Lean Supply Chain Management: A Handbook for Strategic Procurement

Lean Supply Chain Management : A Handbook for Stategic Procurement by Jeffrey P. Wincel Productivity Press © 2004 (240 p...

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Lean Supply Chain Management : A Handbook for Stategic Procurement by Jeffrey P. Wincel Productivity Press © 2004 (240 pages)

ISBN:156327289x

This book provides purchasers and supplier development professionals with the tools needed to transform procurement from a mere cost center to a profit generator. Table of Contents Lean Supply Chain Management—A Handbook for Strategic Procurement Foreword Introduction SECTION I - The Foundations

Chapter 1

- The Purchasing/SCM Executive as CEO

Chapter 2

- The Disciplines of Planning

Chapter 3

- Force Versus Skill

SECTION II - The Crisis Environment

Chapter 4

- Defining the Crisis Environment

Chapter 5

- Crisis Plan Background and Phase 1—Acquisition Team Formation

Chapter 6

- Phase II—Price Benchmarking

Chapter 7

- Phase III—Short-Term Process Improvement

Chapter 8

- Phase IV—Value Analysis/Value Engineering

Chapter 9

- Phase V—Lean Manufacturing

SECTION III - The Standard Environment

Chapter 10 - Defining the Standard Environment Chapter 11 - Supply Base Management Chapter 12 - Supplier Quality and Development Chapter 13 - Cost Management and Control Chapter 14 - Materials Management Chapter 15 - The Supply Chain Organization SECTION IV - Coordinating SCM and Lean Management

Chapter 16 - Developing & Implementing Lean Fundamentals Chapter 17 - Manufacturing Implementation Chapter 18 - Ongoing Improvements Index List of Figures List of Tables List of Sidebars

Back Cover Lean Supply Chain Management : A Handbook for Unlike other strategic procurement guides, Lean Supply Chain Management considers an organization's Stategic Procurement "business condition" as a contributing factor in the development of a strategic procurement strategy. That is, ISBN:156327289x by Jeffrey P. Wincel rather than taking a "one-size fits all" approach, the author's more individualized approach illustrates Productivity Press © 2004 (240 techniques specific to organizations operating in pages) a "standard" environment or "crisis" environment. In addition,Lean Supply Chain Management is the only book that incorporates This book provides purchasers and supplier developmentlean methodology as the key factor in its supply chain strategies. professionals with the tools needed to transform procurement from a mere cost center to a profit generator. Highlights include: Table of Contents Methods for developing and tracking strategic procurement initiatives. Lean Supply Chain Management—A Handbook for Strategic Procurement Foreword Planning in the "standard" and "crisis" environments. Introduction Coordinating supply chain management and lean manufacturing. SECTION I - The Foundations

Performance measurement tools. Chapter 1 - The Purchasing/SCM Executive as CEO Chapter 2 - The Disciplines of Planning Lean Supply Chain Management provides purchasers and supplier development professionals with the tools Chapterto3transform - Force Versus Skill from a mere cost center to a profit generator. needed procurement SECTION II - The Crisis Environment

Chapter 4


Chapter 5


Chapter 6


Chapter 7


Chapter 8


Chapter 9





Lean Supply Chain Management : A Handbook for Lean Supply Chain Management—A Handbook for Stategic Procurement ISBN:156327289x Jeffrey P. Wincel Strategicby Procurement Productivity Press © 2004 (240 pages)

Jeffrey P. WincelThis book provides purchasers and supplier development professionals with the tools needed to transform procurement from a mere cost center to a profit generator. productivity press Copyright © 2004 Productivity Press, a Division of Kraus Productivity Organization, Ltd. Table of Contents Lean Supply Chain Management—A Handbook for Strategic Procurement Foreword All rights reserved. No part of this book may be reproduced or utilized in any form or by any means, Introduction electronic or mechanical, including photocopying, recording, or by any information storage and retrieval SECTION - The Foundations system, Iwithout permission in

Chapter 1

writing from the publisher.


Most Productivity Press books are available at quantity discounts when purchased in bulk. For more Chapter 2 - The Disciplines of Planning

information- contact our Customer Service Department (800–394–6868). Address all other inquiries to: Force Versus Skill

Chapter 3


Productivity Press

Chapter 4 Avenue - Defining the Crisis 444 Park South, Suite Environment 604 Chapter 5 -NY Crisis Plan Background and Phase 1—Acquisition Team Formation New York, 10016 Chapter - Phase II—Price Benchmarking United 6 States of America Chapter 7 - 212–686–5900 Phase III—Short-Term Process Improvement Telephone: Chapter - Phase IV—Value Analysis/Value Engineering Telefax:8 212–686–5411 Chapter 9 - Phase V—Lean Manufacturing E-mail:[email protected] SECTION III - The Standard Environment

Composed Williamthe H.Standard Brunson Environment Typography Services Chapter 10 - by Defining Chapter 11 - Supply Base Management

Library of Congress Cataloging-in-Publication Data

Chapter 12 - Supplier Quality and Development Chapter - Cost Management and Control Wincel,13 Jeffrey.

Lean supply chain management : a handbook for strategic Chapter 14 - Materials Management procurement / bySupply JeffreyChain Wincel. Chapter 15 - The Organization p. cm. IV - Coordinating SCM and Lean Management SECTION 1-56327-289-X Chapter 16 - Developing & Implementing Lean Fundamentals Chapter 17 - Manufacturing Implementation

1. Business logistics. 2. Industrial procurement—Management. I. Title. Index HD38.5.W56 2003 List of Figures 658.7'2—dc22 Chapter 18 - Ongoing Improvements

List of Tables

2003021131 List of Sidebars 06 05 04 03 5 4 3 2 1 There is only one person I can dedicate this to — Heather. Not only are you my partner in life, but my partner in spirit too. Without you, not only would this book have never happened, but neither would the joy of living life. Thank you and I love you.

Supply Chain Management : A Handbook for ForewordLean Stategic Procurement by Jeffrey P. Wincel

ISBN:156327289x

Press © 2004 (240 pages) LEAN AND Productivity SUPPLY CHAIN IMPROVEMENTS This book provides purchasers and supplier development professionals the tools needed to transform During the past 20 years, manywith manufacturing organizations in the U.S. have been writing and studying fromThe a mere cost center tostudies a profit have generator. all aspects of leanprocurement manufacturing. majority of these been based on the famous Toyota Production System (TPS). These lean efforts have taken us in numerous directions. In many books, you can read about TPS, its various tools such as kanban and so on, and improvement Table of Contents techniques such as kaizen. Very little, however, has beenProcurement written concerning one of the primary Lean Supply Chain Management—A Handbook for Strategic success reasons for this great system—supply chain management and development. Foreword Introduction

We have heard about the kiritsu of the Japanese OEMs, and assume this is another reason for success in Japan. Many believe that the joint ownership (and control) of suppliers by big corporations in Chapter - The Purchasing/SCM CEO material prices and profits of suppliers down. This is a kiritsu1 allow companies such asExecutive Toyota toaskeep Chapter 2 -largest The Disciplines of Planningwhile studying lean manufacturing. Much more relevant is the one of our misunderstandings Chapter 3 joint - Force Versus Skilltotal value chain, and the rigorous effort to take waste out of the total constant analysis of the SECTION - Theefforts Crisis are Environment system. II These accomplished while sharing in the financial rewards made possible by the Chapter 4 - Defining the and Crisis Environment improvements in quality profitability. Few have endeavored to put forward the value of utilizing the Chapter 5 - Crisis Plan Background andthe Phase 1—Acquisition entire system approach complete with tools of TPS and Team supplyFormation chain management in an Chapter 6 - Phase II—Price Benchmarking understandable, applicable way. SECTION I - The Foundations

Chapter 7


Beyond reading about the supply chain approach from a successful company, the best learning - Phase IV—Value Analysis/Value Engineering advantage would be to supply companies like Toyota and traditional (automotive) companies. This Chapter 9 - Phase V—Lean Manufacturing would give an individual leader and teams the advantage of seeing and comparing the two methods, SECTION III - The Standard Environment traditional versus lean, side by side. This side-by-side comparison enables us to see what works and Chapter 10 - Defining the Standard Environment what does not work in the U.S. manufacturing environment. This is exactly the comparison that Jeff Chapter 11 - Supply Base Management Wincel brings to the table in his book, Lean Supply Chain Management . Chapter 8

Chapter 12 - Supplier Quality and Development

Chapter 13for - Cost Management and Control Working the "big three" automotive purchasing and supply chain organizations and major tier-one Chapter 14 Jeff - Materials Management suppliers, had learned first hand the differences of these companies in their approach to supply

chain management. JeffChain used Organization this as he set out to successfully incorporate the best practices into his Chapter 15 - The Supply team and supply chain management efforts. In this SECTION IVtheir - Coordinating SCM and Lean Management

book, Jeff examines the need to critically

analyze16 the- current business environment within a company and to recognize if a traditional (slow) Chapter Developing & Implementing Lean Fundamentals change17 is acceptable, or if Implementation the company is in a crisis situation calling for rapid change. Each of these Chapter - Manufacturing conditions requireImprovements different skills and application of lean implementation and supply chain Chapter 18 -will Ongoing management. Index List of Figures

There is a degree of frustration in many organizations working to achieve the success of great

List of Tableslike Toyota or Honda. This success includes improved quality, delivery, cost reduction, and companies List of team Sidebars member morale, all aimed at the quest of improved profitability. There are continued efforts to

study, read books, and employ consultants, but many companies are not seeing the expected bottom line of these efforts. One of the major problems with these efforts is the fact that leaders do not understand lean manufacturing as a total, fully integrated system of manufacturing the product, including the total material value chain. They tend to treat each tool of lean as an independent improvement potential. A second problem is that, all too often, the lean manufacturing system is thought of as a manufacturing-floor project using items like JIT, kaizen, and andons, but having little or no relationship to the total value chain. Likewise, in other corners of the company, total supply chain improvements are being studied independently from the greater total manufacturing systems being implemented. Jeff is one of the first to tie the critical relationships of a total lean manufacturing system (including the plant floor level tools) with the work on total value chain and supply base improvements. Again, much has been written about the total value chain and true gains to be made in a cradle to grave value analysis by taking the waste out of the total system. This is nothing new. In the early 1900s, Henry Ford had a vision of accomplishing his mass production process with a vision of three days from raw material to finished product. Mr. Ford did this by understanding the total value chain from lumber, elements, and raw material through the entire supply base and into final assembly. He realized he could not achieve total cost reduction without a full concentration on the complete value stream. By the way, this was not known as a value steam in the 1900s—it was only sensible way to achieve total

waste reduction and profit improvements while reducing the price of the product to the customer. Likewise, if you look very deeply at the Toyota Production System, or any successful lean system, you will need to realize thatSupply the company goes far: A beyond the manufacturing floor and extends to Lean Chain system Management Handbook for the total value stream of suppliers. The system must incorporate the tools of lean manufacturing, aimed Stategic Procurement at improving the strength of the entire group by the reduction of waste. Jeff has worked to incorporate ISBN:156327289x by Jeffrey P. Wincel many of these tools. Productivity Press © 2004 (240 pages) This book provides purchasers and supplier development

Jeff, as the leaderprofessionals of purchasing and supply chain management for Donnelly Corporation, was very with the tools needed to transform instrumental at working with the Donnelly also patterned after the Toyota system, procurement from a mereProduction cost centerSystem, to a profit generator. and was highly successful at integrating the tools and techniques into the Donnelly distribution center and into the total supply chain. He used the annual planning system of lean to set targets for price Table of Contents reduction and other business improvement, but then extended the effort to assist and educate suppliers Lean Supply Chain Management—A Handbook for Strategic Procurement in the methods of working together for both companies' success. He was instrumental at ensuring that Foreword price reduction expectations were not a one-way street. The only way for us to have been successful Introduction was for both companies to succeed. SECTION I - The Foundations

Many major manufacturers in many fields have not begun to grasp the need to work cooperatively with Chapter 1 - The Purchasing/SCM Executive as CEO their suppliers toDisciplines achieve real improvement. Their approach to price improvement, inventory control, or Chapter 2 - The of Planning any other for the supplier to absorb all the cost, with the benefit only going to them as Chapter 3 improvement - Force VersusisSkill the customer. Even today, they are SECTION II - The Crisis Environment

not seeing that this approach will not only destroy the supplier but also will not lead to cost reduction even in their own company. Jeff wants to take you in a completely Chapter 4 - Defining the Crisis Environment different direction in his approach to understanding and approaching profit improvement through the Chapter 5 - Crisis Plan Background and Phase 1—Acquisition Team Formation total value chain. Chapter 6 - Phase II—Price Benchmarking Chapter 7


ChapterRuss 8 - Scaffede Phase IV—Value Analysis/Value Engineering ChapterVice 9 -President, Phase V—Lean Manufacturing Manufacturing SECTION III -Yachts The Standard Environment Tiara

ChapterHolland, 10 - Defining the Standard Environment Michigan Chapter 11 - Supply Base Management Chapter 12 - Supplier Quality and Development Chapter 13 - Cost Management and Control Chapter 14 - Materials Management Chapter 15 - The Supply Chain Organization SECTION IV - Coordinating SCM and Lean Management


Lean Supply Chain Management : A Handbook for Introduction Stategic Procurement by Jeffrey P. Wincel

ISBN:156327289x

Press ©WHY 2004 (240 NOW? pages) WHY THIS Productivity BOOK AND This book provides purchasers and supplier development professionals with thealways tools needed With any new work, the question that has to to betransform answered is—why? Why a new book on supply procurement from a mere center to aabout profit lean generator. chain management and procurement? Whycost another book systems? Why should we care? Is there anything more important that we can learn from the concept of lean supply chain management? Table of Contents

Why a new book on supply chain management? The answer is simply because the works that exist tend to treat SCM as product movement and delivery, and SCM is really something greater than that. In Foreword fact, many books state that SCM is the same as logistics management, [1] using the Council of Logistics Introduction Management definition. Practitioners in SCM will undoubtedly tell you there are very unique differences SECTION I - The Foundations between logistics and supply chain management. Throughout this book we revisit this difference and Chapter 1 - The Executive as business CEO demonstrate howPurchasing/SCM integrating SCM into other elements delivers the greatest improvements of Chapter 2 - The Disciplines of Planning performance—with, yes, financial benefits as well! Lean Supply Chain Management—A Handbook for Strategic Procurement

Chapter 3


Why a new on lean? Most books SECTION II - book The Crisis Environment

on lean systems center on manufacturing operations and

material4 management within that environment. These books describe the tools and methods by which Chapter - Defining the Crisis Environment to implement lean Plan initiatives, the measures by1—Acquisition which success is observed, and the support needed to Chapter 5 - Crisis Background and Phase Team Formation allow for success. What they don't address is the pre-implementation events that need Chapter 6 implementation - Phase II—Price Benchmarking to occur7 in-the supply chain to enable the lean efforts within the four walls. This is where the value of Chapter Phase III—Short-Term Process Improvement

practical experience comes to play in how this question is answered. Linking supply chain efforts with - Phase IV—Value Analysis/Value Engineering lean efforts—really making them one and the same—is the way in which both efforts are optimized. So Chapter 9 - Phase V—Lean Manufacturing while this book addresses the use of lean tools and the integration with lean implementation internally, SECTION III - The Standard Environment it really creates a new definition and practice in lean. Chapter 8

Chapter 10 - Defining the Standard Environment

Chapter 11 - Supply Base Management Why should we care? Again, the answer is simple, cost … or, more important, profit. In a typical Chapter 12 Supplier Quality and Development manufacturing firm, procurement and supply chain costs make up about 50 percent of COGS (cost of Chapter 13 - Cost and Control 30 percent. Improvement in these two factors can provide goods sold), and Management manufacturing contributes Chapter 14 biggest - Materials Management the single opportunity for profit improvement. At a 20 percent gross profit, it takes $5 of

improved equalChain the profit effect of $1 of supply chain savings. While most readers of this work Chapter 15 sales - The to Supply Organization will be either SCM practitioners or students, the truth of SECTION IV - Coordinating SCM and Lean Management

this story needs to be heard by the executive

management of our organizations so that the Fundamentals appropriate focus and effort is placed here. Typically, Chapter 16 - Developing & Implementing Lean organizations rally around sales strategies or overhead reduction strategies for improving profit, with Chapter 17 - Manufacturing Implementation this biggest of SCM being lost. Chapter 18 - piece Ongoing Improvements Index

