Date post: | 02-Jun-2018 |
Category: |
Documents |
Upload: | anish-mathew |
View: | 219 times |
Download: | 0 times |
of 14
8/10/2019 5_session_lean Supply Chain Design 2014
1/14
1
SESSION#7: Design of Lean Supply Chains
Design of Lean Supply Chain:
Strategies for Inventory Reduction in
a Supply Chain
.Professor
Department of Management Studies
Indian Institute of Technology Delhi
Hauz Khas, New Delhi 110 016, India
Phone: +91-11-26596421 (O); 2659-1991(H); (0)-+91-9811033937 (m)Fax: (+91)-(11) 26862620
Email: [email protected]://web.iitd.ac.in/~ravi1
What is an Inventory System
Inventory is defined as thestock of any item orresource used in anorganization.
An Invent ory System ismade up of a set of policiesand controls designed tomonitor the levels of
2
inventory and designed toanswer the followingquestions:
What levels should bemaintained?
When stock should bereplenished? and
How large ordersshould be? i.e. what isthe optimal size of theorder?
Inventories: Why and Why not
CONS
Large inventories hide operational
problems;
Financial costs to carrying excess inventory;
Risk of damage;
3
Tracking and accounting costs; Risk of obsolescence and depreciation;
PROS
Allows managers to decouple operations;
Protects one system part from disruptions in others;
Reduces number of times orders are placed;
Provides a hedge against inflation;
Allows quantity discounts from suppliers;
Allows firms to meet unexpected demand.
8/10/2019 5_session_lean Supply Chain Design 2014
2/14
2
Creating a Lean Supply Chain
What is lean? A philosophy that seeks to shorten the time
between the customer order and the shipment tocustomer by eliminating waste John Shook
4
We can reduce lean to three elements (Womackand Jones)--
Flow
Pull
Striving for excellence
Elements of a Lean Supply Chain
Lean (JIT) Purchasing
Lean Logistics or JIT Transportation
Lean (JIT) Operations: Toyota Production
System
5
[A] For Fast Moving Items
Buffer Stock = [Lm D2 + Dm
2L
2 ]0.5
Reduction in Buffer stock by reducing uncertainty in
demand and supply
6
, Lm = Mean Lead Time
Dm = Mean Demand
D = Standard Deviation of demand
L = Standard Deviation of lead time
= Factor for a given level of service
8/10/2019 5_session_lean Supply Chain Design 2014
3/14
3
[A] For Fast Moving Items
Buffer Stock = [Lm D2 + Dm
2L
2 ]0.5
Reduction in Buffer stock by reducing uncertainty in
demand and supply
7
If better demand forecasting is done, Dwill be less
=== Leading to lesser Buffer stock
If Lead time (L) monitoring is done, Lmand
Lwill be less
=== Leading to lesser Buffer stock
8
STRATEGY-1: Avoid 99% syndrome for all items
because for every 1% increase in Service level Buffer
Stock increases substantially after 90% level of service
99%
100%
90%
9
Buffer Stock
Service Level
50%
Increase in BufferStock for over 99% ofservice level
8/10/2019 5_session_lean Supply Chain Design 2014
4/14
4
STRATEGY 2:Standardization,Variety Reduction &
Codification
10
STRATEGY-2: Standardization,Variety Reduction
& Codification
If n varieties can be standardized into 1,
then required inventory is (1/ root of n) and
system cost is (1/ root of n).
If 2 parts can be standardized into 1 then
11
nearly 30% reduction in inventory.
If 4 parts can be standardized into 1 then 50 %
reduction & so on.
12
ven or eve opmen
8/10/2019 5_session_lean Supply Chain Design 2014
5/14
5
STRATEGY 3: Better vendor development to reduce
the lead time and increased quality level.
Develop long term partnership with vendor
Develop vendors by providing
Training
Quality and Inspection capability
13
Technology transfer
Assured long term contract
Reliable vendors:
Limited in number
But trusted ones
Located near by
STRATEGY 4: Vendor
Mana ed Inventor VMI
14
Vendor Managed Inventory
VMI transfers inventory management (and
possibly ownership) from the customer to
the supplier
15
VMI synchronizes the supply chain
through the process of collaborative
order fulfillment
8/10/2019 5_session_lean Supply Chain Design 2014
6/14
6
VMI in use today
In the Factory
16
At customer sites
Advantages of VMI
Customer
less resources for inventory
management
assurance that product will be
available when re uired
17
Vendor
more freedom in when & how to
manufacture product and make
deliveries
better coordination of inventory levels
at different customers
better coordination of deliveries todecrease transportation cost
VMI Essentials
TRUST
Accurate information provided on a timely
basis
Inventory levels that meet demands
18
Confidential information kept confidential
TECHNOLOGY
Automated electronic messaging systems to
exchange sales and demand data, shipping
schedules, and invoicing
8/10/2019 5_session_lean Supply Chain Design 2014
7/14
7
19
JIT Purchasing
Characteristics of J IT Purchasing--
Purchase in small lots with frequent deliveries
Mutual, consistent improvement by the buyer andsupplier
Collaborative efforts between buyer and supplier
20
Efficient point-to-point communication linkages
The rights--
right quantity
right time
right quality
JIT Purchasing
What kind of items are best suited
for a ju st-in-time purchasing
21
8/10/2019 5_session_lean Supply Chain Design 2014
8/14
8
Supplier Relationships
Long-term, steady relationships with a few suppliers.
