1. Lean Manufacturing Andrew W. Dalziel Product Director - SCM
This to introduce Lean Manufacturing and give an overview of Intentia’s positioning and support for Lean Manufacturing.
Audience: CxO, Director and senior management level.
Objective: Inform audience of :
1. Intentia’s support for lean manufacturing
2. Intentia’s experience and credibility in Lean Manufacturing.
Environment: Customer specific presentation or a seminar
Time: The full presentation takes approx. 1.5 hours to 2 hours.
Important: Lean manufacturing is a philosophy and moving towards lean manufacturing is not a one off solution but a journey in pursuit of perfection.
Andrew W. Dalziel
Product Director - SCM
Intentia International

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

3. The Challenge – Low Cost Competition
Companies Increased Competition on Costs
% of respondents facing competitive challenges
>70% facing some or significant low cost competition
95% of customers demanding lower prices
50% say competitors are producing higher valued added goods
The EEF figures speak for themselves!
EEF, the manufacturers' organisation, has a membership of 6,000 manufacturing, engineering and technology-based businesses and represents the interests of manufacturing at all levels of government.
Over 70% of manufacturers are facing some of significant competition from low cost producers.
Almost all customers are demanding lower prices.
About 50% say competitors are producing higher value added goods.

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
On the question of outsourcing manufacturing…
45% are planning to or have outsourced manufacturing abroad.
30% are planning to or have invested abroad to replace UK capacity.
We have seen this rush to invest in manufacturing in low cost countries – however, labour costs are increasing in China and high oil process are forcing up transport costs.
There is still an opportunity for UK manufacturing to compete if we can improve our processes and raise productivity.

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
Over the next 50 years, Brazil, Russia, India and China—the BRICs
economies—could become a much larger force in the world economy. Suggest in 2050 the largest economies will be China, US, India, Japan, Brazil, Russia, UK. UK will have overtaken Germany.
Maserati Quattroporte 171mph, V8 4.2 litre, etc. But 4 million personalization possibilities!!! They will be lucky if they sell a couple of thousand cars!
Not only are customer demands driving organizations to deliver products that are configured to the customer’s requirements, but at the same time product life cycles are shrinking. The need for mass customization is driving batch sizes towards ‘one’. Single-piece flow.
Customer want it and they want it now – so lead-times need to come down. They also expect to pay less for products than in the past. So companies need to remove non-value adding activates to improve process and productivity.
In the future, we expect product pricing to go like the low cost airlines where you pay more if you want it delivered tomorrow and less for next week or next month.
Employee retention and motivation is critical to achieve high productivity levels in most businesses due to the leaning curve, etc. With high wages, high productivity is essential in Western manufacturers.
With stricter HSE rules it is important to have a clean and safe work environment.
Organizations cannot afford to have working capital tied up in inventory and throttling the cash flow. If money can be freed it can be reinvested or distributed to shareholders.
In today’s global, competitive environment it is important to win and retain customers. This done through adding value.
Micheal Porter says “ In competitive terms, value is the amount buyers are willing to pay for what a firm provides them. Value is measured by total revenue, a reflection of the price a firms’ product commands and the units it can sell.”

6. Adoption of Lean Manufacturing
Use of Lean as Improvement Methodology 10 20 30 40 50 60 70 80 90 US UK
Country
Percentage of Manufacturers
The above figures from ARC show how prominent lean thinking has become. Many of these companies may not yet be doing lean manufacturing but they are using lean as their primary improvement methodology.
In Denmark, Dansk Industri did a study and there 61% of companies have started lean projects and another 16% were planning to in 2005.
Traditionally it was almost exclusively automotive companies that used lean techniques such as kanban. However, today ARC suggest that it is only 20% (1 in 5) of companies that use kanban which are in the automotive industry (ARC Insights, Kanban Myths Exposed), March 3, 2005)
With the massive interest in lean manufacturing, the time has come for Intentia to communicate our views and experience in lean manufacturing.
And the range of solutions and tools that Intentia offers to support organizations with a lean manufacturing philosophy.
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.”

7. Defining Lean Manufacturing
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.
The focus on customer value adding activities is primary
The elimination of waste (Muda in Japanese) and continuous improvement are secondary to this.
This usually leads to cost reduction and employee empowerment.
Many people translate ‘lean’ to ‘mean’. Lean does not set out to be ‘mean’, but the approach of maximizing customer value and eliminating waste leads to the removal of unnecessary operating costs.
Lean is not a one-off solution it is a journey, a philosophy.

