Becoming Lean: The Bottom-Line

By Thomas R. Cutler

 “Using solutions to synchronize production and material replenishment across the factory via a lean assessment produces impressive results.  Order-to-ship lead times are reduced by over fifty percent, on-time delivery performance is improved by more than twenty percent, and work-in-progress (WIP) inventories are reduced up to forty percent,” according to Narayan Laksham, Founder and President of Ultriva, a lean solutions leader based in Cupertino, California.

Indeed a lean assessment impacts distribution, factories, and the supply chain.  Lean distribution allows companies to manage finished goods inventory in a dynamic, efficient, and real-time environment.  It provides the right product mix, visibility, stock, out alerts, and analytics to be fully streamlined.  A lean factory process allows firms to orient production around customer demands instead of capacity optimization.  Increased flexible scheduling allows adjustments to be made on the fly.  Laksham insists that, “A lean supply chain allows for the replenishment system of choice including kanban, MRP orders, VMI, or 3PL, on a collaborative platform that seamless connects plants and suppliers.”

The Lean Supply Chain: Bottom-Line

The lean supply chain is still largely controlled by MRP and ERP systems which use forecasted or planned demand to set up supplier replenishments.  Every run generates changes to the existing demand while also creating new demands; the result is a series of inconsistencies across the supply chain, late shipments, costly expediting, and stock outs.

As manufacturing spreads horizontally, the global supply chain is becoming the most critical factor in determining customer demands.  Laksham urges, “Managing this chain is no longer a matter of reducing costs but of optimizing a key process that is fueled by integration, trust, common metrics, and aligned goals.”  One of the important methods utilized by Ultriva is the Supplier Portal for Purchase Order Execution which offers a platform to improve collaboration between plants and suppliers so they can interact and perform in synergy to deliver the right parts and the right time.  This type of seamless integration between manufacturing plants and supply bases is best achieved through order visibility, exception alerts, inventory health, performance metrics, and analytics for continuous improvement.  A single platform also allows for immaculate integration from kanban-based replenishment to MRP/forecast-driven supply.

Increased Productivity and Profits

Laksham shared data that demonstrated the efficacy of this lean supply utilization.  With over 3000 suppliers participating across 95 plants in nine countries, the metrics of increased productivity and profitability define the merit of a lean process.

• Improved on-time delivery by 20%
• Shortened lead times by 25% or more
• Reduced inventory levels by more than 40%
• Reduced expediting fees by 50%

Lean Factories: Coming Up Short due to Production Schedule Management

Despite huge investments to make factories more efficient, there has been little progress on improving on-time deliveries and reducing inventory at the finished goods or work-in-progress level; the primary reason is production schedule management.

Lean scheduling and sequencing allows firms to drive the factory to get as close to production cycle time as possible.  With dashboards that display schedules by work cell, operations managers can see if the cell is over capacity or underutilized on a real-time basis.  Supervisors can dynamically modify schedules to meet customer demand dates.  Upstream work center schedules can be driven by downstream pull signals to synchronize production across the floor.  With work-in-progress management tools inventory levels can be aligned with actual consumption to reduce inventory levels and eliminate stockouts.

Checklist of Lean Topics and Issues with Rapid ROI impacts

• Implement eKanban 
• Global Supply Chain Visibility 
• Raw Material Kanban 
• Schedule Based Replenishment 
• Work In Process Kanban 
• Finished Goods Kanban between DC's 
• Finished Goods Kanban with Customers 
• Lean Scheduling With Level Loading 
• Production Sequencing at Final Assembly Cells 
• Production Sequencing at Upstream Workcenters 
• Setting a pull between Assembly Lines and Supermarket 
• Setting a Pull between Assembly Line and Warehouse 
• Identify Parts which are suitable for Kanban 

The move to lean manufacturing must happen in practical, incremental steps. Whether a company begins with distribution, factory, or supply chain, each step improves flexibility and optimizes resources to bring the enterprise closer to a profitable, customer-centered manufacturing and distribution model.