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Lean Operations: Process Synchronization and Improvement
Lean Operations
Initiated by Japanese automaker Toyota. Adopted in USA by the aerospace
industry in 1990’s
Some turnaround times were lowered by 30-50%. Maintenance
productivity improved by 25-50%
Improved performance in all four dimensions in Plants and Supply Chains
» Plant: any singly owned, independently managed and operated
facility (i.e., manufacturing site, service unit, storage warehouse)
» Supply Chain: a network of interconnected facilities with diverse
ownership, and flows of information and materials between the
facilities (i.e., raw materials suppliers, finished goods producers,
wholesalers, distributors, retailers)
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Lean Operations: Process Synchronization and Improvement
What is an Ideal Process? Synchronization + Efficiency
Process Synchronization: The ability of the process to meet customer demand in terms of their quantity, time, quality and location requirements.
Process Efficiency: Measured in terms of the total processing costs. Less cost, more efficient!!.
» Exactly what is needed (not wrong or defective products)
» Exactly how much is needed (neither more or less)
» Exactly when it is needed (not before or after)
» Exactly where it is needed (not somewhere else)
At the lowest cost
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Lean Operations: Process Synchronization and Improvement
The Process ideal: Synchronization & Efficiency
Just-In-Time (JIT)» When the four “just rights” come together—
» Action is taken only when it becomes necessary!!!
» In Manufacturing - production of only necessary flow units in
necessary quantities at necessary times!!!
Synchronized Networks:» Outflow of one process is the inflow to another process!!!!
» Requires precise matching of supply & demand
» All stages are required to be tightly linked with flow of information and
product
» Ideally – the processing stages are achieved for lowest possible cost!!!!
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Lean Operations: Process Synchronization and Improvement
Waste and Its Sources
ANYTHING LESS THAN IDEAL PERFORMANCE IS AN
OPPORTUNITY FOR IMPROVEMENT!!!
Low Efficiency = High Processing Costs
Lack of Synchronization
Defective products, high inventories, delays, stock outs
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Lean Operations: Process Synchronization and Improvement
Buzz-words for managing and achieving efficiency within a plant
Other names connected to lean operations; JIT production, Zero
inventory program, Synchronous manufacturing, Agile
manufacturing, Toyota Production System (TPS)
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Lean Operations: Process Synchronization and Improvement
Waste and Its Sources
Sources of Waste:
» Producing defective products
» Producing too much product
» Carrying inventory
» Waiting due to unbalanced workloads
» Unnecessary processing
» Unnecessary worker movement
» Transporting materials
Waste: producing inefficiently, producing wrong or defective products, producing in quantities that are too small/large, delivering early/late
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Lean Operations: Process Synchronization and Improvement
Waste Reduction
Short term strategies:
» Cycle & Safety inventories
» Safety capacity
» Non-Value adding activities (transportation, inspection, rework,
process control)
Long term strategies:
» Improve the overall processes
» Build in flexibility, predictability, stability to eliminate temporary
fixes. i.e., Reduce setup costs to make it more economical to produce small
batches.
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Lean Operations: Process Synchronization and Improvement
The River Analogy
The boat can sail in shallow water (lean operations) if we are able to find ways
to remove the imperfections on the river bottom!!!
FM WIPFG
Defective Materials Machine Breakdowns
Defects
Long Setups
Long Lead Times Unsuitable EquipmentUneven Schedules
Unreliable Suppliers
Inefficient LayoutsAbsenteeism
Rigid Work Rules
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Lean Operations: Process Synchronization and Improvement
Four Objectives of Lean Operations
Improve process flows (Process Synchronization)
– Efficient plant layout
– Smooth flow of materials and information
Increase process flexibility (Process Synchronization)
– Low equipment changeover times
– Cross-functional training
Decrease process variability (Process Synchronization)
– Flow rates
– Processing times
– Quality
Minimize processing costs (Process efficiencies)
– Eliminate non-value adding activities
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Lean Operations: Process Synchronization and Improvement
Efficiency/Synchronization for mass production:Henry Ford’s Rouge, Michigan plant
Totally integrated with – steel mill, glass factory, machine tools,
electrical systems, assembly line, well-trained (well-paid) workers
Minimal time & cost
Everything in place except
product variety!
