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L E A N M A N U F A C T U R I N G

5S for Suppliers
How this technique can help you maintain
a lean material supply chain
by Kimball E. Bullington

W
HAT DOES SUPPLY management department, often reports to the manager of opera-
for lean production look like? In tions, and that person is usually not a purchasing
some companies it looks like lean expert. The relationship between purchasing person-
production because these lean nel and the general management of operations can be
leaders use the 5Sseiri, seiton, improved if they use a common vocabulary built
seiso, seiketsu and shitsuketech- around concepts familiar to the head of the organiza-
nique to ensure the proper mainte- tion and the heads of the other departments. The 5S
nance of a lean material supply. program provides that common vocabulary.
The term lean supply implies that the supply The program also supports the visual workplace.
chain is appropriate for lean production. This concept Hiroyuki Hirano referred to the 5Ss as pillars of the
of waste elimination in processes has been popular at visual workplace in the title of his book on 5S.4 In a
some manufacturing companies. Its basic tenets are to:1 5S environment there is a place for everything, and
Specify value. everything is in its place. Time spent searching
Identify the value stream. for items is essentially eliminated, and out of place or
Organize the value stream to promote flow. missing items are immediately obvious in a properly
Communicate demand through pull. functioning 5S facility.
Strive for perfection. The 5S program performs a similar function for
supplier maintenance. The users of the system imme-
What is 5S? diately know where to find information about their
The 5Ss are key lean concepts derived from the supply base, and missing or out-of-date information is
Japanese words seiri (sort), seiton (set in order), seiso instantly apparent. To implement a 5S program for
(shine), seiketsu (standardize) and shitsuke (sustain).2 supplier maintenance, you should abide by the fol-
Companies adopting the lean production philosophy lowing five guidelines.
often implement the 5S process to bring order to the
workplace and support lean production. One impor-
1. Sort
tant aspect of the lean production philosophy is its The first step in implementing 5S for lean manufac-
emphasis on value. In the United States, the cost of turing is to take a tour of the target area and mark
purchased materials accounts for approximately 35 with red tags those items that appear out of place or
cents of every sales dollar.3 Any comprehensive effort unnecessary. After each item is reviewed, it is either
to focus on the value a customer receives must put in its proper place or removed if it is unnecessary
include the supply perspective. or redundant. The sort process is essential to organiz-
ing the workspace needed for lean production.
Why use 5S? When applying the sort method to the supply base,
The 5S program is a proven model for organizing you select suppliers to add to the system and elimi-
and maintaining a production operation. It is fre- nate from the system. In purchasing jargon, this is
quently used in manufacturing operations, particular- known as supply base consolidation or rationaliza-
ly progressive ones. tion. Sorting the supplier base through consolidation:
The supply function, especially the purchasing Reduces the waste of inefficient work methods by

56 I J A N U A R Y 2 0 0 3 I W W W . A S Q . O R G
reducing the number of suppliers that must be supply managers often build their improvement efforts
managed by the procurement staff. on an initial sorting of the supply base.
Reduces the waste of supplier selection quality by
focusing efforts of selection, evaluation and improve- 2. Set in order
ment on a few select suppliers. It also improves the In a manufacturing implementation of 5S, set in
quality (conformance to specifications and delivery) order means to arrange products and equipment so
of the products received from these suppliers by they are easy to find and use. Equipment and storage
focusing quality assurance, control and improvement locations are labeled so the tools will be easy to identi-
activities on a smaller number of suppliers. fy when they are needed and put away when they are
Reduces processing waste as fewer purchase orders no longer in use. Labeling storage locations with tape
are necessary and fewer selection audits are needed. on the floor or the workstation facilitates visual man-
Increases the opportunity for supply chain partnering agement. One glance is all thats needed to identify
when suppliers are aware of their sole-source status. missing or improperly stored tools.
So for the management Arranging suppliers
of supply, the primary so they are easy to use
focus of the sort step is to TABLE 1 Supplier Segmentation Value Matrix involves the concept of
select suppliers. It cannot segmentation. To com-
be done by physically Low value potential High value potential plete the initial seg-
attaching red tags to sup- mentation, you need to
High risk Risk value Partnership value
pliers, so how can it be perform a portfolio
applied? Several criteria Low risk Transaction value Price value analysis. This analysis
can be used to identify provides a place for
candidates for elimination everything and allo-
in the sorting process: cates everything in its
Isolate some candidates for elimination by conduct- place. It sorts the supply base by value potential and
ing a performance reviewa review of their quality, risk, strategic value and opportunity for cost improve-
delivery and price performance. A lean producer may ment, and value potential and criticality.
be much more interested in delivery performance or The proper place for a supplier is identified in a seg-
inventory levels than the actual purchase price. But mentation matrix. To create one, you need to clearly
even a lean manufacturers emphasis on delivery, determine how each supplier will be treated based on
price and inventory will shift as conditions dictate. identifiable criteria. See Table 1 for a sample supply
Perform a review of redundant suppliers. Ask how base segmentation by annual expenditures and risk. It
many suppliers have identical or overlapping capa- yields four segments of suppliers with different
bilities. The effort to consolidate suppliers this way opportunities for value contribution.
rewards the best suppliers with additional business. The key suppliers for lean production companies
Determine how many parts are purchased from tend to fall into the high risk/high value partnership
each supplier, which will often result in identifica- segment of the matrix. Partnership suppliers represent
tion of a large number of suppliers providing only a higher risk to the company in terms of design com-
one or a few parts. Some suppliers may not have plexity, start-up communication, custom tooling, over-
been used for some time and may be candidates for all higher demand for buyer input and schedule
sorting or consolidation. pressures. You can also think of risk as the level of
After completing all the sorting, you will likely end opportunity for adverse effects on value, such as dete-
up with an optimum number of suppliers. W. Edwards rioration in delivery, lead time, price or quality.
Deming said, No manufacturer I know of possesses The other supplier segments have different needs.
enough knowledge and manpower to work effectively The low risk/high value potential segment includes
with more than one vendor for any item.5 Many com- commodity items. The value contribution of these
panies choose to use more than one source for a single suppliers is primarily driven by price. A partnership
item for a variety of reasons, including risk, capacity is not the ideal model for these relationships.
and price, but Demings point should be heeded. Low risk/high value potential purchases are char-
Multiplying suppliers increases variation and over- acterized by intense negotiations, competitive bid-
head. The practice of using multiple suppliers for a sin- ding, online auctions and long-term contracts. If the
gle part in order to reduce risk often increases risk, just risk can be reduced for low risk/high value potential
as increasing the number of components in an assem- items, significant savings can be realized by some
bly usually increases the probability of failure. Veteran form of competitive bidding. For example, automobile