Finally, does this or any book provide the roadmap to integrate SCM strategy into the larger business strategy of a company? Many SCM initiatives have either been only moderately successful, or have List of Tablesfailed. Why? They've failed because they haven't been part of a corporate strategy other completely List of Sidebars than saving money. The tendency is that these plans are stand-alone, not usually an extension of the company's manufacturing or technology plans, and may in fact be in direct conflict with the company's goals and approach. This book was written specifically to be used as a strategic planning tool in developing a world class supply chain and procurement plan. List of Figures

This book doesn't jump immediately to implementation steps, but builds the overall business and value systems that must be in place first. It addresses the different commercial and financial environments in which an organization might find itself, and recommends specific approaches tailored to those conditions. Finally, the book concludes by focusing on the SCM steps and implementation order that facilitates the implementation of lean manufacturing within your own organization. [1]David Simichi-Levi, Philip Kaminsky, and Edith Simichi-Levi, Designing & Managing the Supply Chain: Concepts, Strategies, and Cases, 2nd ed. p. xx. (New York: McGraw-Hill/Irwin, 1999)

Supply Chain Management : A Handbook for WHAT'S INLean THIS BOOK? Stategic Procurement

ISBN:156327289x bythemes Jeffrey are P. Wincel A number of major covered throughout this book, building on many of the current trends in Productivity Press 2004and (240practice pages) of world class SCM. Among these issues is the SCM and integrating them into the ©plan use of e-businessThis tools to facilitate and in the tactical transactions, and book provides efficiency purchasers andimprovement supplier development the tools transform strategic planningprofessionals elements in with delivering the needed plan to to implementation. The promise of these e-business procurement from aofmere center to aand profit generator. solutions often outpaces the reality their cost effectiveness availability. However, when the fundamentals of sound procurement and SCM practices are put into place, there are a number of available tools that aid in the ease and availability of information to effectively deploy the SCM efforts. Table of Contents

Lean Supply Chain Management—A Handbook for Strategic Procurement

Another extremely important element that this book conveys is that there is a real and undeniable difference in SCM skill versus SCM power. Often, the largest original equipment manufacturers (OEMs) Introduction confuse the market power they exert over their suppliers with technical competency and skill. Power SECTION I - The Foundations can be a blinding addiction, and only through the conversion to skill can sustainable improvements and Chapter 1 - The Purchasing/SCM Executive as CEO positive supplier relationships be achieved. Chapter 3 specifically addresses this difference, and the Chapter 2 - The Disciplines of Planning rest of the book provides the direction and tools to develop the skill set. Foreword

Chapter 3


SECTION II - The Crisis Environment Procurement efforts and procurement-based

savings are the basis of this work. It is through the

Chapter 4 -of Defining the Crisis Environment integration the procurement efforts and supply chain management that the greatest and most

sustained andPlan profit improvements can be achieved. Supply management is a significantly Chapter 5 cost - Crisis Background and Phase 1—Acquisition Team chain Formation varied and discipline from logistics management. While logistics is a major element of SCM, Chapter 6 -expanded Phase II—Price Benchmarking it does 7not-define nor is it all encompassing of the SCM disciplines. SCM drives deeper into the Chapter Phase SCM III—Short-Term Process Improvement value chain which products and servicesEngineering are designed, developed, manufactured, purchased, and Chapter 8 - by Phase IV—Value Analysis/Value moved.9Each of these elements and their contribution to total cost is part of our development of world Chapter - Phase V—Lean Manufacturing class SCM. SECTION III - The Standard Environment



Lean Supply Chain Management : A Handbook for THE CONTENTS AND STRUCTURE Stategic Procurement

ISBN:156327289x Jeffrey P. Each of the majorbysections of Wincel the book has been organized to provide for an independent learning Productivity 2004 (240as pages) session. These sections havePress been©created stand-alone elements so that your organization can use the book and tools described, basedpurchasers upon where you are in development development and maturity. An ongoing a This book provides and supplier the tools neededinto to transform case study withinprofessionals each chapterwith provides a glimpse the successes and challenges in implementing procurement from acompany mere cost to a profit the SCM practices. The case study is center a combination ofgenerator. a number of actual major tier-one automotive suppliers, and the implementation extends over a five-year period.

Table of Contents

Section I — The Foundations. This section examines the organizational and cultural shift that must first take place to enable the use of lean tools, particularly within the supply chain organization. These Foreword changes create the environment in which an integrated SCM and company strategy can survive and Introduction flourish. Without these basics, many organizations will be unable to adequately address the need of the SECTION I - The Foundations SCM and broader organization to ensure success of the SCM efforts. Lean Supply Chain Management—A Handbook for Strategic Procurement

Chapter 1


Chapter Disciplines of Planning Section II examines the approaches and tools used when Section2 II -—The The Crisis Environment. Chapter 3 disaster - Force Versus Skill Various change concepts are introduced that link short-term economic economic is at hand. SECTION II longer-term - The Crisis Environment focus with sustaining efforts.

Driven by financial demands, these tools translate lean

Chapter 4 into - Defining Crisisfocused Environment methods specificthe actions on profit improvement. The key to this section is the development

of the concept of short-term strategy, focus onTeam the broader and longer-term needs in an Chapter 5 - Crisis Plan Background andwithout Phase losing 1—Acquisition Formation effort to6meet short-term demands. Chapter - Phase II—Price Benchmarking Chapter 7


Section III — The Standard Environment. The third section provides the strategy and specific tools - Phase IV—Value Analysis/Value Engineering for an integrated SCM effort in a "normal" industry and economic environment. By their nature, the Chapter 9 - Phase V—Lean Manufacturing standard environment tools offered here are more deliberate, encompass a larger portion of the total SECTION III - The Standard Environment SCM disciplines, and base the efforts on a more balanced approach to cost, quality, delivery, and Chapter 10 - Defining the Standard Environment technology (CQDT). Chapter 8

Chapter 11 - Supply Base Management

Chapter Supplier Quality and Development Section12IV- — Coordinating SCM and Lean Management. This final section can be used as part of

the profile the rest of the book, as a stand-alone document regardless of the SCM strategies Chapter 13 -ofCost Management andor Control employed. purpose of this section is to integrate the broader supply chain elements into the Chapter 14 -The Materials Management preparation the Chain success of, implementing lean manufacturing methods within your own Chapter 15 - for, The and Supply Organization company. premise onSCM which much this book is SECTION IVThe - Coordinating and Leanof Management

based is derived from the author's personal

experience, which is that is an enabler successful lean implementation. The SCM organization Chapter 16 - Developing & SCM Implementing Lean of Fundamentals and its 17 practices should notImplementation be treated as a stand-alone entity, but an extension of the rest of the Chapter - Manufacturing organization.

Chapter 18 - Ongoing Improvements Index ACKNOWLEDGEMENTS List of Figures

As of I finished List Tables the last page of the book, I looked back on the experience that made it all possible. I never would have made it this far without the help and inspiration of many great people. Dave gave me List of Sidebars the freedom to take as much rope as possible; Dennis showed me how to give it to others; and Donn showed me how not to hang myself — at least not fatally. My supply chain teams did all the things I ever asked and developed truly world class SCM organizations, proving many topics from the book. My dad, Ralph showed me how to develop a calm patience and allow good to happen, and not always try to force things.

Management : A Handbook for SECTIONLean I: Supply TheChain Foundations Stategic Procurement by Jeffrey P. Wincel

ISBN:156327289x

Chapter 1: The Purchasing/SCM Executive as CEO Productivity Press © 2004 (240 pages) This book provides purchasers and supplier development

Chapter 2: The Disciplines of Planning professionals with the tools needed to transform

procurement from a mere cost center to a profit generator.

Chapter 3: Force Versus Skill

Table of Contents Lean Supply Chain Management—A Handbook for Strategic Procurement Foreword Introduction SECTION I - The Foundations

Chapter 1


Chapter 2


Chapter 3



Chapter 4


Chapter 5


Chapter 6


Chapter 7


Chapter 8


Chapter 9





Lean Supply Chain Management : A Handbook for Chapter 1: The Purchasing/SCM Executive as CEO Stategic Procurement by Jeffrey P. Wincel

ISBN:156327289x

Productivity Press ©THE 2004 (240 pages) THE NUMBERS MAKE DIFFERENCE This book provides purchasers and supplier development professionals with thewill tools to transform Seasoned procurement professionals tellneeded you about the tremendous changes in their profession a mere cost center to a profit during the past 10procurement to 20 years.from Among these changes have beengenerator. the increased professional respect members of the purchasing profession have gained; the increase in the "arms length" transactions between the buyer and the seller, which is attributable to commercial relationships now being based on Table of Contents capabilities instead of personal relationships; and most important, the recognition by senior executives Lean Supply Chain Management—A Handbook for Strategic Procurement of the enormous contribution the supply chain management (SCM) organization can make to the Foreword company's bottom line. Introduction SECTION I - The Foundations

The change in perception and behavior came hand in hand with the introduction of computer-based

Chapter - The Purchasing/SCM Executive as CEO analysis1 tools, such as Lotus 1-2-3®, Microsoft Excel®. These tools began to shed light on the impact Chapter 2 - The of Planning that material andDisciplines supply chain savings could make to profit improvement. Figure 1.1 represents the Chapter 3 -ofForce Skill composite cost Versus of goods breakdown for a typical tier-one automotive component supplier based on SECTION II - Theof Crisis Environment the experience the author. These

numbers are generally confirmed in many industry and

Chapter 4 - Defining procurement studies.the Crisis Environment Chapter 5


Chapter 6


Chapter 7


Chapter 8


Chapter 9





Figure 1.1

Lean Chain Management : A Handbook for MORE THAN ASupply COST CENTER Stategic Procurement

ISBN:156327289x Jeffreychange P. Wincel The fundamentalby mindset that must be made is that procurement and supply chain Productivity Press ©as 2004 (240center pages) support services, but as potential profit centers. This organizations should not be treated cost is possible only when executive management thedevelopment potential profit contribution of strategic This book provides purchasersrecognizes and supplier professionals the tools needed to of transform SCM and understands that thewith improvement potential such an organization far outweighs its a mere cost center to aeffectively profit generator. overhead costs. Itprocurement is then that from true strategic SCM can be employed.

CASE STUDY 1.1 Table of Contents Lean Supply Chain Management—A Handbook for Strategic Procurement

DSW Corporation (a fictional company based on composite experience) is a manufacturer of automotive electronics, safety, and body trim products. In 1995, DSW had seen its revenue grow Introduction by 15 to 20 percent for the prior two years and anticipated continued growth like this for the next SECTION I - The Foundations three to four years based upon booked and likely anticipated sales. During the same period the Chapter 1 - The Purchasing/SCM Executive as CEO annual gross profit had declined from 23 percent to 18 percent and annual pretax profit had Chapter 2 - The Disciplines declined from 5 percentoftoPlanning 3.25 percent. The forecast for the coming year GP and pretax were 17 Chapter 3 Force Versus Skill Many of DSW's customers were requiring annual price reductions of 3 to percent and 2.75 percent. SECTION II - Thedisallowing Crisis Environment 5 percent, full recovery of prototype and development costs, and leveraging new Chapter 4 - Defining the Crisisprice Environment competitors to determine targets. Foreword

Chapter 5

- Crisis Plan Background and Phase 1—Acquisition Team Formation Organizationally, DSW Benchmarking had moved to a customer-focused sales and marketing activity, largely Chapter 6 - Phase II—Price

driven the demands of its OEM customers. DSW's manufacturing, product development, and Chapter 7 -by Phase III—Short-Term Process Improvement supply were localized around individual product lines. DSW was evaluating the Chapter 8 -chain Phaseorganizations IV—Value Analysis/Value Engineering

appropriate organizational structure to support the growth pattern and the need to maintain/improve - Phase V—Lean Manufacturing profits. SECTION III - The Standard Environment Chapter 9

Chapter 10 - Defining the Standard Environment Questions Chapter 11 - Supply Base Management

1. What can DSW learn in managing its profits and SCM?


Chapter 13 Cost Management and Control might aid the efforts that need to be taken? 2. -What changes in organization Chapter 14 - Materials Management

3. -What do the Chain activities to date tell you about the focus of DSW? Chapter 15 The Supply Organization SECTION IV - Coordinating SCM and Lean Management

Chapter 16 - Developing & Implementing Lean Fundamentals Chapter 17 - Manufacturing Implementation

So how does an SCM organization transform from a cost center to a profit center? Very simply, the first

Chapter - Ongoing Improvements step is 18 to let the numbers speak for themselves. Table 1.1 shows the gross profit and pretax Index improvements that can be achieved for every dollar of sales with a 5 percent decrease in costs, or 5 List of Figures percent increase in sales. The relationship between improved sales versus decreased material cost is List of Tables about a 5:1 relationship at gross profit (see Table 1.2). Simply put, it takes $5 in increased sales to List of Sidebars have the same profit effect as saving just $1 in material and supply chain costs.

Table 1.1: Cost and Profit Improvement

Standard 5% Reduction 5% Reduction in Price/Profit in Material Manufacturing Lean Supply Chain Management : A Handbook for Model Content Cost Stategic Procurement

by Jeffrey P.$1.00 Wincel $1.00 Productivity Press © 2004 (240 pages)

Sales Material

($.50)

Labor/OH

ISBN:156327289x $1.00

($.475)

($.50)

This book provides purchasers and supplier development professionals with the tools needed to transform ($.30) ($.30) ($.285) procurement from a mere cost center to a profit generator.

Gross Profit

$.20

$.225

$.215

Table of Contents Gross Profit +12.5% +7.5% Lean Supply Chain Management—A Handbook for Strategic Procurement Improvement Foreword

5% Increase in Sales $1.05 ($.525) ($.315) $.21 +5%

SG&A ($.10) ($.10) (Sales, General & SECTION I - The Foundations Administrative Chapter 1 - The Purchasing/SCM Executive as CEO Costs)

($.10)

($.105)

Chapter 2


RD&E3 Chapter

($.05) - Force Versus Skill

($.05)

($.0525)

Introduction

($.05)

(Research, SECTION II - The Crisis Environment Design Chapter 4 &- Defining the Crisis Environment Engineering Chapter 5 - Crisis Plan Background and Phase 1—Acquisition Team Formation Costs)6 Chapter


Chapter - Phase III—Short-Term Pretax7 Profit $.05 Process Improvement $.075 Chapter 8


Profit 9 Chapter


+50%

$.065

$.0525

+30%

+5%

Improvement SECTION III - The Standard Environment

Chapter 10 - Defining the Standard Environment Chapter 11 - Supply Base Management

Table 1.2: Profit Improvement Per $1 Sales Increase or Material Decrease

Chapter 12 - Supplier Quality and Development Chapter 13 -per Cost Management and Control Change $100 in Standard

$1 Decrease to Material Content

$1 Increase in Sales

Sales IV - Coordinating SCM and $100 SECTION Lean Management

$100

$101

Chapter 16 - Developing & Implementing Material ($50)Lean Fundamentals

($ 49)

($ 50.5)

Chapter sales14 - Materials Management Price/Profit Model Chapter 15 - The Supply Chain Organization

Chapter 17 - Manufacturing Implementation

Labor/OH

($30)

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($ 30.3)

Index Gross Profit List of Figures

$ 20

$ 21

$ 20.2

+ 5%

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Chapter 18 - Ongoing Improvements

Gross Profit Improvement

List of Tables

List of Sidebars

SG&A

($ 10)

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RD&E

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($ 5)

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+ 1%

Pretax Profit Profit Improvement

The second way to transform the SCM organization is to recognize the relationship between the cost of the department to the total purchased dollars, or to the improvement contribution by the organization. Dave Nelson, in his book Powered by Honda,[1] discusses the value calculations that he used in determining the staffing level needed to support the strategic SCM efforts at Honda. Honda calculated that for every incremental dollar spent in supplier development (manpower resources), the organization was able to return $8 in cost improvement. [2] Generally, automotive-based procurement studies have pegged the total SCM SG&A budget at approximately 1½ percent to 2 percent of total purchased dollars. For the individual SCM contributor or employee, this means that there should be about a 8:1 payback to annual salary. It is this very measurable performance indicator that drives "CEO thinking" into the SCM organization. Many procurement and SCM organizations will target even higher payback levels, some up to 15 to 20 times annual salary. [1]Dave Nelson, Patricia E. Moody, and Rick Mayo, Powered by Honda: Developing Excellence in the

Global Enterprise (New York: John Wiley & Sons, 1998). [2]Nelson

et al, Powered by Honda, p. 205.


