JPK
Gro
up
June 14-15 • Boston, MA
Combining Lean and Agility to
Manage Demand Uncertainty
This session will explore methods to implement lean processeswhile still being agile enough to react to changes in demand
June 15, 1:00pm
View presentation online at:
https://jpkgroupsummits.com/attendee3
Richard Goyette
Principal Consultant at RIWGO Supply Chain Services
A strong proponent of integrating Lean Manufacturing principles with collaborative supplier
relationships, Rick has over 25 years experience in Supply Chain and Operations with
leading companies, such as Intel, Illinois Tool Works and Therm Fisher Scientific. In
February 2016 he founded Riwgo Supply Chain Services to help other small and mid-size
companies identify areas for improvement and drive process improvements in Supply
Chain and Inventory Management to help drive improvements to their bottom line.
Business Forecasting and Analytics Forum
BUSINESS FORECASTING AND ANALYTICS FORUMBoston, MA
June 14-15, 2016
Richard Goyette, C.P.MRIWGO Supply Chain Services
Explore the Lean and Agile supply strategies
and the potential to incorporate aspects of both strategies into a new model that can
provide benefits to both your company and your
customers.
© RIWGO Supply Chain Services
Lean is defined by the elimination of waste (muda)◦ Waste is anything does not add value to the
process, product, or service.
Anything the customer is unwilling to pay for.
◦ In a perfect system inventory would only exist at the point and time it is needed. Demand “pulls” the process.
Supply Chain is forecast driven, but activated by actual demand.
© RIWGO Supply Chain Services
Agile Supply is defined as positioning all means of supply so that they can quickly adapt to changing situations.◦ Must be able to withstand market changes, demand
fluctuations, variable customer requirements, etc.
◦ Requires rapid flow of information from markets and customers throughout entire supply chain.
Market responsive versus forecast driven.
◦ In a perfect system, the customer can get exactly what they want at its’ required time.
© RIWGO Supply Chain Services
AGILE
LEAN
HIGHLOWVOLUME
HIGH
VA
RIA
BIL
ITY
© RIWGO Supply Chain Services
• Lean Supply Chains can function well when demand uncertainty is low and product variety is minimized.• Principle means to win an order is
lowest cost.
© RIWGO Supply Chain Services
Agile Supply Chains can function well when production and fulfilment cycle times are short and materials are readily available.◦ Principle means to win an order is
customer value enhancement – Giving them exactly what they want.
© RIWGO Supply Chain Services
Pull
ProductionKanban
5S/ Visual
Control
Poke Yoke
Leveling
SMEDCellular
Mfg
Jidoka
Standard
Operations
Line
Balancing
TPM
© RIWGO Supply Chain Services
Lean:◦ Function well when demand uncertainty is low
and product variety is minimized.
“Any color you want, as long it is black”
Production is level loaded and slow to react to demand shifts.
Only as strong as it’s weakest link.
Heavily relies on historical information to set capacity, avoid overproduction, and prevent excess issues.
Missed opportunities!
© RIWGO Supply Chain Services
Agile:◦ Agile Supply Chains can function well when
production and fulfilment cycle times are short and materials are readily available.
SKU Proliferation
Utilize inventory to buffer uncertainty
Large number of changeovers.
Higher costs
Missed opportunities!
