©LeanCor 2008 Lean Logistics Lean – Green – The Future

©LeanCor 2008 Slide: 2 Process and the Supply Chain “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” Toyota Motor Manufacturing Oh No ! What happened !

©LeanCor Is Anything For Certain These Days ?

©LeanCor 2008 Certainty # 1 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

©LeanCor 2008 Certainty # 2 Processes Want to Fall Apart In a system, a process that occurs will tend to increase the total entropy of the universe. Second law of thermodynamics System : A group of interacting, interrelated, or interdependent elements forming a complex whole. Entropy  A measure of the disorder or randomness in a closed system  A measure of the loss of information in a transmitted message  Inevitable and steady deterioration of a system or society

©LeanCor 2008 Lead Time is Only Made of Two Things! Certainty # 3 Value Waste Value Waste Customer Consume Waiting Manufacture Rework Product Design Supplier Build Inventory

©LeanCor 2008 Certainty # 4 Overproduction is the King of waste…Make to order is utopia Supply LTMLT + OL +< Customer LT = MTO Supply LTMLT + OL + < Customer LT = Forecast

©LeanCor 2008 Slide: 8

©LeanCor 2008 Cash to Cash Cycle 5/3/ All we are doing is looking at the time line, from the moment we get an order, order material from our suppliers ( and pay cash to our suppliers )… to the point where we collect that same cash ( and a little profit) from our customer. And we are reducing the time line by reducing the non-value adding activities. Cash to Cash = Accounts Receivables + Inventory – Accounts Payables Inbound Supply ChainManufacturing Lead TimeOutbound Supply Chain II Certainty # 5

©LeanCor 2008 Who is going to blink first ? Who is going to lead and/or follow ? Is it about incentives or disincentives ? Why do we need to wait…is green not obvious ? What Does The Future Hold ?

©LeanCor 2008 Do I need Calculus to Show this Ain’t Green ?

©LeanCor /3/ Let’s examine transportation variables. Drawing assumptions from data that has been released by several organizations, we conclude that it is possible that in North America our truck load transportation system has the following characteristics: Truck Load carriers ( and private fleets ) run from 5% to 15% empty (unpaid) miles to service their customers Average truckload shipment sizes range from 20,000lbs to 28,000lbs when measured by weight and 40% to 65% when measured by trailer cube utilization For purposes of discussion, let’s assume average empty miles are 10% and average trailer utilization is 60%. This means that theoretically, on any given day, with proper coordination (we eliminated all empty miles and had fully utilized trailers), we could move all freight in North America with 50% of the existing trucks A Quick Look…

©LeanCor 2008 Slide: 13 Its Going to Take Real Work…

©LeanCor Principles of the Lean Supply Chain

©LeanCor 2008 Lean - Green & Systems Thinking The defining characteristic of a system is that it cannot be understood as a function of its isolated components. First, the behavior of the system doesn't depend on what each part is doing but on how each part is interacting with the rest... Kofman and Senge, 1993 What we need are more sales promotions ! I love it when a plan comes together…did it ? All New Products every year with 100% new components… You’re a fool if you don’t focus on BOM costs

©LeanCor 2008 Supply Chain & Logistics Management A Practical Viewpoint Logistics Supply Chain Management 16

©LeanCor 2008 Lean and Green Just Make Sense Forcing More Work Through a Broken System…No Way! Growth Raise Efficiency Through Continuous Improvement…Yes Way! Growth

©LeanCor 2008 Thank You