LEAN PRACTICESAUTOMOBILE INDUSTRY SUBMITTED BY: AMALESH DEKA RAJEEV SHARAN ALOK LIEVENS DFT (AP-08)/ NIFT BANGALORE

Introduction- LeanThe purpose of lean is to remove all forms of waste from the value stream. Waste includes cycle time, labor, materials, and energy.The chief obstacle is the fact that waste often hides in plain sight, or is built into activities.

Benefits Lean manufacturing delivers an insurmountable competitive advantage over competitors who dont use it effectively.

Benefits(1) Lower production cost higher profits and wages Cost avoidance flows directly to the bottom line.(2) Supports ISO 14001 and "green" manufacturing Reduction of material waste and associated disposal costs higher profits(3) Shorter cycle times: make-to-order vs. make- to-stock

Bottom Line and the Language of Money The first comprehensive implementation of lean manufacturing yielded: Stock appreciation of 63 percent per year, for 16 years (not counting dividends) 7.2 percent annual wage growth

Implementation of fundamental leanprinciples at Automobile Industry

Lean Implementation atToyotas Existing Supply Chain and CustomerResponsiveness Initiatives

Enterprise ResourcePlanning System (ERP)

Enterprise Resource Planning System (ERP) SAP Automotive ERP Suit Main means of information flow between Toyota and its counterparts worldwide. Tighter collaboration links With SAP, gain: Outstanding strategic, Operational, Financial, Marketing positions

E-Marketplace iStarXchange Initiative with i2 Technologies Inc. Allow subscripted members able to view a single catalogue to: view information on parts checking the prices and availability conduct transaction online forecasting supply and demand delivery cycle Improved forecasting Enhancing the planning Enhance deployment and replenishment of the inventory

Trade Matrix system Initiative with i2 Technologies Inc Automates with equipment manufacturer and suppliers in terms of : sites inventory management warehousing Logistic and shipping

Main SAP Automotive Suit ERP System Main means of information flow between Toyota Australia and its counterparts worldwide. Tighter collaboration links between TMCA and TMC Logistic and shipping Overall Value Chain

BEA Web-logic Integration 8.1 Integrated within the SAP automotive suit Main IT Backbone of TMCA Based on Open Standard Allow connection to their numerous partners in the value chain via an assortment of systems in Australia Integrate the systems and processes that connects Toyota Australia and its trading partners

BEA Web-logic Integration 8.1 Functions: Electronic proof of delivery Online accounts payable status for suppliers Fleet management integration The Toyota Vehicle Order Processing System (TVOPS) Advance Shipping Notice for vehicle deliveries Vehicles inventory synchronization

BEA Web-logic Integration 8.1Customized BEA Application

SAP International collaboration Raw Material Suppliers End Customer SAP/BEA Dealers1st Tier/ 2nd TierSuppliers Manufacturing Warehouse/ Plants Parts Centers

Electronic Kanban-Card System Identical in function to the physical kanban cards used by Toyota in Japan 4 main purpose: Sole means of requesting new parts Send for every order shipment Send to a specific supplier plant Establishing the mix and volume criteria for assessing if an order was correct

Electronic Kanban-CardSystem Kanban= Card (Japanese)

Electronic Kanban-Card SystemPARTS TOYOTAS UPPLIER (TMCA) Ma te ri a l Re qu i re m e n ts Fo rca s t O rde rs Pl a n n i n g ANS I X1 2 8 3 0 Pl a n n i n g Fo re ca s ts Ka n ba n s De l i ve ry Do ck e t Ka n ba n S o rti n g Pro du cti o n Li n eDe s pa tch i n g G o o ds Ka n ba n s De l i ve ry Do ck e t Re ce i vi n g Acco u n ts Re m i tta n ce Advi ce Acco u n ts Re ce i va bl e EDIFAC T REMADV Pa y a bl e EFT EFT BANKING S YS TEM

Australian Automotive Network eXchange (AANX) Four major car manufacturers in Australia are involved Numerous service providers and non-key suppliers Provides IP based Extranets for the automotive industry in Australia Operates as a virtual point network (VPN) Allows users to send date to each other in a reliable and secure manner

Australian Automotive Network eXchange (AANX) Main components: A network that is based on available Internet technology Operated by agreed and standardized service levels. Demonstrating proactive management of trading partner connections Practice the best standard of security and privacy for transactions and interoperability between service providers

Australian Automotive Network eXchange (AANX) Software Gateway Router Dialup tradingTrading PartnerPartner Permanent Connection IBM Laptop Firewall Hardware Compatible Computer Gateway Modem Modem Equant Connect Exchange Point Permanent Connection AANXO Monitor CASP Trading Keytrust Partner Router Hardware Community Firewall Gateway Directory & Authentication AANX Framework

Supplier Website Toyota Supplier.com www.toyotasupplier.com TMCA focused on core competencies in high-end design engineering and system integration Toyota Australia needs highly focused core competency oriented suppliers.

Supplier Website Small and diverse companies though have the ability to display such potential to add Innovation Flexibility and Strength to TMCAs supply base. Supplier-centric web site Provide opportunities to expand TMCA supplier network.