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Lean Operations: Process Synchronization and Improvement
10.4.1 Improving Process Architecture: Cellular Layouts
Process Architecture: the network of activities
and resources
One method:
FUNCTIONAL LAYOUTS
Different product types follow different routings through the
resource pools…enabling each flow unit to be sent to any
available station in the pool.
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Lean Operations: Process Synchronization and Improvement
10.4.1 Review of Process Architectures: Job Shop
AC
BD
Product 1
Output
Input
Product 2
Functional Layout: Resources that perform the same function are physically pooled together–
JOB SHOPS
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Lean Operations: Process Synchronization and Improvement
10.4.1 Improving Process Architecture: Cellular Layouts
Alternate to Process-based Functional Layout:
CELLULAR LAYOUT
All workstations that perform successive operations on a given product are grouped
together to form a “CELL”
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Lean Operations: Process Synchronization and Improvement
10.4.1 Improving Process Architecture: Cellular Layouts
OutputInput A CB
Product 1
Example: Henry Ford’s Assembly Line for the Model T
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Lean Operations: Process Synchronization and Improvement
Improving Process Architecture: Cellular Layouts
Facilitates synchronous flow of
information and materials between
processing stations
Physical proximity of cells reduce
transportation of flow units
Moves small batches of flow units
quickly
Encourages teamwork & cross
functional skill development
Improved communication between
stations
Improves synchronization where each
station produces parts only if the next
station needs them
Easier to recognize and report
problems
Quicker ability to correct defects
ADVANTAGES+ +
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Lean Operations: Process Synchronization and Improvement
10.4.1 Improving Process Architecture: Cellular Layouts
Resources are dedicated to specific
cells
Resources cannot be used by other
cells
Lose advantage of resource pooling
Worker incentives must be “team”
oriented, not individual performance
based
REMEDIES:
» Use flexible resources that are
cross functional
» Peer pressure to control
productivity of team members
DISADVANTAGES- -
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Lean Operations: Process Synchronization and Improvement
Push Strategy
Push Production: Input availability triggers production where emphasis is
on maximization of resource utilization (as long as there is work)
» Planning Tool is Material Requirements Planning (MRP)
» MRP: End-Product demand forecasts are “exploded” backwards to
determine parts requirements at each station
PUSH works well if and only if
» All information is accurate
» Forecasts of finished goods are correct
» There is no variability in processing times
Otherwise, it will disturb the planned flow, and destroy synchronization
throughout the process!!
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Lean Operations: Process Synchronization and Improvement
Pull Strategy
Push Production: Where demand from a customer station
triggers production. Each station produces only on demand
from its customer station
The demand is actually “downstream”
PULL works well if and only if
» There is a well-defined customer/supplier process.
» The process can produce the quantity needed only when signaled to do
so by its customer
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Lean Operations: Process Synchronization and Improvement
10.4.2 Improving Information & Material Flow: Demand Pull
SUPPLY PUSH: Input availability triggers production
DEMAND PULL: Output need triggers production
Supplier
Supplier
Inputs
Inputs
Process
Process Outputs
Outputs Customer
Customer
Information Flow: Material Flow:
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Lean Operations: Process Synchronization and Improvement
10.4.2 Improving Information & Material Flow: Demand Pull
Demand Signaling: Customer needs a way to signal (inform) the
supplier of its need.
Customer’s demand starts a chain reaction –
For withdrawals and replenishments of intermediate parts
EOQ-ROP system is a “Pull” system where ROP triggers
production at the supplier and EOQ determines the quantity
produced
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Lean Operations: Process Synchronization and Improvement
10.4.2 Improving Information & Material Flow: Demand Pull
Synchronized Pull: When the delivery of parts are in sequence
[Suppliers must have greater ability and capability to achieve a
synchronized pull effectively]
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Lean Operations: Process Synchronization and Improvement
10.4.3 Improving Process Flexibility: Batch-Size Reduction
Each station must know HOW MUCH TO PRODUCE AT A TIME
Level Production: where small quantities are produced frequently to mach
customer demand
[i.e., if demand is 10000 sedans and 5000 SUVs, the production would call for
producing 2 sedans and then 1 SUV, and then repeat the sequence]
Changeover Costs and Batch Reduction: Goal of level production is
reduction of changeover costs (fixed setup or transportation costs of each
batch)
I.E. In auto production expensive parts like seats are produced in batches of
one, wipers in larger batches Study the Changeover process to: use special tools to speed it up, customize
some machines, keep some machines already set up.
