Lean Pull Design Webinar - Institute of Industrial Engineers

All right reserved. © Copyright 2010 Invistics 1 www.invistics.com

Lean Pull Design Webinar

August 24, 2010

Tom Knight, Invistics

All right reserved. © Copyright 2010 Invistics www.invistics.com

• Founder & CEO, Invistics

• Manufacturing & Supply Chain Career

About Today’s Speaker

• IIE Member and Frequent Speaker

Tom Knight


Agenda

Urgent Manufacturing Challenges

Implementing Lean & Pull in High-Mix Manufacturing

Best Practices & Case Studies

Questions & Discussion


– Fierce offshore competition

– Shorter product life cycles

– More product variants and SKUs

– Standardizing best practices across plants

– Complex global supply networks

– Heightened regulatory compliance



Increased demands by customers:

Consumer Products adding 20% more SKUs each year

Chemicals experiencing 60% volatility in some SKUs

Product Proliferation is Hitting Every Industry


Then Now

• Long runs

• High utilization

• Dedicated

equipment

• Repetitive

• Stable demand

• Short runs

• Faster changeovers

• Shared equipment

• Responsiveness

• Highly variable demand

High-volume High-mix

Every Industry Is Changing


• It’s not about the high-

volume assembly line

• It’s about :

– flexibility & customer service

– time to market

– new product introductions

– off-shore competition

– reducing cost & inventory

Manufacturing has changed


Agenda






“Companies with relatively mature lean processes have

recorded 68% faster revenue growth over the past 20

quarters than non-lean companies”.

“Lean manufacturers enjoyed net profit margins that

averaged 26% higher than profit margins reported by

manufacturers that haven’t pursued lean practices”.

Manufacturing Insights’ Global Performance Index

2007

Why Are Companies Pursuing Lean?


Non-value Added Time

Movement

Storage

Waiting in Queue

Waiting for Inspection

95%5%

Value Added

“Touch Time”

Non-value Added

95+% of Time for an Order is Non-Value Added Waste


Lean Provides the Tools for Eliminating Waste


Push

Produces product using forecasts or schedules, without regard for what has been consumed

Leads to excess inventory since no “cap” in place

ERP/MRP is an example

Pull

Controls the flow of product by replacing only what has been consumed

“Caps” inventory and replenishes what was sold, usually in appropriate lot sizes

Kanban is an example

Push vs. Pull


Raw Material

“Push” leads to Excess Inventory, hiding wasteful “rocks”

Sea of Inventory

Finished

product to the

customer

Long

changeove

r times

Quality

Problems

Large

Lot

Sizes

Component

shortages

Communication

Problems

Metrics

motivating

high

inventory

Unplanned

Downtime

No “Cap”

on

Inventory

Levels

Demand

variability

Poor

Planning

Tools


Raw Material

“Pull” sets “cap” on inventory, providing the discipline to remove wasteful “rocks”

Long

changeove

r times

Quality

Problems

Large

Lot

Sizes

Component

shortages

Communication

Problems

Metrics

motivating

high

inventory

Unplanned

Downtime

Sea of Inventory

Finished

product to the

customer

No “Cap”

on

Inventory

Levels

Demand

variability

Lower the Water &

Remove the

Rocks

Poor

Planning

Tools


Kanban

Squares

A Simple “Pull” Example


Machine

1

Machine

2

Machine

3

Raw

Materials

Fin.

Goods

Kanban Card

Part Number: 12345

Quantity: 10

Stage: Machine 2

12345

Kanban Card

Part Number: 12345

Quantity: 10

Stage: Machine 3

12345

Kanban Card

Part Number: 12345

Quantity: 10

Stage: Machine 3

12345

Kanban Card

Part Number: 12345

Quantity: 10

Stage: Machine 2

12345

Kanban Card

Part Number: 12345

Quantity: 10

Stage: Machine 2

12345

Kanban Card

Part Number: 12345

Quantity: 10

Stage: Fin Goods

12345

Kanban Card

Part Number: 12345

Quantity: 10

Stage: Fin Goods

12345

Kanban Card

Part Number: 12345

Quantity: 10

Stage: Fin Goods

Kanban Card

Part Number: 12345

Quantity: 10

Stage: Fin Goods

Pull Using “Kanban” Cards


Prerequisites

Part Specific cards: Inventory must be held for every part every day

(even if the part is consumed or ordered infrequently)

Pull Signals: Requires replenishment signal to be visible upstream

(paper, bin, open space, video feed, etc.)

Organizational

Discipline:

Requires:

• discipline to not lose cards

• discipline to only produce more when card arrives

Will Traditional Kanban Work for You?


Adapting Lean beyond Automotive:

High-Mix Industries


What is Different in High Mix Industries?

