DJones Presentation

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Published on November 22, 2007

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SUPPLY CHAIN EXCELLENCE: FROM LEAN PRODUCTION TO LEAN CONSUMPTION:  SUPPLY CHAIN EXCELLENCE: FROM LEAN PRODUCTION TO LEAN CONSUMPTION Professor Daniel T Jones Chairman, Lean Enterprise Academy, UK www.leanuk.org Who am I?:  Who am I? Co-author with Jim Womack of The Machine that Changed the World, Lean Thinking and the new Lean Consumption article and Lean Solutions book Chairman of the non-profit Lean Enterprise Academy in the UK - part of the Lean Global Network Researchers and publishers of the knowledge needed to build a lean business system Thought leaders in pushing forward the frontiers of lean thinking in our Lean Summits and Mentors to organisations seeking to implement lean in every type of activity Lean is Old & not Japanese:  Lean is Old & not Japanese The Venetians understood “flow” production by 1400 – making one ship a day (so probably did the Chinese!) The French Army understood the need for interchangeable parts before 1789 Brunel was making standardised parts in process sequence for the British navy by 1807 Blanchard made rifles on automatically cycling machines laid out in cells in Springfield in1818 Ford developed the first complete “flow production” system at Highland Park, Detroit in 1914 From Mass to Lean:  From Mass to Lean Ford went on to create “mass production” at the Rouge in 1927 - making huge volumes of parts for assembly globally – using big machines, big batches, and complex coordination as pull became push Toyota extended “flow production” to cope with variety – using simple machines with quick change tools, in process sequence pulled by customer demand TPS or “Lean production” was perfected by 1970 and extended across the whole enterprise and across the whole of Toyota City – as the “Toyota Way” Toyota - the Lean Model:  Toyota - the Lean Model Most people now recognise that Toyota is setting the pace – based on its Lean business system It leads in efficiency and quality around the world It also leads in time to market for new products And in introducing new technologies - like hybrids It is globalising assembly and localising parts supply It has overtaken Ford and plans to overtake GM! Superficially Toyota’s functional organisation looks familiar! So what distinguishes the way it operates? Toyota’s Lean Strategy:  Toyota’s Lean Strategy “Brilliant process management is our strategy. We get brilliant results from average people managing brilliant processes. We observe that our competitors often get average (or worse) results from brilliant people managing broken processes.” Lean Thinking is Process Thinking Lean Thinking:  Lean Thinking The objective is to manage the business backwards from the consumer definition of value - not forwards from your organisation and your assets To create lean primary processes to design, deliver and support this value - with minimum wasted effort and time – and the necessary lean support processes And to build a lean management system to develop, sustain and improve these processes over time Be clear about consumer Purpose, before designing the Processes and then organising the People Lean Principles:  Lean Principles Specify value from the standpoint of the consumer - (not from your assets and organisation) Identify the value stream through the steps required to create each product - from concept to launch and order to delivery - and remove the wasted steps Make the process of value creation flow smoothly and quickly to the customer But only in line with the pull of the consumer While pursuing perfection by constantly improving the product and the value stream The Dynamics of Lean:  The Dynamics of Lean Implementing Lean:  Implementing Lean Across the Value Stream:  Across the Value Stream Toyota’s Supply Chains:  Toyota’s Supply Chains Toyota spent 30 years developing lean in house and spreading it up and down its supply chain The most impressive is their aftermarket parts system – supplying 400,000 SKUs to dealers It operates as a series of tight replenishment loops – dealers call off parts from Distribution Centres every day – these shipments trigger daily orders to be picked up from suppliers the next day – 60% of whom can also make every part that is required in a day every day The result is the highest availability, lowest stock levels and the smoothest order signals Lean in Grocery so Far:  Lean in Grocery so Far Supplier RDC Store NDC Many Process Industries:  Many Process Industries Are stuck in the world of short term plan changes And a need to respond flexibly to demands from customers Actually they are caught in a vicious circle – data errors, forecast errors, demand amplification, constant rescheduling, expediting, loss of capacity, finished goods shortages and excess stocks etc The breakthrough is to see where you can flow and create stability and build on that to achieve increased responsiveness to demand Where and How to Flow?:  Where and How to Flow? Where and How to Flow?:  Where and How to Flow? Progression over time:  Progression over time SKUs Volume But this is just the start!:  But this is just the start! There is a lot more to do to achieve the full potential of lean – beyond what Tesco has done In many cases suppliers have only just begun their lean journeys – making a growing range of products Other retailers are picking up on this logic – so progress will continue The answer does not lie in technology – but in rethinking the shared supply chain process The place to begin this journey is with the consumer Consumption:  Consumption Improvements in production and logistics have given consumers a growing range of higher