SCM Operations - Make

Make—This is the manufacturing

step. Supply chain managers
schedule the activities necessary for
production, testing, packaging and
preparation for delivery. This is the
most metric-intensive portion of the
supply chain—one where companies
are able to measure quality levels,
production output and worker
productivity.
 Push System
 Push system : In push system you
plan (demand forecast) first and push
the material down to all the facilities
 Production and distribution decisions
based on long-term forecasts.
 The difference between the push and
pull system lies in inventory
management technique
 Advantages:
 Stock Out risk reduction
 Economies of Scale in production,
warehousing and transportation
 Disadvantages
 Reduced flexibility
 Inventory carrying cost
Pull-Based Supply Chains
 Production and distribution demand
driven
 Coordinated with true customer demand
rather than forecast demand
 Advantages
 Reduced Inventory Levels
 Increased Flexibility

 Disadvantages
 Risk of stock out
Push VS Pull Strategy
 Supply Chain Integration –
Push/Pull Strategies
 Hybrid of “push” and “pull” strategies to overcome
disadvantages of each
 Early stages of product assembly are done in a
“push” manner
 Partial assembly of product based on aggregate
demand forecasts (which are more accurate than
individual product demand forecasts)
 Uncertainty is reduced so safety stock inventory is
lower
 Final product assembly is done based on customer
demand for specific product configurations
Push-
 Supply chain timelinePull determines “push-pull
“Generic” Product Boundary “Customized” Product
boundary”

Push Strategy Pull Strategy

Raw End
Materials Consumer
Supply Chain Timeline
 Consider Two PC
Manufacturers:
 Build to Stock  Build to order
 Forecast demand  Forecast demand
 Buys components  Buys components
 Assembles  Observes demand
computers  Assembles
 Observes demand computers
and meets demand  Meets demand
if possible.  A push-pull system
 A traditional push
system
 Make-to-Stock (MTS)
 Here, the product is built against a
sales forecast, and sold to the
customer from finished goods stock;
this approach is common in the
grocery and retail sectors, FMCG
companies,
 Make-to-Stock
Environment Business Impact
 Make to forecast  Finished goods are
 Rapid delivery From
finished goods stock stocked
 Standard products  Forecast error costs
 High volumes money
 Low variety
 Typically lower profit
margins per unit
 Make To Order
• Here, the product is based on a
standard design, but component’s
production and manufacturing of the
final product is linked to the order
placed by the final customer's
specifications
 Make-to-Order

Environment Business Impact

 More variety than  Forecasted revenue
Make-to-Stock (MTS)  Raw material is stocked in
anticipation of future sales
 Some repeat products
 Long lead times
 Low volumes
 High end item variety
 Large profit margins

•Here, the product is based on a standard design, but component’s production and
manufacturing of the final product is linked to the order placed by the final customer's
specifications; Tailor made suits etc.
Characteristi Make-to-Stock Make-to-Order
cs
Product Producer- Customer-
specified specified
Low variety High variety
Inexpensive Expensive
Objectives Balance Manage
inventory, delivery lead
capacity, and times and
service capacity
Main Forecasting Delivery
operations Planning promises
problems production Delivery time
Control of
 Make To Order
 There are various models for Make To Order.
For example, in some cases, the process of
assembling prepared parts starts when
actual demand occurs (Assemble to Order).
Or, in other cases, the production process
starts with the obtaining of materials and
parts (Build To Order) , or further back from
development designing (engineer to Order).
 Assemble-to-Order
Environment Business Impact
 Fewer products than MTO  Limited finished goods
 Higher volume than MTO  Material is stocked at a
 Some standard sub- semi-finished stocking
assemblies point
 Build to forecast at the  Minimal configuration
option level
time
 Configured to customer  Maximum product
order
flexibility
 Planning Bills

