Lean and Agile Logistics and Supply Chain

Instructer:
Dr.Farahani

By:
Iman Tabari 85125047
Hamid reza Kia 85125030

Spring 2007
 What is ‘Lean’ ? [1]

A set of tools to reduce waste ?

A philosophy based on lead time reduction from customer
order to delivery ?

A state of mind ?

An operational model based on continuous improvement ?

A manufacturing method based on customer demand?

An organizational methodology designed to create a
Learning Organization ?

All of the above ?

What else is it ?
 Lean [2]

Lean is the set of ‘TPS’ of tools that assist in

the identification and then steady elimination
of waste (Muda), quality is improved,
production time and costs are reduced

It is a hot topic in management science in the

first decade of the 21st century.
 Toyota Production System (TPS)

IS the philosophy which organizes

manufacturing and logistics at Toyota

including the interaction with suppliers and
customers.

The main goals of the TPS are to design out
overburden (Muri), smooth production (Mura)
and eliminate waste (Muda)
WHAT LEAN SUPPLY CHAIN IS? [1]

A lean supply chain process has been

streamlined to reduce and eliminate waste
(Muda) or non-value added activities to the
total supply chain flow and to the products
moving within the supply chain .
The purpose of a lean supply chain is to meet
the 8R's is [1]

Right Materials

Right Quantity

Right Time

Right Place

Right Source

Right Service

Right Price

Right Quality
 Lean House
Customer Focus: Hoshin Planning, Takt, Teamwork, Kaizen

JIT Jidoka
1. Pull 1. Plan vs. Actual
2. Flow
Teamwork 2. Visual Control
3. Leveled Flow 3. Poka -Yoke
1. Collaboration
4. Frequency 4. Five W’s
5. Lot Size
2. Best Practices
5. Five Why’s
6. Lead Time 3. Go See
6. Shewhart cycle
7. Returnables 4. Time and Motion 7. No Muda
8. Integration

Standardization – Standardized Work, 5S

Stability – Variation reduction - TPM
 Hoshin Planning (Hoshin Kanri )

a strategic planning methodology that uses a

Shewhart cycle to create goals

assign them measurable milestones

and assess progress against those milestones

The discipline of Hoshin Kanri help an organization:

Focus on a single goal

Communicate that goal to all leaders

Involve all leaders in planning to achieve the goal

Create measurable deliveries (eg. "5 sales this
quarter" instead of "more sales")

Hold participants accountable for setting realistic
goals and achieving them.
Takt

Takt time can be defined as the maximum

time allowed to produce a product in order
to meet demand.

Ta
T =
Td

• T = TAKT Time,
• Ta = Net Available Time to Work
• Td = Total demand (Customer Demand)
Kaizen

the English translation is "continuous

improvement“.

Kaizen aims to eliminate waste , through
standardized work
 Jidoka [3]

meaning automation with a human touch

It is a quality control process used in the Toyota
Production System which applies the following four
principles :
• Detect the abnormality.
• Stop.
• Fix or correct the immediate condition.
• Investigate the root cause and install a
countermeasure.
 Just In Time (JIT) [3]

is an inventory strategy implemented to improve the

return on investment of a business by reducing in
process inventory and its associated costs

‘just-in-time’ focus will include:
• Methods
• Manpower
• Packaging
• Equipment
• Visual Workplace
• Project Management
Poka-yoke [4]

avoiding ( yokeru) inadvertent errors ( poka).

The concept was originated by Shigeo Shingo as

part of the Toyota Production System .

a method of preventing errors by putting limits on

how an operation can be performed in order to
force the correct completion of the operation.
Shewhart cycle(PDCA )

was named for Walter Shewhart, who discussed
the concept in his Statistical Method from the
Viewpoint of Quality Control book.

It is the continuous improvement cycle of Plan,
Do, Check, Act (PDCA).

also referred to as the Deming Cycle.
Muda (Waste)

is a Japanese term for activity that is

wasteful and doesn't add value.