© RIWGO Supply Chain Services
Distinguishing Attributes Lean Supply Agile Supply
Typical Products Commodities, Consumer Electronics
Fashion GoodsConsumer Electronics
Marketplace Demand Predictable Volatile
Product Variety Low High
Product Lifecycle Long Short
Customer Drivers Cost Availability
Profit Margins Low High
Dominant Costs Physical Costs Marketability Costs
Stockout Penalties Long Term Contractual
Immediate and Volatile
Purchasing Policy Buy Materials Assign Capacity
Information Enrichment Highly Desirable Obligatory
Forecasting Mechanism Algorithmic Consultative
Source: Mason-Jones, Naylor, and Towill “Engineering the Leagile Supply Chain” 2000
© RIWGO Supply Chain Services
•Time to Market
•Concept to Delivery
•Order Entry to Delivery
•Response to Market Forces
•Lead Time
•Design, Conversion, Eng. Delivery
•Materials, Inventory
•Design and Engineering
•Conversion
•Quality Assurance
•Distribution
•Administration
•Inventory
•Materials
•Customer Support
•Product Service
•Product Support
•Flex to Meet Customer Demands
•Flex. to Meet Market Changes
•Meeting Customer
Requirements
•Fitness for Use
•Process Integrity
•Minimum Variances
•Elimination of Waste
•Continuous Improvement
Quality Service
Lead
TimeCost
© RIWGO Supply Chain Services
Agile Supply
1.Quality2.Cost3.Lead-Time
1. Service Level
Lean Supply
1.Quality2.Lead-Time3.Service Level
1. Cost
Market Qualifiers
Market Winners
Source: Mason-Jones, Naylor, and Towill “Engineering the Leagile Supply Chain” 2000
© RIWGO Supply Chain Services
Leagile: A hybrid solution combining elements of both lean and agile supply systems to better meet the needs of the market AND the organization.
© RIWGO Supply Chain Services
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
% o
f T
ota
l D
em
an
d
% of Products
Pareto Distribution
Lean
Agile
• Linear Demand
• Standard Work• Pull Systems• Automation• Dedicated
Lines• Analytical
Based S&OP
• Customization• Quick
Response• Flexible
Production Lines
• Safety Stock• Consultative
S&OP
© RIWGO Supply Chain Services
Customer ID Sum of Net Sales % of Total Cum Total Quad Class
689875 $2,870,983.00 18% 18% A
688769 $729,941.00 5% 23% A
688204 $670,000.00 4% 27% A
688125 $666,683.00 4% 32% A
689209 $538,000.00 3% 35% A
690135 $450,584.77 3% 38% A
688139 $420,040.00 3% 41% A
689375 $410,030.02 3% 43% A
…
.
…
.
…
.
…
.
27017 $150,053.05 1% 78% A
27382 $149,000.00 1% 79% A
687987 $148,000.00 1% 80% B
689537 $142,383.00 1% 81% B
677227 $140,060.45 1% 82% B
687699 $132,173.22 1% 83% B
688092 $131,780.00 1% 84% B
26675 $131,567.00 1% 84% B
…
.
…
.
…
.
…
.
688560 $9,345.45 0% 98% B
683874 $7,656.00 0% 99% B
687293 $2,868.25 0% 99% B
683746 $972.20 0% 100% B
Customer Pareto
SKU Sum of Net Sales % of Total Cum Total Quad Class
ACUP-10695 $2,606,581.22 15% 15% A
TWEN-11841 $2,517,050.00 14% 29% A
ACCE-10184 $2,130,917.70 12% 41% A
BECH-66509 $1,553,293.00 9% 50% A
Vect-10696 $1,063,677.06 6% 56% A
XYCF-11842 $1,058,875.77 6% 62% A
SEVE-10185 $670,000.00 4% 65% A
APPE-66510 $629,588.02 4% 69% A
…
.
…
.
…
.
…
. A
Vect-14135 $329,526.00 2% 77% A
XYCF-15281 $304,526.00 2% 79% A
YPLO-16427 $279,526.00 2% 81% B
ONMI-17573 $254,526.00 1% 82% B
MICW-18719 $229,526.00 1% 83% B
…
.
…
.
…
.
…
. B
AQAU-66514 $36,983.00 0% 99% B
SPMM-10701 $35,237.00 0% 99% B
GEMM-11847 $30,669.00 0% 100% B
FORT-10190 $26,101.00 0% 100% B
ECON-66515 $21,533.00 0% 100% B
MICW-10702 $16,965.00 0% 100% B
Customer Pareto
© RIWGO Supply Chain Services
Sales: $2.5M
Orders: 82
GM%: 31%
$ Per Inv:
$30.2K
Sales: $9.8M
Orders: 123
GM% 33.7%
$ Per Inv.
