by Bill garrison

1. Supply - Chain World - North America 2005 A Four part Presentation by Bill garrison

2. Supply - Chain World - North America 2005 Part One: Toyota’s North America ServicesParts SC Part Two : The Toyota Way Part Three: Ok – What’s Lean, Six Sigma, CI and EI to do with SCOR? Part Four: A System Enterprise Aspect of a Lean SCM From a Commercial Aircraft Perspective

3. Part One Service Parts Supply Chain in North America

5. Toyota North American Parts Logistics Division (NAPLD)

7. Toyota North American Plants — 2004 Camry Corolla Avalon Solara Aluminum Wheels Sienna 4 & V6 Engines Mfg HQ Corolla Forklifts Tacoma 4 & V6 GM Prizm Engine Engines components Auto. 1985 Trans. V8 Engines Tundra Truck Beds Sequoia Catalytic Converters 1.5 M vehicles + 1.3 M engines + 0.4 M auto. trans.

11. Key Concepts • Storage, information and planning for warehouse efficiency. • Culture for problem solving. • Taming the “Bullwhip Effect” and creating flow of product and information. • A supply chain is a “system”, and improving it requires “systems thinking.”

12. Toyota’s Supplier Challenge • North American suppliers less capable than Japan 1997 Data N.A. Japan Parts Parts Supplier on-time delivery 89% 95% Fill rate to distributors 70% 93% Fill rate to dealers 93% 98.5% Inventory months of supply 3.2 2.0

13. Toyota’s Supply Chain Results Suppliers Toyota Dealers Toyota • 95% on time • 70% daily order & delivery • 97.8+% fill rate • 14 hrs lead-time • 2.8 months inventory • 46K lines/ee/yr • 7035 days inventory • 4,000 6,000 stocked parts Industry • 62% on time (1 co.) • Infrequent order & delivery • 93.8%-97.4% fill • next day~wk L/T • 4.6-8.5 months inventory • 25K-37K lines/ee • Little change

14. Key Concepts • Storage, information and planning for warehouse efficiency. • Culture for problem solving. • Taming the “Bullwhip Effect” and creating flow of product and information. • A supply chain is a “system”, and improving it requires “systems thinking.”

15. . Example of Inefficient Storage • Picking • instructions– • random order

16. Example of Inefficient Storage • : Wasted space: • Longer footpath • Bigger warehouse

17. ACTION PLANGolden Zone (Pilot-20 Locations)

18. Golden Zone Pilot--Short Pick Path, Parts at Ergonomic Height

19. Storage Pilot Results

20. Capacity Productivity +126% Sales +49% +72% Stocked Parts +14% Sq Ft 1982 1998 1982 1998 Toyota PDC ResultsStorage, Flow & Kaizen

21. Supplier Distributor Customer Manufacturer Dealer Order Delivery Lead-time The Bullwhip Effect • Longer lead-time + more variation  more whip Demand Information

22. To Tame the Bullwhip Effect: • Reduce order-to-delivery lead-time. • Deliver on-time  confidence. • Increase visibility and accuracy of information on true daily demand, supply chain inventory and ETA. • Introduce frequent (daily) replenishment through the supply chain.

23. How Toyota Tamed the Bullwhip • Implement TPS/JIT Logistics throughout the supply chain to create an efficient, levelflow. Sell-one, Buy-one, Make-one Suppliers N.A. Parts Centers Region PDC Dealers 1 pc/day 1 pc/day 1 pc/day

24. JIT and Lean Logistics to Dealers • Dealer stock replenishment increased from weekly to daily Ave. Replenishment Lead-time 100 0 96 14 1994 2004

25. Toyota Dealer Results • Dealers’ Inventory Investment Cut In Half! • Less Inventory Depth/More Breadth  More Customers Satisfied In One-Day Visit

26. BEFORE AFTER Toyota Dealer Results • Reduce inventory • Toyota seven storage techniquesdownsize

27. Toyota Dealer Results • Costly parts storage space converted to revenue-producing service stalls • Significant labor savings Efficiency Improvements Floor Labor space productivity Parts -20-40% +20-30% Service +1-10 +10-30% stalls

28. Daily Level Flow From Suppliers On-time delivery Daily Order Kaizen Increased delivery frequency & milk-run EDI / web-based information flow Small lot deliveries

29. Toyota Supplier Results Industry Best Supplier Performance = Lower Inventory + Customer Satisfaction 95% 100 Service Parts 75 Accessories 62% 54% 50 93 94 95 96 97 98 99 2000 2004

30. Conclusion • Storage, information and planning  warehouse efficiency • Culture for problem solvingkaizen • Taming the “Bullwhip Effect”level flow of product and information • “Systems thinking”Lean supply chain

31. Create Problem Solving Culture • Create binary business processes. • To standardize best practice. • To expose problems. • Coach problem solving at lowest possible level. • Use everyemployee’s full human potential. • “Kaizen mind”—change every 3 – 4 months.

32. Part Two The Toyota Way

33. The Toyota Way Wisdom from the Desk of, Chief Officer of Business Development & Purchasing Parts, Toyota Motor Corporation The Toyota Production System, AKA The “Thinking Production System” TPS as a winning strategy for developing g people in the global manufacturing environment.

