Lean%20eManufacturing

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Lean eManufacturing

• Bob Reary
• Director, Supply Chain Product Strategy

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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

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Historically,
there has been a trade-off between
setup and carrying costs
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It went something like this
EOQ the square root of twice annual
requirements times setup cost divided by item
standard cost times carry rate sourceAPICS
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Early
Manufacturing solutions
were characterized by
Policies and practices of isolation
(Sales-to-Planning- to-Materials Mgmt
. . . .
. . . .
Poor record accuracies
. . . .
High costs
. . . .
Redundancies
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For instance...
Lets count WIP!
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WIP count...
by operation
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WIP count...
by operation
But, how can we have so many?
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Lets look...
at this again!
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We have to consider...
what has moved on!
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So...
heres the count!
But, wheres the other 10 units?
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Then came ERP...
a formal solution

• dependent demand concept
• full accountability
• planning and execution in synch
• What? and When?

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The along came
Dr. Taiichi Ohno
and Shigeo Shingo!
Why count WIP?
Why have WIP in the first place?
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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!!
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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!

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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

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It was founded on this math
JIT means increased orderfrequency sourceReary
A
Frequency
2AS
IC
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Toyota Production System
founded on

• JIT (Kanban)
• Automation with a human touch (Jidoka)
• Smoothing (Heijunka)

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At the supermarket
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Pull System
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Tricks of the trade
Grandpa's Wonder Pine Tar Soap 4.25 oz. bar
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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

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Background
TMMNA Vehicles
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Background
Toyota Parts Manufacturing
Delta, BC
Long Beach, CA
Buffalo, WV
St. Louis, MO
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Facts Figures (Based on 1999 Data)
Background
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North American Vehicle Production
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North American Parts Purchases
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Background
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So, what did Toyota do
to make ERP TPS-friendly?

• elimination of POs 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!
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Where did ERP
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

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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, not orders
• stability, not reaction

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But how about this APS???
Advanced Planning Scheduling

• Optimization of key constraints
• PeopleSoft was a pioneer in this technology

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Supply Chain optimization
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Fast forward some pros and cons of APS

• PROs
• fast memory-resident modelling
• good at complex sequencing

• CONs
• implementation too long and complex
• loading the model is a setup cost that impedes
  frequency

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So what??
Why does it matter?
Lets take stock...
ERP was for accounting and provided a foundation
TPS is the chain
So how does APS fit in?
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TPS vs APS
TPS founded on

• smoothing (averaging?)
• stability

The bus...
APS founded on

• responsiveness
• event-driven planning

and the elevator!
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Then there was
Demand Flow Technology!

• John Constanza Institute of Technology
• Very similar to TPS
• demand-driven execution
• stable operations
• stable patterns of supply

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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

Costanzas Quality Stick is aShingo Poka Yoke
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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)

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APS TPS
FPS!
Flow Production System
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Four-Wall Flow
Turns are about 12/year
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No-Wall Flow
Result turns are now about 36/year!
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The key is cross-web sharing
Planning simplification
Collaborate by Rate
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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-offs

what should be your course of action?
Then...
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A given
This trade-off...
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A given
is exploding!
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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!
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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

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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

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Flexibility...
The wrong way!
Yet another trade-off to solve!
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Scattered buffers
Demand mgmt?
How much worse can it get?
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Looking through...
...that car up ahead
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Flexibility
at lowest level

• using law of large numbers
• eliminates the buffers
• requires strong fulfillment backbone

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eManufacturing?
What is it?
What is its promise?

• Tactically ease of training and deployment
• Strategically interconnectedness to reduce time
  and buffers
• Improve responsiveness in
• design
• demand management
• replenishment

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The Next
Economy
Transitioning

• From What and When to Where (the reach of e)
• Metcalfs Law
• New was B2C and B2B
• Next is C4B

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The Next
Economy
To be characterized by...
Compadres for Business

• The Internet has infinite capacity
• We have to stop thinking in hierarchies!

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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!
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Challenges Vision
Capacity promising assumptions across the supply
web
Traditional countermeasure under-capacity
planning
Future countermeasure real options planning
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Challenges Vision
Instability of ECO process
Traditional countermeasure ECO clumping on a
fixed schedule (bus)
Future countermeasure process integration
upstream
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Challenges Vision
Instability of transition management
Traditional countermeasure buffers
Future countermeasure budget-achieved, life
ends
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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
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Challenges Vision
Shared record accuracy
Traditional countermeasure recent history--gtfew
successes!
Future countermeasure data model simplification
and standards
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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

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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!

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Lean eManufacturing
Questions???

• Bob Reary
• Director, Supply Chain Product Strategy

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