8. Five Core Elements of Lean Thinking
1. Value
Identify and deliver value to the customer
2. Value stream
Identify the value stream to see what is necessary
3. Flow
Make value flow
4. Pull
Make as needed. Customer demand driven manufacturing
5. Perfection
Continuous improvement in pursuit of perfection
Womack and Jones (1996) defined the five core elements of “lean thinking”, which are now widely accepted:
(1) Value—Identify value since it is lean manufacturing’s role to deliver value to the customer.
(2) Value stream —To create customer value, managers need to identify and map which activities add value and which do not. Value stream mapping (VSM).
(3) Flow—Managers must focus on making the value flow through the value chain in the factory and eliminate non-value-adding activities. This usually involves a “single piece” flow concept.
(4) Pull—The value chain is based on a pull approach; that is, customer demand drives manufacturing activity and material flow.
(5) Perfection—Continuous improvement in pursuit of perfection.

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.
Computer software not widely available when lean mfg and kanban appeared. Lean implies continuous improvement and applying technology is part of that.
Increasing product variety -> database and business logic essential
Electronic kanbans offer some advantages such as:
Overcome the problems of paper or physical token kanbans getting lost through carelessness or sabotage. ARC suggest 1% are lost per day.
Where there are different production units and materials move between units it is more practical to use electronic kanbans due to the time and effort required
Physical kanbans are difficult to resize without stopping the system.
It is difficult to introduce/phase in new products when using paper-based kanbans -> need to remove old kanbans from system first.
Supply chains/networks are becoming more complex with globalization, specialization and outsourcing. Electronic kanbans are essential for effective communication to minimize inventory and ensure delivery on-time.
Technology supports supplier/customer portals to enable JIT calloffs or kanban control of material supplies
Computers support complex planning algorithms for TOC, etc.
ERP eliminates waste in administrative tasks such as order entry, order management, invoicing.
Databases and analytics -> Customer value and continuous improvement

10. Intentia Support for Lean Manufacturing
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
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
Main solutions and components delivered by Intentia Application Suite to support planning and control in a lean manufacturing environment.
Blue represents the main area and beige some of the applications, components or functionality that Intentia provides.
Intentia has been delivering lean solutions for years.
If you are on v10 or v11 there are already some things you can do. However, v12 offers greater opportunities.
We will now explore some of these a little further.
EDI=Electronic Data Interchange

11. Value – Enterprise Performance Management
Above is an example of an analysis using the EPM tools.
This shows the revenues and quantities of different product ranges purchased by a specific customer “The Great Outdoors”.
The margin and number of support calls on each product range are shown using traffic lights. For example, sunblock looks good as it makes up a good chunk of revenue, the sales quantity is high, the profit margin is good and support calls are low suggesting a high quality service.
“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

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
Machine breakdown is a critical issue for the shop floor as in a lean environment, one machine going down can stop the entire production line or flow.
TPM is a set of techniques, originally pioneered by Denso in the Toyota Group in Japan.
TPM consists of preventative maintenance, corrective maintenance and maintenance prevention.
Advanced service management includes scheduling of maintenance based on production plans, with automated update of the maintenance schedule based on actual finished production.
Electronic links into the equipments own runtime meters to schedule maintenance. Multiple scheduling options (ie every 4 weeks or 200 running hours which ever comes first)
TPM contributes towards ensuring throughput and the Operational Equipment Effectiveness (OEE). Simulations are possible.
Ultimately, provides focused support for reducing the “big six” TPM losses.

13. Pull – Product Configurator
Enables customers to configure their ‘perfect order’
Added value for the customer
Web-enabled
Movex e-sales enables customers to configure their perfect order using a web-based interface.
Fully integrated with the Intentia Application Suite business engine

14. Pull – Kanban 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
The Intentia Application Suite supports both physical kanbans and electronic kanbans.
It is often useful to start with physical kanbans to give people/operators the feel for how the system works. Once the system is understood there are benefits in electronic kanbans to avoid the problems of lost kanbans, sabotage, resizing, introducing new products, etc. See earlier slide on “How Technology Can Support Lean Manufacturing”.
In the one-card type of system production cards or transportation cards only are used, while in the two-card type of system both production cards and transportation cards are used.
The challenge in kanban is often in the setting of the number of kanban cards in the system and the size of the kanban. This can become complex if the demand for each product varies significantly and the production layout is not line or cell based. (see slide on Kanban Dimensioning)
Where demand is volatile, the order mix changes, routings are complex and/or not all resources are dedicated to lean flow manufacturing, then kanban sizes must continuously be reevaluated. In these situations, a Theory of Constraints approach is often more appropriate.
Electronic Kanban System