ISBN:156327289x


Chapter 1


Chapter 2


Chapter 3



Chapter 4


Chapter 5


Chapter 6


Chapter 7


Chapter 8


Chapter 9





LeanSUPPLY Supply Chain Management : A Handbook for MAKING THE CHAIN CEO Stategic Procurement

byhis Jeffrey Wincel C. Ray Johnson in bookP.CEO Logic[3] discusses the idea ofISBN:156327289x successful executive and functional Productivity 2004 (240 managers thinking and actingPress like a© CEO. Hispages) idea is that it is only by this "expansive" thinking that any executive is goingThis to be able to understand the and dependence and interdependency of their actions to the book provides purchasers supplier development professionals with the tools needed toprofitability. transform rest of the company, and ultimately to the company's procurement from a mere cost center to a profit generator.

He lists the necessary thoughts and attributes of the budding "CEO," and how his or her own area of responsibility can achieve its greatest success. Table of Contents Lean Supply Chain Management—A Handbook for Strategic Procurement [4]

Among Johnson's lists of actions is to focus on the customer.

The main reason for this is obvious,

Foreword sales equals product and product equals profit. Although SCM executives should consider the ultimate Introduction product buyers to be their customers, internal customers are more likely to be their focus. Using the SECTION I - SCM The Foundations CEO idea, executives can

integrate their strategies into the broader needs of the organization, be

Chapter 1 - The Purchasing/SCM Executive as CEO more certain of focusing on the critical needs of the company, ensure broader support of their efforts, Chapter - The Disciplines of Planning and be 2able to clearly articulate SCM's success and contribution to the organization. Examples of this Chapter 3 -are Force Versus Skill throughout this book, especially in the discussion on performance, integration demonstrated SECTION - The Crisisand, Environment strategicIISCM plans, finally, in

Chapter 4

the launch of lean systems.


This book discusses the importance of tracking key performance measures and the role they play Chapter 5 also - Crisis Plan Background and Phase 1—Acquisition Team Formation

in determining the success of the supply chain organization. Here especially, the procurement or supply - Phase II—Price Benchmarking chain executive must transcend the normal view of performance and think like a CEO. A key measure Chapter 7 - Phase III—Short-Term Process Improvement that the CEO looks at is earnings per share (EPS), and often this single measure determines the Chapter 8 - Phase IV—Value Analysis/Value Engineering success or failure of the CEO. Likewise, the supply chain executive must also translate the contribution Chapter 9 - Phase V—Lean Manufacturing of his activities to EPS. Figure 1.2 shows the method by which DSW translated its hard cost supply SECTION III - The Standard Environment chain savings to EPS. DSW was a publicly traded company with 25,000,000 fully diluted outstanding Chapter 10 - Defining the Standard Environment shares of stock. Chapter 6


Chapter 12 - Supplier Quality and Development Chapter 13 - Cost Management and Control Chapter 14 - Materials Management Chapter 15 - The Supply Chain Organization SECTION IV - Coordinating SCM and Lean Management


Figure 1.2: DSW Corporation "Hard" SCM Savings & EPS Contribution Reflecting the savings in this manner is necessary to fully understand the broad contribution that the SCM organization is making to the company. The growth in gross savings and EPS contribution demonstrated by DSW's SCM organization reflects the various steps taken in creating a lean supply chain and those that are the basis of this book. It is through the practices outlined in this book that actual and significant savings can be made. For example, in Figure 1.2, the savings obtained in the "international plan" and "international actual" were largely obtained through the tools and practices described in the Crisis Environment section outlined in Chapters 4 through 9. The savings listed under the "domestic plan" and "domestic actual" represent savings achieved using the tools described in the Standard Environment section in Chapters 10 through 15. CASE STUDY 1.2 Questions

1. What can DSW learn in managing its profits and SCM? Lean Supply Chain Management : A Handbook for Stategic Procurement

2. What changes in organization might aid the efforts that need to be ISBN:156327289x by Jeffrey P. Wincel taken? Productivity Press © 2004 (240 pages) This book provides purchasers and supplier development 3. What do the activities to date tell you about the focus of DSW? professionals with the tools needed to transform procurement from a mere cost center to a profit generator.

Answersencoding="ISO-8859-1"?> 5% = 100 4.5- 5% = 90 3.5 4.5% = 80 2.5- 3.5% = 70 1 - 2.5% = 60 0 - 1% = 50

60 prox = 100 45 prox = 90 30 prox = 80 Net 30/disc = 70 Net 30 = 60

Enter delivery rating from most recent period

Chapterby11 - Supply Base Management

0- 1 = 100 100 - 250 = target. If ppm = 95 250 ChapterDirector 14 - Materials Management VP no target 90 318 500 = 90 Chapter 15 - The Supply Chain Organization Purchasing or cost ppm = 500 - 750 = SECTION IV - Coordinating SCM and Lean Management estimate 80 2700 80 750 Chapter 16 - Developing & Implementing Lean Fundamentals use ppm = 1500 = 70 Chapter 17 - Manufacturing Implementation lowest 70 1500 + = 60 Chapter 18 - Ongoing Improvements price >2700 Index quote ppm = List of Figures 60 Relation 1 ppm = Chapter 12 - Supplier Quality and Development price ChapterManager 13 - Cost Management to and Control 100 63

List of Tables List of Sidebars

Figure 13.5: Logic Sourcing Matrix

To Poi

100 Rat

Dat Sign ___

Lean Supply Chain Management : A Handbook for 4.VALUE MANAGEMENT Stategic Procurement

by Jeffrey P. Wincel Value management (VM) broadly defines the various efforts to ISBN:156327289x capture and retain improvements at Productivity Presschain. © 2004 Cost (240 pages) each step of the value and supply management, supplier management, logistics management, design management, and manufacturing management all have elements attributed to This book provides purchasers and supplier development professionals with theexist toolsinneeded transform value management. Wellknown tools each oftothese, and when utilized as part of an overarching procurement a mere center to a profit generator. operating philosophy create a from changeandcost improvement-focused organization. In SCM, value management becomes the most significant intersection of the internal customer organizations that SCMofsupports. Organizational success is based on integrating internal and external relationships by Table Contents creating a seamless organization. Handbook Many professionals define value as function/cost (V=F/C). Lean Supply Chain Management—A for Strategic Procurement Foreword

Value Stream Mapping

Introduction

SECTION I - The Foundations

Value steam mapping is a visual Executive process developed to provide an analysis tool that defines operational Chapter 1 - The Purchasing/SCM as CEO inefficiencies as Disciplines well as ideal state maps. In the book Learning to See , Mike Rother and John Chapter 2 - The of end Planning Shook provide a simple for examining the internal value stream within an operation.[2] Jim Chapter 3 - Force Versusmethodology Skill WomackIIand Dan Jones defined the SECTION - The Crisis Environment

methods in which to expand this effort to the entire value chain in their book Seeing the Whole: Mapping the Extended Value Stream [3] The extended value stream is Chapter 4 - Defining the Crisis Environment often synonymous withBackground value chain,and thePhase difference in focus being high-level initial evaluation in the Chapter 5 - Crisis Plan 1—Acquisition Team aFormation relationship dynamics between the players in the chain in the value chain focus. [4] Chapter 6 - Phase II—Price Benchmarking Chapter 7 - Phase III—Short-Term Process aImprovement Value stream mapping disciplines provide roadmap on efficiency opportunities to which SCM Chapter 8 Phase IV—Value Analysis/Value Engineering organizations can develop continuous improvement plans and work to identify an ideal end state. The Chapter 9 - Phase V—Lean Manufacturing opportunities identified through the mapping process are incorporated into the lean SCM practices and SECTION III -corporate The Standard Environment overarching objectives to create

a detailed strategic plan and individual performance

Chapter 10 - Defining the Standard Environment objectives. Chapter 11 - Supply Base Management Chapter 12 - Supplier Quality and Development

VA/VE Workshops

Chapter 13 - Cost Management and Control Chapter 14 - Materials Management Value analysis and value engineering workshops are focused value management tools used to improve Chapter 15 The Supply Chain Organization design related cost structures. However, for VA/VE efforts to have long-lasting effectiveness, shortSECTION - Coordinating SCM and Lean term VAIV efforts must be coordinated withManagement long-term VE

efforts. To accomplish this, VA and VE must be

Chapter - Developing Implementing Lean Fundamentals a jointly16 managed effort,&with specific product, commodity, or supplier initiatives capturing the data for

current17 and- future applications. Chapter Manufacturing Implementation Chapter 18 - Ongoing Improvements

Value Data Management

Index

List of Figures

Similar to supplier data management, value data management is critical in retaining the learned List of Tables improvements. List of Sidebars Through formal linkage efforts, actions taken in design, process, logistics, and other value factors can be directly associated with specific teams, suppliers, parts, or programs. The importance of this effort is to eliminate the three steps forward, two steps back reality that often happens during points of transition. The points of transition can either be changes in programs or designs from one generation to the next; changes in personnel, whether supply chain, engineering, program management or other; changes in sourcing; or any of a hundred other change factors. The integration and management of data in value management has been greatly simplified with the advancement of software solutions dedicated to enterprise intelligence. Companies such as SAS [5] provide technology solutions for data analytics and business intelligence. Software and service providers such as i2, Ariba, Baan, and others offer similar data management products. The management of the value management data ultimately needs to be driven back to the SCM of individual supplier performance. The final chapter in the value management efforts is the integration of performance back into supplier and customer expectations. It is only though this coordination that the efforts transcend individual tasks to become living processes. Previously defined stratification measures and annual improvement targets define the process in which this performance can be included. [2]Mike Rother and John Shook, Learning to See , Lean Enterprise Institure Inc; (December 1999). [3]Dan

Jones and James P Womack, Seeing the Whole: Mapping the Extended Value Stream, Lean

Enterprise Institute Inc; Spiral edition (November 2002). [4]Hazel

A. Beck, Value Innovations Ltd.

Lean Supply Chain Management : A Handbook for Stategic Procurement

[5]SAS

Institute is a leading supplier in data analytics. Many of ISBN:156327289x its platforms are dedicated to capturing by Jeffrey P. Wincel and managing performance and intelligence data to support decision making. Information on supplier Productivity Press © 2004 (240 pages) relationship management and data analytic tools from SAS can be found at http://www.sas.com. This book provides purchasers and supplier development professionals with the tools needed to transform procurement from a mere cost center to a profit generator.

Table of Contents Lean Supply Chain Management—A Handbook for Strategic Procurement Foreword Introduction SECTION I - The Foundations

Chapter 1


Chapter 2


Chapter 3



Chapter 4


Chapter 5


Chapter 6


Chapter 7


Chapter 8


Chapter 9





Lean Supply Chain Management : A Handbook for 5.SUPPLY CHAIN PROCESS IMPROVEMENT Stategic Procurement

P. Wincel In our discussionby of Jeffrey cost management, one of the opportunitiesISBN:156327289x identified was the incorporation of Productivity © 2004 (240 pages) supplier development actionsPress to drive cost improvement. In most of these supplier development actions, the focusThis is on individual suppliers andand supplier processes. Just as Seeing the Whole was an book provides purchasers supplier development professionals the tools needed to transform can also be expanded. In addition to expansion of Learning to See , with the efforts of supplier development procurement a mere cost centershould to a profit improving discrete processes, from supplier development also generator. focus on improving the supply chain process. Through the use of kaizen and kaikaku tools, suppliers and customers can gain improvements in theofways in which business is conducted, not just in the application of the lean SCM tools. Table Contents Lean Supply Chain Management—A Handbook for Strategic Procurement

This chapter calls for integration of data into business practices. Likewise, the performance and business practices have to be incorporated into the overall business system described throughout this Introduction book—such as the MBP process. The performance in cost containment should reflect the individual SECTION I - The Foundations contributor actions, the departmental objectives, and ultimately the overarching objectives. Without Chapter 1 - The Purchasing/SCM Executive as CEO evidence of direct contribution to these goals, a reevaluation of the performance, of the objectives, or of Chapter 2 - The Disciplines of Planning SCM practices must occur. The nature of the work and the effort of the work must provide the results Chapter - Force Versus that are3determined to beSkill the most beneficial to the company. Foreword


Chapter 4


Chapter 5


Chapter 6


Chapter 7


Chapter 8


Chapter 9





SUMMARYLean Supply Chain Management : A Handbook for Stategic Procurement

ISBN:156327289x byand Jeffrey Wincelare often the exclusive focus Cost management costP.control of a supply chain organization, and Productivity Press 2004 (240 pages) even more so of procurement within© SCM. The ability to achieve financial improvement in SCM requires efforts affecting the entire chain and reliesand onsupplier the efforts of nonprocurement resources (such as This bookvalue provides purchasers development professionals with the tools needed to transform supplier development and engineering).


Financial improvement in the supply chain is a reality of modern business. The approaches to achieve theseofsavings need to be structured, reliable, and based on ethical business relationships. As Table Contents described in Chapter 3, being hard on the issues (such as price improvement) is acceptable in Lean Supply Chain Management—A Handbook for Strategic Procurement business, provided the basis of the relationship includes a delineation of business requirements and Foreword ramifications. Introduction


Chapter 1

CASE STUDY 13.2


Chapter 2 - The Disciplines of Planning Questions Chapter 3



Chapter 4

In whatthe ways could the supply chain organization contribute to the cost -1.Defining Crisis Environment

Chapter 5


Chapter 6


Chapter 7


Chapter 9


management and cost improvement of the company?

2. Why was the SCM group unable to articulate the full level of savings contribution that was being made? What could be done differently to better articulate the full Chapter 8 - Phase IV—Value Analysis/Value Engineering scope of savings? SECTION III3.- The Standard DSW's VP ofEnvironment Supply Chain

Management was concerned about the overemphasis

Chapter 10 - Defining the Standard Environment on the financial impact of the SCM contributions. What can be done to alleviate Chapter 11 - Supply Management these Base concerns? Chapter 12 - Supplier Quality and Development Chapter 13 Answers - Cost Management and Control Chapter 14 - Materials Management Chapter 15 - The Supply Chain Organization

1.

The supply chain organization had developed and implemented plans to provide hard cost savings (i.e., documented cost reductions) in both production and nonproduction Chapter 16 - Developing & Implementing Lean Fundamentals materials through the use of price targeting and consolidation efforts. The Chapter 17 - Manufacturing Implementation consolidation targets were based on the use of comparative benchmarking Chapter 18 - Ongoing Improvements assessments. Immediate resourcing based savings and commitments to ongoing price Index reductions were achieved during the consolidation activities. SECTION IV - Coordinating SCM and Lean Management

List of Figures List of Tables List of Sidebars

Soft cost savings (i.e., cost avoidances, administrative cost reductions, etc.) were developed and implemented in supplier development activities, especially related to variation reduction and supplier-based part per million (PPM) reject reductions. These savings were translated into a hard number contribution equivalent, including laborrelated savings as measured by full time equivalents (FTEs). The hard and soft cost savings totals were related to overall contribution to DSW in terms of earnings per share (EPS). DSW had 150 million outstanding shares of stock, so each $1,000,000 in savings = $.006 EPS. Therefore, savings of $50,000,000 = $.30 EPS. This measure could be directly compared to EPS contribution due to incremental sales and other cost reduction activities, and allow for a valued assessment of SCM efforts.

2.

Initially the SCM organization did not quantify the nonprocurement savings it was achieving. The focus of the effort was on the underlying improvements in quality and Lean Supply Chain Management : A Handbook for other supply chain activities. Quantifying the value of these improvements was Stategic Procurement secondary to the efforts and actual improvements made. ISBN:156327289x by Jeffrey P. Wincel Productivity Press © 2004 (240 pages) Ultimately the SCM was able to articulate the full scope of savings by translating the This book provides purchasers supplier development value of soft savings into hard and savings equivalents. By benchmarking the ratio of professionals with the tools needed to transform overhead cost supporting supply chain management to the total savings level, the procurement from a mere cost center to a profit generator. organization was able to show the competitive value it contributed to the organization.

