designs (for manufacturability)

  • betters tools for production flexibility

  • ease of access to relevant information

just like any other supplier!


Challenges vision
Challenges & Vision

Capacity promising assumptions across the supply web

Traditional countermeasure:

under-capacity planning

Future countermeasure:

real options planning


Challenges vision1
Challenges & Vision

Instability of ECO process

Traditional countermeasure:

ECO clumping on a fixed schedule (“bus”)

Future countermeasure:

process integration upstream


Challenges vision2
Challenges & Vision

Instability of transition management

Traditional countermeasure:

buffers

Future countermeasure:

“budget-achieved, life ends”


Challenges vision3
Challenges & Vision

Balancing “flexibility” (reach) with “stability” (differentiable richness)

Traditional countermeasure:

year-to-year internal policy and metric mgmt

Future countermeasure:

shared policy in the supply web


Challenges vision4
Challenges & Vision

Shared record accuracy

Traditional countermeasure:

recent history-->few successes!

Future countermeasure:

data model simplification and

standards


Typical benefits
Typical Benefits

of implementing

Lean eManufacturing

  • 30% throughput increase with no corresponding asset increase (yields greater share)

  • turns increase of 50-100% coupled with service increase (5-15 points)

  • 30-50% reduction in cost of quality


OK...

Recommendations...

  • simplify the transaction system and expand reach through collaboration and standards

  • focus heavily on improving shared policies, practices and physical operations

  • connect to actual demand through multi-levels

  • Pursue and use the opportunities afforded by chaos!


Lean emanufacturing1

Questions???

Lean eManufacturing

Bob Reary

Director, Supply Chain Product Strategy


Creating

Collaborative

Commerce

Employee

Portal

Internet

Supplier

Portal

Internet Architecture

Marketplace

eBusiness Applications

eBusiness Analytics

Questions???

Customer

Portal


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