QU A L I T Y P R O G R E S S I J A N U A R Y 2 0 0 3 I 57
5S FOR SUPPLIERS

manufacturers willing to redefine their tire require- along trucking routes so more than one supplier can
ments so they can purchase fewer types of tires could be visited on a single trip.
realize cost savings in the tens of millions of dollars.
The high risk/low value potential suppliers affect 3. Shine: Keep everything swept and clean
value by the nature of the factors that make them high Cleaning implies system maintenance and inspec-
risk, including demanding delivery requirements and tion. As a work area is cleaned, problems such as oil
advanced technology. The factors that drive risk are leaks or other maintenance issues become apparent
often the factors that contribute to the value of the before they have a chance to affect performance.
product. Temporary situations, such as cash flow To maintain and inspect suppliers, you can conduct
problems or capacity limitations, could be the major surveys or audits. The audits can include site surveys,
risk factors. supplier self-assessments, remote surveys, third-party
A minor supplier of plastic injection moldings, for certification type surveys such as ISO 9000 or QS-9000,
example, lost a major account, which significantly or third-party quality awards such as the Malcolm
changed its cash flow situation. Baldrige National Quality Award.
Normally this supplier would When auditing suppliers, you

5S
have been considered moder- should try to obtain objective
ately high risk because it evidence that supports your
required customized tooling, sort and segmentation deci-
but for a time it moved near sions or evidence that sup-
the top of the high risk cate- ports action of a different
gory. In an undesirable situa- seiri type, such as risk reduction
tion such as this, the supplier and continuous improve-
has the potential to reduce the seiton ment. Audits enable the
value, but little or no potential supply manager to detect
for adding value. Suppliers in seiso problems early so they can
this category are usually over- be corrected before further
looked by supply management seiketsu deterioration occurs. Auditing
until some sort of failure occurs, provides an opportunity for
but segmentation can help the supply man- shitsuke reviewing supplier performance. It lets
ager identify these potential problem sup- you ask, are the right measures being used? Is
pliers before something bad happens. the supplier performing adequately? What
The low risk/low value potential suppliers typical- are the reasons behind a particular suppliers less than
ly have high transaction costs compared to the value desirable performance?
of the product. The opportunity for adding value Third-party audits such as those conducted during
comes by consolidating these purchases and reducing the ISO 9000 certification process provide limited
transaction costs. insight under these circumstances. First-person audits
Several different segmentations may be conducted or customized surveys are much better, but you must
to properly categorize your suppliers and can include remember audits are not a panacea. For example, a
an evaluation of the suppliers quality. Performance team audit of one new supplier revealed a low level of
measures may be helpful in segmenting the remaining business activity, which should have been a warning
supply base. of future new product introduction problems.
Deterioration in the segmentation step can arise Unfortunately, the warning signs were ignored.
when new suppliers are added. It can only be prevent- You should schedule regular on-site visits with the key
ed by making classification a step in the process of suppliers identified in the set in order or segmentation
adding a supplier. Another source of deterioration stage. High risk/high value potential suppliers usually
comes when a suppliers risk factor changes. Changes receive the most visits, followed by high risk/low value
such as financial difficulties or capacity problems potential suppliers and low risk/high value potential
should be evaluated on an ongoing basis for key sup- suppliers. Low risk/low value potential suppliers are
pliers, but the problem can also arise at a relatively generally not surveyed except through mail surveys of
minor supplier. regulatory compliance issues.
To address the location aspect of the set in order Partnership maintenance is a key element in pre-
step, identify the location of each supplier on a large serving your supply base. A sound preventive mainte-
map. It will help you further consolidate by forcing nance program is as essential to supplier maintenance
you to group suppliers locally, in targeted areas or as it is to manufacturing. The basic elements of a

