by Bill garrison

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Supply - Chain World - North America 2005
A Four part Presentation
by Bill garrison
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Supply - Chain World - North America 2005
Part One Toyotas North America Services
Parts SC Part Two The Toyota Way Part Three
Ok Whats Lean, Six Sigma, CI and EI to
do with SCOR? Part Four A
System Enterprise Aspect of a Lean SCM
From a Commercial Aircraft Perspective
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Part One
Service Parts Supply Chain in North America
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Toyota North American Parts Logistics
Division (NAPLD)
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Key Concepts

• Storage, information and planning for warehouse
  efficiency.
• Culture for problem solving.
• Taming the Bullwhip Effect and creating flow of
  product and information.
• A supply chain is a system, and improving it
  requires systems thinking.

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Toyotas Supplier Challenge

• North American suppliers less capable than Japan

1997 Data
N.A. Japan Parts
Parts Supplier on-time delivery 89
95 Fill rate to distributors 70
93 Fill rate to dealers 93
98.5 Inventory months of supply 3.2 2.0
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Toyotas Supply Chain Results
Dealers
Toyota
Suppliers

• 70?35 days inventory
• 4,000? 6,000 stocked parts

• 97.8 fill rate
• 14 hrs lead-time
• 2.8 months inventory
• 46K lines/ee/yr

• 95 on time
• 70 daily order delivery

Toyota

• Little change

• 93.8-97.4 fill
• next daywk L/T
• 4.6-8.5 months inventory
• 25K-37K lines/ee

• 62 on time (1 co.)
• Infrequent order delivery

Industry
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Key Concepts

• Storage, information and planning for warehouse
  efficiency.
• Culture for problem solving.
• Taming the Bullwhip Effect and creating flow of
  product and information.
• A supply chain is a system, and improving it
  requires systems thinking.

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. Example of Inefficient Storage

• Picking
• instructions
• random order

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Example of Inefficient Storage

• Wasted space
• Longer footpath
• Bigger warehouse

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ACTION PLANGolden Zone (Pilot-20 Locations)
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Golden Zone Pilot--Short Pick Path, Parts at
Ergonomic Height
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Storage Pilot Results
Jan 2001 Mar 2001
Total locations 3,500 3,500
Golden Zone locations 0 200 (5.7)
Lines/day/ picker (whole W/H) 65 85 (31)
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Toyota PDC ResultsStorage, Flow Kaizen
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The Bullwhip Effect
Demand Information

• Longer lead-time more variation ? more whip

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To Tame the Bullwhip Effect

• Reduce order-to-delivery lead-time.
• Deliver on-time ? confidence.
• Increase visibility and accuracy of information
  on true daily demand, supply chain inventory and
  ETA.
• Introduce frequent (daily) replenishment through
  the supply chain.

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How Toyota Tamed the Bullwhip

• Implement TPS/JIT Logistics throughout the supply
  chain to create an efficient, level flow.

Sell-one, Buy-one, Make-one
Dealers
Region PDC
N.A. Parts Centers
Suppliers
1 pc/day
1 pc/day
1 pc/day
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JIT and Lean Logistics to Dealers

• Dealer stock replenishment increased from weekly
  to daily

Ave. Replenishment Lead-time
100 0
96
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1994 2004
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Toyota Dealer Results

• Dealers Inventory Investment Cut In Half!

• Less Inventory Depth/More Breadth ?
• More Customers Satisfied In One-Day Visit

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Toyota Dealer Results

• Reduce inventory
• Toyota seven storage techniques?downsize

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Toyota Dealer Results

• Costly parts storage space converted to
  revenue-producing service stalls
• Significant labor savings

Efficiency Improvements
Floor Labor
space productivity Parts -20-40 20-30 Se
rvice 1-10 10-30 stalls
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Daily Level Flow From Suppliers
On-time delivery
Daily Order
Kaizen
Increased delivery frequency milk-run
EDI / web-based information flow
Small lot deliveries
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Toyota Supplier Results
Industry Best Supplier Performance Lower
Inventory Customer Satisfaction
95
100
Service Parts
75
Accessories
62
54
50
93
94
95
96
97
98
99
2000
2004
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Conclusion

• Storage, information and planning ? warehouse
  efficiency
• Culture for problem solving?kaizen
• Taming the Bullwhip Effect?level flow of
  product and information
• Systems thinking?Lean supply chain

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Create Problem Solving Culture

• Create binary business processes.
• To standardize best practice.
• To expose problems.
• Coach problem solving at lowest possible level.
• Use every employees full human potential.
• Kaizen mindchange every
• 3 4 months.