Table of Contents 3. The concern of DSW's VP of Supply Chain Management was that the overemphasis Lean Supply Chainon Management—A Handbook fordivert Strategic Procurement the financial impact would the efforts from delivering improvement to

reporting improvement. Where the sole measure of success becomes financial measures, individuals within the organization find creative methods to make those measures look good. One actual incident occurred when a purchasing manager SECTION I - The Foundations allowed buyers to issue purchase Chapter 1 - The Purchasing/SCM Executive as CEO orders at a price higher than the quote, only to receive the overage rebated at the end of the year. The purpose of this was to achieve Chapter 2 - The Disciplines of Planning the increasing financial objectives. Chapter 3 - Force Versus Skill Foreword

Introduction


The concerns were lessened by the use of balanced performance measures in which financial evaluation was one of five measures. The use of balanced measures through Chapter 5 - Crisis Plan Background and Phase 1—Acquisition Team Formation hoshin planning enabled the organization to recognize the value of financial measures Chapter 6 - Phase II—Price Benchmarking equal to other quality, cost, and delivery indicators. Increased audit and governance Chapter 7 - Phase III—Short-Term Improvement was put in place toProcess discourage creative reporting and goal attainment. Chapter 4


Chapter 8


Chapter 9





Lean Supply Chain Management : A Handbook for Chapter 14: Materials Management Stategic Procurement by Jeffrey P. Wincel

ISBN:156327289x

Productivity Press © 2004 (240 pages) DISTRIBUTION, TRANSPORTATION, AND CUSTOMER SERVICE This book provides purchasers and supplier development professionals with tools needed to transform The distribution, transportation, andthe order fulfillment impacting physical product movement often procurement from aWhile merein cost center to a chain profit management generator. defines supply chain management. reality supply is much more, these elements undoubtedly exist. In lean supply chain management, the implementation of these efforts as a strategic initiative involves the incorporation of elements of lean manufacturing systems. Here, the Table of Contents objective is Chain not only the successfulHandbook movement the product, but also the implementation of highly Lean Supply Management—A forof Strategic Procurement visual and efficient systems by and through which the product is moved. Foreword Introduction

Like the efforts of supplier development described in the last two chapters, materials management provides for the opportunity of improved performance, including cost reductions. Recognizing this Chapter - The Purchasing/SCM Executive CEOcontributor to overall lean efforts and success aspect 1of supply chain management as an as equal Chapter 2 -the The Disciplines addresses last element of of Planning the value chain. However, in addition to the product movement and order Chapter 3 is - Force Versus Skill fulfillment the added responsibility of customer service. While perhaps difficult to define in so many SECTION II with - Theso Crisis industries manyEnvironment varying demands, customer service and satisfaction is becoming an increasing Chapter - Defining the Crisis Environment supply 4 chain responsibility. SECTION I - The Foundations

Chapter 5

- Crisis Plan Background and Phase 1—Acquisition Team Formation This chapter describes the integration of lean methodologies into materials handling and management Chapter 6 - Phase II—Price Benchmarking

activities. and cost improvements continue to be the basis on which the strategic initiatives are Chapter 7 Process - Phase III—Short-Term Process Improvement built.

Chapter 8


Chapter 9





Lean Supply Chain Management : A Handbook for STRATEGIC MATERIALS MANAGEMENT Stategic Procurement

by Jeffrey P. Wincel The strategic materials initiative is geared toward three primaryISBN:156327289x elements. The first element is to Productivitystructure Press © 2004 (240fixed pages) develop a visual factory-like using inventory locations. The second is to distinguish distribution operations fromprovides warehousing and storage operations to create material efficiency This book purchasers and supplier development professionals the tools to transform measures. The third element iswith to provide forneeded improved transportation costs. procurement from a mere cost center to a profit generator.

Strategic Initiative

Table of Contents Lean Chain Management—A Handbookorder for Strategic Procurement The Supply strategic initiative here is to maximize fill rate and reaction time for all end item components. Foreword The goal should also be to increase warehouse facility utilization to enable incoming consignment Introduction opportunities and to integrate logistic operations (transportation, distribution, and customer service) into SECTION - The Foundations a single Imultidisciplinary activity.

Chapter 1


- The Disciplines of Planning Implementation Plan

Chapter 2 Chapter 3


SECTION II - The Crisis Environment The following elements make up the

Chapter 4

implementation plan for this initiative:


Inventory flowPlan and Background storage. and Phase 1—Acquisition Team Formation Chapter 5 - Crisis visual Benchmarking factory inventory management. Chapter 61. -Establish Phase II—Price Chapter 7


Chapter 8


2. With production operations, establish min/max kanban production pull methodology.

Chapter 93. -Identify Phase V—Lean Manufacturing fixed inventory locations for high use items. SECTION III - The Standard Environment

4. -Dedicate customer lanes for product inventory, staging, and distribution. Chapter 10 Defining the Standard Environment Chapter 11 - Supply Base Management

Facility use.


1. -Eliminate excess returnable rack inventory through evaluation and customer return. Chapter 13 Cost Management and Control Chapter 14 - Materials Management

2. Streamline material flow methods to eliminate redundant movement.

Chapter 15 - The Supply Chain Organization

SECTION 3. IV -Manage Coordinating and Lean Management spaceSCM allocation by customer-driven

demands.

Chapter 16 - Developing & Implementing Lean Fundamentals

4. -Evaluate direct Implementation ship and space lease opportunities. Chapter 17 Manufacturing Chapter 18 - Ongoing Improvements Index

Logistics integration:

1. Create customer service and distribution teams in lieu of functional segregation and product List of Figures alignment.

List of Tables

List of Sidebars 2. Identify a single point logistics manager.

3. Incorporate release through shipment planning as a single material management function. CASE STUDY 14.1 Customer order entry through EDI (electronic data interchange) release comes into DSW through its distribution operations. All orders from its automotive, aerospace, and defense customers are then processed to the individual manufacturing centers. Regional distribution centers consolidate products for staging and mixed-load shipping. DSW maintained a regional delivery fleet and a limited national over-the-road delivery fleet. Various product configuration and order requirements allow direct full truckload shipments, other are mixed loads with multiple part numbers. Inventory storage is based on free location managed through bar-coding (free location meaning storage to any open inventory location). Distribution operations have appeared to max out space availability, yet often seem to be short of the required components needed to complete shipments. Customer requirements allow for changes of shipment up to two hours prior to pickup time. Delivery is often sequenced orders for color and configuration as well as just-in-time frequencies.

1.

Questions 1. What lean techniques can be borrowed from the manufacturing environment to aid in the Lean Supply in Chain Management A Handbook for efficient operations DSW's distribution :operations? Stategic Procurement

2. How could DSWP.improve operations in an effort to improve ISBN:156327289x by Jeffrey Wincel overall material management order fulfillment rates? Productivity Press © 2004 (240 pages) This book provides purchasers and supplier development

3. What professionals measures would represent thetopace of improvements within the distribution withbest the tools needed transform operations given the delivery pattern? procurement from a mere cost center to a profit generator. Table of Contents Lean Chain Management—A Handbook Strategic EachSupply of these elements is examined in morefor detail in theProcurement following sections. Foreword Introduction SECTION I - The Foundations

Chapter 1


Chapter 2


Chapter 3



Chapter 4


Chapter 5


Chapter 6


Chapter 7


Chapter 8


Chapter 9





Lean Supply Chain Management : A Handbook for 1.INVENTORY FLOW AND STORAGE Stategic Procurement

ISBN:156327289x by Jeffrey P. Wincel a hive of activity representing Distribution operations are frequently controlled chaos. Automated Productivity Presserror © 2004 (240 pages) systems often provide relief from through automated pick systems. These systems economically apply to high-volume systems exhibiting commondevelopment packaging configurations. Distribution This distribution book provides purchasers and supplier professionals the tools needed transform don't always lend themselves to operations with vastly differentwith package sizes and lottofrequencies procurement from a mereoperations. cost center to a profit generator. automated systems, nor do lower-volume

Visual techniques (where product and facilities are bound to specific locations and volumes) Table of factory Contents

provide a calming effect to the transactions, quantities, and locations of materials within the distribution operations. By more precisely managing the storage and movement of material, a closer relationship Foreword can be established between the production operations and distribution and customer demand. Introduction Manufacturing scheduling control and refinement can be managed through visual verification of SECTION I - The Foundations demand fluctuation, which may not be captured in automated information systems. Whereas retail Chapter 1 - The Purchasing/SCM Executive as CEO consumer product demand and delivery systems can provide accurate real-time demand changes, Chapter 2 - The Disciplines of Planning industrial manufacturing for nonretail customers have not benefited from the same systems. Lean Supply Chain Management—A Handbook for Strategic Procurement

Chapter 3


SECTION - The Crisis Environment The firstII step in visual factory implementation

is the distribution equivalent of the manufacturing

Chapter 4 - Defining the Crisis Environment marketplace. In manufacturing, raw material and components are stored in fixed inventory locations

with limited Similarly, finished goods storage fixed to a specific physical location Chapter 5 - inventory Crisis Plancapacity. Background and Phase 1—Acquisition TeamisFormation address6 and limitedII—Price in quantity stored. Minimum and maximum (min/max) inventory levels are Chapter - Phase Benchmarking established upon customer demand analysis and production capabilities—such as order Chapter 7 - based Phase III—Short-Term Process Improvement response production lead time. Any spillage above the max level provides a signal back to Chapter 8 and - Phase IV—Value Analysis/Value Engineering operations curtail production or to reassess production schedule methods. Shortages beyond Chapter 9 -toPhase V—Lean Manufacturing minimumIII provide a similar evaluation point. SECTION - The Standard Environment


When implemented to its ultimate application, the management to the marketplace min/max levels can

Chapter - Supply pull Basesignals Management provide11 production to manufacturing. The use of kanban signals based on the distribution Chapter 12 Supplier Quality and Development requirements provides the closest link between actual demand and production. Demand and lot size

Chapter 13disciplines - Cost Management and Control planning used in planning for raw material and component acquisition applies similarly in this Chapter 14 Materials Management scenario. The kanban signals can be cards, electronic, or many other formats as supported by the Chapter The Supply Chain Organization logistics15or-manufacturing network configuration. SECTION IV - Coordinating SCM and Lean Management


Supply Chain Management : A Handbook for 2.FACILITYLean USE Stategic Procurement

P. Wincel Facility form (i.e.,by theJeffrey physical structure and its use) often doesISBN:156327289x not match the function for which it is Productivity Press © 2004 (240 pages) of demand is unique to each customer, the used. For example, in industries where the majority inventory storageThis andbook management often reflectand product type and not customer. This typically results in provides purchasers supplier development professionals with the to tools needed to transform excessive or redundant product move re-aggregate the parts by customer. Order picking and staging procurement a mere center to a profitifgenerator. becomes a complex network offrom people andcost assets. In contrast, storage and processing in these industries is based on customer demand and usage—inventory, staging, and shipment are more efficient, resulting in improved labor usage and lowered total cost. Table of Contents Lean Supply Chain Management—A Handbook for Strategic Procurement

Actual physical space allocation provides the lean interface between the distribution facility and the manufacturing site. Where facility allocation is determined by part level demand and arranged by Introduction customer, control over supply versus demand match is reinforced. Continuing to support the visual SECTION I - The Foundations factory concept, total customer demand trends are more easily recognized by this facility allocation Chapter 1 - The Purchasing/SCM Executive as CEO method. Low value and slow moving items also gain increased attention because of the availability (or Chapter 2 - The Disciplines of Planning lack of) valuable distribution space. Foreword

Chapter 3


SECTION II - Thesignificant Crisis Environment Finally, unless incremental

sales warrant a need for increased distribution space, facility

Chapter 4 -should Defining CrisisasEnvironment availability be the viewed limited and unobtainable. This view requires continued improvements

in efficiency and planning. The timeand from distribution receiptTeam to shipment staging and transaction should Chapter 5 - Crisis Plan Background Phase 1—Acquisition Formation continually reduced. In some circumstances, distribution does not have to mean a physical transfer Chapter 6 -be Phase II—Price Benchmarking of parts7from the manufacturing operation, but can mean virtual distribution handling from direct Chapter - Phase III—Short-Term Process Improvement manufacturing siteIV—Value to customer shipments. The industrial sector drop-ship approach still has the ability Chapter 8 - Phase Analysis/Value Engineering to serve9 the efficiency efforts in consolidated product response and customer order fulfillment. Chapter - Phase V—Lean Manufacturing SECTION III - The Standard Environment



LeanINTEGRATION Supply Chain Management : A Handbook for 3.LOGISTICS Stategic Procurement

by Jeffrey P. Wincel Professional program and project management has provided aISBN:156327289x good example of how logistics © 2004 (240 pages)chain effort. In program management, a single operations can beProductivity integrated Press as part of the supply manager oversees and coordinates the efforts of various functional employees to deliver a single This book provides purchasers and supplier development professionals with the tools needed are to transform product to the customer. The functional "chimneys" broken down to deliver the best product and procurement a mere cost center to a profit generator. product value to the customer from in a team environment. Logistic integration as part of materials management and SCM can benefit from the same approach. Table of Contents

Traditionally, distribution managers, shipping managers, and scheduling managers individually manage the various functional tasks. By re-creating the view of logistics operations, customer order fulfillment Foreword and satisfaction can be improved through a single point view of the materials tasks. Lean Supply Chain Management—A Handbook for Strategic Procurement Introduction

SECTION I - The Foundations As a single point leader for the

various functions, the logistics manager facilitates all materials efforts

Chapter 1 -receipt The Purchasing/SCM Executive as CEO from order through delivery, providing the customer one face for all issues. In addition, the Chapter - The Disciplines of Planning logistics2 team leader becomes the single point liaison for internal contact as well. With this second role Chapter 3 - Force Versus Skill needs identified by the organization can be captured and implemented the individual customer-based SECTION - The Crisisthe Environment uniformlyIIthroughout logistic stream.

Logistics managers from various customer teams can share

Chapter 4 - Defining the Crisis Environment best practices to improve all materials efforts. Chapter 5


Chapter 6


Chapter 7


Chapter 8


Chapter 9





Lean Supply Chain Management : A Handbook for THE RESULTS Stategic Procurement

ISBN:156327289x by Jeffrey P. Wincel Like the quality, cost, and delivery improvements in SCM, materials management also provides ProductivityThe Press © 2004 (240 pages) measurable improvements. most obvious of these is reduction in transportation costs. Transportation rate negotiations, routing efficiencies, and move frequency are all contributors to this This book provides purchasers and supplier development professionals with the tools needed to transform area of cost savings. When a materials organization focuses only on cost, manufacturing efficiencies from atrue mere cost center a profit generator. can be disrupted.procurement This is especially in routing andto frequency considerations. As pointed out in one of the early chapters, the competing improvement objectives in operational efficiency (such as lower inventory) and reduced costs must be consciously considered when working to optimize total cost Table of Contents structures. balance must be struck between potentially competing objectives. Cost savings in Lean Supply A Chain Management—A Handbook forthe Strategic Procurement rate, routing, and frequency can easily range between 8 to 15 percent from traditional cost levels. Foreword

Introduction

Perhaps not so obvious are the savings from the facility and visual factory changes. Many distribution facilities rely solely on computerized storage data accessible through RF (radio frequency) bar code Chapter 1 - The Purchasing/SCM Executive as CEO scanning to manage inventory availability and placement. The approach often results in a random Chapter 2 - The Disciplines of Planning storage of product, with storage locations selected simply by whatever open space is available. In Chapter 3 - Force these cases, load Versus pickingSkill and staging can often represent a chaotic, random walk throughout the SECTION II - The Crisis Environment facility in which multiple and distant inventory locations must be accessed for the same part. By utilizing Chapter 4 - Defining the shipment Crisis Environment visual storage methods, staging times can be reduced by more than 25 percent, resulting in Chapter 5 - Crisis Background Phase rates 1—Acquisition Team Formation labor savings and Plan increasing order and fulfillment with a fixed labor force. Through the fixed and Chapter 6 - storage Phase II—Price Benchmarking sequenced of inventory, manual pick operations become more controlled and efficient. Often Chapter Phase Process Improvement the pick7 list- can beIII—Short-Term sequenced to coordinate with the storage location so that a single progression Chapter 8 warehouse - Phase IV—Value Analysis/Value within the can occur, eliminatingEngineering backtracking. SECTION I - The Foundations

Chapter 9


Computer-based inventory Environment management SECTION III - The Standard

or other nonvisual methods can result in inaccurate inventory counts, creating customer shortages when shipments are staged. Because inventory can exist in Chapter 10 - Defining the Standard Environment random locations, any system failure or processing oversight has no way to flag potential shortages. Chapter 11 - Supply Base Management Within a visual environment, the management of fixed inventory and min/max storage levels can Chapter 12 - Supplier Quality and Development likewise improve short shipments to customers by 50 percent or more. The efficiency gained in pickChapter 13 - Cost Management and Control stage-load operations by eliminating work interruptions can be significant. The magnitude of this Chapter 14 - Materials Management savings is based on the rate of occurrence, and reaction procedure, but is typically equal to 15 percent Chapter 15 - The Supply of associated labor cost.Chain Organization SECTION IV - Coordinating SCM and Lean Management

Chapter - Developing Implementing Lean Fundamentals Each of16 these materials&management efforts either directly or indirectly support the efficiency of the

manufacturing operations. Implementation By limiting inventory space, the manufacturing operations can more Chapter 17 - Manufacturing accurately to actual demand. By eliminating part shortages, the material management Chapter 18 -produce Ongoingproduct Improvements activity cannot "exercise" the organization to immediately respond and shift production Index priorities—enabling fixed production schedules. Other similar improvements can be defined throughout List of Figures theofmaterials List Tables management efforts and can provide links to overarching objectives of financial performance and customer satisfaction.

