1. LEAN MANUFACTURING IMPLEMENTATION -- Lean Supply Chain
University of Michigan
Manufacturing Strategies IOE 425
October 18, 1999
Ronald L. Turkett

2. Why Lean Supply Chain? Suppliers Toyota Indiana Toyota GeorgetownGM
2 Plts. Europe
Saturn
Nummi
TPS
Ford
Worldwide
FPS
Renault
Toyota
Georgetown
Suppliers
Chrysler
COS
Porsche
Mercedes
Toyota
Cambridge
Peugeot
BMW
Implementing Lean Production Enables Seamless Connection
with Customers and Suppliers

3. The Lean Supply Chain Just in Time
Best Quality - Lowest Cost - Shortest Lead Time
Through Shortening the Production Flow By Eliminating Waste
Just in Time
“The right part
at the right time
in the right amount”
Preconditions
Continuous Flow
Pull System
Takt Time
Level Production
“Built in Quality”
Line Stop
Manual
Automate
Error Proofing
Visual Control
Flexible, Capable,
Highly Motivated
People
The Toyota Production System is built on:
Operational Stability.
Built in Quality.
Just-In-Time.
Flexible, Capable, Motivated, People.
TPS focuses on Best Quality, Lowest Cost, Shortest Lead Time through the elimination of waste.
JIT and Jidoka and People are pillars for the building. Remove any of these and the building falls.
Note: People are in the middle because this is where value is added.
Operational stability is the foundation. Weaken efforts in operational stability and the whole building is shaky.
The roof is the outcome: Best quality, lowest cost, shortest lead time.
Operational Stability
Standardized Work Robust Products & Processes
Total Productive Maintenance Supplier Involvement 8

4. “Lean Vs.Traditional” Half the hours of engineering effort
Half the product development time
Half the investment in machinery, tools and equipment
Half the hours of human effort in the factory
Half the defects in the finished product
Half the factory space for the same output
A tenth or less of in-process inventories
Lean has the potential for helping us accomplish the organizational characteristics listed above.
Source: The Machine that Changed the World, Womack, Jones, and Roos, 1990. 2

5. “Lean Vs Traditional” 99.9% Customer Schedule Attainment
15 PPM or Better
4-6 Inventory Days of Supply
92%+ Operational Availability
Leveled, Sequenced Production
Order to Customer Use - 4 1/2 Hours
Functioning Supplier Partnership
Strong Production Control Function
This slide shows in real terms what lean means. (Read each bullet)
Examples: Tier 1 Suppliers: Johnson Controls Seating, Litens Automotive Partnership, Cadimex, Denso Manufacturing, Toyota Motor Corporation. 3

6. Changing Costing Methods
Principles of Cost Plus: SALES PRICE = COST+ PROFIT
Profit
Profit
SALES
Profit
Traditional
View
Mfg.
Cost
Sales
Price
Sales
Price
Mfg.
Cost
Mfg.
Cost
Principles of Cost Reduction: PROFIT = SALES PRICE - COST
The major difference is that the Toyota view believes the price of the product is set by the customer. Therefore, the only way to increase profit is to reduce cost.
Profit
Profit
Profit
Modern
View
Mfg.
Cost
Sales
Price
Mfg.
Cost
Mfg.
Cost 7

7. Lean Supply - Global Purchasing Strategies
Common Strategy - Buy Cheapest in the world
- Support with dual sourcing
Toyota Strategy Buy to achieve lowest total cost
- Buy in country where manufacturing
is performed
- Minimize Number of Suppliers
- Keep supply chain short as possible
- Toyota is as strong as its weakest supplier

8. Consequences of Cheapest Price
Long Distance Supply - Long lead times
- increases structural cost: people, travel, premium freight, packaging, obsolete material, scrap due to handling damage
Buying cheapest restricts buying from best supplier and achieving total lowest cost
VS.
Buying from best supplier, then get lowest cost

9. Consequences of Long Supply Chains
Long Value Streams Result in:
High Risk
- Quality Spills
- Availability of Supply
- Engineering Changes
High Cost
- Transportation (Premium and Standard)
- Engineering Support/Supplier Development
- Plant Overtime