34. Minoura’s Lessons from Ohno Early in his career, Minoura worked under Taiichi Ohno, recognized as the creator of the Toyota Production System. Ohno, through tireless trial and error, managed to put into practice a “pull” system that stopped the factory producing unnecessary items. But Minoura observes that it was only by developing this “loose collection of techniques” into a fully-fledged system, dubbed the Toyota Production System or TPS, that they were able to deploy this throughout the company. Taichi Ohno A Modern Toyota Assembly Line

35. Minoura’s Lessons from Ohno • A “pull” system ask workers to use their heads • “An environment where people have to think brings • with it wisdom, and this wisdom brings kaizen (CI)”. • In TPS, the T also stands for “Thinking” • “I don’t think he was interested in my answer at all/ • I think he was just putting me through some kind • Of training to get me to lean to think.” • To cut lead-time, cut out all the bits that don’t • add value

36. Minoura’s Lessons from Ohno • The line must stop if there is a problem. Andon Electric Light Board • Deal with defects only when they occur, • and the number of staff you need will drop.

37. Minoura’s Lessons from Ohno • Ask yourself “Why” five times. • “That way you’ll find the root cause, and if you get rid • of that it’ll” never happen again.” • “However, on-the-spot observation rather than deduction • Is the only correct way to answer a “Why?” question.” Improved die casting machine, developed by Toyota, is customized to reflect the shape of the finished product, cost 5)% less than its predecessor, and has on-third the production lead-timed

38. Minoura’s Lessons from Ohno • Train people to follow rules and standards • as if second nature • “Human beings are the ones who actually build quality into • a product..” Human Beings Build Quality Into a Product

39. Minoura’s Lessons from Ohno • Find where part is made cheaply and • use that price as a benchmark. “If we find that there’s a place in the world where they can produce this or that part for this or that price, we should use that price as a benchmark, and pour or efforts into finding a way to make even more cheaply locally.” Using Toyota’s V-Comm digital engineering technology, engineers in Japan and overseas work together to optimize production processes.

40. Minoura’s Lessons from Ohno • Develop people who can come up; with unique ideas. And here resides the other part of the Toyota DNA. the human behavior system ( The Toyota Way) which complements the process behavior system (The Toyota Production System) Both equally essential in lasting and continued success of Toyotl “

41. Part Three Ok – What’s Lean, Six Sigma, CI and EI got to do with SCOR ?

42. SCM and SCOR Model SCM – A Basic Definition and the SCOR Model Definition- Supply Chain Management is the design and management of seamless, value-added processes across organizational boundaries to meet the real needs of the end customer. The development an integration of people and technological resources are critical to successful supply chain integration. The SCOR Model – A most recognized and proven tool that provides unique structure that links business best practices, processes, metrics, and technology to form a unified structure to link and support communication among SC partners and to enhance the effectiveness of SCM and related SC improvement activities.

43. The SCOR Model Associated Best Practices - Lean, OM, EI and Six Sigma/CI - DMAIC, Kaizen , TOC (TP), QFD,, Problem Solving Tools , TOE, Variation Mgmt. 6s CI Kanban Poka Yoke Pull Flow 5 S TOC VMI TPM SMED Jidoka Manufacturing Cells) Value VSM POU Surgeon’s Chart Empowerment SDWT Innovation Management Support Training Quality Circles Work Teams Job Rotation Job Enlargement Job Enrichment Profit Sharing EI Lean Manufacturing Techniques OM MRP-II/DRP-II,TOC (DBR, CCPM). ERP, B2B, Planning, Purchasing, Distribution, Outsourcing

44. POU (Point of Use Tools) for Domestic Issues

45. Part Four A System/Enterprise Aspect of Lean SCM From A Commercial Aircraft Perspective

46. With the 100th anniversary of manned flight in 2003 let’s take a look at the commercial A/C business • The commercial A/C business… • Aluminum primary structural material for over 60 years • Composites Technology lagging in the US • Commercial jet transports introduced 46 years ago • Mach 3 flight over 40 years ago • First Moon landings over 30 years ago • 747 introduced over 30 years ago; big twins 18 years ago • Space Shuttle in service over 23 years • Stealth aircraft operational over 16 years ago • US supersonic transport research effectively canceled • Sonic Cruiser was a nice dream • But .. The Dream liner is real (Boeing 787)

47. Lean in the 21st Century.. • Lean is the key to an economically vital, technically innovative Industries early in the 21st Century • Lean addresses the Industry’s fundamental, structural challenges • Lean is a logical extension of some of the Industry’s greatest achievements • Yet strategically valuable Lean still eludes many companies

48. Historical Development: From lean to mass to mess to... • Early days at Pratt Whitney (circa 1925) demonstrate Lean as natural way of organizing production • Flow manufacturing, cellular-like arrangements • Product-centric layout and organization • European production follows similar patterns • Takt time (concept and term) invented at Folke - Wolf in 1920s

49. Historical Development: From lean to mass to mess to... • Product performance is primary focus as Industry advances during 1920 & 30s. • Engineering specializes - silos emerge • Production follows specialization pattern - silos emerge as separate capabilities and facilities • As product oriented production fades, “management of complexity” becomes major cost, cycle-times stretch out

50. Historical Development: From lean to mass to mess to... • World War II drives industry expansion - Lean makes another appearance as enabler of massive, victorious output • Tightly integrated production lines enable heroic output • Takt time synchronization of production lines • Level scheduling, standard work are the norm • Assets are product-focused and fully utilized • WW II production creates huge Industry asset base at Government expense (much of which remains active today)