Seven Supply Chain Wastes

The Seven Deadly Supply Chain Wastes
Applying Toyota Production System Principles to Create Logistics Value

Joel Sutherland
Managing Director
Center for Value Chain Research
Lehigh University

http://www.scmr.com/article/CA6578682.html&

Author Information:

Joel Sutherland is managing director, Center for Value Chain Research at Lehigh
University, and past vice president of Denso America (Toyota's largest supplier).

Bob Bennett is president of Lean Consulting Associates, LLC, and former group
vice president of Toyota Motor Sales USA, Inc.

All rights reserved, Joel Sutherland, 2009

The Roots of TPS (Lean)

1920’s: Ford applies “Continuous Flow”
concepts to assembly line processes

“Quality means doing it
right when no one is
looking”

Henry Ford



1930’s-1950’s: Toyota expands concept to
create the “Toyota Production System” (TPS)

Dr. Shigeo Shingo and Taiichi Ohno were partners in developing the
Toyota Production System, now known as Lean.
Taiichi Ohno provided the vision and the drive; Dr. Shingo solved the
practical problems and translated Ohno's vision into reality.



1980’s: Motorola formalizes the Six Sigma
Discipline for Process Measurement

1991: MIT completes 5 year study of auto
industry, renames TPS “Lean Production”


Key Principles of TPS
Muda = Anything that is wasteful and
doesn’t add value
Process Focus = Cross-organizational cooperation to
optimize total system performance

Genchi Genbutsu = Collecting facts and data at the
actual site of the work or problem
Kaizen = Continuous and incremental
process improvement
Respect between management,
Mutual Respect =
employees, and business partners


Muda

Every activity in your organization does one
of the following:
Adds value for your customers—and
should be maintained
Is waste (muda)—and should be
eliminated


Process Focus
Most companies place the organization chart in the
foreground
Managers think vertically to optimize their area,
department, or function.
Purchasing Manufacturing Logistics Sales

Horizontal flow of value to customer gets lost.

Process Focus
Purchasing Manufacturing Logistics Sales

What results
do we need
to achieve?
(Vertical
Coordination)

What Process are we going to use to get there?
(Horizontal Coordination)


Organizational Alignment
Support
# Objective Target Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Depts
Implement Pull Sales
1 On-time 98%
Make right part at right time
delivery Purchase
improvement Logistics
Problem Solving
Mfg
Quality
2 Product 20% Qualify suppliers
HR
quality Data collection Mfg
improvement
Purchase
Solve two problems per month

Deploy plan Mfg
3 Cost -15%
reduction Logistics
Standardize Work, Kaizen, Line Balancing
HR
Productivity improvement Finance


Genchi Genbutsu

It’s amazing how many
opportunities you can
identify by carefully
observing operations .


Kaizen
Make problems visible so they can be identified and
solved – then move on to the next opportunity.

12

Kaizen: Asking the Right Questions
Dr. Shigeo Shingo was walking through a factory with a group of
engineers. He stopped in front of a punch press and watched two
workers loading and unloading sheet metal. He looked at his stopwatch
and asked, quot;What percentage of the time are they adding value
and what percentage of the time are they adding waste?“

One engineer said, quot;100%, they are always working.quot; Another said,
quot;Only 70%.quot; Another said, quot;50%.quot;

Dr. Shingo laughed and said, quot;Only 14%. It is only when the press
is bending the metal are we adding value --the rest is waste.“

Source: www.lean-briefing.com


Kaizen: Asking the Right Questions
Then Dr. Shingo asked, quot;What can you do to improve the ratio?“

One engineer spoke immediately, quot;You can put the blank sheets onto a
leveler, like dishes in a cafeteria, keeping the steel always at the height
of the press and reducing the bending time to pick up a sheet.“

Another engineer said, quot;You can put a spring at the back of the press to
automatically reject the formed sheet after the operation so the worker
doesn't have to reach into the press.“

Dr. Shingo’s genius was to understand what waste was and
stay focused on its removal. He knew there was real power in
asking the right question --not telling people what to do.