Here, the product is built to customer specifications from a stock of existing

components; a typical example for this approach is Dell's approach to customizing its
computers
 Engineer-to-Order
Environment
 Custom designed products
 Unique bills of material
 Unique item numbers
 Very long lead times
 Low volumes
 High product variety
Business Impact
 No finished goods
 Low levels of raw
material
 Revenue forecasts
 Difficult to forecast
 Estimating is very
important

Here, the product is designed and built to customer specifications; this approach is
most common for large construction projects and one-off products, such as Formula 1
cars
 The Product-Process
Matrix
High

Engineer-to-Order
Product Variety

Make-to-Order

Assemble-to-Order

Make-to-Stock

Low
Low Product Volume High
 Customer Order De-coupling

(Based upon the Manufacturing Environment)

Inventory Raw WIP Finished

Supplier
Location Material Parts & Matls goods

Customer Order
De-coupling Point

Engineer to Make-to- Assemble to Make-to-

Environment
Order (ETO) Order (MTO) Order (ATO) Stock (MTS)
Just-In-Time and Lean
Manufacturing
IT’S ALL ABOUT
SPEED!

Mouse busting through maze

goes here!!! Too big of file.
 What is Lean?
Producing what is needed, when it is needed,
with the minimum amount of materials,
equipment, labor, and space.
 Definition of Value
Value Added Activity
An activity that changes the size,
shape, fit, form, or function of
material or information (for the first
time) to meet customer
requirements.
Examples: injection molding,
stamping, and forging
Non-Value Added Activity
Those activities that take time
or resources, but the customer
is not willing to pay for.
Example: travel between
stations
 Lean Production / JIT
WHAT IT IS WHAT IT DOES

• Attacks waste
• Management philosophy
• Exposes problems and bottlenecks
• Pull system though the plant
• Achieves streamlined production

WHAT IT REQUIRES WHAT IT ASSUMES

• Employee participation
• Industrial engineering/basics • Stable environment
• Continuing improvement
• Total quality control
• Small lot sizes
 Steps Towards JIT
Manufacturing
 Reengineer the manufacturing system
 Reduce setup
 Integrate quality control
 Integrate preventive maintenance
 Level and balance the system
 Integrate a pull system
 Control inventory
 Implement a vendor program
 Utilize computer integrated manufacturing
(CIM) benefits
What is Waste Identification and Elimination?

A comprehensive understanding of Waste

Identification and Elimination is essential for the
successful transformation to Lean Enterprise.

DOTWIMP?
 What is Waste Identification and Elimination?

Waste Identification
 Waste: is anything that does not directly add value to the
final product or contribute to the product’s transformation.
 Waste: only adds time and cost, no value.
 Waste: is anything your customer would be unwilling to
pay you to do.
 There are seven basic Processing Defects
types of waste known as
Over-
Motion TYPES Production
OF
DOTWIMP WASTE

Inventory Transportation
Waiting
What is Waste Identification and Elimination?

Waste of Defects: Definition

Inspection or
repair of a
product or
service to
fulfill
customer
requirements
 What is Waste Identification and Elimination?

Waste of Defects: Root Causes

 Weak Process Control

 Suspect Incoming Material
 Product Design
 Insufficient Preventative
Maintenance
 Poor Workplace Organization
 Lack of Boundary Standards
 Poorly Trained Operators
 Inadequate Tools / Equipment
 Overproduction
 What is Waste Identification and Elimination?

Waste of Defects: Example

Company reworks 10% of assemblies due to poor employee training

If it costs the company $4 for each assembly and 25,000 are created
annually, the cost of rework would be:

25,000 x 10% x $4 = $10,000

 What is Waste Identification and Elimination?
Waste of Defects: Indicators and Techniques to Eliminate

Indicators:
 Extensive receiving inspection
 Gauging / inspection stations
 Scrap / rework / sorting areas

Golden Rule Techniques to Eliminate:

Defects must be traced
to their root cause for a
permanent solution.
 Supplier quality built-in
 Error proofing
 Reduction of variation
 Quality at source
Reducing Waste
 What is Waste Identification and Elimination?