Negotiation based on a long term commitment toproductivity and quality improvement.
22
Interested in supplier capabilities.
Continuous improvement.
Product/process technology.
Design for manufacturability.
23
STRATEGY 6: Lean Logistics
Production
Inspection
Packing
Storage
Supplier Production
24
Shipping
Transport
Receiving
Inspection
Storage
Production
Trucking
Customer
Transport
Production
TraditionalJust-in-Time
8/10/2019 5_session_lean Supply Chain Design 2014
9/14
9
Lean Logistics
Replacement of expendable packaging withreusable containers
Frequent deliveries made to the point of use
25
(closed loop systems)
Lean Logistics
Long-term dedicated contract carriage replaces
commercial carriage as the primary mode of
transportation
Focus on frequent deliveries of small quantities of
many parts versus large quantities of fewer parts
26
Modified shipping and handling equipment
Side loading trucks
Smaller trucks (similar to beverage trucks)
Delivery at Point of use
STRATEGY 7:
CENTRALISATION OF
27
8/10/2019 5_session_lean Supply Chain Design 2014
10/14
10
Supplier
STRATEGY 7: Centralization of stocking in a multi-echelon distribution system
28
Traditional: Decentralized System
Warehouses
Retailers
Supplier
Centralized Systems
29
Warehouse
Retailers
STRATEGY 8: Staggering the
supplies
30
8/10/2019 5_session_lean Supply Chain Design 2014
11/14
11
STRATEGY 8: Staggering the
supplies
31
[B] Slow Moving Items: Expensive
slow moving spares
(1)Specials-required only at predetermined
date in scheduled shut down or project
materials.
Policy: MRP policy.
32
Do not stock but place an order just in time so
that it arrives on a due date.
Re uired date
33
L
Order ReleasedDate (ORD)
KL
ORD
If L is uncertain with (Lm, L):
then KL= safety lead time
K is a factor which depends up on acceptable risk of delay
8/10/2019 5_session_lean Supply Chain Design 2014
12/14
12
Adequate Warning Spare
If lead time is less than the deterioration
signal in the item
then do not stock but place an order onwarning.
34
If lead time is reduced by faster mode theninventory can come down substantially
Procurement simplification and expediting is abetter strategy than stocking
[C] STRATEGY: Spare bank or
spare pooling
Consider these two systems:
Decentralized store#1 Project site#1
35
Project site#2Decentralized store#2
Project site#2
SupplierCentralized
store
Project site#1
[C] Spare parts pooling
If there are n locations then keeping 1/ root n
centrally will meet the demand adequately
This is particularly useful for slow-moving
expensive spares:
36
Turbine rotor
Project site#2
SupplierCentralized
store
Project site#1
8/10/2019 5_session_lean Supply Chain Design 2014
13/14
13
[C] Indadequate Warning Spares
One for one ordering
[(s-1), s] policy:
s is the optimal number of spares to be
stocked which will be typically 1 or 2.
37
[D] Non-moving materials: Dead
stock
Return to vendor
Redistribute among other locations
Reuse elsewhere
38
Donate to earn goodwill
Dispose off optimally: Inventory control in
reverse gear
Disposal Policy: Frequency of disposal and
process
Inventory pull systems/visible signals
Facility layout changes/work cells
Set up reductions
Level build schedules
Uniform loadin
Implementing the Lean Supply Chain
through focus on Lean Operations
39
Total quality and continuous improvement
Standardized material handling/containers
Product and process simplification
Total preventive maintenance
Flexible workforce
Teamwork
Right performance measures
8/10/2019 5_session_lean Supply Chain Design 2014
14/14
14
Find the best supplier and engage early in the
design process Partner with key suppliers that have high
capability for design and supply
Implementing the Lean Supply Chain
40
where you build your product
Shorten the supply chain by having suppliersclose, frequent deliveries, and leveledproduction plans
Develop pull systems with suppliers