58 I J A N U A R Y 2 0 0 3 I W W W . A S Q . O R G
preventive maintenance program include: engineering is the source of many requests for new
A schedule of the maintenance, such as a team suppliers. Second, engineering, particularly design
meeting schedule with expectations defined for engineering, may harbor a creative environment that
each meeting. feels constrained by programs that promote rigid dis-
A log of the maintenance, which could include cipline. Engineers have been known to say they see no
meeting minutes. reason to limit their supplier selections just so the
An audit of the maintenance, such as an audit of the buyers can play more solitaire on their computers.
teams processes and performance. Fortunately, the 5S program provides the reasoning
Partnership maintenance is not complicated, but it behind the consolidation efforts.
is necessary.
5. Sustain: Discipline starts with the leadership
4. Standardize: Integrate sort, set in order and shine Do you care enough to be consistent with your mes-
This step should follow your successful implemen- sage and vision? Are you communicating the pro-
tation of the sort, set in order and shine steps. gram, including the reasons for your actions, outside
Standardizing or integrating all three steps ensures the procurement department? Are you properly train-
your implementation of the first three pillars wont ing new employees? Does the appropriate structure
deteriorate over time. It formalizes the procedures, exist to support this program? Is supply base mainte-
schedules and practices that sustain the system and nance a significant part of the employee performance
drive future improvements. appraisal process?
Several problems can be avoided through standard- These are issues for leadership to conquer. No 5S
ization, including: process for supply management will be effective with-
The number of suppliers growing unchecked. out vigilant leadership. Lean producers have used this
The number of suppliers becoming unknown, process effectively, and consistent leadership over
which can lead to supply base growth and segmen- time is necessary to prevent system deterioration.
tation deterioration.
The segmentation deteriorating and the classifica- ACKNOWLEDGMENT
tion of the suppliers becoming unknown. Thanks to Kent Johnson, industrial engineer with Chromalox;
Jerry Benefield, former CEO of Nissan Motors, USA; and Kevin
Suppliers not being visited on a regular basis. Stone, director of tactical operations and planning for Comcast
The conducting of surveys informally or with rene- Communications, for their comments, suggestions and examples.
gade processes.
Whats the easiest way to standardize? By assigning REFERENCES:
3S duties. Make sure the personal plans or objectives 1. James P. Womack and Daniel T. Jones, Lean Thinking,
of the supply management personnel cover the neces- Simon and Schuster, 1996.
sary sort (supplier consolidation), set in order (seg- 2. Hiroyuki Hirano, 5S for Operators: 5 Pillars of the Visual
mentation) and shine (audit) issues. For instance, Workplace, Productivity Press, 1996.
some purchasing agents maintain bar charts showing 3. Annual Survey of Manufacturers, U.S. Census Bureau, 2000.
the number of suppliers over time. They also keep a 4. Hiroyuki Hirano, 5 Pillars of the Visual Workplace,
Productivity Press, 1990.
segmentation chart showing their key suppliers in the
5. W. Edwards Deming, Out of the Crisis, Massachusetts
relevant segments and use different colors to indicate Institute of Technology, 1986.
when the supplier was last audited.
Strategic buyers, commodity managers or the pur-
chasing manager are responsible for surveying the KIMBALL BULLINGTON is an associate professor of operations
charts in each buyers area to guarantee they are cur- management at Middle Tennessee State University in
rent. The results of these surveys can be displayed on Murfreesboro, TN, and a supply chain management consultant.
checklists that show the level of implementation. He earned a doctorate in industrial engineering from Mississippi
The motivation for consolidating suppliers often State University in Starkville, MS. Bullington is a Senior
comes from outside the purchasing department, but Member of ASQ.
do these other departments understand why consoli-
dation is valuable? One advantage of the 5S approach
is that it forces purchasing and manufacturing to use a I F YOU WOULD LIKE to comment on this article,
common language. This facilitates the communication please post your remarks on the Quality Progress
between these two groups, but what about interac- Discussion Board at www.asqnet.org, or e-mail
tions between design engineering and purchasing? them to editor@asq.org.
This is a critical interface for two reasons. First,

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