Consider “small-batch” production
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Lean Operations: Process Synchronization and Improvement
10.4.4 Quality at Source: Defect Prevention & Early Detection
Defective flow units increase average flow time and cost!!!
WHY?
It necessitates inspection and rework!!!
Anticipate and then Compensate for the problem:
» Hold extra safety inventory in the buffer
» This increases avg. flow time and cost
Plan and control Quality:
1. Prevent defects for occurring in the first place
2. Detect and correct them as soon as they appear
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Lean Operations: Process Synchronization and Improvement
10.4.4 Quality at Source: Defect Prevention & Early Detection
Defect Prevention» Careful design of both product and process
» Simplification & standardization
» Mistake-proofing (poka yoke)
Parts are designed to halt automatically when defective units are fed into
them (parts are designed to minimize chances of incorrect assembly)
Defect Visibility» Early detection/corrections more effective &
economical
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Lean Operations: Process Synchronization and Improvement
10.4.4 Quality at Source: Defect Prevention & Early Detection
Defect visibility (cont’d)
» Early detection helps tracing to the source
» Contribution to better synchronization and lower costs
» Early detection requires constant vigilance and monitoring!!
Decentralized Control
» Employees must be empowered
with authority and the means to
identify & correct problems at the local level
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Lean Operations: Process Synchronization and Improvement
10.4.4 Quality at Source: Defect Prevention & Early Detection
Decentralized Control (cont’d)
» In typical plants, line workers don’t feel the responsibility,
motivation or security to point out problems.
BEST STRATEGIES OF LEAN OPERATIONS ARE:
1. Preventing problems through better planning
2. Highlighting problems as soon as they occur
3. Delegating problem solving to the local level
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Lean Operations: Process Synchronization and Improvement
10.4.5 Reducing Processing Variability: Standardization of Work Maintenance, and Safety Capacity
Reduce Variability:
» Standardize work at each stage and specify it clearly
Advantages to Standardization:
» Reduces variability from changing personnel
» Reduces variability from one production cycle to the next
» Makes it easier to identify sources of waste that can be
eliminated
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Lean Operations: Process Synchronization and Improvement
10.4.5 Reducing Processing Variability: Standardization of Work Maintenance, and Safety Capacity
Lean Operations try to:
» Minimize carrying safety inventory due to increased flow
time
» Maintain some safety capacity as production against
variability
These could be extra machines, workers, overtime
These forms of safety capacity should be flexible so that it can be
used as needed!!
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Lean Operations: Process Synchronization and Improvement
10.4.6 Visibility of Performance
A company needs to “see”“see” (measure) process performance from
the customer’s perspective
» I.E. Time per call
Measure Percentage of Customers that had a problem resolved
with one call
Actual performance (along with expectations) should be visible at
each work cell
Not for punishment, but to provide quick feedback for corrective
action
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Lean Operations: Process Synchronization and Improvement
10.4.7 Managing Human Resources: Employee Involvement
SYNCHRONIZATION WITHIN A PLANT REQUIRES:
1. Cooperation
2. Contribution
3. Commitment
Elton Mayo’s “Hawthorne Experiments” at Western Electric
showed that:
Research has shown that workers involved in the decision-making process
are better motivated and productive
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Lean Operations: Process Synchronization and Improvement
10.4.7 Managing Human Resources: Employee Involvement
In Companies with Lean Operations:
• Workers are cross-trained to provide the company with flexible workers.
• Workers are in work teams in cells and may perform certain managerial duties such as material ordering, hiring, scheduling
• Great importance on recruiting and training of workers
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Lean Operations: Process Synchronization and Improvement
10.4.8 Supplier Management: Partnerships
Outsourcing: Provides a flexible alternative to producing in-
house
BUT- - - purchased materials account for a major portion of
product cost and are a major source of quality problems!!
