integrating lean and erp on the supplier’s factory … lean and... · title: microsoft powerpoint...

NECON LEAN-ERP - 1 Copyright Robert Abair Associates, Inc., 2005

INTEGRATING LEAN AND

ERP ON THE SUPPLIER’S

FACTORY FLOOR

Northeast Supply Chain Conference

NECON LEAN-ERP - 2 Copyright Robert Abair Associates, Inc., 2005

Lean/Agile Manufacturing is the

fundamental rethinking and radical

redesign of business and supply chain

processes to achieve dramatic

improvements in critical measures of

performance, such as speed, cost,

quality, and service.

LEAN/AGILE MANUFACTURING

NECON LEAN-ERP - 3 Copyright Robert Abair Associates, Inc., 2005

SUPPLY CHAIN MANAGEMENT

RawMaterial 2nd Tier Suppliers

3rd Tier Suppliers

Transportation

Direct Suppliers

Single Plant

Multiple Plants& Warehouses

CustomerWarehouses

Consumer

Retail

Transportation

Distribution

MES

APS

MRP II

ERP

SUPPLY CHAIN MANAGEMENT (SCM)

NECON LEAN-ERP - 4 Copyright Robert Abair Associates, Inc., 2005

YOUR MISSION

Radically change your supply chain processes…

both internally and at your suppliers

Establish

Seamless

Business

Processes!

Reduce

Lead time!

Reduce

Cost!

Reduce

Inventory!

�

�

�

�

��

��

Balanced Balanced Balanced Balanced

LeanLeanLeanLean

NECON LEAN-ERP - 5 Copyright Robert Abair Associates, Inc., 2005

LEAD TIME MAP-PIPELINE MODEL

34 weeks

Kanban

1 week

System

Test

AssemblyBoard

Test

Board

Repair

Sub contractor

or

Foundry

ComponentsASICS

� Test

� Burn

� pack

ASICS

FAB

3 weeks1 week1 week1 week8 weeks 2 weeks4-8 weeks8-9 weeks

Boards@ 8 weeks

Non-boards@ 5 weeks

Respond points

NECON LEAN-ERP - 6 Copyright Robert Abair Associates, Inc., 2005

SUPPLY CHAIN LOGISTICS

• Determine inventory levels by product based on an "A", "B", "C" Analysis of your inventory

• Limit the inventory liability in the entire Supply Chain

• Develop a process for pulling inventory through the suppliers to point of need

• Develop inventory management strategies:

- JIT II

- Vendor Managed

- Inventory

- Consignment Inventory

- KANBAN (Pull)

NECON LEAN-ERP - 7 Copyright Robert Abair Associates, Inc., 2005

SUPPLY CHAIN LOGISTICS ISSUES

• Make-to-Stock Strategy (MTS)

• Make-to-Order Strategy (MTO)

• Inventory Reduction Goals

• Inventory Processes to support Repair and Renovation Business

• Seasonal Demand Patterns

• Line Fill Rate Requirements

• Erratic Demand Requirements

• Variety and number of SKU's

• Lot size and Safety Stock Requirements

• Space Consideration

• Container Control

• Capacity Constraints

NECON LEAN-ERP - 8 Copyright Robert Abair Associates, Inc., 2005

THE ADVANCED PLANNER’S ROLE IN

MANAGING A LEAN - ERP SUPPLY CHAIN

1. Prepare ABC analysis

2. Identify business rules for customer service levels

3. Develop factory flow core principles

4. Develop inventory and shop floor philosophy

� Lead time � Lot sizes � Safety stock

5. Develop communication rules for supply chain (customers/suppliers)

6. Develop setup matrix

7. Develop order launch rules (priority planning)

8. Develop manufacturing loading strategies

� Certain products to certain lines

� Standard setup tools for "A" items

� Load leveling/final assembly scheduling rules

9. Develop customer allocation matrix

10. Load software order modifiers

11. Document all rules

12. Manage all exception messages

13. Post implementation review (quarterly)

NECON LEAN-ERP - 9 Copyright Robert Abair Associates, Inc., 2005

ABC ANALYSIS OF ADVANCED

MANUFACTURING STRATEGIES

Primary Purpose:

� Inventory philosophy

� Customer service philosophy

� Manufacturing strategy (mixed-model matrix)

