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Lean logistics

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Overview of lean manufacturing in scm and logistics
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Lean logistics

  1. 1. Lean SCM Logistics Prepared by Julian Kalac, P.Eng Lean Six Sigma Master Black Belt
  2. 2. Supply Chain Management: encompasses the planning and management of all activities involved in the sourcing and procurement, conversion, and all Logistics Management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third party service providers, and customers. In essence, Supply Chain Management integrates supply and demand management within and across companies. Source:CSCMP formerly CLM Definition of Supply Chain Management
  3. 3. WAREHOUSE ORDER PROCESSING IMPORT EXPORT TRAFFIC PURCHASING FORECASTING DRP FIXED ASSETS ACCTS PAYABLE GEN LEDGER PLAN EXECUTE MANAGE MRP Supply Chain Information Systems ACCTS RECEIVABLE
  4. 4. Logistics Management is: that part of Supply Chain Management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customer’s requirements. Source: CSCMP formerly CLM Definition of Logistics Management
  5. 5. The Logistics Process Manufacturi ng Warehousing Production Planning Inventory Management Raw Material Order Processing Traffic Management Transportatio n Customer Seller Deliver to Customer
  6. 6. Lean SCM Hidden Factory 6
  7. 7. Hidden Factory 7 Shipped on time and customer happy We Made $$$$ ProductionMaterial Ship order CUSTOMER • No Wasted Time • No Wasted Money • No Wasted Resources • No Wasted Material ? ? 99% Customer Quality
  8. 8. The truth 8 The Hidden Factory $50000-material scrap costs $350,000 transportation costs Lost order Wrong order shipped ProductionMaterial Ship order CUSTOMER Hidden Factory
  9. 9. 9 Hidden Factory
  10. 10. HIDDEN INVENTORY
  11. 11. 11 Hidden Factory
  12. 12. 12 Hidden Factory
  13. 13. Where is the hidden factory?
  14. 14. 14
  15. 15. The type of solver technology used is dependent on the characteristics of the planning applications, including where, what, when, and how the work is to proceed. Supply Chain Activities Source: I2 Technologies
  16. 16. Capacity, schedules, status receipts Service, capacity, schedules, routes, receipts Capacity, schedules, status receipts, inventory Goods characteristics, capacity, availability, status Demands goods, requests services, requests receipts Supply Chain Cycle
  17. 17. World-Class Logistics Customer Focus Delight the Customer • Perfect orders • Responsive • Very short OTD cycle time • On-time delivery • Tailored logistics systems • Easy to do business with Focus on Growth • Partnerships • Tailored programs • Product availability • “Mutual” success Provide Shareholder Value Minimize Asset Base • Asset consolidation • Cross-docking, flow-through • In-transit merge • Greater use of third parties • Worldwide contracting • Network optimization • Replace inventory with information Understand True Logistics Cost • Activity-based costing • Net landed cost vs. functional lowest costs • External partner linkage • Competitive cost index Enable and Exploit Information Technology Integrate Systems • Common applications • Decision support tools • Leverage capabilities of suppliers • Real-time tracking • Reverse logistics World-Class Infrastructure • Internal and external resources • Training • World-class people • Constant upgrade of capabilities • “Interest in change”
  18. 18. WHAT IS IT? • The use of an outside logistics company to perform all or part of a company’s material management or product distribution function. • It is the integration of information, inventory, warehousing, and transportation services. Third Party Logistics
  19. 19. 3PL Functions—View from Cadre Technologies
  20. 20. What Is Fourth Party Logistics? A Fourth Party Logistic (4PL) provider is a supply chain integrator that assembles and manages the resources, capabilities, and technology of its own organization with those of complementary service providers to deliver a comprehensive supply chain solution. Fourth Party Logistics (4PL) A New Way to Collaborate
  21. 21. 4PL Forward Logistics Supply Network Synchronization Transportation Carriers CUSTOMER Event Mgmt & SCP/E Visibility Communication SCM 4PL Lead Logistics Provider Warehouses DCs Contract Manufacturers Brokers Forwarders 3PLs Order Fulfillment
