Supply chain

Nov 30 2018

Runners, Repeaters, and Strangers among Components

In assembly operations, we need a Plan For Every Part (PFEP). For each purchased component, we must specify suppliers, choose order and delivery patterns, organize all actions taken inside the plant to deliver it from the receiving dock to the assembly line.

Setting a plan for each one of the thousands of purchased items is a daunting task. It helps if you can group the items in a handful of categories. Policies by category may not be as fine-tuned as for individual items but they are an improvement over “one-size-fits-all.”

To make it easiest to do what you do the most frequently, a natural criterion for categorizing purchased components is frequency of use. Once you have sorted the purchased components by decreasing frequency of use, however, you need to set category boundaries that make sense for assembly.

Rather than using arbitrary cut-offs, we base thresholds on the proportion of the demand that can be built completely as a function of the frequency rank of components. A point on this plot means, for example, that 50% of the demand can be met using only the 100 most frequently used components.

We explain how we use this chart to categorize components as Runners, Repeaters, and Strangers. Then we show how we generate it from bills of materials and a product demand. We end with actual examples from several factories and recommendations on communicating these results.

Continue reading…

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Jun 27 2014

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.”

Source: www.supplychaindigital.com

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.

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Jun 20 2014

Supplier Assessment — It’s The Gut That Counts Says Nobu Morita | Pat Moody

“Beyond Report Cards, Beyond Balance Sheets?  When Evaluating Suppliers, Why It’s Your Gut That Counts.

What’s the best way for supply management and manufacturing pros to evaluate current and potential suppliers? And is there only one “best way?”  There are hundreds of supplier assessment tools, books and checklists, but there is no single standards committee that absolutely dead nuts certifies what’s out there, especially when your supplier is located two continents and three oceans and four hand-offs away!”

Source: sites.google.com

Michel Baudin‘s comments:
When assessing a manufacturing organization, I always look for information from three sources:

  1.  Data, and preferably raw rather than cooked into metrics by recipes unknown to me.
  2. Direct observation of production.
  3. What people tell me, which may or may not agree with the data and what I sense on the shop floor.

I don’t see Morita as disagreeing with this, but I think we must be careful about basing decision on a “gut feel,” which may be no more than the expression of prejudices you didn’t even know you had.

Still, when your gut feel tells you that something is not quite right, it often is. I wouldn’t base my decision on it, but I would take it as a signal that further investigation is needed.

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Nov 8 2013

Demand/Capacity Curve | John Dyer | IndustryWeek

See on Scoop.it – lean manufacturing

“True company growth can be achieved when the maximum capacity is increased by breaking bottlenecks and the sales team makes promises to the customers that the business process can support.”

 

Michel Baudin‘s insight:

John Dyer presents the capacity of a business as a constraint set by the slowest operation in its process, also known as its bottleneck. In manufacturing, at least, it is more realistics to think of it as fuzzy.

If a solid line exists, we don’t usually know exactly where it is. Even an operations manager who claims to know it won’t share that information with colleagues.  Right after claiming in a meeting that production is running full blast, he or she miraculously finds a way to squeeze 15% more out of it.

If  a perceived bottleneck is a purely human process requiring no unusual skills, it can eliminated by rebalancing the work. Dyer’s discussion is centered on where it is a machine and its capacity can be increased by process improvement.

But does this mean that continuous improvement should be focused exclusively on the bottleneck? In many cases, the bottleneck is the most sophisticated machine on the floor, and increasing its capacity  requires engineering knowledge that is not present in the factory’s work force, and can only be done by bringing in outside experts.

On the other hand, the work force has the skills needed to improve the performance of other operations. This can ensure that the bottleneck has the materials it needs at all times, and free human resources that can be trained to operate and maintain the bottleneck, and eventually to improve it.

This article has a “Part 2” about  why it is so difficult to work with in-house suppliers . Dyer’s term for in-house suppliers is “intercompany suppliers,” which confused me, because I took “intercompany” to mean “between companies,” the way “international” means “between countries.”