� Expediting or priority planning strategy

� Purchasing and supply chain strategy

� Distribution strategy

� Sales and Marketing strategy

Inventory Class

Dollar Volume

Number of Units

“A” 80% 20% “B” 15% 30% “C” 5% 50%

NECON LEAN-ERP - 10 Copyright Robert Abair Associates, Inc., 2005

KANBAN CONSIGNMENT VMI BREADMAN S.S. MRP JIT

Rating

3,2,1

Weight

3,2,1

1. Inventory

2. Liability

3. Lead time

4. Planner efficiency

5. Buyer efficiency

6. Effort to implement

7. IS support

8. Capital

9. ECN exposure

10. Affinities

11. Other risks

Catalog: _________________

Supplier: _________________

Date: _______________

SUPPLY CHAIN INVENTORY EXCELLENCE

SELECTION TEMPLATE

NECON LEAN-ERP - 11 Copyright Robert Abair Associates, Inc., 2005

1. Prepare ABC analysis

2. Identify business rules for customerservice levels (for both factories)

3. Develop factory flow core principles

4. Develop inventory and shop floor philosophy

� Lead time � Lot sizes � Safety stock

5. Develop communication rules for supply chain (customers/suppliers)

6. Develop setup matrix

7. Develop order launch rules (priority planning)

8. Develop manufacturing loading strategies

� Certain products to certain lines

� Standard setup tools for "A" items

� Load leveling/final assembly scheduling rules

9. Develop customer allocation matrix

10. Load software order modifiers

11. Document all rules

12. Manage all exception messages

13. Post implementation review (quarterly)

THE ADVANCED PLANNER’S ROLE IN

MANAGING A LEAN - ERP SUPPLY CHAIN

NECON LEAN-ERP - 12 Copyright Robert Abair Associates, Inc., 2005

CUSTOMER SERVICE LEVEL

BUSINESS RULES

A items:“A” items will be shipped same day – 95% of time“A” items not in stock will be shipped in 5 working days

B items“B” items will be shipped same day – 80% of time“B” items not in stock will be shipped in 10 working days

C items“C” items will be shipped same day – 70% of time“C” items not in stock – will quote delivery

NECON LEAN-ERP - 13 Copyright Robert Abair Associates, Inc., 2005

THE ADVANCED PLANNER’S ROLE IN

MANAGING A LEAN - ERP SUPPLY CHAIN

1. Prepare ABC analysis

2. Identify business rules for customer service levels

3. Develop factory flow core principles

4. Develop inventory and shop floor philosophy

� Lead time � Lot sizes � Safety stock

5. Develop communication rules for supply chain (customers/suppliers)

6. Develop setup matrix

7. Develop order launch rules (priority planning)

8. Develop manufacturing loading strategies

� Certain products to certain lines

� Standard setup tools for "A" items

� Load leveling/final assembly scheduling rules

9. Develop customer allocation matrix

10. Load software order modifiers

11. Document all rules

12. Manage all exception messages

13. Post implementation review (quarterly)15

NECON LEAN-ERP - 14 Copyright Robert Abair Associates, Inc., 2005

LEAN/AGILE MANUFACTURING

FACTORY FLOW CORE PRINCIPLES

1. Everything moves within four hours

� “Time is everything”

2. If the downstream center can’t use it – Don’t do it!

3. Everything moves to point of consumption

4. 50% improvement (year-on-year thinking)

� Scrap � Setup � Rework � Process steps

5. No paperwork

6. No material handling

7. No labor reporting

8. No computer transactions/systems

9. Assume “pipe line” flow (no backflow)

10. No inspection or testing (Robustness)

NECON LEAN-ERP - 15 Copyright Robert Abair Associates, Inc., 2005

LEAN/AGILE MANUFACTURING FACTORY

FLOW CORE PRINCIPLES (cont.)

