Page 1 Lean Manufacturing Andrew W. Dalziel Product Director - SCM Intentia International

Page 2 Agenda – Lean Manufacturing  Introduction – The Challenge  Why Lean Manufacturing Makes Sense  What is Lean Manufacturing?  How Does Technology Support Lean?  Intentia and Lean Manufacturing  The Benefits of Lean Manufacturing  Example of Where to Start the Lean Journey  Summary

Page 3 The Challenge – Low Cost Competition % of respondents facing competitive challenges Companies Increased Competition on Costs >70% facing some or significant low cost competition 95% of customers demanding lower prices 50% say competitors are producing higher valued added goods >70% facing some or significant low cost competition 95% of customers demanding lower prices 50% say competitors are producing higher valued added goods

Page 4 The Challenge – Manufacturing Costs Manufacturers Look Abroad % of companies employing competitiveness strategy 45% planning to or have outsourced manufacturing abroad 30% planning to or have invested abroad to replace capacity 45% planning to or have outsourced manufacturing abroad 30% planning to or have invested abroad to replace capacity

Page 5 Why Lean Manufacturing Makes Sense  Western manufacturers under cost pressure from low-cost countries  Customers are demanding greater product variety and highly customized products  Customers are demand more new products  Customers demanding shorter delivery lead-times and lower prices  Increasing transactional volumes  Worker motivational issues  Stricter Health & Safety rules  Cash flow issues with working capital tied up in inventory  Competitive global environment - advantage through delivering greater added value  …. Lean Manufacturing Makes a Lot of Sense

Page 6 Adoption of Lean Manufacturing An ARC Group strategy report written by Simon Bragg (2004) suggests that “Today 36 percent of US manufacturers and 70 percent of UK manufacturers are using lean as their primary improvement methodology.” Use of Lean as Improvement Methodology USUK Country Percentage of Manufacturers

Page 7 Lean manufacturing is essentially a philosophy that focuses on customer value-adding activities and the systematic identification and elimination of waste, as well as continuous improvement in flow manufacturing environments to increase productivity. Defining Lean Manufacturing

Page 8 1. ValueIdentify and deliver value to the customer 2. Value streamIdentify the value stream to see what is necessary 3. FlowMake value flow 4. PullMake as needed. Customer demand driven manufacturing 5. PerfectionContinuous improvement in pursuit of perfection Five Core Elements of Lean Thinking

Page 9 How Technology Can Support Lean Manufacturing  Product data management for managing exploding product variety  Electronic kanban offers many advantages over physical kanbans –Avoids problems of loss or sabotage of physical kanbans –Quicker transfer of information between production areas and partners –Faster and easier to resize kanbans –Easier to phase in new products  Supplier and customer portals for kanban control or JIT call-offs  Ability to support complex algorithms for Theory of Constraints planning  Databases and powerful analytics tools to identify customer value and support continuous improvement  Elimination of waste in administration, such as order entry, order management, invoicing, etc.

Page 10 EDI=Electronic Data Interchange Intentia Support for Lean Manufacturing Lean Manufacturing Electronic & Physical kanbans EDI/XML Supplier Call-Offs Orderless Production Production Rate Plant Maintenance TOC Drum- Buffer- Rope Materials Back- flushing Enterprise Performance Measurement Lean Material Planning Order Initiation Business Process Design Tool Forecasting Customer Delivery Schedules Opportunity Analyzer Product Configurator iBrix based Customer and Supplier Portals Examples of Intentia Support Pull - JIT/ Kanban Pull - Theory of Constraints Flow - Lean Material Planning Flow - Levelled Scheduling Flow - Total Productive Maintenance Perfection- Continuous Improvement Value Stream - Mapping Value - Analysis Pull - Repetitive Scheduling Pull - Product Configuration Examples of Lean Techniques

Page 11 Value – Enterprise Performance Management “In competitive terms, value is the amount buyers are willing to pay for what the firm provides them. Value is measured by total revenue, a reflection of the price a firms product commands, and the units it can sell.” Michael Porter “In competitive terms, value is the amount buyers are willing to pay for what the firm provides them. Value is measured by total revenue, a reflection of the price a firms product commands, and the units it can sell.” Michael Porter

Page 12 Flow – Total Productive Maintenance (TPM)  Advanced enterprise asset management options increase equipment reliability and thus: –Improve availability –Reduce downtime –Reduce product scrap and wasted time managing that scrap –Increase machine tolerances and thereby increase quality  Diagnostics management features automatically identify situations where the current maintenance strategy is not working and trigger a continuous improvement review.  Support for reliability centered maintenance (RCM), which can underpin the TPM strategy  Synchronized maintenance and production planning maximizes the available production time  Contributes towards throughput and OEE and supports simulation Ultimately, provides focused support for reducing the “big six” TPM losses.

Page 13 Pull – Product Configurator  Enables customers to configure their ‘perfect order’  Added value for the customer  Web-enabled

Page 14  Support physical and electronic kanban systems  One-card and two-card systems – production and transportation kanbans  External kanban requirements from customers and for call-offs to suppliers  Manual or automatic dimensioning of kanban chain (number of cards in system) Physical Kanban System Production kanban KAN-001 Kanban item KANBAN11 85 Item no Name To location... Order Quantity. 10/08/05 Electronic Kanban System Pull – Kanban

Page 15 Pull – Theory of Constraints Production Planning  Makes value flow through the bottleneck (and factory)  Easy to communicate and intuitive for the planner to use  Does not require high data quality  50% of the time and effort to implement of an advanced production planning solution  Can result in less inventory overall than when using kanban Remaining buffer on a non-bottleneck resource

Page 16 Some Benefits of a Lean Manufacturing Philosophy For the CEO  Focus on customer value-adding activities  Elimination of activities that do not contribute directly to customer value and built-in quality  Support or pull-based manufacturing with quick response to customer orders For the CFO  Reduced waste -> removal of unnecessary activities and cost  Removal of stock and work in progress (WIP) -> improved inventory turns and less working capital employed in the business  Improved return on capital employed (ROCE ) For the Operations Director  Shorter production cycle times and greater agility  Productivity and quality improvements  Increased employee motivation (through teams and empowerment)  Promotes continuous improvement

Page 17 Example: Lean Manufacturing in F&B – Where to Start? Future Move decoupling point upstream, e.g., fill and bake-to-order ShippingSupplierRaw Material Warehouse MixingFinished Goods Warehouse Baking/ Cooking Filling Line Packing Lines Temporary Storage Pull Pack or Label-to-order or using Electronic Kanban or TOC Order-less Production with Back-flushing of Raw Materials Pull Supplier Agreements with JIT call off or Supplier Managed Inventory Decoupling Point Still need to forecast VMI At customer DC

Page 18 Summary – What’s the Issue? ISSUE Maximizing customer value TO Protect and grow market share PROBLEM Demanding customers AND Cash tied up in inventory AND Cost pressures SOLUTION Adoption of a lean manufacturing philosophy WITH Intentia as a partner for lean solutions VALUE Increased customer value AND Elimination of waste AND Continuous improvement

Page 19 Thank You for Your Time and Questions