Lean+Distribution+PresentationFinal.ppt

Slide:1Catalina Capital Advisors/Lean Quest LLC,Proprietary,Parker Hannifin Concepts of Lean Distribution,April 14-15,2004,Slide:2Catalina Capital Advisors/Lean Quest LLC,Proprietary,Evolution of Lean From Factory to Supply Chain,Slide:3Catalina Capital Advisors/Lean Quest LLC,Proprietary,The Evolution from Lean Manufacturing to Lean Distribution,Toyota and others have effectively leveraged their success in Lean Manufacturing to improve the profitability and effectiveness of their supply chainHigh costs of distribution make Lean Distribution particularly attractiveandExtending Lean thinking from manufacturing to the customers provides benefits for all members of the supply chain(manufacturing customers).,Slide:4Catalina Capital Advisors/Lean Quest LLC,Proprietary,The Challenges of Lean Distribution,Difficult for people to see flow and pull in warehousesThe processes of a warehouse seem too dynamicOld thinking:Warehouses hold inventoryNew thinking:Warehouses flow inventorySupply chains are made up of multiple silos that do not have common objectives.Hinders systems thinkingLeading system process improvements across organizational boundaries is difficult,Slide:5Catalina Capital Advisors/Lean Quest LLC,Proprietary,Transition Lean Manufacturing Thinking to Lean Distribution,Think of your supply chain as a“Conceptual Plant”that produces customer orders,“The Conceptual Plant”,Slide:6Catalina Capital Advisors/Lean Quest LLC,Proprietary,The Same Lean Principles Apply to Both Lean Manufacturing and Lean Distribution,Same Lean principles and concepts apply,but the emphasis,methods and applications shiftGo back to the base purpose of the principles to determine the application in distribution,Slide:7Catalina Capital Advisors/Lean Quest LLC,Proprietary,Goals/Benefits of a Lean Distribution Network,Slide:8Catalina Capital Advisors/Lean Quest LLC,Proprietary,Benefits of Lean Distribution,Increased Profitability and RONA Reduced costs(25%to 40%expected)Reduced capital costs for storage and equipment Reduced inventory levels Improved productivityReduced transportation costsImprove efficiency of manufacturing and purchasingIncreased salesIncreased customer satisfaction and loyaltyIncreased order fill ratesReduced lead timesImproved qualityIncreased consistency of activities,Slide:9Catalina Capital Advisors/Lean Quest LLC,Proprietary,Supply chain activities synchronized to meet customer demand,Principles Used to Attain the Benefits,Stability and Sustainment Achieved through Associate Development,Environment Driven By Continuous Improvement,Slide:10Catalina Capital Advisors/Lean Quest LLC,Proprietary,Overview of the Components of Lean Distribution,Slide:11Catalina Capital Advisors/Lean Quest LLC,Proprietary,Typical Supply Chain,Customer,Daily Sales,Distributor,PSC,Divisions,Suppliers,WeeklyReplenishment,Semi-MonthlyReplenishment,MonthlyReplenishment,Immediate Same Day,Weekly5 Days,Semi-Monthly10 Days,Monthly20 Days,InformationFlow,ProductFlow,TypicalSlow information flows(7+weeks)Large lot bulk movement of product,TOTALDAYS=35+,Slide:12Catalina Capital Advisors/Lean Quest LLC,Proprietary,The effects of large lot thinking have become accepted as expenses of doing business,TypicalLarge Lots=Efficiency Economies of Scale,Slide:13Catalina Capital Advisors/Lean Quest LLC,Proprietary,A Lean Distribution Network Reduces Costs,LeanIntegrated System=Efficiency Continually Improving System,Slide:14Catalina Capital Advisors/Lean Quest LLC,Proprietary,The Lean Supply Chain,Customer,Daily Sales,Distributor,PSC,Divisions,Suppliers,FrequentReplenishment,FrequentReplenishment,FrequentReplenishment,ImmediateDay N,Same DayDay N,Same DayDay N,Next DayDay N+1,InformationFlow,ProductFlow,LeanRapid