His point is that in-house customers may be bad for a supplier because transfer prices calculated on a cost-plus basis can be below market prices. This causes in-house suppliers to give preferential treatment to their external customers.

A remedy that Dyer does not seem to consider is to make transfer prices between divisions match market prices. This works as long as the supplier division has external customers — or the customer division external suppliers —  through which market prices can be known.

In many cases, in-house suppliers make parts based on the company’s unique technology, that have no outside market, and for which there is no market price. Transfer prices then have to be negotiated in a way that is “fair” to both sides. Figuring out what that means is a conflictual process, that is avoided by treating the supplying division as a cost center rather than a profit-and-loss center.

See on www.industryweek.com

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Oct 18 2013

When Bad Things Happen to Good Supply Chains | Industry Week

See on Scoop.it – lean manufacturing

“Any single failure anywhere in the supply chain can bring operations and profits to a standstill. From the 2011 tragedies of the Tōhoku earthquake and tsunami in Japan to last year’s devastating Hurricane Sandy closer to home, Mother Nature has a way of reminding us to reexamine catastrophe preparedness.

These events, and the tragic aftermath that follows, also serve to remind the insurance industry of the challenges in quantifying risk and accounting for exposure in an increasingly complex supply chain environment. As a result, risk managers are being asked new questions as insurance underwriters require them to seek information from a broader range of stakeholders within and outside of their organizations.”

 

Michel Baudin‘s insight:

The article is limited to a list of questions an insurer might ask about a supply chain, some of which cannot be pratically answered. The supply chain management literature often states the need to know your suppliers’ suppliers and your customers’ customers, but most companies don’t, and practically can’t.

After all, the point of buying from suppliers is to delegate responsibility for the whole upstream supply chain. If you have to worry about it all the way to mining raw materials out of the ground, you might as well make it all in-house from scratch, like at Ford’s River Rouge plant in the 1930s.

Asking the right questions is fine, but providing answers is better. Supply chain disruptions come in many degrees of severity and a variety of frequencies, from trucks delayed by traffic accidents to earthquakes and tsunamis.

You can, and should have preplanned responses to small, frequent disruptions. That may involve building some slack in milk run schedules, keeping small buffers of stocks, or having contingency plans for alternative transportation…

But you cannot practically have preplanned responses to all possible catastrophes. What you need is to monitor operations with vigilance to get early warnings, and develop relationships with your suppliers and customers that are strong enough that they come together and develop an ad-hoc, rapid response when disaster strikes.

This is the lesson I see in Toyota’s response to emergencies, from the Mississippi flood of 1993 to the Aisin Seiki fire of 1997 and the Fukushima earthquake of 2011.

See on www.industryweek.com

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Jun 4 2013

Enterprise Ireland and Lean | Irish Times

See on Scoop.it – lean manufacturing

“The Japanese are renowned worldwide for their car production where the concept of the management philosophy Lean derives from. It all began at Toyota when the car manufacturers discovered a new, more efficient method of producing cars valued by customers all over the world. The principles learned at Toyota became known as Lean which is claimed can be applied to almost any business. The core principle is creating value by reducing waste and unnecessary risk.”

Michel Baudin‘s insight:

While informing us that the Irish government has an agency promoting Lean, this article reflects common misconceptions.

No, it’s not a “Japanese management philosophy.” it is an approach developed by individuals who happened to be Japanese, which is not the same. Most Japanese today do not know or practice it, and quite a few non-Japanese do.

And this emphasis on “creating value” is an American talking point, not the Toyota Production System.

According to the article “Toyota benchmark themselves constantly,” which is news to me. While it is clear that Toyota is on the lookout for new ideas, I had not heard of Toyota doing benchmarking surveys of competitors. My understanding is that Toyota’s management considers such surveys to be a waste of time.

The article equates Lean with Continuous Improvement, giving the impression that it’s all there is to it.

And finally, the article repeats the Business Week claim that the Shingo Prize is “the Nobel Prize for operational excellence.”

See on www.irishtimes.com

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