11. No subassemblies

12. Carrier control

13. All parts and processes under SPC control

14. No holding containers

15. Direct ship from last operation

16. Direct receipt for first operation

17. No inventory

18. Standardized processes

19. Standardized components

20. Standardized tools

21 Universal packaging

22. Universal assembly lines

23. Universal equipment

NECON LEAN-ERP - 16 Copyright Robert Abair Associates, Inc., 2005

THE ADVANCED PLANNER’S ROLE IN

MANAGING A LEAN - ERP SUPPLY CHAIN

1. Prepare ABC analysis

2. Identify business rules for customer service levels

3. Develop factory flow core principles

4. Develop inventory and shop floor philosophy

���� Lead time ���� Lot sizes ���� Safety stock

5. Develop communication rules for supply chain (customers/suppliers)

6. Develop setup matrix

7. Develop order launch rules (priority planning)

8. Develop manufacturing loading strategies

� Certain products to certain lines

� Standard setup tools for "A" items

� Load leveling/final assembly scheduling rules

9. Develop customer allocation matrix

10. Load software order modifiers

11. Document all rules

12. Manage all exception messages

13. Post implementation review (quarterly)

NECON LEAN-ERP - 17 Copyright Robert Abair Associates, Inc., 2005

MIXEDMIXEDMIXEDMIXED----MODEL MATRIXMODEL MATRIXMODEL MATRIXMODEL MATRIX

(TOP DOWN)(TOP DOWN)(TOP DOWN)(TOP DOWN)

A B C D (BxC)

E F (.5xE)

G (BxF)

H (A÷Ex4)

# OF ITEMS

% OF TOTAL

WEEKS SUPPLY SAFETY SOCK

SAFETY STOCK WEIGHT-

ED

LOT SIZE

WEEKS SUPPLY

AVE CYCLE STOCK

LOT SIZE

WEIGHT-ED

# OF

SETUPS PER

MONTH

A ITEMS

50

80%

2.0

1.6

1

.5

.4

200

B ITEMS

500

15%

4.0

.6

4

2

.3

500

C ITEMS

1000

5%

8.0

.4

8

4

.2

500 TOTALS

2.6

.9

1200

TOTALTOTALTOTALTOTAL 3.5 WEEKS OF INVENTORY3.5 WEEKS OF INVENTORY3.5 WEEKS OF INVENTORY3.5 WEEKS OF INVENTORY

NECON LEAN-ERP - 18 Copyright Robert Abair Associates, Inc., 2005

THE ADVANCED PLANNER’S ROLE IN

MANAGING A LEAN - ERP SUPPLY CHAIN

1. Prepare ABC analysis

2. Identify business rules for customer service levels

3. Develop factory flow core principles

4. Develop inventory and shop floor philosophy

� Lead time � Lot sizes � Safety stock

5. Develop communication rules for supply chain customers and suppliers)

6. Develop setup matrix

7. Develop order launch rules (priority planning)

8. Develop manufacturing loading strategies

� Certain products to certain lines

� Standard setup tools for "A" items

� Load leveling/final assembly scheduling rules

9. Develop customer allocation matrix

10. Load software order modifiers

11. Document all rules

12. Manage all exception messages

13. Post implementation review (quarterly)

NECON LEAN-ERP - 19 Copyright Robert Abair Associates, Inc., 2005

THE ADVANCED PLANNER’S ROLE IN

MANAGING A LEAN - ERP SUPPLY CHAIN

1. Prepare ABC analysis

2. Identify business rules for customer service levels

3. Develop factory flow core principles

4. Develop inventory and shop floor philosophy

� Lead time � Lot sizes � Safety stock

5. Develop communication rules for supply chain (customers/suppliers)

6. Develop setup matrix7. Develop order launch rules (priority planning)

8. Develop manufacturing loading strategies

� Certain products to certain lines

� Standard setup tools for "A" items

� Load leveling/final assembly scheduling rules

9. Develop customer allocation matrix

10. Load software order modifiers

11. Document all rules

12. Manage all exception messages

13. Post implementation review (quarterly)

NECON LEAN-ERP - 20 Copyright Robert Abair Associates, Inc., 2005

JOB SEQUENCING SETUP/

CHANGEOVER MATRIX (HOURS)

EXAMPLES:

Sequence: D - A - C - B - E

S/U hours: 10 + 4 + 4 + 2 = 20 HOURS

Sequence: A - B - D - E - C

S/U hours: 1 + 1 + 3 + 3 = 8 HOURS

F R O M

TO A B C D E

A - 3 1 1 0 2

B 1 - 4 2 4

C 4 6 - 4 3

D 2 1 3 - 6

E 3 2 2 3 -

NECON LEAN-ERP - 21 Copyright Robert Abair Associates, Inc., 2005

THE ADVANCED PLANNER’S ROLE IN

MANAGING A LEAN - ERP SUPPLY CHAIN

1. Prepare ABC analysis

2. Identify business rules for customer service levels

3. Develop factory flow core principles

4. Develop inventory and shop floor philosophy� Lead time � Lot sizes � Safety stock

5. Develop communication rules for supply chain (customers/suppliers)

6. Develop setup matrix

7. Develop order launch rules (priority planning)8. Develop manufacturing loading strategies

� Certain products to certain lines� Standard setup tools for "A" items� Load leveling/final assembly scheduling rules

