1 Lean Supply Strategies: Applying 5S Tools to Supply Chain Management Kimball Bullington, Ph.D. Professor of Supply Chain Management Middle Tennessee State University

Presentation Expectations Not a lean operations sales pitch 5S is necessary, but not sufficient Supply strategies should be consistent with operations strategy – this may not be for you

Outline What is 5S? What is a Supply Strategy? What is Lean Supply? Developing a Supply Strategy Using 5S

Five S An organizational method for lean operations A pillar of the visual workplace A system for workplace housekeeping

Why Use 5S as a Model? It is a simple model and easy to understand and communicate. It uses a familiar vocabulary in a lean system. It helps to communicate the reasons for SCM activities such as consolidation and segmentation to those outside of supply management.

Five S Sort (seiri) Set in Order (seiton) Shine or purity (seiso) Standardize (seiketsu) Sustain (shitsuke) 5S

Five S Sort Set in Order Shine Standardize Sustain RED TAG If it doesn’t belong, If it isn’t being used, If it is in the way – get rid of it.

Set in Order A place for everything and everything in its place. Tool cutouts Taped outline on floor or bench Color coding

Five S Sort Set in Order Shine Standardize Sustain Input Output Tape enforces “Set in Order”

Shine Keep everything clean and swept System maintenance and inspection Problems are more easily spotted when the workplace is in order It promotes discipline

Standardize Standardize ensures that your progress in 3S implementation is not wasted. Procedures, schedules, practices

Sustain Deming’s point number 1: Constancy of purpose Golden Broom Award

Outline What is 5S? What is a Supply Strategy? What is Lean Supply? Developing a Supply Strategy Using 5S

What is a Supply Strategy? Strategy – A plan for achieving organizational goals.

The Supply Strategy should support the Corporate Strategy. The Supply Strategy should support the Operations Strategy. The Supply Strategy should give our customers confidence in the quality, reliability, and safety of our products. Supply Strategy Constraints

Outline What is 5S? What is a Supply Strategy? What is Lean Supply? Developing a Supply Strategy Using 5S

Lean Supply Supply in a Lean Operations environment Supply that supports Lean Operations Supply with little waste Supply consistent with lean principles

Lean Operations The latest incarnation of JIT Based on Toyota Production System. Waste elimination Widely used in automotive mfg & repetitive mfg. Gaining popularity in all mfg. as well as services

Outline What is 5S? What is a Supply Strategy? What is Lean Supply? Developing a Supply Strategy Using 5S

Why Use 5S as a Model for Supply Strategy? It is a simple model and easy to understand and communicate. It uses a common language in a lean system. It communicates the reason for consolidating and segmenting to those outside of supply management.

Five S Supply Strategy Sort Set in Order Shine Standardize Sustain

Five S Supply Strategy Sort Set in Order Shine Standardize Sustain RED TAG If they don’t belong, If they aren’t being used, If they are in the way – get rid of them.

Five S Supply Strategy Sort Set in Order Shine Standardize Sustain Red Consolidate Tag If they don’t belong, If they aren’t being used, If they are in the way – get rid of them.

How do we make improvement when the restraining forces offset the driving forces? Consolidation Restraining ForcesDriving Forces Progress

Forces Driving Consolidation Reduces waste of working with wrong suppliers Focuses efforts of selection, evaluation, and improvement on a few suppliers Reduces transaction waste Increases opportunity for partnering and leverage Is consistent with lean production!

Forces Opposing Consolidation Fear of loss of competition Doubtful savings Lack of understanding of motivation Lack of commitment to the selection process Pets

Improvement by Reducing Restraining Forces Consolidation Progress

Five S Supply Strategy Sort Set in Order Shine Standardize Sustain

Set in Order Segmentation –Risk value –Spend value –Design value –Time value –Location value

How Can I Be Successful? Evaluation of Current Supply Base Number of Suppliers Breakdown by Commodity Skills / Process Evaluation Performance Evaluation

Critical 2: Special Situations Critical 1: Long-term Relationship Non-Critical 1: Contractual High Low High Risk Annual Spend Supplier Segmentation Matrix Non-Critical 2: Transactional Consolidate Risk reduce & Consolidate

Design Lean Design & Lean Supply Base Segmentation

Five S Supply Strategy Sort Set in Order Shine Standardize Sustain

Shine Keeping machines clean helps us to spot problems Keeping our supply base “clean” (i.e., orderly, measured) helps us to spot problems or opportunities Working with suppliers on ongoing development opportunities

Shine Inspection of suppliers implies surveys or audits –Site surveys –Supplier self-assessment –Remote surveys –3 rd party certification surveys –3 rd party quality awards

SWOT Analyses Common Themes Strengths –Current supplier provides product for process mkt. Weaknesses –We are a small customer with little leverage –Lack of management depth for small suppliers Opportunities –Setup reduction –Cost reduction Threats –Loss of technology leadership

Shine – Reduce Entropy Entropy – a measure of the degree of disorder in a system: entropy always increases in a closed system. Disorder – more suppliers, unknown number of suppliers, late deliveries, lost discounts, poor quality, suppliers treated inappropriately, etc.

Five S Supply Strategy Sort Set in Order Shine Standardize Sustain

Standardize Include in personal plans Make the status visible (e.g., # of suppliers) Assign audit responsibilities Ticklers

Standardize: Problems Avoided Growth of supplier base Size of supplier base unknown Segmentation deteriorates Suppliers not visited regularly Surveys conducted informally or with renegade processes Development efforts delayed / neglected

Five S Supply Strategy Sort Set in Order Shine Standardize Sustain

Deming’s point number 1: Constancy of purpose The leadership of supply is responsible for sustaining the process. Supplier day – annual reviews Ongoing strategy implementation monitoring, review, and revision Supplier database

Five S Supply Strategy Sort – supplier consolidate Set in Order - segment Shine – survey, SWOT, & development Standardize – 3S scheduled Sustain – sustaining leadership Five S is the foundation of lean operations and it can be the foundation of lean supply.

Five S References 1.James P. Womack and Daniel T. Jones, Lean Thinking, 1996.) 2.Hiroyuki Hirano, 5S for Operators: 5 Pillars of the Visual Workplace (Productivity Press, 1996.) 3.Hiroyuki Hirano, 5 Pillars of the Visual Workplace (Productivity Press, 1990.) 4.Kimball Bullington, 5S Supply Base Maintenance, Quality Progress, Jan., Hau Lee, The Triple-A Supply Chain, Harvard Business Review, October, 2004.

45 Lean Supply Strategies: Applying 5S Tools to Supply Chain Management Kimball Bullington, Ph.D. Professor - MTSU