$79.3K
Sales: $.785M
Orders: 63
GM%: 29%
$ Per Inv:
$12.5K
Sales: $2.6M
Orders: 31
GM%: 26%
$ Per Inv:
$84.9K
A
B
AB
Product Classification
CustomerClassification
Perform Quad Analysis by crossing customer classification to SKU classifications.
Purchased Parts Inventory
Cost Per Unit Total
% of
Total
Parts
Active% of Total
ActiveInventory Value
% of Total
Inventory
Unit Cost <= $3 862 33% 725 34% $ 199,415 2%
Unit Cost $3>X<$10 508 20% 418 20% $ 197,563 2%
Unit Cost >=$10 1,219 47% 992 46% $ 9,807,508 96%
Total Inventoried Parts 2,589 2,135 $ 10,204,486
54% of all active purchased parts cost less than $10, yet only account for 4% of total inventory.
45% of all PO receipts and 50% of total transactions are related to parts that cost less than $10.
Resource allocation in nearly even between parts making up only 4% of Inventory valuation and the remaining 96%.
Frequency of PO receipts for low value parts makes it likely that shortages could occur that will impact ability to meet customer requirements.
Cost Per Unit Inventory
Transfers (*)
PO
Receipts
Total Inv
Trans.
Xaction
Per Part
Xaction Per
Active Part
(**)
PO Rec
Per Act
Part
Unit Cost < $3 13,880 3,608 17,488 20 24 5.0
Unit Cost $3>X<$10 8,840 4,618 13,458 26 32 11.0
Unit Cost >$10 19,962 10,253 30,215 25 30 10.3
Totals 42,681 18,479 61,160 24 29 8.7(*) = 50% of actual transactions to offset issue and receipt transaction
(**) = Active part = activity in last 12 months.
Plan for every part where resource allocation and return on effort is part of the consideration.
© RIWGO Supply Chain Services
De-Coupling / Postponement: ◦ Utilize lean principles to produce to common level.
◦ Customize to final configuration.
◦ De-Coupling points can vary based on product and needs of company.
◦ Goal should be to push de-coupling point as close to completion of product as possible.
Incorporate postponement / de-coupling potential into design criteria.
Develop Flex Stations to minimize waste while providing for multiple manufacturing options.
© RIWGO Supply Chain Services
Make to Order/ Standard Product
Product is completed to
established process from
start to finish.
•Custom products
•Make to Stock
Base Level Assembly
Utilize standard base
assembly and complete to
final configuration.
•Modular products
•Add-on configurations
•Higher complexity finished
configuration
End Stage Customization
Product is 90%+ complete
and is finished to order
•Custom covering
•Software programming
•Accessory kits
•Simple bolt on configurations.
Lean
Decoupling
Point 1
Lean
Decoupling
Point 2
Flex Points have multiple
configuration options that can be done in-line.
© RIWGO Supply Chain Services
Cellular Manufacturing:◦ Establish Agile cells dedicated to high service level
requirements.
“Don’t Sweat the small stuff”◦ Expand stocking parameters of the non-trivial /
many items to offset uncertainty and best utilize resources.
Breadman
Kanban Systems
VMI
© RIWGO Supply Chain Services
“Everything but the kitchen sink”◦ Include multiple options for final configuration with
the product to allow customer to configure to their needs.
Technology Based Solutions:◦ Software configurations
◦ 3D Printing
Plugs for multiple regions included,
limiting the need to adjust for specific
demand.
© RIWGO Supply Chain Services
Upselling / Order Conversion◦ Monitor demand and create plans to incentivize
customers to purchase targeted products.
◦ Specials / Promotions
Outsourcing◦ Move production of non-core products to 3rd
parties.
Turnkey Finished Goods
Sub-Assemblies
◦ Partner with 3rd party distributors to hold stock to increase availability and mitigate inventory risk.
© RIWGO Supply Chain Services
Richard Goyette
http://www.riwgo.com
https://www.linkedin.com/in/rickgoyette