List of Sidebars

CASE STUDY 14.2 Questions 1. What lean techniques can be borrowed from the manufacturing environment to aid in the efficient operations in DSW's distribution operations? 2. How could DSW improve overall material management operations in an effort to improve order fulfillment rates? 3. What measures would best represent the pace of improvements within the distribution operations given the delivery pattern? Answers

1.

DSW implemented three primary lean efforts: 1) visual factory with fixed min/max Lean Supply Chain Management : A Handbook for inventory levels, 2) kanban pull signals from finished goods delivery, providing Stategic Procurement production scheduling per lean manufacturingISBN:156327289x structure, and 3) local delivery assets by Jeffrey P. Wincel used as a heijunka pace setter driving receipt to staging time reductions. Productivity Press © 2004 (240 pages)

This book provides purchasers and supplier development DWS completed facility and organization changes to create customer-based teams, professionals with the tools needed to transform each with a single team leader. The teams and facilities became responsible for all procurement from a mere cost center to a profit generator. multifunctional logistics and materials management activities. By having a materials "cradle to grave" owner, the company created "subject matter" or customer experts Table of Contentswho could provide a greater focus on individual customer needs. Likewise, the facility Lean Supply Chainwas Management—A for Strategic Procurement organized soHandbook that all customer product was located in dedicated and contiguous Foreword warehouse space, enabling the use of various lean management tools.

2.

Introduction SECTION I -3. The Foundations Customer satisfaction

was generally driven by order fulfillment. However, due to the

Chapter 1

frequency of shipments, need for part sequencing, stringent measures in excess - The Purchasing/SCM Executiveand as CEO

Chapter 2

of customer - The Disciplines of demand Planningwere put into place. Shipments that did not contain the

Chapter 3

- Forceappropriate Versus Skillmix or quantity of parts on a specific truck, but were delivered during the

same Environment day, were counted SECTION II - The Crisis

against the material and plant performance indicators.

Chapter 4


Chapter 5


Chapter 8


Chapter 9


This measure of "shortships" generally was far tougher than the customer measures, which required shipment within the one day delivery window. Like other measures at Chapter 6 - Phase II—Price Benchmarking DSW, this and more were incorporated as the hoshin planning measures for the Chapter 7 - Phase III—Short-Term Process Improvement materials operations.




Lean Supply Chain Management : A Handbook for Chapter 15: The Supply Chain Organization Stategic Procurement by Jeffrey P. Wincel

ISBN:156327289x

OVERVIEWProductivity Press © 2004 (240 pages) This book provides purchasers and supplier development needed of to the transform This final chapterprofessionals of Section IIIwith is a the brieftools discussion organizational fit between the strategic lean procurement from a mere cost center to a them. profit generator. supply chain efforts and the resources available to deploy Any structure can be successful, whether single line, matrix, functional, operational, etc. Required skills and training are far more important than the reporting structure in which they reside. Lean supply chain management requires a Table of Contents vastly different setManagement—A of skills from traditional chain management. Lean Supply Chain Handbooksupply for Strategic Procurement Lean supply chain management requires both the technical ability related to lean supply chain initiatives as well as the relationship skills Foreword with which to deploy them to the supply base. Introduction SECTION I - The Foundations

- The Purchasing/SCM Executive as CEO Organizational Structure

Chapter 1 Chapter 2

- The Disciplines of Planning Organizational structure seldom considered a strategic initiative, except perhaps in the human Chapter 3 - Force Versus is Skill

resources In SCM the strategic SECTION II department. - The Crisis Environment

initiative is based on the value a particular organizational

structure and skills training provides. Chapter 4 - Defining the Crisis Environment Chapter 5


Strategic Initiative - Phase II—Price Benchmarking

Chapter 6 Chapter 7


The strategic initiative here is to enhance the capability and efficiency of the supply chain organization - Phase IV—Value Analysis/Value Engineering by developing lean-based improvement strategies within procurement, supplier development, and Chapter 9 - Phase V—Lean Manufacturing materials management, thereby increasing the focus on the strategic management of information and SECTION III - The Standard Environment communications (via e-business systems) to support supply base management and customer service Chapter 10 - Defining the Standard Environment requirements. This can be done by implementing training methods to support the achievement of Chapter 11 - Supply Base Management business plan initiatives and overarching hoshin objectives, highlighting action deployment and Chapter 12 - Supplier Quality and Development sustained improvement. Chapter 8

Chapter 13 - Cost Management and Control Chapter 14 - Materials Management

CASE STUDY 15.1


Concurrent to the launch its Lean initial Management lean supply chain SECTION IV - Coordinating SCMofand

efforts, DSW had entered into a

companywide organizational assessment. In an effort to improve its functional performance, Chapter 16 - Developing & Implementing Lean Fundamentals increase customer satisfaction, and improve profits, DSW was striving to understand what Chapter 17 - Manufacturing Implementation appropriate changes should be made. Chapter 18 - Ongoing Improvements Index

Operationally the company had very strong and independent divisions, each possessing its own

List offunctional Figures organizations. A small corporate staff served to mediate the differences in functional List ofpractices Tables between the organizations, and was now being asked to take a more direct role in these List ofefforts. Sidebars

Questions 1. Under what organizational structure could DSW's supply chain organization increase its lean supply chain efforts through synergy of effort and resources, while maintaining the divisional independence and control? 2. How would the SCM organization insure its employees possess the appropriate skills necessary to initiate lean supply chain efforts, and how would it plan for promotions and succession? 3. What arguments might be expected from the divisional general managers and the supply chain employees against a revised SCM structure, and how would the SCM group counter these arguments?

At fully staffed levels, salary structure needs should be evaluated, and opportunities to consolidate or restructure responsibilities to improve needed budget allocation should be identified. Global purchasing requirements can be integrated into a single worldwide procurement strategy or organization.

Implementation Plan Lean Supply Chain Management : A Handbook for

The following elements make up the implementation plan for this strategic initiative: Stategic Procurement by Jeffrey P. Wincel Productivity Press © 2004 (240 pages)

Organization (see Table 15.1):

ISBN:156327289x

This book provides purchasers and supplier development Table 15.1: Organization Alternatives

Activity

professionals with the tools needed to transform procurement from a mere cost center to a profit generator.

Current Structure

Proposed Structure

Global procurement No formal global Table of Contents

International procurement organization—regional manager to coordinate efforts Lean Supply Chain Management—A Handbook for Strategic Procurement functional focus only and opportunities operations

Foreword

Introduction Supplier SECTION I - The Foundations development

Quality-based, procurement dependent structure

Chapter 1


Chapter 2


Chapter 3

- Force Versus Skill Distribution, Functionally driven separate transportation and activities—"chimney Chaptercustomer 4 - Defining the Crisisorganizations" Environment service SECTION II - The Crisis Environment

Chapter 5

Development-based, procurement supportive organization. Commodity and discipline expertise Customer-based logistics teams—incorporated materials functions


Chapter 61. -Assess Phase II—Price resourceBenchmarking deployment and determine appropriate program team support while Chapter 7 -continuing Phase III—Short-Term Process Improvement to optimize core competencies. Chapter 8

- Phase IV—Value Analysis/Value Engineering and supplier development resources on developing a supply base that Chapter 92. -Focus Phase purchasing V—Lean Manufacturing

a competitive advantage in SECTION III provides - The Standard Environment

cost, quality, and technology.


3. Focus materials and logistics resources on effective inventory management and customer order fulfillment.



Chapter 13 Cost Management and Control 4. -Facilitate benchmarking, supplier development, and strategic analysis using data analysis Chapter 14 -tools. Materials Management Chapter 15 - The Supply Chain Organization

global purchasing strategies and staffing SECTION 5. IV -Define Coordinating SCM and Lean Management

needs.

Chapter 16 - Developing & Implementing Lean Fundamentals

People:

Chapter 17 - Manufacturing Implementation

1. Develop training curriculum and courses for all job classifications.

Chapter 18 - Ongoing Improvements Index

2. Develop gap analysis skills evaluation for all employees (including team leaders and

List of Figures managers). List of Tables

3. Expand training for supervisors to focus on leadership, employee training, skill List of Sidebars enhancement, and successor planning.

Lean Supply Chain Management : A Handbook for THE ORGANIZATION EFFORTS Stategic Procurement

by Jeffrey P. Wincel In any business environment, a team-based structure providesISBN:156327289x the greatest opportunity to deliver the Productivity © 2004teams (240 pages) desired results and changes. Press Individual allow for a sense of entrepreneurial spirit even in classic corporate environments. Byprovides breakingpurchasers the walls of functional responsibility, team members share hats in This book and supplier development tools needed job assignments. professionals All members with havethe a shared equity to in transform the success or failure of the project, and procurement from a mere cost center to a profit generator. therefore break from the normal "not-my-job" mentality. The of organizational Table Contents development of a lean supply chain team must carefully consider the ways in which

limited human resources can be most appropriately applied in a global organization to optimize performance. Targeting resources often means moving people outside of their functional comfort zone.

Lean Supply Chain Management—A Handbook for Strategic Procurement Foreword

Introduction SECTION I - The Foundations

Chapter 1


Chapter 2


Chapter 3



Chapter 4


Chapter 5


Chapter 6


Chapter 7


Chapter 8


Chapter 9





Lean Supply Chain Management : A Handbook for PROCUREMENT AND DEVELOPMENT Stategic Procurement

ISBN:156327289x Jeffrey P. Wincel and development resources In supporting leanbySCM, procurement need to be initially targeted on the Productivity Press © 2004 (240 pages) development of supply base capabilities. While this often conflicts with the desire for immediate cost reductions, it provides long-term sustainability reduction (as discussed in previous chapters). This book provides purchasersof and supplierefforts development professionals with the needed to transform Global coordination of procurement andtools supplier development efforts needs to include a recognition of a mere cost center the to abusinesses profit generator. the varying socialprocurement and politicalfrom environments in which operate.

Through a global analytical assessment, tailored regional commodity deployments maximize Table of Contents

systemwide benefits. The use of global commodity managers (or lead buyer structures) allows for a balance between tactical and development responsibilities as well as the consideration of specific Foreword regional deployment needs. In any region, the global application of lean supply chain elements Introduction facilitates the competitive and price benchmarking efforts leading to a consolidated commodity strategy. SECTION I - The Foundations Supplier and commodity development activities arising out of these evaluation tools create the basis for Chapter 1 - The Purchasing/SCM Executive as CEO globally coordinated efforts. Internal and external organizations quickly recognize the single-voice Chapter 2 - The Disciplines of Planning approach between operations, divisions, and world regions, minimizing the divide-and-conquer efforts Chapter 3 often - Force Versus Skill suppliers exhibit. Lean Supply Chain Management—A Handbook for Strategic Procurement


Chapter 4


Chapter 5


Chapter 6


Chapter 7


Chapter 8


Chapter 9





Lean Supply Chain Management : A Handbook for MATERIALS MANAGEMENT Stategic Procurement

ISBN:156327289x by Jeffrey Wincel Material and logistics staff, P. again organized as teams, are directed in the management and integration Productivity © 2004 (240 pages) of lean techniques in support Press of inventory management and reduction, along with improved order fulfillment.Chapter 14 book provided the applications of the techniques to this staffing structure. The This provides purchasers and supplier development professionals the tools to transform operational efficiencies gainedwith through lean needed deployment can be quantified to support total supply chain procurement from a mere cost center to a profit generator. savings.

When materials management activities, such as production planning, logistics, transportation, Table of various Contents

and customer service are integrated, the organization deconstructs the functional inefficiency typically exhibited in material movement activities. Focus shifts from individual tasks to customer satisfaction. Foreword Thetasks are designed to support broad customer satisfaction and therefore construct a new paradigm Introduction toward job performance. Lean Supply Chain Management—A Handbook for Strategic Procurement


Chapter 1


Chapter 2


Chapter 3



Chapter 4


Chapter 5


Chapter 6


Chapter 7


Chapter 8


Chapter 9





LeanSKILL Supply Chain Management : A Handbook for PEOPLE AND DEVELOPMENT Stategic Procurement

ISBN:156327289x by Jeffrey P. Wincel Key to the successful delivery of lean SCM initiatives is the capable workforce to do so. It is unlikely Productivity Press © 2004 the (240 developed pages) that most organizations already possess lean supply chain skills outlined in this book. To develop those skills, supply chain manager and mustsupplier providedevelopment specific knowledge and training Thisthe book provides purchasers withtothe tools needed to transform requirements andprofessionals have the ability measure competency within those skill sets. Through the from a merematrix cost center to a in profit generator. development of aprocurement skills and development as shown Figure 15.1, the supply chain manager can clearly articulate to his or her staff and to the broader organization the level of mastery of lean SCM. Figure 15.1 categorizes skills by areas of mastery—e-technology skills, business development Table of Contents skills, and lean knowledge skills. Within eachforofStrategic these skill sets, the required level of mastery is Lean Supply Chain Management—A Handbook Procurement defined, along with the evaluated level of each of the employees. The deviation of these two indicators Foreword provides the gap assessment that drives employee development. Introduction SECTION I - The Foundations

Chapter 1


Chapter 2


Chapter 3



Chapter 4


Chapter 5


Chapter 6


Chapter 7


Chapter 8


Chapter 9





Figure 15.1: Skills Matrix Coupling experience and performance with skill mastery creates the environment in which fact-based succession planning can be derived. By formal use of skills mastery and annual performance reviews, each successive level of job classification can identify a successor or promotional opportunity. Through this, each employee can be certain of the path he or she is on, and where he or she needs to head to progress in his or her career. As there are many forms of succession planning methods, this book will not offer a new one. Selecting and using one that is already known will satisfy your organization's skill development needs.


ISBN:156327289x Jeffrey aP.quick Wincel This chapter has by provided glimpse of the need to consciously address organizational Productivity Press ©chain 2004 (240 pages) coordination to support lean supply needs. Not only does the traditional organizational design need to take place, but, more important, the analysis of actual employee skill to required skill level must This book provides purchasers and supplier development with tools needed to transform be done. Trainingprofessionals and education in the these lean elements are more important than the structure in which procurement from a mere needs cost center to a to profit generator. they operate. Finally, succession planning to occur ensure adequate "bench strength" in the SCM organization. By specifically targeting needed training elements, an SCM staff can be created that has the ability to operate in any of the many supply chain positions. Table of Contents


CASE STUDY 15.2

Foreword Introduction

Questions


Chapter 1


Chapter 2

-1.The Disciplines of Planning structure could DSW's supply chain organization Under what organizational - Force Versus increase its Skill lean supply chain efforts through synergy of effort and resources,

Chapter 3

SECTION II - The Crisis Environment while maintaining the divisional

independence and control?

Chapter 4


Chapter 5

HowPlan would the SCM organization insure its employees possess the appropriate -2.Crisis Background and Phase 1—Acquisition Team Formation

Chapter 6

skillsII—Price necessary to initiate lean supply chain efforts, and how would it plan for - Phase Benchmarking

Chapter 7


Chapter 8


Chapter 9


promotions and succession?

3. What arguments might be expected from the divisional general managers and the supply chain employees against a revised SCM structure, and how would the SECTION III - The Standard Environment SCM group counter these arguments? Chapter 10 - Defining the Standard Environment Chapter 11 Answers - Supply Base Management Chapter 12 - Supplier Quality and Development Chapter 13 - Cost Management and Control

DSWManagement employed a "hybrid" organization in which tactical or functional SCM remained Chapter 14 -1.Materials fully within theOrganization operating division, and a strategic supply chain group was formed as Chapter 15 - The Supply Chain part of theSCM corporate function. The centralized group SECTION IV - Coordinating and Lean Management

was responsible for the selection

and development of all Lean long-term suppliers; was the lead negotiator for all multiyear Chapter 16 - Developing & Implementing Fundamentals

agreements; was responsible for cross-division commodity group savings; and acted as a commodity council leader for all divisions that purchased a particular commodity. Chapter 18 - Ongoing Improvements The corporate SCM executive was responsible for the performance assessment, job Index assignment, and development of all SCM personnel. Daily job reporting was List of Figures determined by employee deployment, with divisional managers responsible for List of Tables functionally deployed SCM personnel. While not a matrix organization with dual formal List of Sidebars reporting relationships, DSW's hybrid organization relied on the daily manager (whether tactical or strategic) to provide performance direction and evaluation. Chapter 17 - Manufacturing Implementation

2.

