the principles of the lean business system: #6 partnering · the principles of the lean business...

25 October, 2013© S A Partners

The Principles of the Lean

Business System:

#6 Partnering

Lean in the 21st Century ™ Series

Professor Peter Hines


• Welcome

• Webinar will last about 1 hour

• We will invite you to complete

a few Polls

• Q&A session

Our Webinar

Lean in the 21st Century™


• Frederick Taylor invented the business system used by

organizations throughout the 20th Century

– Cost is the focus

– Scientific Management System

– Functionally organized by expertise

– Built for internal efficiency

– Not fit for the global , competitive environment of the 21st century

– Relies on traditional management to be effective

– Objective is to minimize the time it takes to do value added

processes

• Peter Hines has invented a business system of the 21st

Century

– People are the focus

– Value Management System

– Organized by value delivered

– Built for productivity in an extended enterprise

– Fit for the global, competitive environment of the 21st century

– Relies on leadership disposition and language to be effective

– Objective is to reduce or eliminate non-value added activities

Welcome!

• Co-founder Lean Enterprise Research Centre, Cardiff University

• Chairman, S A Partners• Adjunct Professor, University of

South Australia

Professor Peter Hines

90% of problems in business are caused by management, 10% by the workman. F. W. Taylor, 1912


• Research conducted by Professor Peter Hines identified 5 key elements of success:-

• Link business system to a one to two year strategy through Policy Deployment

• Dismantle traditional, siloed, functionally-focused business processes

• Deploy human resources aligned to value to be delivered

• Develop leadership to be effective in a 21st century business system space

• Synchronize business systems with suppliers and customers

We encapsulate this in an evolutionary business model rooted in time tested customer, quality and lean thinking

The Lean Business Model

How we see creating a 21st

century business system…


The Lean Business Model ®

Original source: Professor Peter Hines

Benchmarking Toyota’s Supply Chain: Japan vs U.K.

Long Range Planning, February, Volume 31, Number 6, pp. 911-918, 1998, ISSN 0024-6301


The Principles


Admin

Qualityproblems

Market testingvia competitivequotes

Pricenegotiation

Traditional Role

Admin

SupplierMeasurement& ImprovementActivity

Supplier Strategy

ComponentDevelopmentStrategy

Negotiation

New Role

Cost Reduction& Cost Planning

AdditionalNewActivities

% ofBuyer’sTime

….this requires a different mentality

towards supply chain integration

Quality Problems

Expeditinginformation& parts


• How much of your purchasing time is value added?

• 0-10%

• 11-20%

• 21-40%

• 41-60%

• 60%+

• Please select one answer

Poll #1


Japan Value

Added

Competitive

Gap

UK Value

Added

Indexed

Competitive

Gap

Apportionment

Assemble 22.2 1.82 40.4 18.0%

1st Tier 22.1 2.84 62.8 40.2%

2nd Tier 9.6 4.35 41.8 31.8%

3rd Tier 2.8 4.35 12.2 9.3%

4th Tier 0.2 4.35 0.9 0.7%

Raw Materials 43.1 1.00 43.1 0.0%

Total 100% 2.01 201.2% 100%

Competitive Advantage in Toyota

Toyota’s Primary Source of Competitive Advantage is in its ability to manage & develop its Supply Chain


A World Class Supplier Base:

Toyota Japan (mid 90s)

Measure Toyota

Supplier

UK

Supplier

Gap

Delivered

Quality

5.1 ppm 1250 ppm 244x

Value Added

per employee

£76.9K £29.6K 2.6x

On Time

Delivery

99.96% 89.28% 268x


• How much of your total sales are bought in content?

• 0-20%

• 21-40%

• 41-60%

• 61-80%

• 81-100%


Poll #2


Network Sourcing Model Overview

1. A tiered supply structure with a heavy reliance on small firms

2. A small number of direct suppliers with individual part numbers sourced from one supplier but within a competitive dual sourcing environment

3. High degrees of asset specificity among suppliers and risk sharing between customer and supplier alike

4. A maximum buy strategy by each company within the semi-permanent supplier network, but a maximum make strategy within these trusted networks

5. A high degree of bilateral design employing the skills and knowledge of both customers and suppliers alike

6. A high degree of supplier innovation in both new products and processes

7. Close, long-term relations between network members involving a high level of trust, openness and profit sharing

8. The use of rigorous supplier mapping and measurement increasingly giving way to supplier self-certification

9. A high level of supplier coordination by the customer company at each level of the tiered supply structure

10. A significant effort made by customers at each level individually to develop their suppliers













Organisation & Structure

Common Destiny & Relationship

Measurement & Improvement













Organisation & Structure


1. Tiered Supply Structure

Deep Pan: Many LayersThin and Crispy: Few Layers

SmallFirms

Key Characteristics & Activities:

• Module rather than component purchasing• Consolidation of ‘catalogue’ parts e.g. fixings• Re-tiering of less important suppliers• Closer relationships with the vital few• Closer design linkages• Higher percentage of costs from smaller (cheaper) suppliers


2. Small Number of Direct Suppliers

with ‘Multiple’ Sourcing

Few DirectSuppliers

Mazda

ToyoKogyo

DeltaKogyo

Mazda 3 Seats Mazda 6 Seats

1/3rd 1/3rd 1/3rd

Zone ofIntenseCompetition


3. High Degree of Asset

Specificity

• The degree to which suppliers make specific investments concerned

with their ability to supply any one particular company

• The greater the degree of asset specificity, the greater the degree of risk

sharing in new projects & short term opportunism by ether trading

partner

• Trust is fundamental - Asset specificity is not the cause but a

consequence of the strategies

• 4 types of asset specificity

– Physical asset specificity - e.g. dies, moulds & tooling

– Dedicated asset specificity - e.g. investment in production capacity

– Human asset specificity - e.g. education for one customer

– Site asset specificity - e.g. location close to customer firm


4. Maximum Buy Strategy

• The individual participant in an excellent network

enacts a maximum buy strategy while the whole

network enacts a maximum make strategy

• Keep as much as possible in your semi-permanent

supplier network

• Degree of value adding is low

– Toyota - accounts for 22% of total costs (materials, tools

& finished parts

– GM - traditionally accounts for 50%













Common Destiny & Relationship


5. Bilateral Design

• The role of subcontractors in new product

development

• Subcontractors supply 70% of the value of end

products. Therefore they should play a major role in

the introduction of new products

Make toCustomer Drawings

SupplierBlack Boxor Catalogue Parts

Networking SourcingBilateral Design


Lean Sourcing Target

Target cost

Time

15%

3-5%

3-5%

3-5%

3-5%

Innovation

Target cost

Stepwise savings with IPD

Continuous improvements

Continuous improvements with Category Management

Kaizen cost


6. High Degree of Supplier

Innovation

• Supplier do not wait to be asked for ideas

• Suppliers always seeking ways to help you in terms

of product, process or people

• Preferred Customer syndrome


7. Close Long Term Trusting

Relationships

• Goodwill Trust

• Tough but fair

• High pressure but shared rewards













Measurement & Improvement


8. Supplier Measurement:

Current State Map

C/T = 1 secC/O = 20 minUptime = 70%27,000 secavEPE 10 Days

5 MonthForecast

Lead Time= 47 to 69daysVA Time =7262 sec(121 min)

C/T = 1 secC/O = 30 minUptime = 70%27,000 sec avEPE 10 Days

C/T = 13 minC/O = 0 minUptime = 85%2 shifts27,000 secav

C/T = 1 hourC/O =Uptime = 65%2 shifts27,000 secav

C/T = 9 minC/O = 0 minUptime = 85%2 Shifts27,000 secav

Tray = 14 off2 shifts

12,000pcs/mo

Coils3

Days

1200 Sec. 900 Sec. 1 Sec. 1 Sec. 780 Sec.

1.2 Days2 Days2 Days10 Daysto 32 Days

6 Days2 Days

II I I I I

VehicleAssembler

Blanking AssemblyPressing Paint Assembly DispatchSlit Dispatch

DailyOrderWithTimeslots

1 xhours

ShippingSchedule

2 shifts

Coils

SteelServiceCentre

3 MonthForecast

WeeklyOrder

FaxRevision

PRODN. CONTROL

WeeklyScheduleby Day

I I

Dispatch

I

Pack

I

Pickle

I

Hot roll

Iron & SteelMaking

C/T = 120 hrs(includescooling)

C/T = 15 minC/O = 10 min

C/T =4min/coilC/O = 45 minUptime = 55%2 shifts27,000 secav

WeeklySchedule

& Revisions

STEEL MILL SCHEDULING

Check vsProduction Plan

Check vsSales Plan

COMMERCIAL

Order (3months inadvance)

Promise(Negotiation)

Call off weeklyor by day

Revisions toMissed

Deliveries

IndividualSchedules

3 Days1 Day16 Days

240 Sec.

3 Days

3600 Sec. 540 Sec.

0.6 Days 0.27 Days


Future State Map

coil

tote

C/T = 1 secC/O = 5 minUptime = 85%27,000 secavEPE Day

Lead Time= 11.5daysVA Time =6902 sec

C/T = 1 secC/O = 5 minUptime = 85%27,000 sec avEPE Day

C/T = 60 minC/O = 0 minUptime = 65%2 Shifts27,000 secav

Tray = 14 off2 shifts

12,000pcs/mo

1200 Sec. 1 Sec. 1 Sec.

4 Hours1 Day1 Day

VehicleAssembler

Blanking Pressing DispatchSlit Dispatch

DailyOrderWithTimeslots

1 xhours

OXOX

2 shifts

Coils

SteelServiceCentre PRODN.