quality products at lower prices through many different sales channels So why is consumption still so frustrating? Why does the new computer fail to work with the rest of our kit? Why do we have to waste so much time in hub airports and general hospitals? Why do we fail to find exactly what we are looking for on a trip to the supermarket? Why is it so difficult to connect consumption and provision? Why do we think and act differently as consumers to how we do in our lives as providers? The Consumption Process:  The Consumption Process The answer begins by seeing consumption not as an isolated transaction between strangers But by seeing consumption as a process of steps to solve a consumer’s problem – involving researching, selecting, obtaining, integrating, maintaining, upgrading, disposing and replacing many items over time – interacting with several providers of goods and services in a parallel provision process Add this up and you realise that managing the household consumption processes is complicated and takes a lot of “unpaid” time and mind share The Consumer’s Dilemma:  The Consumer’s Dilemma We all have more and more choices to make and more and more products to manage but less time and energy to do so This situation creates a major opportunity for providers and a major win-win opportunity for collaboration Principles of Lean Consumption:  Principles of Lean Consumption Solve the consumers problem completely Don’t waste the consumer’s (or the provider’s) time Provide exactly what the consumer wants Deliver it where it’s wanted Supply it when it’s wanted Continually aggregate solutions to reduce the consumer’s time and hassle Solve my Problem:  Solve my Problem It is not the object we are buying but the use we get from the object or service – in relation to its context Has it solved my problem completely? What was I trying to do exactly? What else did I have to do to solve the problem completely? Was that a hassle? Fujitsu Services reversed the logic of outsourced customer service and technical support – getting experienced staff to ask about customer purpose, offer a fix, redesign to eliminate the root cause and discover additional value for future products We need a dialogue to discover purpose and hassle Don’t Waste my Time:  Don’t Waste my Time The assumption is “my time is free” – so I can do more! In reality customer’s and provider’s time is wasted by a poorly designed and disconnected consumption and provision processes Mapping both processes and their interactions reveals this wasted time and cost and identifies opportunities for win-win collaboration to cut time and cost for both By creating a dialogue with consumers to pre-diagnose the problem, planning and preparing, separating job types and creating standardised lean processes Slide25:  Car Repair Before Lean Slide26:  Lean Car Repair What I want:  What I want Fulfilment levels are poor in most systems 98.5% availability drops to 92% on the shelf and 55% for a basket of 40 items in the grocery store 80% availability for the shoe with 150 day order window leads to 40% being remaindered 52% of consumers get the cars they wanted on time and 64% of service jobs are completer RFTOT Better IT, RFID and stocks are not the answer – but rapid, reflexive, replenishment loops back upstream And compressing the length of the supply chain Where I want it:  Where I want it We all use many formats depending on our circumstances – and time pressure places a growing premium on convenience – which signals the end of the “big box” dominant mass retailing format Scale economies do not derive principally from production economies or store size but buying power The key to serving multiple channels is a common fulfilment system and a “water spider” replenishment system for all formats – including local stores and home shopping Which requires much more accurate fulfilment Alternative Shopping Trips:  Alternative Shopping Trips Total Travel Time Cost 195 m $12.00 160m $12.00 95m $5.00 50m $4.00 15m ----- 25m ------ When I want it:  When I want it Is everything purchased on impulse? Is there any incentive to plan ahead? The consequence is that production must be infinitely flexible, every event must be planned and we have to dispose of unwanted stock Reversing this logic – How can we plan ahead with most consumers while offering price incentives to smooth the demand for production slots? This stability creates the possibility of responding to the “got-to-have-it-now” consumers at much lower cost? This realistically takes us beyond “build to order” Aggregate Solutions:  Aggregate Solutions Why are consumers increasing the number of suppliers – often one off strangers – to acquire the elements of the solution to their problems? While lean producers are decreasing the number of suppliers, each with a deeper knowledge to solve bigger problems on a continuing basis? Why can’t someone provide continuing solutions to integrate the elements to solve my bigger problems? Such as communications, mobility, shelter, healthcare, financial management and routine shopping A New Era:  A New Era We are moving beyond the era of Mass Consumption in which one format fits all at ever higher scale – bigger boxes – as ever increasing variety is substituted for true consumer desire To a world of Lean Consumption in which consumption and provision become a shared process that is clearly visible to everyone and in which problems are jointly defined and resolved with minimum time and cost SUPPLY CHAIN EXCELLENCE: FROM LEAN PRODUCTION TO LEAN CONSUMPTION:  SUPPLY CHAIN EXCELLENCE: FROM LEAN PRODUCTION TO LEAN CONSUMPTION Professor Daniel T Jones Chairman, Lean Enterprise Academy, UK www.leanuk.org

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