The SCM management team identified the curriculum of necessary skills for all positions and all levels. Each manager completed a skills assessment for each employee and developed an individualized training plan. The general training matrix outlined not only the required and recommended skills for each position, but provided a clear indication of the skills required at all levels, so that employees could pursue the skills required for promotional opportunities. Finally, the individualized training matrix was used as part of the annual performance review process.

3.

The divisional general managers expressed concern with what was perceived as a loss of control for a major cost element of their profit and loss responsibilities. By Lean Supply Chain Management : A Handbook for having theProcurement commodity level savings performance targeted by, and controlled by, the Stategic centralized supply chain group, the general managers felt that they would not receive ISBN:156327289x by Jeffrey P. Wincel the attention necessary for them to meet or exceed their profitability targets. Productivity Press © 2004 (240 pages)

This SCM book executive provides purchasers development The explained and that supplier the product sourcing would occur within the professionals with the tools needed to transform division, with the tactical buyer negotiating the initial price. The strategic group was procurement from a mere cost center to a profit generator. responsible for using SCM tools, such as multiyear productivity agreements, VA improvements, etc., to ensure continual cost reduction activity. Additionally, the Table of Contentsstrategic group would also provide extended supplier development support to assist Lean Supply Chainthe Management—A Strategic Procurement divisions withHandbook their mostfor problematic suppliers, allowing the divisional quality Foreword resources to focus on internal and customer quality improvements. Introduction

Other concerns SECTION I - The Foundations

included determination of resource levels and personnel deployment, performance evaluations, payCEO and promotion decisions, concern over conflicting Chapter 1 - The Purchasing/SCM Executive as directives from the divisions and the central organization; etc. Each of these issues Chapter 2 - The Disciplines of Planning had to be addressed with an ongoing dialogue between the divisional managers and Chapter 3 - Force Versus Skill the corporate managers. It required recognition that each of the groups was striving to SECTION II - The Crisis Environment provide the best results for the benefit of the entire company. Once the ego control Chapter 4 - Defining the Crisis Environment issues were put aside and the common efforts recognized, both teams were able to Chapter 5 - Crisis Plan Background and Phase 1—Acquisition Team Formation successfully operate within the new organization. The most significant key element in Chapter 6 - Phase II—Price Benchmarking "forcing" the facilitation and resolution of the concerns was executive corporate Chapter 7 - Phase III—Short-Term Process Improvement support and their championing of the concept of lean supply chain initiatives. The Chapter 8 - Phase IV—Value highest Analysis/Value Engineering company's management recognized and endorsed the importance of the Chapter 9 - Phase V—Lean Manufacturing contribution SCM could make. SECTION III - The Standard Environment

The the SCM employees expressed only two main concerns: 1) to whom would they Chapter 10 - Defining Standard Environment report; 2) how would they be measured on performance? The first of these was Chapter 11 - Supply Baseand Management addressed clearly defining that when deployed in an operational position, they Chapter 12 - Supplier Quality by and Development report directly to the divisional manager who would determine "what and when" Chapter 13 - Cost would Management and Control supply chain activities needed to be undertaken. The issue of "who and how" the Chapter 14 - Materials Management

supply chain job was to be done was under the direction of the corporate supply chain manager. The performance issue mirrored the reporting issue in that the corporate SECTION IV - Coordinating SCM and Lean Management manager was ultimately responsible for the performance evaluation. However, when Chapter 16 - Developing & Implementing Lean Fundamentals operationally deployed, 50 percent of the evaluation was based on operation Chapter 17 - Manufacturing Implementation performance as determined by the operational manager. Chapter 15 - The Supply Chain Organization

Chapter 18 - Ongoing Improvements Index List of Figures List of Tables List of Sidebars

After initial concern, the employees embraced the new organization as it allowed for a better match between skills and job tasks. Employees who excelled in the operational and tactical side of supply chain management were relieved of the distractions of attempting to define strategic initiatives. Likewise, SCM strategists were provided an environment in which they could focus on long-term initiatives without the daily interruptions of production support issues. The organization also provided for job rotation and development, allowing for movement between various divisions as well as tactical and strategic assignments.

Supply Chain Management : A Handbook for SECTIONLean IV: Coordinating SCM and Lean Stategic Procurement ISBN:156327289x by Jeffrey P. Wincel Management Productivity Press © 2004 (240 pages) This book provides purchasers and supplier development

Chapter 16: Developing & with Implementing Lean Fundamentals professionals the tools needed to transform


Chapter 17: Manufacturing Implementation Table Chapter of Contents 18: Ongoing Improvements

Lean Supply Chain Management—A Handbook for Strategic Procurement Foreword Introduction SECTION I - The Foundations

Chapter 1


Chapter 2


Chapter 3



Chapter 4


Chapter 5


Chapter 6


Chapter 7


Chapter 8


Chapter 9





Lean Supply Chain Management : A Handbook for Chapter 16: Developing & Implementing Lean Stategic Procurement ISBN:156327289x by Jeffrey P. Wincel Fundamentals Productivity Press © 2004 (240 pages) This bookso provides purchasers andthat supplier development techniques are already in All the material presented far loosely assumes lean manufacturing professionals with the tools needed to transform place, enabling the launch of lean supply chain efforts. Section IV shows how to implement internal procurement from a mere cost center to a profit generator. lean manufacturing efforts and lean supply chain activities simultaneously. This is accomplished by implementation steps with supplier readiness steps. The following material takes the Table Contents basicoflean manufacturing initiatives and matches those efforts to supply chain support initiatives. The Lean Supply Chain Management—A Handbook Procurement in-depth focus is on the supply chain aspectsforofStrategic this pairing, not on the lean manufacturing aspects. Foreword Introduction

IMPLEMENTING THE MATERIALS FLOW STRATEGY


Chapter 1 real - The Purchasing/SCM Executivethe as launch CEO of lean manufacturing and SCM is in the materials The first coordination effort between Chapter 2 - The of Planning flow strategy. It'sDisciplines at this starting point that the procurement activities have to be ready to support Chapter 3 - Force Versus manufacturing's first stepsSkill toward lean implementation. The following sections show the correlation SECTION - The Environment betweenIIthe leanCrisis initiatives and SCM

activities.

Chapter 4


Chapter 5


Chapter 6


Chapter 7


Chapter 8


Chapter 9





Lean Supply Chain Management : A Handbook for LEAN ACTION 1 Stategic Procurement

ISBN:156327289x by Jeffrey P. Wincel Like the manufacturing process itself, the implementation of lean manufacturing techniques can be Productivity © 2004 A (240 pages) flow strategy begins with the receipt and storage of followed as material flows intoPress the plant. materials raw material and This components. Before any discussions begindevelopment regarding JIT deliveries, line-side book provides purchasers and supplier professionals withcomponent the tools needed toprocesses transform must be established. In a lean shipments, etc., raw material and storage procurementthis from a merestorage cost center to a profit manufacturing environment, material is based on thegenerator. concept of marketplace material storage.

Table of Contents

STUDY 16.1 Lean Supply Chain Management—A Handbook CASE for Strategic Procurement Foreword

DSW's North American operations began the implementation of lean manufacturing methods approximately 18 months prior to the development of the lean supply chain efforts. Many of the key SECTION I - The Foundations elements were beginning to take hold, however, supplier performance in quality and delivery had Chapter 1 - The Purchasing/SCM Executive as CEO seemed to deteriorate. As driven by the lean manufacturing efforts, delivery frequency was Chapter 2 - Thewhile Disciplines of Planning increasing lot sizes and on-hand inventory were decreasing. Introduction

Chapter 3


SECTION - The Crisis Environment The II rest of the DSW's worldwide

organizations had yet to implement the lean manufacturing

efforts, werethe justCrisis beginning implementation plans. Customer demands for cost reductions and Chapter 4 - and Defining Environment quality were driving a more Team rapid implementation than had occurred in Chapter 5 -improvements Crisis Plan Background and DSW Phase toward 1—Acquisition Formation North Additionally, a recent "noncore" acquisition was causing a serious financial drain on Chapter 6 America. - Phase II—Price Benchmarking the7entire company, both limiting the available cash for improvement initiatives and requiring Chapter - Phase III—Short-Term Process Improvement immediate costIV—Value reductions. Chapter 8 - Phase Analysis/Value Engineering Chapter 9

- Phase V—Lean Manufacturing Questions


1. Based on DSW's worldwide lean implantation efforts and progress, and its current financial situation, where should DSW focus its SCM efforts, and in what areas?

Chapter 10 - Defining the Standard Environment Chapter 11 - Supply Base Management

Chapter 12 Supplier and Development 2. -Based onQuality the implementation focus, what impact might DSW see in commonizing a global Chapter 13 -approach Cost Management and efforts? Control to lean SCM Chapter 14 - Materials Management

3. -How SCM organization get in step North American lean manufacturing efforts? Chapter 15 The would Supplythe Chain Organization SECTION IV - Coordinating SCM and Lean Management


In this marketplace concept, each received material or component has it own highly visible storage

Chapter 18much - Ongoing Improvements location, like that in a grocery store. The purpose of this method is to precisely manage the Index location and movement into the manufacturing environment. However, Rother and Shook in Learning to List ofcaution Figures about the use of supermarket pull systems between processes until continuous flow has See List of Tables been introduced in as many processes as possible. [1] What I am proposing here is a supermarket only List of Sidebars between incoming material and the first production process. This is the key interface between the lean

manufacturing environment and supply chain management. [1]Rother and Shook, Learning to See , p. 44.

Lean1Supply Chain Management : A Handbook for SCM ACTION Stategic Procurement

ISBN:156327289x by Jeffrey P. Wincel In support of the marketplace material storage concept, procurement must be prepared to ready its Productivity Pressmarketplace © 2004 (240 pages) suppliers for the change. In most settings, the inventory locations are designed for package-size storage versus pallet storage. In addition, to provide simplified material handling systems, This book provides purchasers and supplier development professionals the tools neededsizes. to transform the handling racks are normallywith limited to standard With these requirements SCM has to prepare procurement from aand mere cost center to a profit generator. its suppliers for packaging planning lot-size compliance.

By establishing and verifying the use of standard package-size and lot-size compliance, procurement Table of Contents

can support manufacturing in smoothly introducing marketplace inventory management with minimal storage rack redesign. Lot-size compliance also aids in min/max inventory level management.

Lean Supply Chain Management—A Handbook for Strategic Procurement Foreword

Introduction SECTION I - The Foundations

Chapter 1


Chapter 2


Chapter 3



Chapter 4


Chapter 5


Chapter 6


Chapter 7


Chapter 8


Chapter 9





Lean Supply Chain Management : A Handbook for LEAN ACTION 2 Stategic Procurement

ISBN:156327289x Jeffrey P. Wincel Either concurrentby with the development of marketplace storage, or immediately following it is the Productivity Press ©quantity 2004 (240control. pages) In a lean manufacturing environment this is development of incoming inventory accomplished through identifying minimum and and maximum levels for each incoming material. This book provides purchasers supplierinventory development professionals the tools transform This min/max inventory controlwith system is keyneeded to the to visual nature of lean manufacturing. This concept procurement from a mereprocess cost center to a profit generator. ensures that deviations from the planned are easily visually identified in that they fall outside of the norm structure.

Table of Contents

The basis for the minimum and maximum levels is derived from the customer demand. A main lean manufacturing tenet is the concept of level production. In this level production system, inventory below Foreword the minimum level jeopardizes the plant's ability to manufacture product uninterrupted. Inventory levels Introduction above the maximum represent waste in the system. In this case cash is being outlaid to procure and SECTION I - The Foundations store material that is not needed in the planned manufacturing schedule. While the fundamental Chapter 1 - The Purchasing/SCM Executive as CEO process of establishing min/max inventory levels applies to the entire material flow process throughout Chapter 2 - The Disciplines of Planning a lean manufacturing setup, it is at material incoming (or line-side if selected) in which coordinated Chapter 3 - Force Versus efforts need to occur withSkill procurement. Lean Supply Chain Management—A Handbook for Strategic Procurement


Chapter 4


Chapter 5


Chapter 6


Chapter 7


Chapter 8


Chapter 9





Lean2Supply Chain Management : A Handbook for SCM ACTION Stategic Procurement

ISBN:156327289x by Jeffrey P. Wincelinventory levels, the frequency With the establishment of min/max of inbound material shipments Press © 2004 (240 pages)levels seldom corresponds to a single weekly or begins to change.Productivity The replenishment of min/max monthly shipment. With increased frequencies there are a number of cost factors that may This book providesshipping purchasers and supplier development professionals the tools evaluate needed to transform increase on the supply side. Towith adequately these elements, SCM must conduct formal procurement from a mere cost center to a profit generator. shipping frequency planning and cost evaluations.

Component suppliers often base their unit price on the planned weekly volumes, with cost based on Table of Contents

production run sizes and limited inventory holding. Increasing the shipping frequency may result in suppliers attempting to increase unit price. With adequate evaluation and alternative planning, such Foreword cost changes can be eliminated. Lean Supply Chain Management—A Handbook for Strategic Procurement Introduction

SECTION I - The Foundations Also, increased shipping frequencies

can drive up the cost of inbound transportation. Active planning

Chapter 1 - The Purchasing/SCM Executive as CEO and consolidation of the now smaller and more frequent shipments can eliminate the added costs. MilkChapter 2 - The Disciplines of Planning run consolidation, cross-dock activities, or other consolidation efforts can be utilized for these efforts. Chapter 3 -isForce Skill This issue muchVersus more complicated in the European market, where inbound cost is often born by the SECTION supplier.II - The Crisis Environment

Chapter 4


Chapter 5


Chapter 6


Chapter 7


Chapter 8


Chapter 9






ISBN:156327289x by summarized Jeffrey P. Wincel This chapter briefly the paired actions necessary do lean work within a company. The Press © 2004 (240efforts pages) includes the following activities: paring of lean andProductivity supply chain preparation

This book provides purchasers and supplier development

Lean action 1. The development marketplace material storage, which: professionals with theoftools needed to transform from a mere cost center to a profit generator. 1. Existsprocurement between receiving and first manufacturing process. 2. Doesn't start between processes until continuous flow achievements have been made. Table of Contents Lean Supply Chain Management—A Handbook for Strategic Procurement

3. Is the key interface between the lean environment and SCM.

Foreword

Introduction SCM action 1 (directly supportive of lean action 1). The preparation of the supply base material SECTION I - The Foundations delivery systems, including:

Chapter 11. -Lot Thesize Purchasing/SCM as CEO identification Executive and compliance. Chapter 2 - The Disciplines of Planning

packaging Chapter 32. -Standard Force Versus Skill development or enforcement. SECTION II - The Crisis Environment

Lean action 2. The demand-based setting of incoming inventory control levels during which: - Defining the Crisis Environment

Chapter 4

levels are driven level production, Team which Formation is the key to the visual nature of lean Chapter 51. -Min/max Crisis Plan Background andfrom Phase 1—Acquisition Chapter 6

-manufacturing. Phase II—Price Benchmarking

Chapter 7


Chapter 8


2. Scheduling problems or supplier nonconformance are readily identified.

Chapter 9 action - Phase Manufacturing SCM 2.V—Lean The implementation of increased shipment frequencies where: SECTION III - The Standard Environment

1. Smaller lot sizes are driven by closer control of manufacturing space and asset utilization.


Chapter 11 Supply Base 2. -The need for Management formal frequency planning and cost evaluation becomes clear. Chapter 12 - Supplier Quality and Development

3. -Milk-run consolidation, and other logistic issues are addressed. Chapter 13 Cost Management and cross-dock, Control Chapter 14 - Materials Management

These primary elements serve as a critical foundation on which production implementation of lean

Chapter 15 - Thesystems Supply Chain Organization manufacturing can begin. Without them, there can only be limited success and a likely SECTION IV - Coordinating SCM and Lean Management

retracing of initial efforts as later systems are not supported.


CASE STUDY 16.2

Chapter 18 - Ongoing Improvements IndexQuestions List of Figures List of Tables

1. Based on DSW's worldwide lean implantation efforts and progress, and its current

List of Sidebars financial situation, where should DSW focus its SCM efforts, and in what areas?