  22. 22. Domestic versus International Requirements NAFTA FMC GATT WTO NVOCC CHB IFF FREIGHT BROKER EXPORT IMPORT DOMESTIC
  23. 23. 24 INSANITY --“Doing the same thing over and over again and expecting different results” Albert Einstein
  24. 24. 25
  25. 25. 26
  26. 26. HQ Advanced Planning Systems Host ERP Operations Management Systems SCP/SCM and CRM Warehouse's WMS Distribution Center's WMS Plant's MES Customer Base/ERP Wholesaler Distributor Supplier Base/ERP Transportation Carriers Transportation Carriers Integrated Supply Chain Links
  27. 27. Orders Filled Complete On-Time Delivery Responsive Production Rapid Order Fulfillment Reduce Transportation Costs Reduce Manufacturing Costs Reduce waste and obsolescence Increase turnover Reduce inventory Network optimization software contains advance planning engines to synchronize and optimize the supply chain channel for supplier/carrier selection, production sourcing, and inventory pre-build decisions. Synchronized Lean Logistics
  28. 28. • Identification and systemic elimination of non-value add costs and re-alignment of resources to deliver value to the customer faster, better, & more consistently • Lean Manufacturing = SPEED • Lean in Manufacturing: – Focus: Eliminate waste, non-value add steps, process constraints and bottle necks that cause problems in work throughput 29 What is Lean? Leading to Leading toEliminate Waste Reduced Cycle Times Increased Capacity
  29. 29. Eliminating the Wastes Value Added Typically 95% of all lead time is non-value added 1. Overproduction 2. Waiting 3. Transportation 4. Non-Value Added Processing 5. Excess Inventory/Material 6. Defects 7. Excess Motion 8. Underutilized People Non-Value Added 5 %
  30. 30. | | 31 Lack of cross-functional training Over relying on a select few while others are Inadequately trained  Operators are unable to rotate and help each other out to balance the work-load High overtime, increased pressure stress
  31. 31. 32 Hidden Factory
  32. 32. 33
  33. 33. Process Value Added Adds value to the output and customer is willing to pay for. Optimize Non-Value Added Does not add value to the output, and customer isn’t willing to pay for. Eliminate Business-Value Added Does not add value to output, customer will not pay for, but is necessary. (Legal, Safety, Etc.) Minimize LEAN VALUE ADD/NON VALUE ADD
  34. 34. • Lean in Supply Chain: • Lean Logistics: 35 What is Lean Supply Chain? Leading to Leading toPULL SYSTEM Reduced Lead Times Reduced Inventory Leading to Leading toReduce waiting time In/Outbound Crossdocking Reduced delivery time
  35. 35. Basic Lean Concepts Pull Systems Production scheduling method used to link downstream activities to upstream activities Work begins based upon a demand signal (kanban) from a downstream customer, either internal or external Avoids overproduction, work backlog, and disconnects within a process Nothing is produced until the downstream customer signals a need
  36. 36. 37
  37. 37. • KANBAN – A signal to produce – Signal can be an empty square, bin, shelf, cart, or kanban card – Kanban qty is safety stock used while new order is delivered – Kanban qty is calculated based on usage, lead time, delivery time – Can be setup manually or automated – Can extend through electronic notification to suppliers using automatic messaging and triggers Basic Lean Concepts
  38. 38. 39
  39. 39. SCOR (Supply Chain Operations Reference) Model: Structured around Five CORE Process Types SCOR Model Customer’s Customer Supplier’s Supplier Supplier Internal or External Customer Internal or External Your Company Plan Make DeliverSource Make / Repair DeliverMakeSourceDeliver SourceDeliverSource Return Return Return Return Return Return Return Return Plan Plan Provides Framework for your Transformation / Improvement Projects. • Defining the boundaries / scope of the supply chain . • Evaluate the supply chain’s strengths and weaknesses. • Industry benchmarks, standardized terms, metrics, Enables a total enterprise view of a supply chain 40
  40. 40. Integrating Process Improvement Methods & Tools Product/ServiceValueStream Processes Processes Process Start Process Finish Process Steps Processes Processes Organization Customers End-use Customers Suppliers Sub- Suppliers Process Steps TransactionalProcessSteps Return Return Plan Make DeliverSource Make/Repair DeliverMakeSourceDeliver SourceDeliverSource Return Return Return Return Return Return SCOR Supply Chain Model 41