9. Develop customer allocation matrix

10. Load software order modifiers

11. Document all rules

12. Manage all exception messages

13. Post implementation review (quarterly)

NECON LEAN-ERP - 22 Copyright Robert Abair Associates, Inc., 2005

PRIORITY PLANNING

(EXPEDITING)

W hen an item fa lls be low sa fe ty s tock leve l:

C lass C overage A c tion /E xped ite

A B e low 100% W ith in lead tim eA Be low 50% Today

B Be low 100% Focus w eek /dayB Be low 50% Ins ide lead tim e

C Be low 100% No ac tionC Be low 50% Focus w eek /dayC Be low 25% Ins ide lead tim e

NECON LEAN-ERP - 23 Copyright Robert Abair Associates, Inc., 2005

THE ADVANCED PLANNER’S ROLE IN

MANAGING A LEAN - ERP SUPPLY CHAIN

1. Prepare ABC analysis

2. Identify business rules for customer service levels

3. Develop factory flow core principles

4. Develop inventory and shop floor philosophy� Lead time � Lot sizes � Safety stock

5. Develop communication rules for supply chain (customers/suppliers)

6. Develop setup matrix

7. Develop order launch rules (priority planning)

8. Develop manufacturing loading strategies (both factories)

���� Certain products to certain lines

���� Standard setup tools for "A" items

���� Load leveling and final assembly scheduling rules9. Develop customer allocation matrix

10. Load software order modifiers

11. Document all rules

12. Manage all exception messages

13. Post implementation review (quarterly)

NECON LEAN-ERP - 24 Copyright Robert Abair Associates, Inc., 2005

THE ADVANCED PLANNER’S ROLE IN

MANAGING A LEAN - ERP SUPPLY CHAIN

1. Prepare ABC analysis

2. Identify business rules for customer service levels

3. Develop factory flow core principles

4. Develop inventory and shop floor philosophy

� Lead time � Lot sizes � Safety stock

5. Develop communication rules for supply chain (customers/suppliers)

6. Develop setup matrix

7. Develop order launch rules (priority planning)

8. Develop manufacturing loading strategies

� Certain products to certain lines

� Standard setup tools for "A" items

� Load leveling/final assembly scheduling rules

9. Develop customer allocation matrix

10. Load software order modifiers

11. Document all rules

12. Manage all exception messages

13. Post implementation review (quarterly)

NECON LEAN-ERP - 25 Copyright Robert Abair Associates, Inc., 2005

CUSTOMER

CAPACITY ALLOCATION

Customer

Hours allocated

by Product Fam ily

Hrs. Total

Required

Capacity

Capacity

Used Last

4 Weeks

A B C D E

Jones Co.

Arbor M fg.

Post Processing

W ilson Ind.

Dumont Ltd.