Waste (Muda) reduction is an effective

way to increase profitability.
 5S

Seiri : tidiness, organization.

Seiton : orderliness.

Seiso : cleanliness.

Seiketsu : standards.

Shitsuke : sustaining discipline .
Total Productive Maintenance (TPM)

TPM is “deterioration prevention” and

"maintenance reduction", not fixing machines.

also referred to as the"Total Productive

Manufacturing" or "Total Process Management ".
TPM has five goals:

Maximize equipment effectiveness.

Develop a system of productive maintenance for
the life of the equipment,

Involve all departments that plan, design, use, or
maintain equipment in implementing TPM.

Actively involve all employees.

Promote TPM through motivational management.
Lean Logistics Concept 1 of 3 – Lot Size [1]
Lean Logistics Concept 2 of 3 – Frequency [1]
Lean Logistics Concept 3 of 3 – Level Flow [1]
 What is agility?

One of the biggest challenges facing organizations

today is the need to respond to ever increasing
levels of volatility in demand.

To meet this challenge the organization needs to

focus its efforts upon achieving greater agility such
that it can respond in shorter time-frames both in
terms of volume change and variety change
 What is agility?

Agility is a business-wide capability that embraces

organizational structures, information systems, logistics
processes and, in particular, mindsets.

A key characteristic of an agile organization is flexibility

Indeed the origins of agility as a business concept lie in

flexible manufacturing systems (FMS).
 What is agility?

Later this idea of manufacturing flexibility was extended

into the wider business context and the concept of
agility as an organizational orientation was born.

Agility should not be confused with ``leanness'‘.

 What is agility?

The lean approach is level scheduling combined with the

elimination of muda.

lean approach is for those markets where cost is the

primary order winning criteria.

there are many other markets where the order winner is

availability
 What is agility?

Webster's Dictionary:
it defines lean as ``containing little fat'‘
whereas agile is defined as ``nimble'

Naylor et al.:
Agility means using market knowledge and a virtual
corporation to exploit profitable opportunities in a
volatile market place.
Leanness means developing a value stream to
eliminate all waste and to ensure a level schedule.
The agile supply chain
Market
sensitive

Network
Virtual Agile SC based

Process
integration
The agile supply chain

market sensitive is meant that the supply chain is

capable of reading and responding to real demand.

The use of information technology to share data

between buyers and suppliers is, in effect, creating a
virtual supply chain. Virtual supply chains are
information based rather than inventory based.

Electronic Data Interchange (EDI) and now the Internet
have enabled partners in the supply chain to act upon
the same data.
 The agile supply chain

Shared information between supply chain partners can

only be fully leveraged through process integration.

process integration is meant collaborative working
between buyers and suppliers, joint product development,
common systems and shared information.

This idea of the supply chain as a confederation of
partners linked together as a network provides the fourth
ingredient of agility.

the route to sustainable advantage lies in being able to
leverage the respective strengths and competencies of
network partners to achieve greater responsiveness to
market needs.
Market qualifiers, market winners, Total value

Hill (1993):
it is important for every business to understand
what the baseline is for entering into a
competitive arena these are the ``order qualifiers‘
To actually win the order requires specific
capabilities and these are the ``order winners'

We can borrow from these important ideas to

develop a wider supply chain oriented concept of
``market qualifiers'' and ``market winners'
Market qualifiers, market winners, Total value

When businesses in a supply chain focus upon the

end-user there are many metrics that can be
considered

they may be aggregated as Service, Quality, Cost and

Lead-time
Market qualifiers, market winners, Total value
Lean SC And Agile SC

the lean paradigm is most powerful when the

winning criterion is cost.

when service and customer value enhancement

are prime requirements for market winning then
the likelihood is that agility will become the
critical dimension.
Lean SC And Agile SC
Which paradigm?
Characteristics of equal importance