Lean approach:
» Choose only a few capable suppliers
» Cultivate cooperative, long-term relationships
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Lean Operations: Process Synchronization and Improvement
10.4.8 Supplier Management: Partnerships
In Lean Operations:
» Suppliers are an extension of the plant
» Processing without inventories or quality inspection
» Synchronization requires defect-free material
» Frequent deliveries, small batches
» Supplier’s process be able to produce small quantities on
demand
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Lean Operations: Process Synchronization and Improvement
10.4.8 Supplier Management: Partnerships
YOU ARE TREATING THE SUPPLIERS AS
PARTNERS
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Lean Operations: Process Synchronization and Improvement
10.4.1 – 10.4.8 SUMMARY
Lean Operations aim to sustain continuous
flow processing in an economical manner:
1. Synchronize material and information
flows
2. Increase flexibility
3. Reduce variability
4. Decrease processing costs
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Lean Operations: Process Synchronization and Improvement
Chapter 10
Lean Operations:
Process Synchronization and Improvement
Questions??
37
Lean Operations: Process Synchronization and Improvement
Operations Management:
Lean Operations (JIT) Module
MBPF House Manufacturing Game
The transition to Lean Ops
The Paradigm of Lean Operations: The ideal Methods for synchronization & waste reduction
Increasing visibility for continuous improvement
Approaching the ideal with Product Variety: TPS
Managing variety & flexibiltiy
Toyota Production System (TPS)
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Lean Operations: Process Synchronization and Improvement
Paradigm of Lean Operations:The Ideal Process
Synchronization of all flows
1 x 1
production on demand
defect free
At lowest possible cost
Waste = Gap between ideal and actual
How do we set up a system to continually reduce waste ?
39
Lean Operations: Process Synchronization and Improvement
Toyota’s waste elimination in Operations
1. Overproduction
2. Waiting
3. Inessential handling
4. Non-value adding processing
5. Inventory in excess of immediate needs
6. Inessential motion
7. Correction necessitated by defects
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Lean Operations: Process Synchronization and Improvement
Synchronize to reduce waste: Cut Batch Sizes
Batch Mfg (Lotsize = 5) Flow Mfg (Lotsize = 1)
012345
10
15
20
Space
Time
Example Process: A
1 min/job
B
1 min/job
C
1 min/job
D
1 min/job
A B C D
5
5
5
5
012345
10
15
20
A B C D
1
5
55
555
55555
Space
11111
111111111
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Lean Operations: Process Synchronization and Improvement
How to run Lean Operations:Managing Variety
Monthly Production Requirement:
Model Sedan StationWagon
Quantity 10,000 10,000
How should production be scheduled for the month?
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Lean Operations: Process Synchronization and Improvement
Synchronize to reduce waste: Heijunka Mixed Level/Balanced Production
Batch Production Schedule Mixed Production Schedule
(AAAABBBB..) (ABAB...)
Product Apr/12.................15...........................30 Apr/12....................15.......................30
A
B
time
FGI
time
FGI
43
Lean Operations: Process Synchronization and Improvement
Synchronize to reduce waste: Reduced Setup Times
Can we shrink batch sizes with long setup/changeover times?
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Lean Operations: Process Synchronization and Improvement
Synchronize to reduce waste: customer demand pulls product
Supplierinputs outputs
Process Customer
PUSH: Inputs availability triggers execution
Supplierinputs outputs
Process Customer
PULL: Outputs need triggers execution
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Lean Operations: Process Synchronization and Improvement
Implementation: Kanban Production Control Systems
Kanban
Processing center i
Processing center i + 1
WIP
Job
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Lean Operations: Process Synchronization and Improvement
Synchronize to reduce waste:Quality at the Source
DefectsFound at:
Own Process Next Process End of Line FinalInspection
End User’sHand
$ $ $ $ $
Impact to theCompany
VeryMinor
MinorDelay
Rework Resched.
of work
SignificantRework
Delay inDelivery
AdditionalInspection
Warrantycosts
Administrative costs
Reputation Loss of
MarketShare
47
Lean Operations: Process Synchronization and Improvement
Synchronize to reduce waste:Quality at the Source
Quality at source also improves time and throughput performanceFool-proof/Fail-safe design (Poka-Yoke)Inspection
» Self» Automated (Jidoka)
Line-stopping empowerment (Andon)
Human infrastructure
48
Lean Operations: Process Synchronization and Improvement
Synchronize to reduce waste: From Functional Layout to Cells
ProductionControl
ProductionControl
ProductionControl
RoofCut
RoofCut
RoofCut
BaseCut
BaseCut
BaseCut
FA BaseAssyFA FA Base
AssyBaseAssy
QC QC QC
ProductionControl
FA
BaseCut
RoofCut
BaseAssy
ProductionControl
FA
BaseCut
RoofCut
BaseAssy
ProductionControl
FA
BaseCut
RoofCut
BaseAssy
49
Lean Operations: Process Synchronization and Improvement
Synchronize to reduce waste: Just-In-Time operations
JIT = have exactly what is needed, in the quantity it is needed,
when it is needed, where it is needed.
