supply chain management strategy - november 2016

[email protected]

Supply Chain Management Strategy

Thinking win, Win, WIN

Supply Chain ManagementMaterials Management Strategy

Marek Piatkowski – November 2016


[email protected]



Introduction - Marek Piatkowski Professional Background

Toyota Motor Manufacturing Canada (TMMC) - Cambridge, Ontario from 1987-1994

TPS/Lean Transformation Consulting - since 1994 Professional Affiliations

TWI Network – John Shook, Founder Lean Enterprise Institute (LEI) – Jim Womack Lean Enterprise Academy (LEA) – Daniel Jones CCM/CAINTRA – Monterrey, Mexico SME, AME, ASQ, CME

Lean Manufacturing Solutions - Toronto, Canada

http://twi-network.com

[email protected]



[email protected]



S I P O C Suppliers are individuals or organizations that provide inputs

(materials) to the process. These can be internal (e.g. department, division, or individuals) or external (e.g. vendors, government, or individuals)

Inputs are materials and information that are required by the process to produce the outputs – finished or semi-finished products

Process are key manufacturing steps and their sequence that convert raw materials and purchased parts into finished or semi-finished products

Outputs are typically finished or semi-finished products that are produced as a result of the process execution

Customers are those who receive the process output and who placed the order

[email protected]



Purchased Parts Management In a traditional material handling system, large quantities of

purchased parts arrive at the receiving dock, typically on pallets or in large boxes

They are either stored in the warehouse or delivered directly to the production floor by hand or by forklift trucks in a poorly defined manner

Quite often quantities delivered are much larger than the quantities required by production. Parts are delivered on pallets or containers that make very little sense from parts presentation point of view

As a result of this system the shop floor becomes a mini-warehouse with multiple storage locations and excess inventory.

[email protected]



Finished Goods Parts are produced not based on what the Customer orders, but

based on sales forecasts or on “economical quantities” that meet manufacturing efficiency objectives

This results in not meeting Customer’s expectations when it comes to lead time or the price. In order to compensate for this we carry large amounts of finished goods inventories

So we produce parts, put them in Finished Goods inventory warehouses, hoping that one day the Customer will call and place an order

These methodologies create conflicting priorities and confusion among departments and individuals responsible for what we call Material Flow

[email protected]



WIP – Work in Process Inventory In many operations the ownership of production, transportation

and storage of WIP components and sub-assemblies is in hands of Production Supervisors

Their priority is to produce parts in the most efficient and easiest way for them

Once parts are produced they are being “pushed” to the parts warehouse or to the next manufacturing process

In many instances the overproduce or change the sequence of production schedule dues to parts shortages or other reasons

Management of WIP inventory becomes a secondary priority.

[email protected]



Inventory Common problems that we see with such traditional systems include:

Unnecessary high levels of inventories – too much of what you do not need and not enough of what you need

Difficulty knowing how much inventory we have in our warehouse

Difficulty knowing where to find parts in a warehouse Difficulty knowing how many purchased parts are on the floor Confused and frustrated Suppliers Parts shortage – production lines running out of parts Production operators unable to sustain cycle times because

they are searching for parts Less than 100% on time deliveries And more …

http://www.google.ca/url?sa=i&rct=j&q=inventory%20management&source=images&cd=&docid=d7ct8y7kPjBLkM&tbnid=eVDzusAxvEb3nM:&ved=0CAUQjRw&url=http://www.prlog.org/10693751-inventory-management-system-sales-purchase-accounting-inventory-modules-riyadh-saudi-arabia.html&ei=TBL7UczKM4fq2gWhzoHYDQ&psig=AFQjCNFhkdQFacdQ0bxDymjoMaSeMI2NLw&ust=1375495109867583

[email protected]



Inventory – the Necessary Evil

How much inventory you need to operate your business on daily basis?

We do not usually “manage” inventories We reduce it or cut it, but we do not manage it Maybe we do not know how? Who in your Organization is responsible for inventory levels? How do you manage your inventories? We do not manage inventories the same way we manage money You need capital to operate – you also need inventories to operate This is not about having too much or not enough inventories Can you answer that question for every part?