information flows(1+days)Small lot/1-piece flow of product,TOTALDAYS=1+,Slide:15Catalina Capital Advisors/Lean Quest LLC,Proprietary,Toyotas Lean Supply Chain Results,Customers,Immediate Sales,Dealers,Rgn PDC,NAPLD,Suppliers,DailyReplenishment,14 hoursReplenishment,DailyReplenishment,Immediate,Nightly,Daily Cutoff,Daily,InformationFlow,1 pc,1 pc,1 pc,1 pc,ProductFlow,Toyota,Industry,Slide:16Catalina Capital Advisors/Lean Quest LLC,Proprietary,Components of a Lean Distribution Network,Components of a Lean Distribution NetworkSales Policies and PracticesInventory ControlWarehousing/Physical DistributionTransportation Information Flow,Slide:17Catalina Capital Advisors/Lean Quest LLC,Proprietary,Typical Distribution Network,“The Bullwhip Effect”,Slide:18Catalina Capital Advisors/Lean Quest LLC,Proprietary,Lean Distribution Network,No“Bullwhip”,Slide:19Catalina Capital Advisors/Lean Quest LLC,Proprietary,Component:Sales Policies and Practices,Physical Distribution,Physical Distribution,No“Bullwhip”,Transportation,InventoryControl,Manufacturing,Information FlowOrders,Information FlowStatusTransaction,Consumers,Natural Demand Variation,Sales Policiesand Practices,Slide:20Catalina Capital Advisors/Lean Quest LLC,Proprietary,Component:Sales Policies and Practices,Aligning sales policies and practices with Lean to eliminate the distortion of demand signals.Key points for demand classification:True demand signals occur as the customer consumes the productFalse demand signals occur when demand is shifted or lumped due to sales policies or practices Not just Parkers Sales Policies;Distributors Polices-to-Customers and Suppliers Policies-to-Parker effect the flow of demand information and materialsPotential Benefits:Tamed bullwhip reduces demand fluctuation 40%-60%.Increased sales from Lean efficiencies and improved service,Slide:21Catalina Capital Advisors/Lean Quest LLC,Proprietary,Component:Physical Distribution Sales Policies and Practices,TypicalDistorted parts order profiles make Inventory Control more difficult,LeanSales policies provide true demand signals for Inventory Control,Slide:22Catalina Capital Advisors/Lean Quest LLC,Proprietary,Sales Push ProgramsFree transportation on large shipmentsMinimum order size,Component:Physical Distribution Sales Policies and Practices,TypicalShifted demand causes capacity and planning problems for operations and transportation,LeanSales policies provide true demand;allows capacity to be optimized for operations and transportation,Capacity,Under Utilized Resources,Over Capacity,ME,Slide:23Catalina Capital Advisors/Lean Quest LLC,Proprietary,Component:Physical Distribution Sales Policies and Practices Summary,TypicalCreate false demand in the systemEncourage large lot thinking Box quantities not aligned with customer usageTerms and conditions in conflict with Lean Push to customers,LeanDriven by true demandSupport small lot processingReward high volume customers over timeLeverage new Lean capabilities for additional salesAlign terms and conditions with desired resultsDevelop distributor/customer base to improve the supply chain,Potential Benefits:Tamed bullwhip reduces fluctuation 40%-60%.Increased sales from Lean efficiencies and improved service,Slide:24Catalina Capital Advisors/Lean Quest LLC,Proprietary,Sales Policiesand Practices,Component:Inventory Control,Physical Distribution,Physical Distribution,No“Bullwhip”,Transportation,Manufacturing,Information FlowOrders,Information FlowStatusTransaction,Consumers,Natural Demand Variation,InventoryControl,Slide:25Catalina Capital Advisors/Lean Quest LLC,Proprietary,Component:Inventory Control,Main questions for Inventory Control:How to tame the bullwhip effect?What parts to stock where to balance customer