Can be done weekly or monthly

NECON LEAN-ERP - 26 Copyright Robert Abair Associates, Inc., 2005

THE ADVANCED PLANNER’S ROLE IN

MANAGING A LEAN - ERP SUPPLY CHAIN

1. Prepare ABC analysis

2. Identify business rules for customer service levels

3. Develop factory flow core principles

4. Develop inventory and shop floor philosophy

� Lead time � Lot sizes � Safety stock

5. Develop communication rules for supply chain (customers/suppliers)

6. Develop setup matrix

7. Develop order launch rules (priority planning)

8. Develop manufacturing loading strategies

� Certain products to certain lines

� Standard setup tools for "A" items

� Load leveling/final assembly scheduling rules

9. Develop customer allocation matrix

10. Load software order modifiers (both systems)

11. Document all rules

12. Manage all exception messages

13. Post implementation review (quarterly)

NECON LEAN-ERP - 27 Copyright Robert Abair Associates, Inc., 2005

THE ADVANCED PLANNER’S ROLE IN

MANAGING A LEAN - ERP SUPPLY CHAIN

1. Prepare ABC analysis

2. Identify business rules for customer service levels

3. Develop factory flow core principles

4. Develop inventory and shop floor philosophy

� Lead time � Lot sizes � Safety stock

5. Develop communication rules for supply chain (customers/suppliers)

6. Develop setup matrix

7. Develop order launch rules (priority planning)

8. Develop manufacturing loading strategies

� Certain products to certain lines

� Standard setup tools for "A" items

� Load leveling/final assembly scheduling rules

9. Develop customer allocation matrix

10. Load software order modifiers

11. Document all rules

12. Manage all exception messages

13. Post implementation review (quarterly)

NECON LEAN-ERP - 28 Copyright Robert Abair Associates, Inc., 2005

THE ADVANCED PLANNER’S ROLE IN

MANAGING A LEAN - ERP SUPPLY CHAIN

1. Prepare ABC analysis

2. Identify business rules for customer service levels

3. Develop factory flow core principles

4. Develop inventory and shop floor philosophy

� Lead time � Lot sizes � Safety stock

5. Develop communication rules for supply chain (customers/suppliers)

6. Develop setup matrix

7. Develop order launch rules (priority planning)

8. Develop manufacturing loading strategies

� Certain products to certain lines

� Standard setup tools for "A" items

� Load leveling/final assembly scheduling rules

9. Develop customer allocation matrix

10. Load software order modifiers

11. Document all rules

12. Manage all exception messages

13. Post implementation review (quarterly)

NECON LEAN-ERP - 29 Copyright Robert Abair Associates, Inc., 2005

THE ADVANCED PLANNER’S ROLE IN

MANAGING A LEAN - ERP SUPPLY CHAIN

1. Prepare ABC analysis

2. Identify business rules for customer service levels

3. Develop factory flow core principles

4. Develop inventory and shop floor philosophy

� Lead time � Lot sizes � Safety stock

5. Develop communication rules for supply chain (customers/suppliers)

6. Develop setup matrix

7. Develop order launch rules (priority planning)

8. Develop manufacturing loading strategies

� Certain products to certain lines

� Standard setup tools for "A" items

� Load leveling/final assembly scheduling rules

9. Develop customer allocation matrix

10. Load software order modifiers

11. Document all rules

12. Manage all exception messages

13. Post implementation review (quarterly)

NECON LEAN-ERP - 30 Copyright Robert Abair Associates, Inc., 2005

Company 1 (RA) Lean Supply Chain

Results Matrix

15 days

12 days

2 days

33 parts

3.5 wks

3

$88.5K

Future State

Lean Process

50%Sub Supplier Lead Time 39 Components

30 days

50%Production Cycle Time25 days

60%Order Entry Cycle Time5 days

48%Number of Custom Materials60 parts

71%Oracle Lead Time12 wks

SameNumber of Systems in Pipeline3

67%Liability$267K

Percent

ImprovementPerformance Metric

Current State

MRP Push

Process

NECON LEAN-ERP - 31 Copyright Robert Abair Associates, Inc., 2005

Company 2 (OLP) Lean Supply Chain

Results Matrix28

$0 Liability

$37.1K

6 weeks

3 items

4.6 days

2 weeks

14

$144.2K

Future

State

Lean

Process

-Cost Down-

Block Assy Liability Eliminated13 wk L/T @ $.5K per unit

42%Value of Power Controller Reduction$64.9K

57%Power Controller L/T Reduction14 weeks

40%Reduced unique parts over 55 days L/T5 items

29%Manufacturing Lead Time6.5 days

86%Lead Time 14 weeks

SameNumber of Systems in Pipeline14

47%Liability$270.2K

Percent

ImprovementPerformance Metric

Current

State

MRP Push

Process

NECON LEAN-ERP - 32 Copyright Robert Abair Associates, Inc., 2005

Company 3 (BP) Lean Supply Chain

Results Matrix

1 line / 3 shifts

Integrated

½ day

3 days

3 to 0

1 to 3 weeks

11 to 17

$539K

Future State

Lean Process

-Cost Down-

Capacity2 lines / 1 shift

Supply ChainNot integrated

90%Order Cycle Time6 days

SameTransit Time3 days

SameSafety Stock3 to 0

80%Lead Time11 to 12 weeks

29%Number of Systems in Pipeline11 to 12

17%Liability$647K

Percent

ImprovementPerformance Metric

Current State

MRP Push

Process

NECON LEAN-ERP - 33 Copyright Robert Abair Associates, Inc., 2005

Company 4 (CON) Lean Supply Chain

Results Matrix

14 days

17

2 weeks

15

$38.6K

Future State

Lean Process

-Cost Down-

35%Process Time Improvement20

62%Number of Unique Components37

71%Lead Time 7 weeks

114%Number of Systems in Pipeline7

28%Liability$53.9K

Percent

ImprovementPerformance Metric

Current State

MRP Push

Process