  41. 41. Warehousing Equipment Diversity Standard Racking Double Deep Narrow Aisle Mobile Racking Drive in Rack Live / Flow Source: ATLET
  42. 42. Warehouse Layout-Combo Storage Methods
  43. 43. Crossdocking and Logistics No stock! Customer Order Receipt Ship Storage! Cross-Docking • Cross Docking Helps to achieve the key logistics objectives of: • Stock reduction • Fixed resource reduction • More responsive operating systems
  44. 44. LEAN CROSS DOCKING
  45. 45. Warehouse Layout--Crossdocking
  46. 46. USING MULTIPLE MODES OF TRANSPORTATION FOR ONE CONTINUOUS MOVEMENT Intermodalism
  47. 47. Supply Chain Compass-Five Stages The Fundamentals Cross- Functional Teams Integrated Enterprise Extended Supply Chain Supply Chain Communities Business Pain Cost of quality Unreliable order fulfillment Cost of customer service Slow growth, margin erosion Non-preferred supplier Driving Goal Quality and cost Customer service Profitable customer responsiveness Profitable growth Market leadership Organizational Focus Independent departments Consolidated operations Integrated supply chains (internal) Integrated supply chains (external) Rapidly reconfigurable Process Change Standard operating procedures Cross-functional communication Cross-functional processes Customer- specific processes Reinvented processes Metric Predictable costs and rates On-time, complete delivery Total delivered cost Share of customer Net worth IT Focus Automated Packaged Integrated Interoperable Networked Key Tools/ Planning Spreadsheets Point tools Enterprise supply chain planning Point-of-sale supply chain planning Synchronized supply chain planning Execution MRP and other homegrown applications MRP II ERP Customer management systems Network-centric commerce
  48. 48. Aligning worldwide distribution strategies around sourcing/selling business models Reengineering the movement of product to improve availability and lower net landed cost Synchronizing processes across all regions/markets Key Requirements Key Performance Measures Key Organizational Processes • Centralized management/worldwide integration • Customer service options • Sourcing initiatives and alliances • Procurement/supplier integration • Global network optimization • Process-driven information systems Shareholder Measurements • Inventory turns • Asset utilization • Operating costs • Customer satisfaction • Loss management (asset protection) Customer Measurements • Product availability • Flexibility • On-time performance • Speed • Responsiveness • Consistency • Quality Planning and Control • Configuration and scheduling • Demand management and communication • Sourcing strategy • Manufacturing strategy • Supply chain integration • Product life cycle Support • Infrastructure • Information and technology • Key performance indicators Global Logistics Strategy ng
  49. 49. Lord Kelvin on Measures When you can measure what you’re speaking about and express it in numbers, you know something about it; but when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meager and unsatisfactory kind….---Lord Kelvin
  50. 50. Measuring Up – A Best Practice Model for Evaluating Supply Chain Performance Goal Measure Definition Improved customer- order fulfillment Fill rate Portion of custom orders (either external or internal) that are on time and accurate as the customer would determine Improved customer satisfaction Survey Systematic feedback obtained directly from customer (external or internal); likely using a sampling survey Better procurement/ supplier management Supplier order fulfillment Portion of supplier orders that are on time and accurate Supplier quantity Non-conforming or defective items or services divided by total at supplier interface Procurement effectiveness Year-over-year cost reduction on like items (i.e., by commodity family) Inventory Days of supply on hand Inventory investment on hand (in dollars) divided by daily ship rate (in dollars) Inventory turns Cost of Goods Sold (COGS) divided by average annual inventory investment Timing Cash-to-cash Elapsed time from payment of suppliers to collection of payment from customers Quality Quality Non-conforming or defective items or services divided by total at customer interface Operational integrity Productivity loss Operational productivity lost due to supply chain non- conformance
  51. 51. Supply Chain & Logistics Management A Practical Viewpoint Logistics Supply Chain Management 52
  52. 52. THANK YOU

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