1. Use of market knowledge:

• The nature of the end-user or market sector as a whole
will have a direct impact upon which paradigm will be
the most apt for any supply chain or part of a supply
chain
2. Integrated supply chain/value stream/virtual corporation
• Businesses must work together to form an integrated
supply chain focusing on meeting the demands of the
end-user or final customer.
• With the integrated supply chain both the information
and material flows will be simplified, streamlined and
optimized reducing waste and lead times.
Characteristics of equal importance
Characteristics of equal importance

3. Lead time compression:

• Leanness calls for the elimination of all waste or in

lean terminology `muda

• agile manufacturing requires a responsive supply

chain This also calls for lead time compression in
terms of information flow as well as material flow.
Characteristics of similar importance

1. Eliminate muda:
• Lean manufacturing is called lean as it uses less, or the
minimum, of everything required to produce a product
or perform a service
• Quite clearly the agile manufacturer would also aim to
eliminate as many non-value adding activities as
possible
• in an agile system there will have to be a careful
consideration of stock and/or capacity requirements to
ensure the supply chain is robust to changes in the end
users‘ requirements
Characteristics of similar importance

2. Rapid reconfiguration:
• Agile manufacturing means that the production process
must be able to respond quickly to changes in
information from the market
• Therefore, the ability to rapidly reconfiguration the
production process is essential.

• In lean manufacturing the ability to change products

quickly is also key as any time wasted in changing over
to a new product is muda and therefore should be
eliminated
Characteristics of different importance

1. Robustness:
• An agile manufacturer must be able to withstand
variations and disturbances and indeed must be in a
position to take advantage of these fluctuations to
maximize their profits.
2. Smooth demand/level scheduling:
• Lean manufacturing by its very nature tends to reduce
demand variation by simplifying, optimizing and
streamlining the supply chain.
Characteristics of different importance
Characteristics of different importance
Comparison of lean supply with agile supply:
the distinguishing attributes
Practical Ways of Marrying the Lean and Agile
Paradigms

• Here are three proven ways in which the

paradigms have been brought together to provide
available and affordable products for the end
customer:

1. The Pareto Curve Approach

2. The De-coupling Point Approach
3. Separation of “Base” and “Surge” Demands
The Pareto Curve Approach
• Typically an analysis of the business will show that
the 80/20 (or similar) rule holds.
The De-coupling Point Approach

• decoupling point separates the part of the supply

chain that responds directly to the customer from the
part of the supply chain that uses forward planning
and a strategic stock to buffer against the variability
in the demand of the supply chain.

• The positioning of the decoupling point therefore

depends upon the longest lead time an end-user is
prepared to tolerate and the point at which
variability in product demand dominates
The De-coupling Point Approach

• Downstream from the decoupling point all products

are pulled by the end-user, that is, they are market
driven.

• Upstream from the decoupling point the supply

chain is initially forecast driven.

• A parallel concept to the ‘material’ de-coupling point

described above is that of the ‘information’
decoupling point
The De-coupling Point Approach
Separation of “Base” and “Surge” Demands
• Base demand can be forecast on the basis of past
history whereby surge demand typically cannot.
• Base demand can be met through classic lean
procedures to.

• surge demand is provided for through more flexible,

and probably higher cost, processes.

• Strategies such as these are increasingly being

employed in the fashion industry where the base
demand can be sourced in low cost countries and the
surge demand ‘topped up’ locally nearer to the
market.
Practical Ways of Marrying the Lean and Agile
Paradigms
 References
1. Robert Martichenko, Lean Logistics,ppt,sit LeanCor LLC
2. Ronald G. Askin and Jeffrey B. Godberg, 2002, deisign and
Analysis of lean production systems , wiley
3. Donald waters, 2003, Inventory control and
management,Wiley,2nd.
4. Nikkoan kogyo shimbun,Ltd. 1988, -yoke: improving product
quality by preventing defects,productivity press .