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Part Two
The Toyota Way
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The Toyota Way
Wisdom from the Desk of, Chief Officer of
Business Development Purchasing Parts, Toyota
Motor Corporation
The Toyota Production System, AKA The Thinking
Production System TPS as a winning
strategy for developing g people in the global
manufacturing environment.
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Minouras Lessons from Ohno
Early in his career, Minoura worked under Taiichi
Ohno, recognized as the creator of the Toyota
Production System. Ohno, through tireless trial
and error, managed to put into practice a pull
system that stopped the factory producing
unnecessary items. But Minoura observes that
it was only by developing this loose collection
of techniques into a fully-fledged system,
dubbed the Toyota Production System or TPS, that
they were able to deploy this throughout the
company.
Taichi Ohno
A Modern Toyota Assembly Line
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Minouras Lessons from Ohno

• A pull system ask workers to use their heads
• An environment where people have to think brings
  
• with it wisdom, and this wisdom brings
  kaizen (CI).

• In TPS, the T also stands for Thinking
• I dont think he was interested in my answer at
  all/
• I think he was just putting me through some kind
• Of training to get me to lean to think.

• To cut lead-time, cut out all the bits that
  dont
• add value

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Minouras Lessons from Ohno

• The line must stop if there is a problem.

Andon Electric Light Board

• Deal with defects only when they occur,
• and the number of staff you need will drop.

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Minouras Lessons from Ohno

• Ask yourself Why five times.
• That way youll find the root cause, and if you
  get rid
• of that itll never happen again.
• However, on-the-spot observation rather than
  deduction
• Is the only correct way to answer a Why?
  question.

Improved die casting machine, developed by
Toyota, is customized to reflect the shape of the
finished product, cost 5) less than its
predecessor, and has on-third the production
lead-timed
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Minouras Lessons from Ohno

• Train people to follow rules and standards
• as if second nature
• Human beings are the ones who actually build
  quality into
• a product..

Human Beings Build Quality Into a Product
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Minouras Lessons from Ohno

• Find where part is made cheaply and
• use that price as a benchmark.

If we find that theres a place in the world
where they can produce this or that part for this
or that price, we should use that price as a
benchmark, and pour or efforts into finding a way
to make even more cheaply locally.
Using Toyotas V-Comm digital engineering
technology, engineers in Japan and overseas work
together to optimize production processes.
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Minouras Lessons from Ohno

• Develop people who can come up with unique
  ideas.

And here resides the other part of the Toyota
DNA. the human behavior system ( The Toyota Way)
which complements the process behavior system
(The Toyota Production System) Both equally
essential in lasting and continued success of
Toyotl
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Part Three
Ok Whats Lean, Six Sigma, CI and EI got to do
with SCOR ?
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SCM and SCOR Model
SCM A Basic Definition and the SCOR Model
Definition - Supply Chain Management is the
design and management of seamless, value-added
processes across organizational boundaries to
meet the real needs of the end customer. The
development an integration of people and
technological resources are critical to
successful supply chain integration. The
SCOR Model A most recognized and proven tool
that provides unique structure that links
business best practices, processes, metrics, and
technology to form a unified structure to link
and support communication among SC partners and
to enhance the effectiveness of SCM and related
SC improvement activities.
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The SCOR Model Associated Best Practices
- Lean, OM, EI and Six Sigma/CI -
DMAIC, Kaizen , TOC (TP), QFD,, Problem Solving
Tools , TOE, Variation Mgmt.
6s
CI
Kanban Poka Yoke Pull Flow 5 S TOC VMI TPM SMED Ji
doka Manufacturing Cells) Value VSM POU Surgeons
Chart
Empowerment SDWT Innovation Management
Support Training Quality Circles Work Teams Job
Rotation Job Enlargement Job Enrichment Profit
Sharing
EI
Lean Manufacturing Techniques
OM
MRP-II/DRP-II,TOC (DBR, CCPM). ERP, B2B,
Planning, Purchasing, Distribution, Outsourcing
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POU (Point of Use Tools) for Domestic Issues
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Part Four
A System/Enterprise Aspect of Lean SCM From A
Commercial Aircraft Perspective
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With the 100th anniversary of manned flight in
2003 lets take a look at the commercial A/C
business