service levels(fill rate)with how much inventory to keep?Integral to a Lean operating supply chain:Leverages the ability to process and deliver order more frequently Reduce inventory levels(Distribution Centers&Finished Goods)Reduce Depth,but Increases Breath of Inventory at DistributorsSmoothes or tames the bullwhip effectPotential Benefits:30 to 50%reduction in inventoryIncreased order fill rates 10 to 15%reduction in obsolescence and scrap20 to 40%less space required,Slide:26Catalina Capital Advisors/Lean Quest LLC,Proprietary,Component:Physical Distribution Inventory Control,TypicalStocking Quantities set by Target Inventory Investment and Fill RateNeed Network Rationalization,Target Inventory Investment,FillRateTargets,Stocking Quantities,LeanStocking Policy determined by Service Levels and Production PoliciesProvides clear rules for connectionsNetwork Rationalization Simplified,StockingPolicies,Slide:27Catalina Capital Advisors/Lean Quest LLC,Proprietary,Component:Physical Distribution Inventory Control,TypicalMin/Max Ordering Long Order CyclesInfrequent Deliveries“Large Lots are Efficient”Macro Level Control,LeanSell 1/Buy 1 Replenishment OIL Based OrderingDaily Ordering CyclesFrequent DeliveriesMicro Level Control,Slide:28Catalina Capital Advisors/Lean Quest LLC,Proprietary,Component:Physical Distribution Inventory Control,TypicalLong Order CyclesInfrequent DeliveriesHigh variation in resultsSales Policies and Practices Inventory Control Practice,Drive,Supplier PSCs Customer Manufacturing Distributor,Slide:29Catalina Capital Advisors/Lean Quest LLC,Proprietary,Component:Physical Distribution Inventory Control,LeanFrequent Ordering CyclesFrequent DeliveriesReduced Order-to-Delivery Lead Times Increased Visibility of Inventory and Status,Tames,Supplier PSCs Customer Manufacturing Distributor,Slide:30Catalina Capital Advisors/Lean Quest LLC,Proprietary,Component:Inventory Control Continuous Improvement,TypicalProblems are hidden no improvementsProblems come from outside source(management)Systems/control is maintained at a macro levelProcesses are not standardized Management are firefighters/expediters,Slide:31Catalina Capital Advisors/Lean Quest LLC,Proprietary,Component:Inventory Control Continuous Improvement,LeanPlan vs.Actual CheckedProblems are made visible to feed the CI processManagement are CI coachesProblems are in the processesOpportunities are addressed at micro(part number)levelInventory control and operations work together to reduce variationVisual concepts used to make excess stock visible,Part A,Part B,Safety StockActive Stock,“My Parts Watching”,Slide:32Catalina Capital Advisors/Lean Quest LLC,Proprietary,Component:Physical Distribution Inventory Control Summary,TypicalStocking Quantities set by Target Inventory Investment and Fill RateNeed Network Rationalization Min/Max Ordering Long Order CyclesInfrequent Deliveries“Large Lots are Efficient”Macro Level ControlSeasonality/Abnormality are not detected,LeanStocking Policy determined by Service Levels and Production PoliciesSimplified Network RationalizationSell 1/Buy 1 Replenishment OIL Based OrderingDaily Ordering CyclesFrequent DeliveriesMicro Level ControlSeasonality/Abnormalities are smoothed over time,Potential Benefits:30 to 50%reduction in inventoryIncreased order fill rates 10 to 15%reduction in obsolescence and scrap20 to 40%less space required,Slide:33Catalina Capital Advisors/Lean Quest LLC,Proprietary,InventoryControl,Sales Policiesand Practices,Component:Physical Distribution,No“Bullwhip”,Transportation,Manufacturing,Information FlowOrders,Information FlowStatusTransaction,Consumers,Natural Demand Variation,Physical Distribution,Physical Distribution,Slide:34Catalina Capital Advisors/Lean Quest