Waste of Overproduction: Definition

Producing more,
or sooner, than
is needed
 Producing a larger amount
than is necessary.

 Producing at a rate faster

than required.
 What is Waste Identification and Elimination?

Waste of Overproduction: Root Causes

 Incapable Process
 Long Changeovers / Set-Ups
 Lack of Level Schedules
 Redundant Inspections
 Misuse of Automation
 Insufficient Preventative Maintenance
 Just-In-Case Thinking
 What is Waste Identification and Elimination?

Waste of Overproduction: Example

Company produces 5,000 more parts than necessary, “just in case”

 Extra parts not needed by customer take up

valuable aisle/storage space
 Increased inventory increases overhead expense
 Extra production reduces available time for orders
needed by other customers
 What is Waste Identification and Elimination?
Waste of Overproduction: Indicators and Techniques to Eliminate
Indicators:
 Excessive inventories
 Make to Forecast
 High scrap/rework
 High Lead times

Techniques to Eliminate:
Golden Rule  Small lot production (one-piece
Build what the customer flow when possible)
needs, when it is needed  Make to Demand
in the quantity needed.
 Level Scheduling
 What is Waste Identification and Elimination?

Waste of Transportation: Definition

Any movement
of material or
information that is
not required for
“Just-In-Time”
production
 What is Waste Identification and Elimination?

Waste of Transportation: Root Causes

 Multiple Storage Location

 Large Lot/Batch Processing
 Poor Plant Layout
 Redundant Inspection
 Poor Housekeeping
 Unleveled Scheduling
 Overproduction
 What is Waste Identification and Elimination?

Waste of Transportation: Example

Employee walks 35 feet to next station 32 times per day

 Avg. walking pace = .227 seconds per foot

 .227 seconds x 35 feet = 7.9 seconds per trip
 7.9 seconds x 32 times = 252.8 seconds per day
 252.8 seconds x 260 working days = 18.3 hours per year
 18.3 hours x $20 per hour = $366 per year spent for
employee to walk to next station

If stations were 6 feet apart, the amount paid to walk to

next station would only be $63
 What is Waste Identification and Elimination?
Waste of Transportation: Indicators and Techniques to Eliminate

Indicators:
 Lack of pull systems
 Large lots
 Double Handling

Techniques to Eliminate:
 Predetermined routes / frequent
Golden Rule delivery
 Small (no) containers / kitting / de-
Transportation adds
NO VALUE to any part. containerization
 Pull systems
 Improve factory layout
 Single piece flow
Minimizing Waste: Group Technology
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Saw Saw Saw Grinder Grinder

Heat Treat

Lathe Lathe Lathe Press Press Press

Minimizing Waste: Group
Technology
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Revising by
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Technology Cells
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reduce
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movement and
and improve
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product flow
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Grinder
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Heat Treat

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Saw Lathe A B Lathe Press
 What is Waste Identification and Elimination?

Waste of Waiting: Definition

Being idle
between
operations
 What is Waste Identification and Elimination?
Waste of Waiting: Root Causes

 Unbalanced Work Loads

 Insufficient
Preventative
Maintenance
 Unplanned Down Time
 Long Changeovers / Set-Ups
 Upstream Quality Problems
 Overproduction
 What is Waste Identification and Elimination?
Waste of Waiting: Example

Employee waits 20 seconds for previous operation to finish each part

 20 seconds x 60 parts per hour = 20 minutes per hour spent

waiting for parts
 20 minutes x 8 hours per day = 2.67 hours per day spent
waiting
 2.67 hours x 260 days per year = 694.4 hours per year
spent waiting
 694.4 hours x $20 per hour = $13,888 spent on employee
waiting for previous operation
 What is Waste Identification and Elimination?
Waste of Waiting: Indicators / Techniques to Eliminate
Indicators:
 Operators waiting for machine
 Operators waiting for material
 Operators faster than line

Golden Rule
Techniques to Eliminate:
Design machine and
 Improve work distribution
process to support
operators; shift from  Cross train operators
machine focus to
 Pull systems / frequent
people focus.
deliveries
 Improved changeovers
 What is Waste Identification and Elimination?

