Question On Optional Components | Arvind Janarthanam

“Greetings! First of all, I am thankful to this blog. It has helped me out with my queries.

I’m working as a scheduler and we are facing sudden change in the optional parts that we supply to our customer. The reliability of the forecast we have is coming down. Most of our parts being imported is affecting our cost due to last-minute freight. Can you please suggest an approach to arrive at the minimum number of stock we could maintain against each options(based on past data) so that we strike a balance between the inventory and availability.


Michel Baudin‘s response:

Dear Arvind:

You tell me you are a scheduler, but many of the actions that can improve the procurement of optional parts are beyond the range of what a scheduler can decide. You are also asking a generic question, to which there is no generic, universal answer. All I can do is lay out a few possible courses of action.

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The Routledge Companion to Lean Management | Torbjorn Netland

Screen Shot 2016-08-09 at 9.47.28 AMThe Routledge Companion to Lean Management is now available for pre-ordering. It is a compilation of contributions from multiple authors, edited by Torbjorn Netland, and Chapter 8 is my overview of Lean Logistics. The other co-authors include Dan Jones, Jim Womack, John Shook, Jeffrey Liker, Robert Hafey, John Bicheno, Glenn Ballard, Michael Ballé, Mary Poppendieck, and many others whose work I am not familiar with.

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“Ohm’s Law” for WIP — Little’s Law Explained in Russian | Holz Expert

Sourced through from:

Translated from Russian: “Every production manager knows that the amount of work in process (WIP) — stacks of parts lying between machines waiting for processing —  should be reduced. In contrast to the raw materials in the warehouse,  work has already been done on it, and its cost increased by the amount of value added. This makes it an illiquid asset – in contrast to raw materials and finished goods, it cannot be sold. In addition,  WIP costs extra space, heating, transportation and personnel. But, before reducing WIP, it is necessary to properly evaluate it…”

Michel Baudin‘s comments:

 Even though it has a German name meaning “Wood Expert,” Holz Expert is a consulting group based in Moscow and specialized in the furniture industry.

I had not heard of them before, but Oleg Novikov pointed out this article to me on Facebook. It is well done. If you can’t read Russian, check it out with Google translate. They explain all the assumptions needed for the formula to be applicable, and give examples from furniture manufacturing. They even include a smiling picture of John D.C. Little.

Working with Russian clients, I was surprised that they insisted on mathematical formulas in consulting reports. To them, it was essential to the credibility of the recommendations, a feeling that I have never encountered among their counterparts anywhere else.


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Fundamental failings in “Lean” procurement | Supply Chain Digital

A side-loading truck

“The famous Lean approach, adopted by companies all over the world, considers the expenditure of resources on anything that doesn’t create value for the end customer as waste and seeks to eliminate unnecessary processes within this framework.

The concern, however, is that companies are losing out by either not fully understanding the practice or not committing themselves enough to the change in thinking adopting it requires.”


Michel Baudin‘s comments:

The points in the article are valid, and could be summarized by saying that, in procurement/supply chain management/logistics, efficiency should never be pursued at the expense of effectiveness.

The more fundamental mistake, however, is the half-baked notion that “anything that doesn’t create value for the end customer is waste.”  Any business activity involves tasks the customer is never aware of, let alone values, and a narrow-minded focus on what customers are “willing to pay for” blinds managers to the need and the benefits of, for example, supporting suppliers.

Customer willingness to pay is not an actionable criterion to identify waste. An activity is waste if, and only if, your performance does not degrade in any way when you stop doing it. If eliminating it does not degrade your quality, increase your costs, delay your delivery, put your people at risk, or make your employees want to quit, then it is waste. But, even with a proper perspective on waste, eliminating it only improves only efficiency, not effectiveness. It’s about getting things done right, not getting the right things done.In a manufacturing company, procurement/supply chain management/logistics is the pit crew supporting production, and the business benefits of doing this job better dwarf any savings achieved through efficiency.

Reducing order fulfillment lead times, introducing new products, or customizing them helps the business grow. And it may require spending more rather than less on the supply chain, for example by moving trucks that are not 100% full.

Formula 1 Pit Stop 1950 to 2013

William Botha posted the following Youtube video in the TPS Principles and Practice discussion group on LinkedIn:

It contrasts a Formula 1 racing pit stop at the Indianapolis 500 in 1950 with one in 2013 in Melbourne, Australia. The time the car was stopped went from 67 to 3 seconds.

The 1950 pit stop used 4 people for 67 seconds, which works out to 4 minutes and 28 seconds of labor. If we include the external setup — before the car arrives — and the cleanup afterwards, the 2013 pit stop used 17 people for 44 seconds, or 12 minutes and 28 seconds of labor. In terms of labor costs, the 2013 pit stop was therefore less “efficient.” In a race, however, cutting the car stoppage time by a factor of 22 is priceless.

Car racing is often used as a metaphor for manufacturing, with machine changeovers as pit stops. In fact, many of the pit stop tricks are used in SMED, from prepositioning everything you need to using quick attach and release tools.

More generally, we can see the production operators as the drivers working to make the product cross the finish line, and everybody else in logistics, maintenance, QA, etc. in the role of the pit crew. This casts the time of operators and materials handlers, for example, in a different light. The operators on a line work in sequence, so that, if you delay one, you delay the entire line. The materials handlers, on the other hand, work in parallel and, if one waits, it does not affect the others.