2. Based on the implementation focus, what impact might DSW see in commonizing a global approach to lean SCM efforts? 3. How would the SCM organization get in step with the North American lean manufacturing efforts? Answers

1.

DSW's supply chain organization recognized the need to implement its lean SCM Lean Supply Chain Management : A Handbook for efforts in both NA and rest of the world regions. However, this recognition included an Stategic Procurement understanding that the business, customer, and economic conditions differed in each ISBN:156327289x by Jeffrey P. Wincel area. For its North American deployment, DSW selected the "standard environment" Productivity Press © 2004 (240 pages) initiatives, but also accelerated the initial preparation steps in support of the existing This book provides purchasers and supplier development lean effort. In the rest of the world, DSW's lean SCM deployment followed a crisis professionals with the tools needed to transform model. A critical focus of this on immediate savings and cost procurement from a mere costdeployment center to a effort profit was generator. reductions.

Table of Contents 2. The supply chain organization recognized that there was no driving need to have an Lean Supply Chainidentical Management—A Handbook forprofile Strategic Procurement lean implementation in each of its regional areas. The need for Foreword

commonization was determined to be in the tools, strategy, and philosophy of lean SCM deployment. Making every regional SCM group a learning organization was an SECTION I - The Foundations important objective. As such each region was encouraged to create a unique lean Chapter 1 - The Purchasing/SCM Executive as CEO supply chain environment, but coordinated with other global efforts. Introduction

Chapter 2


Chapter 3

SCMSkill organization was able to get in step with the North American lean -3.ForceThe Versus

manufacturing efforts SECTION II - The Crisis Environment

by accelerating the first lean supply chain actions. By creating a lean material flow, delivery, Chapter 4 - Defining the Crisis Environment and inventory system, delivery performance and quality were addressed. The suppliers were provided the reasoning for the Chapter 5 - Crisisimprovements Plan Background and Phase 1—Acquisition Team Formation process changes, the tools to support the new actions, and the training to implement Chapter 6 - Phase II—Price Benchmarking the tools in a collaborative manner. Whereas previous process changes had been Chapter 7 - Phase III—Short-Term Process Improvement implemented through edict to the supply base, the lean supply chain efforts were Chapter 8 - Phase IV—Value Analysis/Value Engineering addressed through various formal and informal communication, discussion, and Chapter 9 - Phase V—Lean Manufacturing decision-making events. The participative approach helped DSW refine its lean SCM SECTION III - The Standard Environment efforts, and to facilitate a broader acceptance by the suppliers. Chapter 10 - Defining the Standard Environment Chapter 11 - Supply Base Management Chapter 12 - Supplier Quality and Development Chapter 13 - Cost Management and Control Chapter 14 - Materials Management Chapter 15 - The Supply Chain Organization SECTION IV - Coordinating SCM and Lean Management


Lean Supply Chain Management : A Handbook for Chapter 17: Manufacturing Implementation Stategic Procurement by Jeffrey P. Wincel

ISBN:156327289x

The implementation of the lean manufacturing process typically occurs on a single product or product Productivity Press © 2004 (240 pages) line at a time. It is unusual and not recommended to attempt to lean the lines of an entire production This book provides purchasers and supplier development facility simultaneously. The lessons learned during the first attempt provide the basis for the second professionals with the tools needed to transform attempt and simplify the third attempt, until cost the facility wholegenerator. exhibits lean manufacturing procurement from a mere center as to aa profit techniques. The next paragraphs briefly outline some of the primary actions taken during the manufacturing rollout. Again, the importance is to understand the process and timing of lean Table of Contents manufacturing and how changes in supply chain management can support these efforts. Lean Supply Chain Management—A Handbook for Strategic Procurement Foreword

LEAN MANUFACTURING

Introduction


To enable all the downstream lean manufacturing activities, the first action which must occur is to

Chapter 1 -the The Purchasing/SCM Executive CEO determine required manufacturing time as necessary to meet customer demands. Takt time, as the Chapter 2 - The Disciplines of calls Planning lean manufacturing literature it, is simply the calculation of available labor hours divided by the Chapter 3 demand. - Force Versus customer RotherSkill and Shook describe this as the initial activity in the development of the lean [1] Crisis SECTION II - The Environment value stream. Yasuhiro Monden offers

detailed methods of translating available work time, customer

Chapter 4 and - Defining the Crisis Environment demand, other capacity constraints into takt time calculations in his book. [2] Takt time is such a Chapter - Crisis Plan its Background 1—Acquisition Team Formation critical 5 factor because purpose isand to Phase maximize the time utilization of the production labor, or stated Chapter 6 -toPhase II—Price Benchmarking differently, use only the time needed to make a part. It is the first step in identifying and eliminating

labor waste. Chapter 7 - Phase III—Short-Term Process Improvement Chapter 8


From the development of takt time, the process of continuous flow manufacturing arises. Simply stated, - Phase V—Lean Manufacturing this methodology removes inventories from between the manufacturing processes and delivers a SECTION III - The Standard Environment product to the next value-added operation exactly when it is needed. The level of staffing and the work Chapter 10 - Defining the Standard Environment order to be performed is determined by the development of standardized work. Standardized work is a Chapter 11 - Supply Base Management detailed description that tells employees the order in which parts are manufactured to support takt time Chapter 12 - Supplier Quality and Development calculations. Deviations from standardized work result in variance from the takt time, and inhibit the Chapter 13 - of Cost Management and Control trace-ability product defect causes. Monden's book details the benefits obtained by standardized Chapter 14 Materials Management work, and the resulting smoothed production and reduced inventories. [3] Chapter 9


Of all theIVlean manufacturing this next one SECTION - Coordinating SCMprocesses, and Lean Management

is the most widely known. Commonly called just-

in-time,16 the- timely availability of the rightLean material, at the right time, in the right quantities, certainly is a Chapter Developing & Implementing Fundamentals cornerstone in lean manufacturing. Although JIT is commonly used in reference to material delivery Chapter 17 - Manufacturing Implementation from a supplier or to aImprovements customer, JIT within an operation is equally important. In a successful lean Chapter 18 - Ongoing environment, kanban-based material movements facilitate this on-time material availability. Kanban is Index

most easily described as a visual signal sent to the supplying operation that goods are needed. The kanban signal should be used as the basis of kicking off continued production or material delivery. This List of Tables kind of material movement is necessary where continuous flow processing is not feasible or when the List of Sidebars supply operation is too distant or unreliable. Kanban systems are used most effectively with the use of supermarket or inventory storage between processes, and can provide tremendous advantages over traditional MRP, especially with outside suppliers.[4] [1]Rother and Shook, Learning to See , p. 40 List of Figures

[2]Yasuhiro

Monden, Toyota Production Systems , 3d Ed. (Hingham MA: Kluwer Academic Publishers, 1998), pp. 304–307. [3]Monden,Toyota

Production Systems , pp. 63–70. Author's note: While production smoothing is a distinct item in TPS practice, which is not detailed here, the ability to achieve production smoothing is greatly dependent on standardized work. [4]Monden,Toyota

Production Systems , pp. 71–73.

SCM


bywithin Jeffreyoperations P. Wincel often mirror those with theISBN:156327289x The changes seen suppliers. In the development of the Productivity © 2004 (240 pages)in the lean environment was the placement of a material flow strategy, the firstPress element discussed marketplace for incoming and materials. In the development manufacturing implementation, JIT delivery This bookcomponents provides purchasers and supplier professionals with thecall tools needed to transform and material availability via a kanban system were introduced. Now the two can be beneficially procurement from a mere cost center to a profit generator. and production smoothing, a paired. With conformance to the packaging specifications, lot compliance, supplier kanban can be introduced to achieve component/material JIT. The entire purpose for this is to eliminate a push system of material delivery, and create a pull system. While MRP can represent a pullTable of Contents typeSupply system, it does not reflect manufacturing andProcurement need in a real-time environment as supplier Lean Chain Management—A Handbook forusage Strategic kanbans do. Quoting Monden, "Although the kanban system is a very effective means to realize the JIT Foreword concept, it should not be applied to suppliers without corresponding changes in the overall production Introduction [5] system of the user company. SECTION I - The Foundations Chapter 1


As the component production gets further removed from the ultimate customer, the ability to ensure - The Disciplines of Planning good product becomes more difficult. The tier one supplier must listen to the final customer, and clearly Chapter 3 - Force Versus Skill In the automotive industry customers have been given the ability to know the customer's concerns. SECTION II - The Crisis Environment warrant the production's quality and usability. However, at the same time, the supplier hasn't yet Chapter 4 - Defining the Crisis Environment demonstrated the repeatability to provide acceptable product. The next step in SCM has to be to certify Chapter - Crisis Plan Background and Phase 1—Acquisition TeamThe Formation supplier5 quality through objective quality performance indicators. ability to do this eliminates the Chapter 6 inspection - Phase II—Price Benchmarking incoming point and delivers the material directly from dock to stock. The development of the Chapter 7 quality - Phase III—Short-Term Process Improvement objective measures (parts per million reject rate, delivery performance, etc.) should drive a [6] that supports Chapter - Phase IV—Value Analysis/Value Engineering supplier8 stratification methodology the lean manufacturing environment. Chapter 2

Chapter 9


The following twoStandard SCM initiatives don't necessarily SECTION III - The Environment

directly correlate to lean manufacturing items; however, the resulting actions provide improved operational support and profitability. The first of these Chapter 10 - Defining the Standard Environment items is the systematic commodity and supplier review activity. As outlined previously, there are many Chapter 11 - Supply Base Management methods by which to accomplish this. The critical factor is driving continued cost, quality, and delivery Chapter 12 - Supplier Quality and Development improvements. Each of these factors increases the level of operational performance. Paired with these Chapter 13 - Cost Management and Control continued improvements, and often as a part of systematic commodity strategies, is the consolidation Chapter 14 - Materials Management of component and material suppliers. By planning for a controlled and appropriate number of suppliers Chapter - The Supply Chain Organization within a15 commodity, limited resources can be focused on communicating performance expectations and SECTION IV - Coordinating SCM and Lean Management assisting in driving supplier performance improvement. Competitive benchmarking assessments are Chapter Developing detailed16in -Chapter 11. & Implementing Lean Fundamentals Chapter 17 - Manufacturing Implementation

Supplier18quality performance is often not considered part of SCM responsibility or at least very little is Chapter - Ongoing Improvements written or mentioned about it in SCM literature. I hold the steadfast position that supplier quality Index management List of Figures is as critical in SCM as is purchasing, logistics, and materials management. Poor performance List of Tables or the lack of root cause resolution leads to a number of downstream SCM activities (i.e.,

expediting activities, premium freight routing, customer containment activities, etc.). It is for this reason that daily supplier quality resolution must be considered a critical element in the joint implementation of SCM and lean manufacturing. In an SCM organization, a supplier quality or development activity serves to assist the operational quality organization in providing for permanent corrective action when additional assistance is needed. While an SQA or SDE activity is not intended to work all the operational supplier issues, their role is to "deep dive" systemic supplier quality problems to protect the operations from a reoccurrence of specific problems. These activities support the implementation of lean manufacturing in that they allow the manufacturing operation to focus its efforts on improving its own activities. [5]Monden,Toyota Production Systems , p. 37.

List of Sidebars

[6]Wincel,

"A Practitioners View," p. 59.


byaJeffrey P. Wincel Figure 17.1 shows side-by-side pairing for the manufacturingISBN:156327289x implementation of early lean and SCM Productivitycan Press 2004 (240 pages) steps. Similar comparisons be ©established for the materials flow strategy and the ongoing improvements. Through these pairings, the implementation the true initial efforts of internal lean This book provides purchasers and supplier of development professionals with the tools needed to transform manufacturing launches can successfully occur. procurement from a mere cost center to a profit generator.

Table of Contents

Manufacturing Implementation


Lean manufacturing actions Foreword

SCM Implementation actions

Introduction SECTION I - The Foundations Takt time calculation

Chapter 1


Chapter 2

- The Disciplinesofofstandardized Planning Development work

Chapter 3

- Force Versus instruction forSkill all operations

JIT delivery via kanban system "Dock to stock" part certification (the elimination of incoming inspection)


Chapter 4

- Defining the Crisis Implementation of Environment "pull systems"

Chapter 5

between utilizing kanban review activity - Crisis Planprocesses Background and Phase 1—Acquisition Team Formation

Chapter 6


Chapter 7


Chapter 8


Chapter 9 - 17.1: PhaseManufacturing V—Lean Manufacturing Figure Pairings SECTION III - The Standard Environment



Systematic commodity and supplier

Supplier development focus

Lean Supply Chain Management : A Handbook for Chapter 18: Ongoing Improvements Stategic Procurement by Jeffrey P. Wincel

ISBN:156327289x

With the careful introduction of the elements described in Chapter 17, lean manufacturing is now in Productivity Press © 2004 (240 pages) place. Although the steps provide the operational basis for lean, continued refinement will be necessary This book provides purchasers and supplier development for life. Supply chain management efforts support the lean rollout, and on their own accord are professionals with the tools needed to transform providing additional benefits the organization. Now the to improving the fine points. procurementtofrom a mere cost center to afocus profitmoves generator. These elements include working on improving performance measures, trying new equipment, reinforcing the basics, learning new techniques, and learning how to further create a competitive Table of Contents advantage over the competition in the markets served. Lean Supply Chain Management—A Handbook for Strategic Procurement Foreword

LEAN MANUFACTURING

Introduction


There is no one in American manufacturing who hasn't heard of kaizen. In Monden's book, he

Chapter 1 kaizen - The Purchasing/SCM Executive as CEO describes as the method to reduce organizational slack through the "continuous implementation Chapter 2 improvement - The Disciplines of Planning [1] The organizational slack is the excess amounts of defective of smaller activities." Chapter - Forcelabor Versus Skill product,3 unused time, idle inventories, and other forms of waste or muda. The kaizen activities SECTION II in - The Crisis Environmentenvironment employed a lean manufacturing

are the way to achieve continuous improvement in

Chapter - Defining thequality, Crisis Environment product4setup, product workplace organization and cleanliness, customer satisfaction through Chapter - Crisis Plan and Background and Phase 1—Acquisition Team Formation delivery5performance, safer working conditions. Improvement in each of these areas provides the Chapter 6 - for Phase II—Price opportunity added profit Benchmarking and business growth. Chapter 7


Many of the main lean manufacturing principles center on the foundation of level production. The ability - Phase IV—Value Analysis/Value Engineering to achieve this is based on many things, including comprehensive knowledge of customer demand, Chapter 9 - Phase V—Lean Manufacturing robust and proactive demand planning systems, and material availability. With the implementation of SECTION III - The Standard Environment marketplace pull systems and the use of kanban, it is important to validate the accuracy of material Chapter 10 - Defining the Standard Environment demand signals. Kanban cards become the link between meeting the customer demands and the Chapter 11 - Supply Base Management material available for production. As these systems grow there arises the need to manage the kanban Chapter 12 - Supplier Quality and Development card count. Manufacturing must address this issue to ensure that the cards in the pull system reflect Chapter 13 - demand Cost Management and Controlplan. Loss of cards or overabundance of cards can create a the current and level scheduling Chapter 14 Materials Management shortage or oversupply of material. Kanban card readers are an effective tool for validating the Chapter 15 - number The Supply Chainin Organization appropriate of cards the system. Chapter 8

SECTION IV - Coordinating SCM and Lean Management

In examining the lean manufacturing andLean SCM co-dependency, it's appropriate to look at the joint Chapter 16 - Developing & Implementing Fundamentals manufacturing and supply issue of marketplace and in-process inventory reduction as an ongoing Chapter 17 - Manufacturing Implementation manufacturing improvement. With the lean manufacturing environment, inventories are among the most Chapter 18 - Ongoing Improvements visible areas of potential waste and improvement. The image of lowering the water in the stream to Index

reveal the stones of opportunity for improvement is a common one applied to inventory reduction. Improvements in manufacturing efficiencies as a result of the lean techniques provide the opportunity to List of Tables reduce the safety stock on hand. List of Figures

List of Sidebars

Figure 18.1 graphically represents the lean manufacturing building blocks utilized by automotive supplier Donnelly Corporation [2] in the "Donnelly Production System." The building represents the base, pillars, and encompassing roof symbolic of the initiatives of a lean manufacturing implementation. Developed by Russ Scaffede, former Senior Vice President of Global Manufacturing Operations at Donnelly, and based on his experience as Vice President of Powertrain Operations at Toyota Motor Manufacturing in Georgetown, Kentucky, the symbols in this graphic drove the various steps of lean implementation at the company.