CONTROL

DispatchPackPickleHot roll

Iron & SteelMaking

C/T = 120 hrs(includescooling)RFT = 85%

C/T = 15 minC/O = 10 min

C/T =4min/coilC/O = 5 minUptime = 85%2 shifts27,000 secav

STEEL MILL SCHEDULING

Orders

1 Day 7 Days

1200 Sec.

1 Day

3600 Sec.

1 Day

141414

900 Sec.

600600600

ForecastTransmission(Supply Chain

Syvchronisation)

5 MonthForecast

14Assembly& Paint

14Batch

toteBatch

Coil600

DailyOrder

600600

coil

Coil600

F I F O


9. & 10. Category Management:

Supplier Coordination & Development

• A process where one partner in a relationship modifies or influences the behaviour of the other partner with a view to mutual benefit

– Supplier coordination - activities made by a customer to mould their suppliers into a common way of working so that competitive advantage can be gained particularly by the removal of inter-company waste

– Supplier development - activities made by the customer to help improve the strategies, tools and techniques employed by suppliers to improve their competitive advantage, particularly by removing intra-company waste

• Both of these are required simultaneously


Kyoryoku Kai

(Supplier Associations)

The Supplier Association may be defined as a mutually benefiting group of a company’s most important suppliers brought together on a regular basis for the purpose of strategic alignment, planning and operational improvement designed to produce world class standards of quality, cost, delivery and innovation.


The Logic of Supplier

Associations

• A team of a customer and key strategic suppliers

• Devolving strategy and policy through the supply

chain to create a common sense of purpose

• Strengthening trust and the relationship

• Sharing knowledge and expertise

• Developing and learning together

• Eliminating waste - non value added activities both

in and between firms


Toyota’s Kyoho kai

• Basic philosophy towards suppliers

– Long term relations

– Creation and maintenance of cooperative relations

– Multiple sourcing of parts

– Optimal make/buy ratio often weighted towards the

latter


Organisation of Tokai Kyoho Kai

Activities Frequency Description

General assembly 1 per year Election of board members, activities, budgets

Board meeting 6 per year Report/request from Toyota top management

Meeting with supplier senior staff

2 per year Development of close communications

Groups:

Cost

Quality

Safety

1 per month Improvement of suppliers’ management through process improvement

Section meeting:

1, 2, 3 1 per month

Improvement and development of communication and management

Others Kyoho news


• In your dealings with suppliers are you:

• Mostly Day to Day Activities?

• Mostly Organisation & Structure?

• Mostly Common Destiny & Relationship?

• Mostly Measurement & Improvement?

• A Good Balance?


Poll #3


• What further activity would you like?

• Please select one or more answers

Poll #4


• If you would like to discuss anything coming out of the webinar please contact me at: [email protected]

or +44 (0)7974 416660

• Please also link up with me at: uk.linkedin.com/in/profpeterhines/

• Or join me at my Lean Business System LinkedIn group: http://www.linkedin.com/groups/Lean-Business-System-1801885?trk=myg_ugrp_ovr

• See also the previous webinars at: http://www.sapartners.com/webinars-2/

Further Questions

mailto:[email protected]

http://uk.linkedin.com/in/profpeterhines/

http://www.linkedin.com/groups/Lean-Business-System-1801885?trk=myg_ugrp_ovr

http://www.sapartners.com/webinars-2/


• Accelerating Business Performance – How to create Culture of Business

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– Date: 14 November – Dublin, 15 November - Belfast, 2013

– http://www.sapartners.com/accelerating-business-performance-create-culture-

business-improvement/

– Date: 3 December - London, 2013

– http://www.sapartners.com/how-to-create-a-lean-culture/

– Learn • Share • Grow – Achieve Lean Excellence at Aimia Foods,

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– 16-17 January 2014

– http://www.sapartners.com/achieve-lean-excellence-event/

For further information please contact [email protected]

Or visit http://www.sapartners.com/uk-events/ for our full event schedule

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http://www.sapartners.com/achieve-lean-excellence-event/

http://www.sapartners.com/achieve-lean-excellence-event/


http://www.sapartners.com/uk-events/


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the principles of the lean business system: #6 partnering · the principles of the lean business...

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