Manufacturing

CharacteristicAutomotive

High Mix Industries

(Discrete & Process)

Product Demand Stable Variable

Product Volume High Variable

Product Mix Low High

Production Flows Dedicated Equip. Shared Equipment

Equipment Utilization Low (3rd shift free) High

Equipment Changeovers Short, Infrequent Long, Frequent

Equipment Reliability Reliable Unreliable


Beware of

“automotive” lean tools in

high-mix manufacturing environments


Toyota High-Mix

#1

Value Streams

Dedicated cells for

similar products

Flow Paths through

shared equipment

#2

Organization

Dedicated people for

each cell

Focused factories

aligned to flow paths

#3

Performance Measures

Visual line of sight

metrics like Heijunka

boards

Flow Path metrics

leveraging enterprise

software

#4

Bottlenecks and

Capacity Planning

Fixed bottlenecks &

Rules of thumb to

dedicate capacity

Shifting Bottlenecks

& Optimization of

capacity buffers

#5

Inventory Optimization

Rules of thumb to

slowly lower “water

levels”

Optimization of

inventory buffers

using operations

research

#6

Lot Sizing

Rules of thumb like

EPEI

Optimization of lot

sizes/campaign

sizes/rhythm wheels

#7

PullPart-specific Kanban

Part-generic

techniques like

CONWIP

Seven Best Practices:

Adapting Lean to High-Mix


Agenda






Customer Details

Products: Food additives, pharmaceutical excipients, and other specialty chemicals

Results: Cut working capital 35+% in 3 months at initial site in Europe. Now expanding pull world-wide to 9 sites and 6 distribution centers in Europe, North America, and Asia

Products: Prescription & Over-the-Counter Drugs

Results: Cut working capital 80% while increasing throughput, productivity, and customer service. Plant went from risk of shutdown to leading plant in company, and was awarded “Team of the Year” within overall Pharma industry.

Products: Chemicals and Prescription Drugs

Results: Cut working capital 50%, while increasing throughout and asset utilization and maintaining perfect customer service levels.

Case Studies: Best Practices Using Pull


Prerequisites for Pull

Necessary

Leadership with lean experience and a commitment to pull

Organizational Culture

Receptivity to change

Discipline to produce only when more inventory is needed

Nice But Not Necessary

Accurate forecasts

Stable demand

Reliable equipment

On-time vendors

Dedicated cells

Fast changeovers

Small lot sizes


Best Practices for Pull

Build organizational consensus on:

The business case for pull

The best pull method(s) for your business

Demonstrate quick success in a pilot

Scale pull across sites and the supply chain

Sustain benefits

Control “water” level using software

Remove “rocks” using Lean/Six Sigma


1. Analyze four key metrics:

• Inventory

• Cycle Time/Throughput Time

• Customer Service

• Throughput

2. Estimate the value of inventory reductions:

• What is the value of reducing cycle time by 1 day?

• What other savings will result as inventory is reduced?

3. Estimate additional benefits, such as

• Improved customer service due to shorter cycle times

• Improved first pass quality or yield due to shorter cycle times

• Ability to better prioritize „rock removal‟ projects

Building The Business Case


Typical ROI for Pull is often >300%,

with payback in < 1Year


• High-Volume Make-to-Stock:

– “Part-Specific” Kanban: best for repetitive make-to-stock businesses, but you must hold inventory for each part every day.

• High-Mix or Make-to-Order

– “Part-Generic” Kanban

– Constant Work-in-Process (CONWIP)

– Drum Buffer Rope (DBR)

• All four pull “flavors” will “cap” inventory and replenish actual demand up to this cap.

Design Best “Flavor” of Pull for your business


Building Consensus: Pull Design Workshops

DC 3

Columbus

4 SKUs

Inboxes

Sorted by

Product

Wheel

Ferment

ationBledning

Recover

y

Pack to

WIP

Re-

blend

Pack to

FG

Raw Material

WIP

Re-pack

Quality

Q.I.

DC2

Hodges

20 SKUs

DC4

Antwerp

6 SKUs

Ship to

Customer

Buy

Raw

MaterialDirect Ship40%

60%

Pete

Reblend Loop

Pull sig

nals

For CDL

Quality

2-14

days

CDL

Pull signals from

Remote DCs

DC1

San Diego

Pull signals from

San Diego DC

Lyman

sets targetsPul

l sig

nals

For R

eble

nd

Pull signasl from

WIP

Pull Design for SKUs using 2 Loop Replenishment

Pete

CDL LoopCDL Inbox

Reblend Inbox

• Design the best “flavor” of pull for your plant/supply network

• Build consensus on how pull will work

• Scope out a quick, low-risk pilot to implement this design,

and prove the benefits & business case


Option 1: “Generic” Kanban

Allows you to have 100‟s of part numbers with each part family

Pull Design Options

Authorize

Inventory

Authorize

Inventory

Authorize

Inventory

Authorize

Inventory

Authorize

Inventory

Weigh Kit &

Assign to

batch

Initial

Blend

Final

Blend

1

Compress

1

Compress

2

Coating

Pack & Ship

Final

Blend

2Encapsulate

Wet

Granulation

Part Family 1

Part Family 2

Authorize

Inventory

Authorize

Inventory

Authorize

Inventory

Authorize

Inventory


Option 2: Constant Work in Process (CONWIP)