Reduce transfer batches
Level load production
Pull rather than push work
Quality at source
Set up cells
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Lean Operations: Process Synchronization and Improvement
Reducing waste: Increase Problem VisibilityLower the Water to Expose the Rocks
Scrap &Rework
Missed Due DatesToo Much Space
Late Deliveries
Poor Quality
Machine Downtime
Engineering Change Orders
Long queues
Too much paperwork
100% inspection
Inve
ntor
y
51
Lean Operations: Process Synchronization and Improvement
Source: Lieberman and Demeester
Lean Operations: Causal Link Diagram
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Lean Operations: Process Synchronization and Improvement
Time plays the role of Inventory in Lean Service Operations
TIME
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Lean Operations: Process Synchronization and Improvement
Continuous Improvement: Kaizen
Increase visibility of waste
Targeted improvements
» Active worker involvement
» Time for experimentation
» Supplier involvement
Exploratory stress
Human infrastructure
54
Lean Operations: Process Synchronization and Improvement
....
Lean Operations:Best Implementation is TPS
TPS is a production management system that aims for the “ideal” through
continuous improvement
Includes, but goes way beyond JIT. Pillars:
» Synchronization
Reduce transfer batch sizes
Level load production
Pull production control systems (vs. push): Kanban
Quality at source
Layout: Cellular operations
» Continuous Improvement (Kaizen): through visibility & empowerment
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Lean Operations: Process Synchronization and Improvement
Learning ObjectivesBasic Lean Operations
Paradigm of Lean Operations:Strive for the ideal by eliminating waste
Synchronize» Reduce transfer batch sizes» Level load production» Pull production control systems (vs. push): Kanban» Quality at source» Layout: Cellular operations
Improve» Increase problem visibility (river analogy)
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Lean Operations: Process Synchronization and Improvement
Operations Management:
Supply Chain ManagementImproving Supply Chain Performance (The bullwhip effect)
Causes of bullwhip effect
Managerial implications
ECR and QR
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Lean Operations: Process Synchronization and Improvement
Information Distortion:The Bull Whip Effect
What is the Bull-Whip Effect?
» The variance of orders is greater than that of sales, and the
distortion increases as one moves upstream.
Causes
Managerial Implications
Source: “Information Distortion in a Supply Chain: The Bullwhip Effect”, Lee, Padmanabhan, and Whang, July 1996.
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Lean Operations: Process Synchronization and Improvement
Causes of Bull Whip Effect:Order Batching
Economies of Scale in Ordering
Quantity Discounts
Short Term Discounting (Trade Promotions)
Periodic Review System with Review Period T > 1 period (Order at
least T period demands). Correlation of order timing.
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Lean Operations: Process Synchronization and Improvement
Causes of Bull Whip Effect:Price Variations
Short Term Discounting (Trade Promotions)
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Lean Operations: Process Synchronization and Improvement
Causes of Bull Whip Effect:Demand Signal Processing
Demand is non-stationary over time.
Demand forecasts are updated based on observed demand.
Order Policy: Dynamic Order Upto Points
» implies that a large demand this period will lead to an estimate of higher
order-upto point for next period
» Implies, Order quantity for next period will be greater than demand
realized for this period
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Lean Operations: Process Synchronization and Improvement
Causes of Bull Whip Effect:Rationing Game
Suppose, limited production capacity, say during peak season
Supplier / Manufacturer will ration the supply to satisfy retailers’ orders.
Retailers’ know this.
They exaggerate orders in order to secure a larger share of the limited capacity.
During off-peak, no capacity limits. So orders are back to normal.
