Lean supply chain and its effect on product cost and quality: A case study on Ford Motor Company By: H.M. Wee, Simon Wu

Lean supply chain and its effect on product cost and quality: A case study on Ford Motor CompanyBy: H.M. Wee, Simon WuSupply Chain Management: An International Journal, Vol. 14 Is: 5 pp. 335 341

Presented by:Umair Majeed 13008087011Table of ContentsAbstractIntroductionLean supply chainValue stream mapping (VSM)VSM measurable and improving toolsVSM case study Ford Lio Ho Motor CompanyFindings and recommendationsConclusionAbstractPurpose : To analyze how Toyota continuously and consistently achieve its success through continuous waste elimination and the objective of long term philosophy.Design/methodology: The methodology used is the case based approach (CBA), which described lean supply chain (LSC) through value stream mapping (VSM).Findings: VSM is beneficial in cost reduction, quality enhancement and lead time reduction. This paper also provides a four step process to implement VSM.IntroductionGeneral Motors (GM), Ford & Chrysler dominated the global market in 20th century but in 1994 Toyota became the global No. 2 motor manufacturer by overtaking Ford and in 2008 Toyota replaced GM to be the largest automaker globally.Kiichiro Toyoda President of Toyota set up the companys objective: to use small lot size with cheaper vehicles to compete with the cost of American motor companies by continuously reducing cost, creating continuous material flows, process standardization and waste elimination.US and Europe believed that only mass production leads to reduction in manufacturing costs while Toyota managed to achieve low manufacturing cost with smaller volume and shorter lead times with help of lean manufacturing.

Lean Supply ChainThe term lean also known as TPS means a series of activities to eliminate waste, reduce non-value added (NVA) activities, and improve value added (VA) activities . Waste is defined as anything that interferes with the smooth flow of productionThe eight wastes described in TPS are: overproduction, waiting, conveyance, over processing, excess inventory, movement, defects and unused employee creativity.Lean supply chain identifies all types of waste in the value stream chain and seeks to eliminate hem (Rother and Shook, 1999; Abdulmalek and Rajgopal, 2007).Value Stream MappingThe VSM is a lean supply chain tool used by TPS to identify between wasteful and necessary value-adding activities. The lean VSM links all processes from raw material to final consumer.It begins by listing all operations, and classifies them into VA and NVA. VSM includes activities of: production flow from raw material input to finished good delivery; design flow from concept to launch; and material and information flow the combination of production and design flow.VSM BenefitsVSM has the following benefits:Provides a complete visual flow (material and information) to support decision making.Highlights and exposes the wastes.Demonstrates the close linkage between information and material flow.Develops a plan to eliminate waste and continuous improvement.VSM ProcessConduct on site study of the current process, including 5M Man, Machine, Material, Method, and Message. Identify VA as well as NVA operations in order to draw a visual Current State Map (CSM).Identify wastes and bottleneck for lean improvement .After data collection and analysis, set up challenging target with measurable indicators.Use continuous improved idea with measurable target using brainstorming to draw future state map (FSM). Perform gap analysis between CSM and FSM, one can discover problems, and countermeasures to implement, evaluate and follow-up problems. After each improvement session, the FSM changes back to CSM.VSM MeasurableFTT (first time through): Percentage of units that complete a process and meet quality at the first time. (Not scrapped, rerun, retested or returned)BTS (build to schedule): Build to schedule reveals how well a plant executes plans to build the right products at the right time in the right sequence.DTD (dock to dock time): Dock to dock time is the elapsed time between unloading raw materials and releasing finished goods for shipment.OEE (overall equipment effectiveness): OEE is a measure of the availability, performance efficiency and quality rate of a piece of equipment. Value rate: The percent of all value added time.A/T: Available time (excludes meal time)Total present time Break time.T/T: Takt time (customer demand rate) Available time/Schedule volume.C/T: Cycle time (Available time Average down time - Defects time)/Schedule volume.W/T: Working time of each operator.VA: Value added time (customer wishes to pay).NVA: Non-value added time (normally includes waste).VSM Improving toolsDescriptions for improving tools:Visual Factory, it is a visual management tool. Quick Change Over, which is used to reduce operation time or change over timeError Proofing, it is a fool proofed device to prevent defects.Ford TPM, it is a total productive maintenance program used for equipment improvement.Safety, focus on safety and ergonomic improvement.

Call part sequential feeding: It is a call part system through lighting kanban by sequential feeding; the sequence is the same as the main line.Kitting supply sequential feeding: It is also a sequential feeding and supplied by kits.

VSM case study Ford Lio Ho Motor Company

Ford Lio Ho Motor Company is located in Chungli city, Taiwan, is an affiliate of global Ford Motor Company. The main products include passenger car, commercial car and SUV. Ford Lio Hos vision is to become a competitive company by applying new technology, improve quality and human resource management. Ford Lio Ho introduced Lean Manufacturing Design (LMD) to the Initial Application Area (IAA) in 1990 and implement Ford Production System (FPS), based on the lean production concept to achieve continuous waste elimination.Step I : Problem FindingCollect the measurable indices from current situation, such as FTT, OEE, C/T, W/T

Step (2). Idea findingAccording to the above root causes, we define the task as: Apply pull system concept to build sequential partsfeeding and JIT kanban to reduce NVA (pick up time) and wastes (walking, waiting).Set up error proofing devices and visual aids for criticalprocess control to promote the quality of first timethrough.Practice total productive management (TPM) to reducemachine breakdown and use quick change over tool toreduce setup time.

Step (3). Obstacle finding

The Five-Why analysis (5-why) is a logic diagram depicting the cause and effect relationship for searching root cause and generating the intermediate or final task.Step (4). Solution findingAfter identifying the obstacles and tasks, formulate the solution for achieving future state map (FSM).Identify working space for kitting and sequential feeding,Re-design sequential rack for common used,Re-balance works to identify surplus manpower from NVA reduction,Set up JIT kanban for directly parts supply from suppliers.Set up error proofing devices and visual aids to promote the quality of first time through (FTT).Practice frequently TPM (total productive maintenance) and apply quick change over to improve performance for aging equipments to improve OEE.

Findings and recommendations

ConclusionThis study shows how VSM supports the lean supply chain and identifies potential opportunities for continuous improvement to eliminate waste.NVA wastes were continuously eliminated from the supply chain process which resulted in a shortened lead time and improvement in business performance.ANY QUESTIONS ?