The pit crew must be ready and waiting when the car arrives, so that it can spring into action, and the car should never be waiting for the crew. Likewise, an operator on an assembly line should never wait for parts, and cutting down on materials handlers to save money is counterproductive. A key point of Lean Logistics is to focus on effectiveness first. You pursue efficiency later, but never at the expense of effectiveness, because it doesn’t pay for the organization as a whole.


Lean Logistics Seminars in Spain

Following is a translation of the report posted on Asenta’s website on the joint seminars we conducted in Barcelona, Madrid, and Bilao last week:

Lean Logistics – World Class Practices Series 2013

On October 7, 8 and 10, we held the fourth session of our World Class Series 2013 Lean Cycle in three cities, with more than 100 executives in attendance.

We provided an overview of the meaning and scope of the Lean Logistics as a strategy for competitiveness, together with  case studies, to show the solutions used on specific problems and thus show the benefits of  highly effective management

Among the speakers was Michel Baudin, a recognized expert in operations management and a strategic partner of ASENTA. Since 1987 has been advising companies on Lean implementation across many industries in America, Asia and Europe. He has published four books on various aspects of operational excellence.

Also participating were Luis Mauleon, Managing Partner at ASENTA, who specializes in transformation processes in organizations, and Juan Ortega, Management Consultant and coordinator of Lean Logistics at ASENTA.

These seminars were for CEOs, and Directors of Manufacturing, Operations, and Logistics, and, more  generally, for leaders committed to improving their organizations’ supply chains.

Following are a few shots of the seminars in Barcelona and Bilbao:


How the 80/20 Rule will improve the safety of your warehouse | IndustryWeek

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“If companies can identify their high movers from a pick history list, the “vital” 20% can be optimally located within the shelving systems to maximize production efficiencies and to minimize wasted time and effort. The 80/20 Rule can help companies strategically locate “vital” materials so that employees’ efficiency and safety are maximized.”



Michel Baudin‘s insight:

In this article ergonomist Lance Perry explains that organize items in warehouses by frequency of use improves the ergonomics of manual storage and retrieval.

In Lean Logisitics, I presented the same policies as a means of increasing productivity and reducing the lead times of warehouse operations. Making what you use the most often easiest to reach improves multiple dimensions of performance at the same time. There is no tradeoff; you don’t rob Peter to pay Paul; you don’t make X better by making Y worse. That’s why we call is an improvement.

What is most puzzling is that such a simple idea is not already universally applied.

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The Porsche Lean Story | Competitive Advantage via Quantitative Methods

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Michel Baudin‘s insight:

Along with information about the history of Porsche’s turnaround since the early 1990s, this article contains strange statements about, for example, Lean Manufacturing being “Non-Quantitative,” which must make Ohno and Shingo turn over in their graves.

It also contains the doubtful statement that “the costs of warehousing excess inventory are a hundred of times more expensive than a delay caused by a missing part.” The point of Lean Logistics is not to trade-off full warehouses for shortages!

The real paradox of stock is that hoarding parts is ineffective at preventing shortages. The Lean Logistics approach is to keep inventories low but monitored with vigilance, and to respond quickly when floods, tsunamis, or earthquakes disrupt the supply chain.

The article further asserts that “Statistical Process Control” was central to Porsche’s effort, but gives not indication that it is even used. I don’t recall it being mentioned or seeing any trace of it in the Porsche plant in Leipzig two years ago.

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Article on “Lean warehouse” off the mark

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“Lean is not just for manufacturing […]; its techniques and tools can be adapted to almost any type of operation. In warehouses and DCs, it can improve efficiency, inventory, safety, and costs, say experts in the discipline. And because Lean changes the way people think about processes and communication, it can be especially effective in helping facilities use warehouse labor more efficiently and cost-effectively. It’s a complex subject that requires formal training to master, but the following will provide a general idea of how lean principles can have a huge impact on warehouse labor.”


Michel Baudin‘s insight:

This article is all about the efficiency of warehouse operations and the way “Lean” can reduce warehouse labor. It says almost nothing about the effectiveness of warehouse operations. From this article’s perspective, driving an empty forklift is a waste to be eliminated, but there is not a word about using other means than forklifts to move goods, in perhaps less than pallet quantities, such as carts or small trains. There is not a word either about locating frequently used items in the locations that are easiest to reach, or collocating items that are frequently used together…

At least in manufacturing operations, the number of people used in warehouse operations is a tiny fraction of the number used in production, and increasing their productivity is not the issue. A Lean implementation may instead increase their numbers to improve service and achieve much larger productivity gains in production.

The pursuit of fully loaded forklifts and trucks may increase the efficiency of storage, retrieval, and transportation operations, but also delay e deliveries and hurt the performance of the business as a whole. This is not just my own observations. It has been described as a systematic phenomenon by researchers like Hau Lee.

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Israel’s Efficiency Contract Under Fire

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“TEL AVIV — Israel’s Defense Ministry is slightly ahead of schedule in a 10-year government-mandated plan to save 30 billion shekels (US $8.4 billion) through 2017, but no thanks, uniformed officers say, to the ministry’s high-priced contract with an international consulting firm.

Nearly five years into the plan, high-ranking officers here insist the lion’s share of the 9.2 billion shekels saved thus far stem from internal, self-generated measures, despite costly and — in many cases — unrealistic reforms proposed by New York-based McKinsey & Co.”

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