Source: www.lean-briefing.com


Kaizen—”The Five Why’s”
Problem: Washington Monument was disintegrating
Why is it disintegrating? Use of harsh chemicals
Why use harsh chemicals? To clean pigeon poop
Why so many pigeons? They eat spiders and
there are a lot of spiders at the monument
Why so many spiders? They eat gnats and
there are a lot of gnats at the monument
Why are there so many gnats? They are
attracted to the light at dusk
Solution: Turn on the lights at a later time


Mutual Respect

Trust Employee
Organizational
Satisfaction is
Mutual
Prosperity is
realized through
Respect
achieved through
Continuous
Continuous Continuous
Improvement Process
Improvement Improvement



Over-
Delay/
production
Waiting

Space
Inventory
Errors

17

1. Overproduction

Delivering products before needed

Requesting a quantity greater than needed
for end use.
Requesting products or components earlier
than needed.


Overproduction--Example

“Let’s load the trailers and let them
wait until we get an order.”

Overproduction--Results

Firm orders =
10,000~12,000/day
16,000~20,000/day
Overproduction =
4,000~10,000/day

Problem: Inaccurate demand forecasting

Solution: Demand forecasting process improved to
include weather thereby aligning production with demand

Results: 35% improvement in sales forecast accuracy


2. Space

Less than optimal use of space

Less than full/optimal trailer/container loads
Cartons not filled to capacity
Inefficient use of warehouse space


Space--Example

The curse of the 60” x 60”
Pallet

Space--Solving the Problem

Automobile Air Conditioner

52”

26”
26”


Space--Results

Packaging redesigned for 40” x 48” pallets
Reduced transportation costs 30~40%
More efficient use of dock doors
Pallet costs reduced significantly


3. Delay/Waiting

Any delay within a process or between the end
of one activity and the start of the next activity

Waiting for a dock to clear
Waiting for loading/unloading
Delay between receiving customer order
and fulfilling the order


Delay/Waiting--Example

Strict labor union rules—29 job
classifications
Multiple handoffs vs. continuous
flow—e.g., receiving/put-away
& picking/shipping
Significant delays incurred from
one process to the next
Joint genchi genbutsu with
union & management


Delay/Waiting--Results

Reduced job classifications from 29 to 18
>30% improvement in receiving/shipping
productivity
Improved order to delivery cycle times


4. Transportation/Conveyance

Unnecessary transport that results
in added cost

Out-of-route stops
Excessive backhaul
Locating fast moving inventory to the back of
the warehouse


Transportation/Conveyance--Example

Shippers had excessive deadhead 5 Retail
Shippers
Matched/balanced freight patterns (10 loads/week)

Selected regional carriers
Arranged committed capacity
Established lower rates 1 Paper
Shipper
(10 loads/week)


Transportation/Conveyance--Results

Reduced deadhead from 16% to 3%
Reduced number of carriers by 80%
On-time pickup & delivery >98%
Cost savings of 10% to 15 % per shipper


5. Inventory

Any logistics activity that results in more
inventory being positioned than needed or
in a location other than where needed

Too much inventory due to early deliveries
Receiving quantity greater than needed
Inventory in the wrong DC


Inventory--Example

(Curtin Matheson Scientific)

“But we need to have all our
inventory close to the customer.”


Inventory--Example

Market segmentation
Clinical (doctors offices)
Industrial (Fortune 500)
Purchasing patterns/processes
Clinical (out-of-stock)
Industrial (monthly purchase orders)
Lead time requirements
Clinical (1 day)
Industrial (5 days)
Network adjustment


Inventory--Results

Reduced network from 22 to 19 DC’s
Clinical—19; Industrial—5
Slow moving—Central DC
Reduced inventory by 30~35%
Improved fill rate


6. Motion

Unnecessary movement of people
Walking, reaching, and stretching
Caused by poor storage arrangement or poor
ergonomic design of packaging work areas


Motion--Example

“Because we’ve always done it this way.”

Motion--Example

One continuous flow Reduced storage
Handled once Reduced inventory
~40% travel reduction JIT


7. Errors

Any activity that causes rework,
unnecessary adjustments or returns, or
warranty claims
Damage, defective
Inventory discrepancies & adjustments
Billing errors
Quantity or labeling errors


Errors Label:
Part:
P/N:
Problem:12345 12346
12346

P/N Verification Sheet
Solution:

P/N:
P/N:
P/N:
12345
P/N:
12345
12345
P/N:
12345
12345
1 2 3 4 5
P/N:
12345
12345
P/N:
12345
12345
12345
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12345
5 units 7 labels

1 2 3 4 5

Key Takeaways
Culture must be fully understood, embraced and
practiced.
Ensure metrics and targets are aligned with the
new lean behaviors you want.
Necessary to utilize full human potential of every
employee.
Requires top-down approach.
Senior executives must demonstrate commitment.


Questions


Seven Supply Chain Wastes

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