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Lean Operations: Process Synchronization and Improvement
Causes of Bull Whip Effect: Behavioral Issues*
Misperceptions of feedback
» Stages do not see how their actions affect others
» When problems arise they blame others
» when they get “proactive” and place more orders, they male
matters worse
» They don’t learn from their experience since consequences
of their actions occur elsewhere
* Source: The Fifth Discipline
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Lean Operations: Process Synchronization and Improvement
Managerial Implications of the Bull Whip Effect
Cause» Order Batching
Contributing factors» High Order Cost» Full TL economies» Random or correlated ordering
Counter Measures» EDI & Computer Assisted Ordering (CAO)» Discounted on Assorted Truckload, consolidated by 3rd party logistics» Regular delivery appointment
State of Practice» 3rd party logistics in Europe, emerging in the U.S.» P & G
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Lean Operations: Process Synchronization and Improvement
Managerial Implications of the Bull Whip Effect
Cause Fluctuating Prices
Contributing factors High-Low Pricing Sell-in and Sell-thru not synchronized
Counter Measures EDLP Special Purchase Contract
State of Practice
P&G (resisted by some retailers)
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Lean Operations: Process Synchronization and Improvement
Managerial Implications of the Bull Whip Effect
Cause» Demand Signal Processing
Contributing factors» No visibility of end demand» Multiple forecasts» Long lead-time
Counter Measures» Access sell-thru or POS data» Single control of replenishment» Leadtime reduction
State of Practice
» Sell-thru data in contracts (e.g., HP, Apple, IBM)
» VMI (P&G and Walmart)
» EDI and Cross docking
66
Lean Operations: Process Synchronization and Improvement
Managerial Implications of the Bull Whip Effect
Cause» Shortage / Rationing Game
Contributing factors» Proportional rationing scheme» Ignorance of supply conditions» Unrestricted orders & free return policy
Counter Measures» Allocation based on past sales.» Shared Capacity and Supply Information» Flexibility Limited over time, capacity reservation
State of Practice» Saturn, HP» Schedule Sharing (HP with TI and Motorola)» HP, Sun, Seagate
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Lean Operations: Process Synchronization and Improvement
Efficient Consumer Response
Supplier WarehouseDistributorWarehouse
RetailStore
Consumer Household
Demand Flow
Product Flow
Unlinked ReplenishmentIn Supply Chain
A Single ECR Grocery Supply Chain
Supplier WarehouseConsumer Household
Demand Flow
Product Flow
DistributorWarehouse
RetailStore
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Lean Operations: Process Synchronization and Improvement
Comparison of Cycle Times Before and After ECR
DRY GROCERY CHAIN BEFORE ECR
Supplier Warehouse
38 days
Distributor Warehouse(Forward buy 9 days,
Inventory turn 31 days)40 days
Retail Store
26 days
104 days
PackingLine
Consumer Purchase
PackingLine
Supplier Warehouse
27 days
DistributorWarehouse
12 days
Retail Store
22 days
Consumer Purchase
61 days
DRY GROCERY CHAIN AFTER ECR
Source: Kurt Salmon Associates
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Lean Operations: Process Synchronization and Improvement
ECR Investments by Manu-facturers were less than planned.
ECR investments as a percentageof sales: - Actual ‘94 = .45
- Plan ‘95 = .60- Actual ‘95 = .34
Fastest GrowingECR Components
Average Industry Implementationof ECR Elements
Manufacturers 39% (up 3pp from YAG)Brokers 52% (up 8pp from YAG)Wholesalers 48% (up 4pp from YAG)Chains 70% (up 26pp from YAG)Indepdendents 46% (up 14pp from YAG)
• Cross-Docking Displays +21%• Cross-Docking ‘Turn’ +20%• Cat. Mgmt. Partnerships +19%• Scan-based Promo/Pymnt +15%• Cat. Mgmt. Org. Struct. +14%
46%
55%
46%
54%
34%
47%
EfficientAssortment
EfficientPromotion
EfficientReplenishment
ECR IMPLEMENTATION
ECR Industry Update:Evidence of Change Through 1995
Source: Kurt Salmon Associates
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Lean Operations: Process Synchronization and Improvement
Payback on ECR Investment is Excellent
Chain 1.9 yearsWholesalers 2.2 yearsManufacturers 3.0 yearsBrokers 3.0 years
Retailer Investment Priorities
• Headquarter Systems: IS/IT• Education/Training• Category Management Discipline• Business Process Re-engineering• Store Level Systems
Manufacturer Investment Priorities
• Information Technology• Education/Training• Customer Alliances• Business Process Re-engineering• Sales and Sales Promotion
ECR Industry Update: Investments
Source: Kurt Salmon Associates