A series of operations with a single inventory target

Pull signal sent to first operation when inventory reaches target level

Similar to eKanban, but more flexible in number of operations in each loop

Pull Design Options

Weigh Kit &

Assign to

batch

Initial

Blend

Final

Blend

1

Compress

1

Compress

2

Coating

Pack & Ship

Final

Blend

2Encapsulate

Wet

Granulation

Part Family 1

Product 2

Authorize

Inventory

Authorize

Inventory


Option 3: “Drum-Buffer-Rope

Based on “Theory of Constraints”

Similar to CONWIP but loops always end at bottlenecks

Pull Design Options

Weigh Kit &

Assign to

batch

Initial

Blend

Final

Blend

1

Compress

1

Compress

2

Coating

Pack & Ship

Final

Blend

2Encapsulate

Wet

Granulation

BOTTLENECK

BOTTLENECK

Product Family 1

Product Family 2

Authorize

Inventory

Authorize

Inventory

Eli Goldratt

http://search.barnesandnoble.com/booksearch/imageviewer.asp?ean=9780884271789&z=y


Case Study: Pull using

Constant Work-in-Process (CONWIP)

Bottleneck

Weigh-up More of Product 2

When WIP Drops Below Target

Weigh-up More of Product 1

When WIP Drops Below Target

Initial

Blend

1

Product 1Final

Blend

1

Compr.

1CoatingE E

Product 2Final

Blend

2Wet

Granulation

Encap-

sulationE

Weigh

Kit &

Assign

to Batch

Compr.

2Pack

&

ShipBottleneck


Case Study:

Pull Pilot to “Dial-In” Inventory

WIP vs. CONWIP Target during Pilot Project

-

5

10

15

20

25

30

35

40

45

8/23 9/22 10/22 11/21 12/21 1/20

Kilo

s [

1000

s]

1st CONWIP Target:

WIP Dropped &

Stabilized2nd CONWIP Target:

WIP Dropped &

Stabilized

(Target

Removed:

WIP Grew

again)

Inventory vs. Pull Target During Pilot


Case Study: Implement pull using web pages and existing data


Case Study:

Pull Design Workshop

FGFGWIPWIPRMRM

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Xanthan 3 / NAWX

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Xanthan 2

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Designed for:

• Make-to-order & make-to-stock

• Shared, unreliable equipment

• Large forecast error

• Other process variability


Best Practices for Sustainable Pull Benefits

Establish clear responsibilities

Produce only when authorized, e.g. red light report

Update caps and reorder points monthly

Reward and recognize removing rocks & lowering water

Automate information flow to minimize maintenance effort

Utilize existing inventory data from ERP/MRP

Use easy-to-understand web pages

Scale pull to all sites holding inventory (plants & DCs)

Develop pull designs locally to build consensus

Establish company-wide best practices for pull (software helps here)


Poor Lead

Time

Manageme

nt

Forecast

Accuracy

Low First

Pass

Success

Raw Material

Cycle Time

Schedule

Sequence

Restrictions

Equipment

Cycle TimeLong

Changeov

er Times

Large

Productio

n

Campaign

s

Demand

variabilit

yQC / QA

Cycle Time Uncontrolled

Scheduling

Case Study: Use pull to provide visibility and remove rocks


Milestones in Your Pull Implementation

Building Consensus: Pull Design Workshop

Ensure organizational readiness for pullDesign pull methods for your supply network (Kanban, CONWIP, DBR, etc.)Confirm the business case, and expected benefits of a pilot2-3 days

Proving the Benefits: Pull Pilot

Quick, low-risk pilot to fix inventory problems using existing ERP dataMost sites see large (20-40%) reductions in working capital 2-3 months

Scaling the Benefits: Expanding Pull

Rapid roll-outs ensure best practices scale across the supply networkUtilize software, as needed, for sustainable success


Tom Knight

Insert

Photo

Here

Thank You! Questions?

For more information:

• Call 770-559-6386

• Email [email protected], or

• Visit www.invistics.com

mailto:[email protected]

Documents

Lean Pull Design Webinar - Institute of Industrial Engineers