[email protected]



Materials Management Strategy Materials Management Strategy based on Lean Transformation

principles offers a solution to all these problems The solution is to replace traditional material-handling and

inventory management systems with lean Materials Management Systems based on five key implementation principles:1. Control and Command - a single Materials Management

Organization2. Inventory Control through a use of Plan-For-Every-Part (PFEP)3. Inventory storage systems based on principles of a

Supermarket4. Engineered delivery routes – times based or replenishment

based routes5. Production or delivery instructions based on a pull signal

Material Flow generates Information Flow

http://www.google.ca/url?sa=i&rct=j&q=material%20management%20strategies&source=images&cd=&cad=rja&docid=Oot67Gdcu_GdyM&tbnid=jL2lSjn3O28qbM:&ved=0CAUQjRw&url=http://www.epa.gov/region10/westcoastclimate.html&ei=EBL7UY_KCsTV2QWdnoHABA&psig=AFQjCNEffiFYnVCEfpxxQC9gQV9P8eZn-A&ust=1375495051112729

[email protected]



Material Strategy Objectives Produce what the Customer wants when the Customer wants it Reduce the lead time from the Customer order to delivery Introduce flexible manufacturing – small lot production Minimize the cost of materials by eliminating sources of waste in

the delivery of material, receiving, storage, production flow and shipping

Gain control of inventory costs Eliminate costs associated with parts shortages and schedule

changes Improve the flow of material

[email protected]



Materials Management Strategy It is not uncommon to achieve:

Double digit improvements in inventory terms Significantly reduce storage space requirements Minimize operating costs Totally eliminated line stops due to parts shortage Achieve 100% on time customer deliveries Minimize lead times

[email protected]



EXAMPLE

[email protected]



Part Number Description Consumption - Weekly Volume LAST 6 MONTHS

Quantity per bag

# of Parts in the Warehouse on

July 18, 03

Cost per Part - $$$

Cost of Inventory on

July 18, 03

Maximum Inventory in the

Stock Room

Target (Max) Cost of

Inventory

1 Containers = days of

Inventory

1B0457 TERM FERRULE 15 750 2,712 $0.33 $894.96 750 $247.50 2501B0797 FILL FERRULE 9738 10,000 2,935 0.34 $997.90 20,000 $6,800.00 51B0799 TERM.FERRULE 9788 10,000 6,345 0.44 $2,791.80 20,000 $8,800.00 51B1449 TERM FERRULE 339 4,981 0.23 $1,145.63 500 $115.00 51B1720 FILL FERRULE 157 3,500 0 0.45 $0.00 3,500 $1,575.00 1111B1920 TERM FERRULE 160 3,000 257 0.33 $84.81 3,000 $990.00 941B3554 FILL FERRULE 58 2,750 1,479 0.37 $547.23 2,750 $1,017.50 2371B3555 TERM FERRULE 58 1,500 760 0.55 $418.00 1,500 $825.00 1291B3644 TERM FERRULE 0 7,875 277 0.54 $149.58 500 $270.00 51B3664 FILL FERRULE 5018 7,975 4,256 0.34 $1,447.04 15,950 $5,423.00 81B3821 TERM FERRULE 324 2500 6,393 0.55 $3,516.15 2,500 $1,375.00 391B4806 TERM FERRULE 3950 3280 8,947 0.33 $2,952.51 9,840 $3,247.20 41B6324 TERM FERRULE 14 0 2,710 0.44 $1,192.40 500 $220.00 51B0360 LID 0 450 4,981 0.43 $2,141.83 500 $215.00 51B0743 LID 15 450 0 0.45 $0.00 450 $202.50 1501B0779 LID 0 500 0 0.36 $0.00 500 $180.00 51B1019 LID 544 900 0 0.33 $0.00 1,800 $594.00 81B1067 LID 0 6,738 0.33 $2,223.54 500 $165.00 51B1530 LID 0 450 0 0.33 $0.00 500 $165.00 51B1556 LID 39 250 5,500 0.37 $2,035.00 250 $92.50 321B1606 LID 0 250 0 0.76 $0.00 500 $380.00 51B1632 LID 0 277 35,912 0.65 $23,342.80 500 $325.00 51B1644 LID 0 500 0 0.45 $0.00 500 $225.00 51B1734 LID 494 500 0 0.56 $0.00 1,000 $560.00 51B1761 LID 438 950 0 0.56 $0.00 950 $532.00 111B1831 LID 0 900 5,558 0.55 $3,056.90 500 $275.00 51B1990 LID 0 500 0 0.34 $0.00 500 $170.00 81B2216 LID 0 14,722 0.55 $8,097.10 500 $275.00 81B2218 LID 0 2,663 0.33 $878.79 500 $165.00 81B2220 LID 157 4,031 0.44 $1,773.64 500 $220.00 11B2549 LID 11 1,000 0 0.43 $0.00 1,000 $430.00 455