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
Lean planning focuses on making value flow through the factory. The Theory of Constraints (TOC) recognizes that the bottleneck determines the maximum flow rate through the factory. TOC focuses on making value flow through the bottleneck and hence the factory. Thus, is consistent with lean manufacturing.
Some of the benefits of using TOC in practice are that it easy to communicate the resource plans as they are visual with the use of colors and flags.
High data quality is not an issue to start using the system. Reasonably good data quality is only required on the bottleneck.
As only the lead-times for the bottleneck are focused on, the inaccuracies in other lead-time elements for operations in an order are averaged.
The software is easy for the planner to use with the planner focusing on planning the bottleneck.
Prioritization of orders ensures that the highest priority items and rush orders get pulled quickly through the system.
The fact that there is one common plan and each order is prioritized ensures that all departments are working towards the same goals.

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
As above.
Copes with many of the challenges and issues raised by “Today’s Business Environment”
Typical lean results over time….
Scrap Reduction By 90%
Reduce Setup Times By 90%
Reduce Lead Times By 50%
Achieve 20 inventory turns/year
Reduce Operating Costs
Productivity improvement 10 to 40%
Quality improvement 25-75%

17. Example: Lean Manufacturing in F&B – Where to Start?
Shipping
Supplier
Raw
Material
Warehouse
Mixing
Finished
Goods
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
Supplier Agreements
with JIT call off or
Supplier Managed
Inventory
Decoupling
Point
Still need to forecast
VMI
At customer DC
Set up long-term purchase agreements with suppliers and use JIT call offs or move to supplier managed inventory (SMI) for both ingredients and packaging materials. Put pressure on packaging suppliers to reduce their lead times for critical printed materials or alternatively, if feasible, develop techniques for in-line printing.
Production of product can be order-less with back-flushing to report material usage.
Bring down responsibility to the production floor by making demand information transparent (including which items are on promotion). This will give more control and help in reducing built-in planning “buffers“.
Focus on setup time reduction in order to reduce batch sizes. Unlikely that batch production can be replaced by units of one.
Rebuild production equipment to reduce setup and change-over costs.
Pack or label-to-order using either a kanban or TOC based pull approach. Product can packed to customer’s requirements – labelling, etc. shortly before shipping to reduce finished goods stock and avoid the need for put away of finished goods and packaging materials by using cross-docking. For kanban, back-flushing will record anticipated material usage. Note: Pack-to-order assumes that the intermediate product has a reasonable lifespan (this is usually the case with dry goods) and label to order assumes that a product recipe is the same for different customers.
VMI at customer DCs might be another step. Use of VMI or POS-data on the customer side will increase transparency and avoid stock bullwhip effects.
It will still be necessary to forecast to determine long-term capacity requirements and purchase agreements (or support supplier managed inventory), and determine the master demand schedule, but operations will become much leaner and more customer pull-driven.
FUTURE – try to move the decoupling point upstream over time. For example, can you move towards fill-and-bake to order?
Future
Move decoupling point upstream,
e.g., fill and bake-to-order

18. Summary – What’s the Issue?
Maximizing
customer value TO
Protect and
grow market share
PROBLEM
Demanding customers
AND
Cash tied up in inventory AND
Cost pressures
VALUE
Increased customer value
AND
Elimination of waste
Continuous improvement
SOLUTION
Adoption of a lean
manufacturing philosophy
WITH
Intentia as a partner for
lean solutions
Bottom line … in todays competitive environment the issue that you have to do everything to maximize the value you deliver to your customers in order for you to protect and grow market share. If you don’t provide value then customers will go elsewhere.
How do you measure value? Well … according to Michael Porter who is a professor at Harvard and has written several books on competitive strategy, competitiveness etc…
“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.”
So in essence … if you don’t provide value to your customers then you will have to drop your prices to sell product … or sell less units.
That is why customer value is so important.

19. Thank You for Your Time and Questions
So that was a quick presentation on lean manufacturing and how Intentia as your business solutions partner can support your organization.
Thank you for your time and I hope you found this last 25 minutes or so useful.
Are there any questions?
I will be around for the rest of this afternoon and this evening. And you can always ask your account manager for more information.