Waste of Inventory: Definition

Any supply
in excess
of one piece
flow
 Inventory Hides Problems !!

Inventory Hides Waste !!

Company
INVENTORY LEVEL

WATER = INVENTORY

VARIATION EQUIPMENT POOR

LARGE DOWNTIME LAYOUT
LONG LOT SIZES
CHANGEOVERS SUPPLIER
ROCKS = PROBLEMS QUALITY
 What is Waste Identification and Elimination?
Waste of Inventory: Root Causes

 Local Optimization
 Unreliable Processes
 Unreliable Suppliers
 Unleveled Schedules
 Poor Communication
 Long Changeovers
 PoorOperational
Availability
 Overproduction
 What is Waste Identification and Elimination?
Waste of Inventory: Example

Company rents warehouse space to hold extra inventory

 Need 4,000 square feet to hold inventory

 Warehouse space costs $4.00 per square foot per month
 4,000 square feet x $4.00 = $16,000 per month
 $16,000 x 12 months = $192,000 per year for storage
 What is Waste Identification and Elimination?
Waste of Inventory: Indicators and Techniques to Eliminate
Indicators:
 Storage / holding areas
 Large buffers between
operations

Golden Rule
Inventory is a symptom of
the other forms of waste Techniques to Eliminate:
and will hide this waste if
 Small Lot Production
allowed. Eliminate the
waste and the inventory  Level Scheduling
will not be needed.
 Pull systems
What is Waste Identification and Elimination?

Waste of Motion: Definition

Any
movement
that does
not add
value
 What is Waste Identification and Elimination?
Waste of Motion: Root Causes

 Inconsistent Work Methods

 Poor Equipment, Office
or Plant Layout
 PoorWorkplace Design
(Parts Presentation)
 Lack of Workplace Organization
 Overproduction
 What is Waste Identification and Elimination?
Waste of Motion: Example

Employee walks to tool crib 100 feet away 3 times a day to retrieve equipment

 Costs $98.37 per year for employee to make the trip

(per transportation calculation)
 High chance of tools getting lost or misplaced due to
proximity of storage location
 Reduced productivity from employee due to travel for
equipment
Waste of Motion: Example
Waste Example
 Bricklaying, through late
Nineteenth Century
 The brick weighs
about five pounds
(2.3 kg). How
much is the worker
actually raising
and lowering every
time he bends over
for another brick?

Source: Levinson Productivity Systems,

P.C.
 Bricklaying, after Frank
Gilbreth
 The joke about the underachievers and the light bulb
isn't so funny any more.
 Lesson: waste can, by long habit ("living with it,"
"working around it") become built into a job.

Source: Levinson Productivity Systems,

P.C.
 What is Waste Identification and Elimination?
Waste of Motion: Indicators and Techniques to Eliminate

Indicators:
 Excessive reaching / bending
 Excessive walking
 Cluttered work area

Techniques to Eliminate:
Golden Rule  Improved workstation design

The focus MUST be on  Design for flow

the operator.  Designate / label storage area
 What is Waste Identification and Elimination?
Waste of Processing: Definition

Effort which
adds no
additional
value in the
eyes of the
customer. “Using a Hammer to Crack a Nut”
 What is Waste Identification and Elimination?
Waste of Processing: Root Causes

 Just-In-Case Logic
 True
Customer
Requirements
Undefined or Unclear
 Redundant Steps
 Lack of Operator Training
 Overproduction
 What is Waste Identification and Elimination?
Waste of Processing: Indicators and Techniques to Eliminate
Indicators:
 Variation between operators
 Unnecessary heat treat
 Machine cutting air
 Redundant / Unnecessary
Labeling

Techniques to Eliminate:
 Compare current state
Golden Rule
processes to customer
Understand customer requirements
specifications.  Product design improvements
 Process improvements