[email protected]




Quantity per bag


July 18, 03

Cost per Part - $$$


July 18, 03


Stock Room


Inventory


Inventory

1B5961 LID 226 450 58,019 0.65 $37,712.35 900 $585.00 101B6150 LID 316 473 41,037 0.45 $18,466.65 946 $425.70 71B1632 LID 0 277 35,912 0.65 $23,342.80 500 $325.00 51B3418 LID 95 28,337 0.34 $9,634.58 500 $170.00 51B4944 LID 38 500 23,433 0.34 $7,967.22 500 $170.00 661B6665 LID 0 21,990 0.44 $9,675.60 500 $220.00 51B4983 LID 18 465 21,467 0.55 $11,806.85 465 $255.75 1291B6676 LID 0 17,738 0.45 $7,982.10 500 $225.00 51B3834 LID 0 16,226 0.37 $6,003.62 500 $185.00 51B2216 LID 0 14,722 0.55 $8,097.10 500 $275.00 81B4391 LID 0 665 9,648 0.65 $6,271.20 500 $325.00 51B4806 TERM FERRULE 3950 3280 8,947 0.33 $2,952.51 9,840 $3,247.20 41B2846 LID 0 8,338 0.45 $3,752.10 500 $225.00 71B4867 LID 0 1164 7,608 0.55 $4,184.40 500 $275.00 51B1067 LID 0 6,738 0.33 $2,223.54 500 $165.00 51B3393 LID 0 6,497 0.55 $3,573.35 500 $275.00 51B3821 TERM FERRULE 324 2500 6,393 0.55 $3,516.15 2,500 $1,375.00 391B0799 TERM.FERRULE 9788 10,000 6,345 0.44 $2,791.80 20,000 $8,800.00 51B1831 LID 0 900 5,558 0.55 $3,056.90 500 $275.00 51B1556 LID 39 250 5,500 0.37 $2,035.00 250 $92.50 321B1449 TERM FERRULE 339 4,981 0.23 $1,145.63 500 $115.00 51B0360 LID 0 450 4,981 0.43 $2,141.83 500 $215.00 51B6675 LID 0 277 4,950 0.43 $2,128.50 500 $215.00 51B3732 LID 281 460 4,299 0.33 $1,418.67 920 $303.60 81B3664 FILL FERRULE 5018 7,975 4,256 0.34 $1,447.04 15,950 $5,423.00 81B2220 LID 157 4,031 0.44 $1,773.64 500 $220.00 11B5234 LID 101 900 3,540 0.33 $1,168.20 900 $297.00 451B3952 LID 353 750 3,421 0.76 $2,599.96 750 $570.00 111B6253 LID 450 860 3,410 0.56 $1,909.60 1,720 $963.20 101B6385 LID 1293 950 3,257 0.55 $1,791.35 2,850 $1,567.50 41B0797 FILL FERRULE 9738 10,000 2,935 0.34 $997.90 20,000 $6,800.00 5

[email protected]