ISBN:156327289x


Chapter 1


Chapter 2


Chapter 3



Chapter 4


Chapter 5 - 18.1: CrisisDonnelly Plan Background and Phase 1—Acquisition Team Formation Figure Lean Production System Chapter 6


[1]

Monden, Systems , p. 199. Chapter 7 -Toyota Phase Production III—Short-Term Process Improvement Chapter 8


[2]Donnelly

Corporation is now part of Magna International, with the resulting division being called - Phase V—Lean Manufacturing Magna-Donnelly.

Chapter 9




Lean Supply Chain Management : A Handbook for SCM IMPROVEMENTS Stategic Procurement by Jeffrey P. Wincel

PurchasingProductivity Press © 2004 (240 pages)

ISBN:156327289x

This book provides purchasers and supplier development

As the manufacturing operations move beyond the lean manufacturing implementation phase to professionals with the tools needed to transform sustained ongoing improvements, supply chain management activity is positioned to enter into longprocurement fromthe a mere cost center to a profit generator. term agreements with its supply base. The definition of a manufacturing strategy and the implementation of SCM strategies define the rules of business in such a clear manner that the risk Table of Contents involved with many multiyear agreements is greatly reduced. These multiyear agreements provide for Lean Supply Chain Management—A Handbook for Strategic Procurement supplier sourcing continuity which is a benefit for both the supplier's business planning and the Foreword operation's process stabilization efforts, and for ongoing purchase cost/price improvement initiatives; Introduction they also demonstrate the sincerity of supply partnerships. SECTION I - The Foundations

Extending multiyear contracts is the Chapter 1 -from The the Purchasing/SCM Executive as ability CEO to select pre-sourced suppliers for new production programs. existsofthrough the clear definition of preferred supply base participants, clarity of Chapter 2 -This Theability Disciplines Planning manufacturing expectations, Chapter 3 - Force Versus Skillquality and price expectations, and jointly planned supplier growth plans. Pre-sourcing simply is Environment the SCM equivalent SECTION II - The Crisis

of capacity planning. By working with suppliers as well as internal customers, efficient use of supplier Chapter 4 - Defining the Crisis Environment labor, engineering, financial, and manufacturing resources can be 5achieved theBackground benefit of all parties. Chapter - Crisisfor Plan and Phase 1—Acquisition Team Formation Chapter 6


- Phase III—Short-Term Process Improvement Logistics and Distribution

Chapter 7 Chapter 8

- Phase IV—Value Analysis/Value Engineering Just as9the- optimal lean manufacturing layout includes a single customer demand pacing location, SCM Chapter Phase V—Lean Manufacturing

becomesIII truly integrated into a lean manufacturing SECTION - The Standard Environment

environment when its distribution activity becomes the pacemaker process. The process of verifying the customer demand and adjusting associated Chapter 10 - Defining the Standard Environment min/max inventory locations can provide the opportunity for the distribution location to become the pull Chapter 11 - Supply Base Management for the rest of manufacturing. By this action, the production demand process is as close to the customer Chapter 12 - Supplier Quality and Development as it can get. Waste is squeezed out of the system throughout the entire value chain, and the process Chapter 13 - Cost Management and Control stands or falls based upon its abilities. Material arrives at the distribution point closer to the needing Chapter 14 - Materials Management staging window to meet the customer demand, sending back the kanban signal as the material ships. Chapter 15 - The Supply Chain Organization

SECTION - Coordinating SCM and Management With theIV use of the distribution site Lean as the pull signal location,

the buildup or shortfall of inventory is

Chapter & Implementing Lean isolated16 in -a Developing single visual point throughout theFundamentals factory, fullfilling the single-piece flow aspects of lean

manufacturing. In this situation, the ability to recognize needed changes in inventory level, especially Chapter 17 - Manufacturing Implementation reductions, quickly occurs. The savings associated with these inventory adjustments can be Chapter 18 - more Ongoing Improvements readily achieved. Index List of Figures

Supplier Quality

List of Tables

List of Sidebars

Again, recognizing that supplier quality is often not thought of as a part of supply chain management, there are ongoing improvement activities that can occur in this area that will affect both traditional SCM activities and manufacturing operations. The first of these is the refinement and implementation of specific supplier performance improvement and measurement metrics. The ability to objectively measure past and current supplier performance in support of the lean and SCM efforts and to proactively address potential shortfalls drives continued improvement in each area. One of these improved SCM activities is the use of metrics to stratify the commodity supply bases, and to use the stratification in new product source selection. Such stratification provides a direct reward to those suppliers who perform to the highest levels. In addition, the stratification highlights those suppliers who can potentially cause system performance problems, thus enabling proactive corrective measures to be taken.

Product and Program Design Much of the SCM discussions here are based upon the introduction of a supplier product into series production. However, ongoing SCM improvement must also include the upstream opportunities. The product engineering element cannot be ignored. Through prelaunch value engineering activities, both

SCM and manufacturing operations benefit from improved quality levels and product performance. By establishing and meeting component and material performance targets, the need to maintain safety stock and process is minimized. To accomplish these, SCM activities must employ supplier Lean Supply Chain Management : Athe Handbook for management evaluation and preparation skills to position the suppliers to fully participate in the Stategic Procurement activities. Similar by value analysis initiatives must also occur and are analogous ISBN:156327289x to the kaizen activities in Jeffrey P. Wincel the production environment. Productivity Press © 2004 (240 pages) This book provides purchasers and supplier development professionals with the tools needed to transform procurement from a mere cost center to a profit generator. Table of Contents Lean Supply Chain Management—A Handbook for Strategic Procurement Foreword Introduction SECTION I - The Foundations

Chapter 1


Chapter 2


Chapter 3



Chapter 4


Chapter 5


Chapter 6


Chapter 7


Chapter 8


Chapter 9






ISBN:156327289x by Jeffrey P. Wincel many manufacturing organizations When implementing lean processes, begin with the steps described Productivity Press © 2004 (240 pages) in this chapter instead of ending with them. The desire to eliminate waste throughout the organization, and by connection improve cost, is the driving factor behind development this. The danger is that the fundamental This book provides purchasers and supplier professionals withimprovement the tools needed to are transform skills necessary to support these efforts not in place. The reductions in organizational procurement from a mere cost (waste), center tothe a profit generator. of kaizen efforts, and slack as evidenced by the elimination of muda implementation manufacturing process refinement are all the elements driving lean improvement.

Table of Contents

Some of the additional manufacturing continuous improvement areas include the refinement of material demand signals; reductions to inventory; and better planning mechanisms and technologies, such as Foreword automated card readers. These elements continue to match up with changes in SCM such as multiple Introduction process improvements in procurement, supplier development, logistics and distribution systems, and SECTION I - The Foundations product design. The total value chain (or value stream) is expanded beyond the internal environment in Chapter 1 - The Purchasing/SCM Executive as CEO these lean refinement actions. Lean Supply Chain Management—A Handbook for Strategic Procurement

Chapter 2


Chapter 3 -toForce Skill here there are many other lean initiatives and SCM activities that In addition thoseVersus mentioned SECTION II - The Crisis organizations can takeEnvironment advantage of.

The key is in understanding the entire value chain or material flow

Chapter Defining the Crisis Environment system4and- how to complement the two disciplines with the focus on improving the value chain for

bottom 5line- results. Chapter Crisis Plan Background and Phase 1—Acquisition Team Formation Chapter 6


Chapter 7

SUMMARIZING LEAN IMPLEMENTATION AT DSW - Phase III—Short-Term Process Improvement

Chapter 8


As DSW refined the efforts underway within its supply and manufacturing operations, the company V—Lean Manufacturing began-toPhase be recognized as a leader in both lean manufacturing and supply chain initiatives. SECTION III - The Standard Environment Frequently, customer organizations would use DSW as a model not only for their other suppliers, Chapter - Defining Standard Environment but10 also for their the internal operations as well. Training for customer employees would often occur at Chapter 11 Supply Base Management the DSW facilities, demonstrating the successful implementation of lean initiatives. Chapter 9


Throughout DSW organization SCM and manufacturing personnel were frequently asked to Chapter 13 - Costthe Management and Control speak industry Management and professional conferences to detail the approaches they used. A number of Chapter 14 -atMaterials DSW andChain executives now lead their own businesses in assisting others to implement Chapter 15 managers - The Supply Organization leanIV efforts. Even withSCM this and attrition, has been able SECTION - Coordinating Lean DSW Management

to retain its focus in lean initiatives as both

the16 SCM and manufacturing actionsLean are based on robust processes and not on single individuals. Chapter - Developing & Implementing Fundamentals Chapter 17 - Manufacturing Implementation

The lean implementation efforts enabled the company to achieve significant and sustained

Chapter 18 - Ongoing Improvements improvement throughout its divisions, and throughout its worldwide operations. Within supply chain Indexmanagement, DSW has been able to improve net purchase price through the use of its lean supply List ofchain Figures tools. The average reduction has increased each year for the past seven years, and normally List ofexceeds Tables the industry average by 2 to 3 percent per year. The net reductions have now reached 7+ List ofpercent Sidebars per year, without forcing suppliers to take the reduction from their own operating margins.

In many cases, as the cost structures have improved and allowed for lower prices, the suppliers' profit margins have increased. Likewise, supplier quality has improved by over 80 percent during the same period. Coupling the supplier quality improvements with similar internal quality improvements, DSW now achieves "world-class" quality levels—actually moving toward Six-Sigma levels. The inclusion of supplier quality and development as a strategic lean supply chain effort has enabled the creation of a "selfsufficient" supply base, capable of servicing DSW lean requirements. Finally, DSW's other SCM areas such as logistics, distribution, etc., have recognized their place in overall company efficiency and performance, and have been able to deliver specific EPS (earnings per share) contribution. All SCM efforts now work to treat the supply chain organization as a potential profit center versus a traditional cost center. DSW continues to refine its lean supply chain efforts. While not every attempt is successful, even the failures provide a learning tool for continued improvement. Like every company initiative, daily events occasionally take focus away from the lean SCM efforts; however, the underlying philosophy of every action continues to be a strategic view of supply chain management.


ISBN:156327289x


Chapter 1


Chapter 2


Chapter 3



Chapter 4


Chapter 5


Chapter 6


Chapter 7


Chapter 8


Chapter 9





Index


A

by Jeffrey P. Wincel Productivity Press © 2004 (240 pages)

ISBN:156327289x

book provides purchasers and supplier development Acquisition team This formation professionals with the tools needed to transform in price benchmarking, 84-85 procurement from a mere cost center to a profit generator. responsibilities, 68-69 required in, 69 Table of Contents

ACT-based sourcing, 168-70


Affordable cost target (ACT), 76-79,81,128,162,168-70 Foreword Introduction Agreements, 224 SECTION I - The Foundations

Alsbro, Steve, 61n

Chapter 1


American manufacturing, 221 - The Disciplines of Planning

Chapter 2

Annual 3 Chapter


cost II reductions, 164 SECTION - The Crisis Environment salary, Chapter 4 7- Defining the Crisis Environment Chapter 5 - 151 Crisis Plan Background and Phase 1—Acquisition Team Formation APQP,128, Chapter 6 - Phase II—Price Benchmarking Ariba,177 Chapter 7


Chapter 8


Asian-based companies, 133

Automotive-based procurement studies, 7 Chapter 9 - Phase V—Lean Manufacturing SECTION III -Industries The Standard Environment Automotive Action Group (AIAG),

76n,150

Chapter 10 - industry, Defining the Standard Environment Automotive 217-18 Chapter 11 - Supply Base Management

Availability of components, 47

Chapter 12 - Supplier Quality and Development Chapter 13 - Cost Management and Control Chapter 14 - Materials Management Chapter 15 - The Supply Chain Organization SECTION IV - Coordinating SCM and Lean Management


Index


B

by Jeffrey P. Wincel Productivity Press © 2004 (240 pages)

ISBN:156327289x

This book provides purchasers and supplier development professionals with the tools needed to transform procurement from mereperformance, cost center toThe a profit generator. Balanced Scorecard-Measures thataDrive (Kaplin & Norton), 17-18

Baan,177

Beck, Hazel, 176 encoding="ISO-8859-1"?> See also PPM < Table of Contents Savings Leancost Supply Chain Management—A Handbook for Strategic Procurement measures and, 115 Foreword immediate,50,73,97 Introduction known threshold, 166 SECTION I - The Foundations long-tem contract coveragebr / br / and, 140br / br / Chapter 1 - The Purchasing/SCM Executive as CEO market-based, 67 Chapter 2 - The Disciplines maximum/minimum, 85 of Planningbr / br / profile, Chapter 3 66-67 - Force Versus Skill sharing 93 SECTION II -mechanism, The Crisis Environment techniques, 65 Chapter 4 - Defining the Crisis Environment trend 67 Plan Background and Phase 1—Acquisition Team Formation Chapter 5 chart, - Crisis Chapter 6 Russ, - Phase II—Price Benchmarking Scaffede, 223 Chapter 7 Phase III—Short-Term Process Improvement SCORE,94 Chapter 8br / br / - Phase IV—Value Analysis/Value Engineeringbr / br / Chapter 9br / br / - Phase V—Lean Manufacturingbr / br / SDE (supplier development engineer), 91,219br / br / Second-level goals, 18 SECTION III - The Standard Environment Chapter Defining the Standard Environment Seeing 10 the- Whole: Mapping the Extended Value Stream,176,178 Chapter 11 slowdown. - Supply Base Segment SeeManagement Slowdowns Chapter 12 - Supplier Quality and Developmentbr / br / Semiconductor shortages, 47br / br / Chapter 13 - Cost Management and Controlbr / br / Senior 14 management Chapter - Materials Management in implementation plans, Chapter 15 - The Supply Chain18-21 Organizationbr / br / review in, 20-21 SECTION IVprocess, - Coordinating SCM and Lean Management strategic SCM and, 4 in task identification, 18-21br / br / Chapter 16 - Developing & Implementing Lean Fundamentals Chapter 17 - Manufacturing Implementationbr / br / Setting 18 The- Direction: Management by Planning (Johnston & Daniel) 13n Chapter Ongoing Improvements Index SG&A costs, 49,50 List of Figures Shipping frequencies, 210-11 List of Tablesbr / br / Shook, John, 176,209,215br / br / List of Sidebarsbr / br / Short-term problem resolution, 52 strategic,53,125 Short-term process improvement (SPI) closure stage, 93-94 contrasted with point kaizen, 94-95 as crisis plan element, 64,65 definition,90-91 implementation of, 92-93 See also Point kaizen Six sigma, 102-103,114,173 Slack,221,226 Slowdowns, 47,49,50,51 Sourcing competitive collaboration and, 39 continuity,224 growth,82 initial,81br / br / leveraged ongoing, 166 logic model, 174,175 to lowest costLean supplier always, 85 Management : A Handbook for Supply Chain OEMs and, 33Stategic Procurement open,142 ISBN:156327289x by Jeffrey P. Wincel open quote approach in, 159 Productivity Press © 2004 (240 pages) opportunities,84 This book provides purchasers and supplier development pattern,138 professionals with the tools needed to transform selective,85 procurement from a mere cost center to a profit generator. Specifications, 102 encoding="ISO-8859-1"?> 66 1.2

Lean Supply Chain Management: A Handbook for Strategic Procurement

Lean Supply Chain Management: A Handbook for Strategic Procurement

Lean Supply Chain Management - A Handbook For Stategic Procurement

Strategic Supply Chain Management

Reinventing Lean: Introducing Lean Management into the Supply Chain

Supply Chain Project Management

Supply Chain Logistics Management

Supply chain management

Supply Chain Management

Supply Chain Logistics Management

Supply Chain Management

Food Supply Chain Management

Supply Chain Management

Supply Chain Management - Sources for Competitive Advantages

Essentials of Supply Chain Management

Purchasing and Supply Chain Management

Essentials of Supply Chain Management

Essentials of Supply Chain Management

Essentials of Supply Chain Management,

Strategic Procurement: Organizing Suppliers and Supply Chains for Competitive Advantage

Supply Chain Design and Management: Strategic and Tactical Perspectives

Materials Management: An Executive's Supply Chain Guide

Careers in Supply Chain Management 2008

Essentials of Supply Chain Management, 2nd Edition

Construction Purchasing & Supply Chain Management

Logistics and Supply Chain Management, 4th Edition

Materials Management: An Executive's Supply Chain Guide

Logistics and Supply Chain Management, 4th Edition

Successful Strategies in Supply Chain Management

Research Methodologies in Supply Chain Management

Lean Supply Chain Management: A Handbook for Strategic Procurement