LLC,Proprietary,Component:Physical Distribution,Warehousing and Physical Distribution takes place at all levels of the supply chain Processing is typically broken into 4 integrated environments:Outbound(Order Fulfillment)Inbound(Replenishment)Value Added Activities(i.e.Hose or Systems Assembly)Support Activities(Physical Inventories,Returns,etc.)Potential Benefits:20 to 100+%increase in productivityUp to 30+%increased storage density,Slide:35Catalina Capital Advisors/Lean Quest LLC,Proprietary,Component:Physical Distribution Lean Planning and Management,TypicalPeriods of high overtime and underutilizationStaffing trends toward peaks,LeanCapacity aligns more closely with day-to-day volumes,Adjustments made daily to fine tune capacity levels,Creating a heijunka workload schedule Sales Policies level demand informationPlan and schedule work to level workload,Slide:36Catalina Capital Advisors/Lean Quest LLC,Proprietary,Component:Physical Distribution Lean Planning and Management,TypicalResource assignments fixed by functionProcessing in large lotsActivity peaks concentrate in specific areasNo Flow or pull“A full dock is a happy dock!”mentality,Typical Work Schedule,Pick/Pack,Long Order-to-Delivery Lead Time,Stage on Dock,Load Trucks,Order Cut Off,Delivery Time,Results:Longer lead-timesLarge batch inefficiencies of people,space and equipmentPoor quality,Slide:37Catalina Capital Advisors/Lean Quest LLC,Proprietary,Component:Physical Distribution Lean Planning and Management,LeanCustomer requirements(pull)determines the WindowWindow creates Heijunka work scheduleSmall Batches create the flowWindow and Batches drive PacePace and Cycle determine required resources(people)Precise resource planning,Results:Shorter lead-timesIncreased productivityImproved qualityLess space and equipment,Lean Heijunka Work Schedule,Shorter Order to Delivery Lead Time,Create a heijunka shipping schedule for a JIT level pull and flow through the distribution center.,Slide:38Catalina Capital Advisors/Lean Quest LLC,Proprietary,Component:Physical Distribution Lean Planning and Management,Typical Batch Work Schedule,Lean Heijunka Work Schedule,Effect of heijunka schedule on Customer Service,Slide:39Catalina Capital Advisors/Lean Quest LLC,Proprietary,Component:Physical Distribution Lean Planning and Management,Typical-Large Batch1-to-1 orders to pickervarying cycle timesLong pick paths,Pick by Order,Pick paths covers large areas,Single Picker/Single Order,Pick paths concentrated in 1 zone,Multiple Pickers/Multiple Orders,Zone 1,Zone 2,Slide:40Catalina Capital Advisors/Lean Quest LLC,Proprietary,Component:Physical Distribution Lean Planning and Management Summary,Heijunka workload plan lowers manning needs.Heijunka shipping and receiving schedules reduces lead-time while increasing efficiency.Small batch processing enables efficient manpower planning and surfaces problems for improvement.,Typical1-to-1 orders to personLong travel pathsLong cycle timesLong processing windows No flowSupervisors dispatch work,LeanMultiple order per personPeople 1-to-1 to zones Restricted travel pathsPredictable cycle timesShort processing windowsHeijunka flow to the dockPeople know what to do next without being told,Slide:41Catalina Capital Advisors/Lean Quest LLC,Proprietary,Component:Physical Distribution Storage,Apply the 7 Lean Storage TechniquesAn aligned strategy throughout the supply chain,Slide:42Catalina Capital Advisors/Lean Quest LLC,Proprietary,Component:Physical Distribution Storage,Typical StorageConsolidated picking confined to a zone,but pick paths still too long,Pick Multiple Orders without Lean Storage,Pick paths covers entire zone,Lean StorageHigh velocity areasParts grouped by commodity More condensed pick paths,Pick paths concentrated in f