Quantity per bag


July 18, 03

Cost per Part - $$$


July 18, 03


Stock Room


Inventory


Inventory

1B1720 FILL FERRULE 157 3,500 0 0.45 $0.00 3,500 $1,575.00 1111B0743 LID 15 450 0 0.45 $0.00 450 $202.50 1501B0779 LID 0 500 0 0.36 $0.00 500 $180.00 51B1019 LID 544 900 0 0.33 $0.00 1,800 $594.00 81B1530 LID 0 450 0 0.33 $0.00 500 $165.00 51B1606 LID 0 250 0 0.76 $0.00 500 $380.00 51B1644 LID 0 500 0 0.45 $0.00 500 $225.00 51B1734 LID 494 500 0 0.56 $0.00 1,000 $560.00 51B1761 LID 438 950 0 0.56 $0.00 950 $532.00 111B1990 LID 0 500 0 0.34 $0.00 500 $170.00 81B2549 LID 11 1,000 0 0.43 $0.00 1,000 $430.00 4551B5651 LID 437 500 35 0.45 $15.75 1,000 $450.00 61B5636 LID 595 500 120 0.43 $51.60 1,500 $645.00 41B5883 LID 0 970 125 0.37 $46.25 500 $185.00 51B6642 LID 0 240 0.38 $91.20 500 $190.00 51B6220 LID 9 950 250 0.56 $140.00 950 $532.00 5281B1920 TERM FERRULE 160 3,000 257 0.33 $84.81 3,000 $990.00 941B3644 TERM FERRULE 0 7,875 277 0.54 $149.58 500 $270.00 51B5758 LID 891 1000 449 0.36 $161.64 2,000 $720.00 61B5920 LID 865 900 741 0.76 $563.16 1,800 $1,368.00 51B3555 TERM FERRULE 58 1,500 760 0.55 $418.00 1,500 $825.00 1291B3090 LID 461 900 1,006 0.36 $362.16 1,800 $648.00 101B3126 LID 58 1,173 0.56 $656.88 500 $280.00 71B4542 LID 0 1,296 0.56 $725.76 500 $280.00 51B4467 LID 206 460 1,392 0.45 $626.40 460 $207.00 111B3554 FILL FERRULE 58 2,750 1,479 0.37 $547.23 2,750 $1,017.50 2371B6632 LID 0 472 1,500 0.55 $825.00 500 $275.00 51B6384 FINISHED LID 1,642 0.36 $591.12 500 $180.00 51B4637 LID 0 800 2,006 0.56 $1,123.36 500 $280.00 51B3558 LID FINISHED 27 2,013 0.55 $1,107.15 500 $275.00 51B3298 LID 3407 950 2,409 0.56 $1,349.04 7,600 $4,256.00 7

[email protected]




Quantity per bag


July 18, 03

Cost per Part - $$$

Cost of Inventory on July 18, 03


Stock Room


Inventory


Inventory

1B0743 LID 15 450 0 0.45 $0.00 450 $202.50 1501B0779 LID 0 500 0 0.36 $0.00 500 $180.00 51B6476 LID 69 500 2,751 0.34 $935.34 500 $170.00 361B5368 LID 2233 500 2,831 0.44 $1,245.64 4,500 $1,980.00 51B3952 LID 353 750 3,421 0.76 $2,599.96 750 $570.00 111B5234 LID 101 900 3,540 0.33 $1,168.20 900 $297.00 451B2220 LID 157 4,031 0.44 $1,773.64 500 $220.00 11B3664 FILL FERRULE 5018 7,975 4,256 0.34 $1,447.04 15,950 $5,423.00 81B3732 LID 281 460 4,299 0.33 $1,418.67 920 $303.60 81B4867 LID 0 1164 7,608 0.55 $4,184.40 500 $275.00 51B2846 LID 0 8,338 0.45 $3,752.10 500 $225.00 71B4806 TERM FERRULE 3950 3280 8,947 0.33 $2,952.51 9,840 $3,247.20 41B4983 LID 18 465 21,467 0.55 $11,806.85 465 $255.75 1291B6665 LID 0 21,990 0.44 $9,675.60 500 $220.00 51B4944 LID 38 500 23,433 0.34 $7,967.22 500 $170.00 661B3418 LID 95 28,337 0.34 $9,634.58 500 $170.00 51B1632 LID 0 277 35,912 0.65 $23,342.80 500 $325.00 51B6150 LID 316 473 41,037 0.45 $18,466.65 946 $425.70 71B5961 LID 226 450 58,019 0.65 $37,712.35 900 $585.00 10

TOTALS 427,351 $208,351.36 133,301 $56,249.95 2,619

Actual $208,351.36

Target (Max) $56,249.95

Variance (Savings) -$152,101.41

[email protected]



EXAMPLE

[email protected]



Komora "411" / Cavity "411"