• The commercial A/C business
• Aluminum primary structural material for over 60
  years
• Composites Technology lagging in the US
• Commercial jet transports introduced 46 years ago
• Mach 3 flight over 40 years ago
• First Moon landings over 30 years ago
• 747 introduced over 30 years ago big twins 18
  years ago
• Space Shuttle in service over 23 years
• Stealth aircraft operational over 16 years ago
• US supersonic transport research effectively
  canceled
• Sonic Cruiser was a nice dream
• But .. The Dream liner is real (Boeing 787)

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Lean in the 21st Century..

• Lean is the key to an economically vital,
  technically innovative Industries early in the
  21st Century
• Lean addresses the Industrys fundamental,
  structural challenges
• Lean is a logical extension of some of the
  Industrys greatest achievements
• Yet strategically valuable Lean still eludes many
  companies

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Historical Development From lean to mass to
mess to...

• Early days at Pratt Whitney (circa 1925)
  demonstrate Lean as natural way of organizing
  production
• Flow manufacturing, cellular-like arrangements
• Product-centric layout and organization
• European production follows similar patterns
• Takt time (concept and term) invented at Folke -
  Wolf in 1920s

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Historical Development From lean to mass to
mess to...

• Product performance is primary focus as Industry
  advances during 1920 30s.
• Engineering specializes - silos emerge
• Production follows specialization pattern - silos
  emerge as separate capabilities and facilities
• As product oriented production fades,
  management of complexity becomes major cost,
  cycle-times stretch out

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Historical Development From lean to mass to
mess to...

• World War II drives industry expansion - Lean
  makes another appearance as enabler of massive,
  victorious output
• Tightly integrated production lines enable heroic
  output
• Takt time synchronization of production lines
• Level scheduling, standard work are the norm
• Assets are product-focused and fully utilized
• WW II production creates huge Industry asset base
  at Government expense (much of which remains
  active today)

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Historical Development From lean to mass to
mess to...

• Cold War drives more cycles of product
  performance advance, specialization in design and
  production
• Product complexity increases lead to systems
  engineering but concept is not applied to
  production systems
• Political influence over distribution of work
  becomes more predominant
• Fragmentation of production systems reaches
  extreme levels

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Historical Development From lean to mass to
mess to...

• 75 years after Kitty Hawk (1978), Aerospace
  Industry reaches peak as provider of defense and
  transportation products in cost-plus / regulated
  market environment
• Production system configurations of this era are
  complex and fragmented
• Work is organized according to all forms of logic
  except Lean
• Cost / cycle time growth is exponential

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Historical Development From lean to mass to
mess to...

• And then the environment begins to change
• Deregulation transforms airlines from
  quasi-government utilities into cost conscious,
  financially oriented businesses
• By 1990, airframe prices begin to follow trend
  in airline revenue per seat mile - downward
• Collapse of East Block and Soviet Union
  (1989-1991) ends Cold War, defense spending
  declines worldwide
• Major, new generation weapon systems come under
  extreme political scrutiny - public support sags
• US dominance of commercial airframe market is
  seriously challenged by Airbus
• 2005 Airbus market share leader
• Equivalent production done with 10,000 less
  workers than Boeing?

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Historical Development From lean to mass to
mess to...