Supplier Website Access Flow From Toyota Australia Suppliers web site

Agent Oriented Domestic Marketplace Will be able to support a broader base of services given further growth in e-Market infrastructure Baseline interaction and directory services Specialty market services, such as: Dynamic trading; Cooperative supply chain integration and management Enables and facilitates the relationship between business participants Suppliers and service providers; and Supporting systems

Agent Oriented Domestic Marketplace Many-to-many relationships supported between TMCA and these business partners. Enables both TMCA and suppliers to leverage economies of scale in their trading relationships Allows access to a more liquid marketplace Further allows the use of dynamic pricing models e.g. Auctions (one of the services provided in the proposed e-marketplace) Improve the economic efficiency of the market where uncertainty about prices and demands are common.

Agent Oriented Domestic Marketplace Many-to-many relationships supported between TMCA and these business partners. Enables both TMCA and suppliers to leverage economies of scale in their trading relationships Allows access to a more liquid marketplace Further allows the use of dynamic pricing models e.g. Auctions (one of the services provided in the proposed e-marketplace) Improve the economic efficiency of the market where uncertainty about prices and demands are common.

Agent Oriented DomesticMarketplace Logical concept of the Domestic e-Marketplace

Agent Oriented DomesticMarketplace Logical concept of system Integration.

Real Time Inventory Tracking Module To be incorporated into the BEA system, which comprises of 4 agents Forecast Agent Inventory Agent Order Agent Multi - Tier Visibility Agent

Real Time InventoryTracking Module

Agent Based Supply Chain An agent-based transport and logistics coordination system (collaborative e-market), are designed to accomplish transport and logistic coordination tasks among different automotive manufacturers in Australia. Consist of 4 generic roles agents in supply chain: Distribution Hub Agent Logistics Coordinator Agent, Manufacturer Agent Transporter Agent.

Agent Based Supply Chain

Integration

Fords Lean Implementation at Supply Chain and Customer Responsiveness Initiatives

Existing Supply Base As the company had grown over the years, so had the supply base In the late 1980s: there were several thousand suppliers of production materials in a complex network of business relationships Suppliers were picked primarily on the basis of cost, little regard was given to: overall supply chain costs complexity of dealing with such a large network of suppliers.

Existing Supply Base As the company had grown over the years, so had the supply base In the late 1980s: there were several thousand suppliers of production materials in a complex network of business relationships Suppliers were picked primarily on the basis of cost, little regard was given to: overall supply chain costs complexity of dealing with such a large network of suppliers.

Existing Supply Base Beginning in the early 1990s: Shifted toward longer-term relationships with a subset: tier 1 tier 2 below suppliers. Ford made its expertise available: just-in-time (JIT) inventory total quality management (TQM) statistical process control (SPC)

Ford Production System Ford 2000 initiative produced five major, corporation wide reengineering projects One was Ford Production System (FPS) Aimed at making Ford manufacturing operations: Leaner more responsive more efficient

Ford Production System Aspired to level production and move to a more pull-based system, with: synchronized production continuous flow Stability throughout the process

What was Fords intentionswhen reengineering itsproduction system, and howwere they going to do this?

Exhibit 2 Moving from Push to Pull Process Push PullDesign Design strategy Please everyone Mainstream customer Vehicle More is better wants minimal combinationsMarketing Pricing strategy Budget-driven Market-driven Vehicle purchase Higher Lower IncentivesManufacturing Capacity planning Multiple material/ Market-driven andand supply capacity constraints, (no constraints FPV/ Driven by program CPV* + 10% for Budget vehicle, +15 for components Schedule and build Maximize production Schedule from make whatever you customer-driven order can build bank, build to schedule

Exhibit 2 Moving from Push to Pull Process Push PullDealer network Dealer ordering Orders based on Orders based on Allocations and customer demand Capacity constraints Order to delivery Longer (60 + days) Shorter (15 days or times less) Inventory High with low Low with rapid turnover turnover Dealership model Independent Company-controlled dealerships, dealerships (Ford negotiations with Retail Network) company

One Important Part of FPS was Synchronous Material Flow (SMF) Ford defined as a process or system that produces a continuous flow of material and products driven by a fixed, sequenced, and leveled vehicle schedule, utilizing flexibility and lean manufacturing concepts. One key to SMF was In-Line Vehicle Sequencing (ILVS): used vehicle in-process storage devices (such as banks and ASRSs) and computer software to assure that vehicles were assembled in order sequence

Order to Delivery The purpose of OTD: reduce to 15 days from 45 to 65 days Pilot studies in 1997 and 1998 identified bottlenecks throughout Fords supply chain: Marketing material planning vehicle production transportation processes

Fords Approach to Implementing an Improved OTD Process Ongoing forecasting of customer demand from dealers A minimum of 15 days of vehicles in each assembly plants order bank to increase manufacturing stability Regional mixing centers that optimize schedules and deliveries of finished vehicles via rail transportation A robust order amendment process to allow vehicles to be amended for minor color and trim variations without the need to submit new orders

Ford Retail Network July 1, 1998, launched first Ford Retail Network (FRN) in Tulsa, Oklahoma under the newly formed Ford Investment Enterprises Company (FIECo). Two primary goals: to be a test bed for best practices in retail distribution and drive those practices throughout the dealer network to create an alternative distribution channel to compete with new, publicly owned retail chains such as AutoNation.

Enterprise Model Comparison Ford Breakthrough Objectives/Key Initiatives Customers Dealers Ford Retail Network OT D Order Mgmt FPDS Bill of Material DTD Outbound Logistics Supply chain Leadership Plan/Site FP Operations S Inbound FP Logistics S CFOP Suppliers

The EndAny questions?