0

200

400

600

800

1000

1200

1400

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39

Zapa

s [s

zt] /

Stoc

k [p

cs]

Supermarket Inventory Reduction

[email protected]



Komora "321" / Cavity "321"

0

200

400

600

800

1000

1200

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39

Zapa

s [s

zt] /

Stoc

k [p

cs]

Supermarket Inventory Reduction

[email protected]



Wszystkie komory / All cavities

0

1000

2000

3000

4000

5000

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39

Zapa

s [ s

zt ]

/ St

ock

[pcs

]

Charts of inventory in supermarket

> 50% Reduction of Inventory

[email protected]



Do you haveMaterials Management System in place in your Organization?

[email protected]



Materials Strategy - Future Vision Centralized Materials Management Organization Plant layout to facilitate Material Flow

One Purchased Parts Supermarket near receiving One Finished Goods Supermarket near Shipping Mini WIP markets at point of manufacture Controlled Material Delivery Traffic

Flexible production planning – link manufacturing to Customer orders

100% on time deliveries No backorders No Line stops dues to parts shortages

Visual Management

http://www.google.ca/url?sa=i&rct=j&q=materials+management+images&source=images&cd=&docid=HJ8Eg-nmiox6dM&tbnid=R5PR01Wc-Cs69M:&ved=0CAUQjRw&url=http://fineturn.in/services.html&ei=CRP7UYWwOuuI2gWgu4CABA&bvm=bv.50165853,d.b2I&psig=AFQjCNHO1SZ257BroZYaKa0zUEUYNEPORA&ust=1375495290458892

[email protected]



Vision for FlowCreate a Vision for Flow of Materials

[email protected]



Material Flow Plan - Year One A new Materials Management Organization Create Materials Flow inside the Plant

One purchased parts Supermarket near receiving One finished goods Supermarket near shipping Supermarkets/Mini WIP markets located along isles to facilitate a

timed delivery System Mini WIP markets at “Point of Manufacture” - parts delivered

directly from the Supermarket to operator’s fingertips Control Material Delivery Traffic

Dedicated Material Handling Team Standardized delivery routes set up to replenish only what has

been consumed One Way Aisles and Super Highways Forklifts Restricted to Shipping/Receiving Area only

[email protected]



Material Flow Plan - Year One Create Flow in Manufacturing Design and Implement Production Cells (CCF)

Operator Flow Material Flow Internal To Cells Position work cells to facilitate Material Delivery Standardized Work

Develop Flow between Cells (MMF) Create Flow Throughout the Facility Material Flow from Raw Supermarket to Cells Material Flow between Cells (WIP) Information Flow between Manufacturing and Materials

[email protected]



Material Flow Plan - Year Two Expand Material Flow activities Link manufacturing to Customer orders

Pull to Distribution Center or Finished Goods Supermarket Level Scheduling JIT - Pick, Pack and Ship

Schedule production for a single point - Pacemaker Just-in-Time and sequential production Implement advanced IT systems

MRP Bar Code technology E-Kanban

[email protected]



Material Flow Plan - Year Three Implement Flow between Suppliers and The Plant Connect Suppliers to Internal Supermarket

Kanban Milk Runs Supplier Ratings Sourcing Strategy

Establish Flow from Manufacturing through Distribution to Customers

Move towards paperless technology

[email protected]



Material Strategy Objectives Produce what the Customer wants when the Customer wants it Reduce the lead time from the Customer order to delivery Introduce flexible manufacturing – small lot production Minimize the cost of materials by eliminating sources of waste in

the delivery of material, receiving, storage, production flow and shipping

Gain control of inventory costs Eliminate costs associated with parts shortages and schedule

changes Improve the flow of material

[email protected]



Changing the World. One Transformation at a timeThis presentation is an intellectual property of W3 Group Canada Inc.

No parts of this document can be copied or reproducedwithout written permission from:

Marek PiatkowskiW3 Group Canada Inc.iPhone: 416-235-2631

Cell: 248-207-0416

[email protected]://twi-network.com

[email protected]



Presentations in this Workshop

1. Log in to: www.slideshare.net

2. Type in my name in search area:

Marek Piatkowski3. Select a

presentation you want to see

4. Learn and Enjoy

supply chain management strategy - november 2016

Business