10. Automotive Supply Chain
Supply Chain = Value Chain
Retail
Customer
OEM
Tier # 1
Tier # N
Ore in
Ground
Objectives: Highest Quality
Lowest Cost
Shortest Lead Time

11. Purchasing, Finance, Quality
The Lean Enterprise
Lean Enterprise Leap
Operations, PC&L, Engr
Purchasing, Finance, Quality
World Class
Lean Supply
Chain
Implemented
Full Benefits of
Lean Supply Chain
Traditional
Manufacturing
& Support Functions
Lean Supply Chains are not just a Materials
Management Effort

12. ? Automotive Customers Which group drives lean supply chains? ToyotaGM
Honda ?
Ford
NUMMI
Saturn
Chrysler
Nissan

13. Reaction to Changes Occurs Only Weekly
Demand/Schedule Variance Causes
Planning/Scheduling System Mechanics: Push Scheduling
PRODUCTION FLOW
All production operations receive same schedule
Supplier
Machining
Assembly
Customer
Schedule
Schedule
Schedule
Schedule
Production
Scheduling
Reaction to Changes Occurs Only Weekly

14. Typical Demand/Scheduling Model
OEM
Tier
# 1
# 2
Schedule
Actual Demand
Traditional Scheduling Systems
1. Demand and schedule are usually different
2. Noise increases moving down stream
3. Affected most by changes in order quantity, delivery time and lead time

15. Lean Supply Chain - Pull Production System
Ship
Ship
Ship
Customer
Leveled Production
Plan
Raw
Material
Machining
Assembly
Work Sequence Layout: Visually lay out the steps in the process being defined in the work sequence layout area. This layout can be defined in many ways and should b the optimal way to define the specific process for the operation. An example of the procedure for creating a Work Sequence Layout is:
Draw the machine layout and record the machine names.
Outline and number the working sequence.
Draw a solid line representing the path of the work sequence.
Draw a dotted line connecting the last process to the first indicating the movement of the return from the final task.
Shade the machine with the lowest processing capacity.
NOTE: In some cases if the operator is basically stationary, you may want to draw the workers’ movements in relationship to the part with the appropriate steps in sequence.
Pull Schedule
Pull Schedule
Assembly Schedule
SME Lean Supply Chain
06/07/98
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16. OEM’s Lead Supply Chain Management Process
Process: Smoothing Production to Reduce Supply Chain Cost
Ship
Ship
O.E.
Tier 1
Tier 2
Pull
Signal
Pull
Signal
Leveled Sequenced
Production
Leveled Sequenced
Production
Action Steps-All Customers
1. Smooth production build and communicate plan to suppliers
2. Maintain daily production levels as planned (maintains smooth flow)
3. Minimize parameter changes in system (lot size, quantity, & lead time)
4. Convert from push scheduling to pull scheduling
5. Maintain open communications with supplier - Provide Supplier
access or view of actual demand
Safety Symbols: If specific types of equipment are needed, make sure it is also specified in the “Recommended Safe Job Procedure” section. If possible, list the part # of the safety equipment required.
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17. Takt Time Vs. Cycle Time - An Important Distinction
Time (Available seconds per working day)
Volume (Daily production requirement)
Takt Time =
Sets pace of production to
match pace of sales.
Actual time required for a worker to
complete one cycle of his job process
Cycle Time =

18. Implementing the Lean Supply Chain
Level Sequenced Production
producing a repeatable pattern by volume and mix within each day of the monthly production plan
Characterized by:
a smoothed production plan over an extended time
every model made every day
daily adjustment can be made
a predictable production process

19. Implementing the Lean Supply Chain
Summary
Find the best supplier and engage early in the design process
Partner with key suppliers that have high capability for design and supply
Suppliers should be located in the country where you build your product
Shorten the supply chain by having suppliers close, frequent deliveries, and leveled production plans
Develop pull systems with suppliers
Know production capacity by comparing effective cycle times with Takt times.