• Mid-to-late 1990s see Industry struggling with
  fundamental change worldwide
• US Majors consolidate as business / program base
  collapses major asset consolidations fail to
  emerge, Industry financial performance declines
• European producers also consolidate
• Russia remains mired in confusion
• China State Enterprise model starting to rumble
  as
• An monster of an economical powerful engine l
• Most other producers settle for subcontracting
  roles
• Yet early Aerospace experiments with Lean fail to
  deliver strategic results

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Historical Development From lean to mass to
mess to...
500
450
400
350
300
Speed (inches/hour)
250
Common snail travels at Mach 0.0000094 (0.007
mph) 10X average velocity of fastest part
moving through manufacturing facility
200
150
100
50
0
Snail
Composites
Aluminum Parts
Titanium Parts
Aluminum Parts
(Fab)
(Buy)
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Whats to be done? Apply Lean Value Stream to
the Enterprise SC System
7000
6,370
The Actuator travels more than 6,370 miles
during production It only travels 46.5 miles
into space Travel during production is 36 times
further than during final use
6000
5000
4000
Travel - Miles
3000
2000
1000
46.5
0
Actuator Production
Actuator Flight
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Whats to be done? Apply Lean Value Stream to
the Enterprise SC System
Physical SpaceView
Hand Offs 74 Distance Traveled
- Intersite 7,596 miles -
Intrasite 18,805 feet
Hardware and information flows in the current
system Before Lean Thinking
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Whats to be done? Apply Lean Value Stream to
the Enterprise SC System
Deer Creek

Green Bay
PGF
Wilmington
TSB
Oklahoma City
FRP
PGE
GBP
Hand Offs 11 Distance Traveled -
Intrasite 550 feet
Green Bay
To Wilmington
Wilmington
Dry-End
FHP
Oklahoma City
Wet-End
Pulping Equipment
Hardware and information flows in the current
system with Lean Thinking
RVS
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Whats to be done? Apply Lean Value Stream to
the Enterprise SC System
Organizational view Complex process and
supporting cast Before Lean Thinking
OrganizationalHand-off Statistics Production
Centers 07 Suppliers
31 Subcontractors 02 Total
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Whats to be done? Apply Lean Value Stream to
the Enterprise SC System
Reductions in resources serving the configuration
are sustained by physical and organizational
change With Lean Thinking
Products
Division
Machine
Configuration
Systems
Engineering
Planning
Mfg
Engineering
Vendor Interface
OrganizationalHand-off Statistics Production
Centers 03 Suppliers
08 Subcontractors 00 Total
11
Mfg
Ops
Transportation
Wilmington
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Whats to be done? Apply Lean Value Stream to
the Enterprise SC System

• Across some of the industry, patterns emerge from
  the patterns -- everybodys got it
• Process villages, functional organization focus
• Fractured product and information flows
• Support activities dominant within value streams
• Huge cycle times, slow inventory turns, lots of
  space
• The configuration of work norms are mass
  production logic pared with desire to maintain
  capacity and staff
• Resources that serve the configuration are not
  recognized as such

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Whats to be done? Apply Lean Value Stream to
the Enterprise SC System

• Begin, as always, with Value
• Understand the value provided to the ultimate
  customer
• Identify the entire production system
• Characterize the channels in which value flows
  (or tries to)
• Develop Enterprise-level views of the current
  configuration of work
• Physical, organizational, policies
• Culture and impediments to change
• Suppliers, first and second tier

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Whats to be done? Apply Lean Value Stream to
the Enterprise SC System

• Identify resources that serve the
  configuration, but dont stop there
• Understand the underlying configuration and its
  drivers
• Test all elements of configuration of work
  against Lean principles and other business needs
• Reconfigure with Flow as first guiding principle
  (and second and third and)
• Of hardware, information, people, ideas

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An Industry that can afford its Future

• A Lean Aerospace industry...
• Applies new measures to the enterprise to reveal
  resources that serve the configuration and
  trades the full burden they represent against
  investmentsin reconfiguration and continuous
  improvement
• Extends its concepts of Lean enterprise across
  company boundaries to its suppliers and customers
• Likewise applies Lean thinking to product
  development and design
• Aggressively pursues the future by trying to
  shape and drive it with new technologies and
  products - even at the expense of its current
  portfolio

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An Industry that can afford its Future

• The Aerospace Industry can afford its future, if
• It develops a clear vision of Lean before further
  erosion occurs
• It takes action soon to fundamentally
  reconfigure
• The future is out there
• Examples of a 21st century Lean industry are
  emerging on the edges of the industry

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Aha, The Trappings of Outsourcing
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And ..Know Your Customer
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Questions?
The Last thing I remember, is that I was at the
Supply Chain World North America 2005,
Disneyland, I dont know if was stricken by
attack of boredom or by that ride on Thunder
Mountain?.