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Perfecting Supply Chain Flow

By Kevin Duggan |   2013 | 8 | 9

Increasingly, companies are striving to achieve operational excellence__not just in manufacturing, but in all areas of business. That’s because operational excellence takes lean principles to a new level, with the goal being a supply chain that requires less management__potentially one that requires no management at all. And, where lean teaches to continuously to drive out waste and create value stream flow, operational excellence provides a final destination.

One component of operational excellence in manufacturing is designing an effective flow with the ability to visually distinguish normal from abnormal flow. Flows move products through a factory and provide visual indicators that enable employees to easily see the current status. However, with today’s supply chains spread around the globe, this has become a bit more difficult. Many supply chain elements exist outside of the four walls of the company__the work becomes beyond our ability to physically see what’s going on at any given point in time.

To make sure supply chain flow is clear to all employees, no matter where they are, evaluate the following questions:

  1. Is the supply chain on time?
  2. How do we know the supplier will not fail?

Shipping and receiving
The shipping and receiving docks are the best places for employees to see flow within the supply chain and know if things are running on time. At the shipping dock, for example, lines show the different ship windows that exist throughout the day. As parts are made, they are loaded into the shipping area based on the established pitch. There is an expectation that parts will show up on the shipping dock by certain times throughout the day. A visual system like the one in Figure 1 makes it possible for everyone in the organization to easily see production status. For the receiving dock, a similar setup can be used, simply altering the meaning of the visual indicators. Figure 2 shows how employees will know if parts have been delivered on time.

Figure 1: Shipping dock visual indicators

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Figure 2: Receiving dock visual indicators

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Creating standard work for abnormal flow
The next step is to make the flow “self-healing,” which involves creating pre-established standard work that employees can execute on their own in order to fix abnormal flow. At the shipping deck, for example, the standard work for fixing abnormal flow might involve investigating and fixing the root cause behind products not being manufactured on time. Whatever the standard work tells employees to do, there needs to be a clear threshold for when standard work should be enacted. It also should be unambiguous__meaning, there should be no need for a worker to seek out additional explanation or approval before acting. In fact, standard work should not require any type of intervention from management. The established visual indicators should be all that are required to signal the need to correct abnormal flow.

Ensuring effective supply
Making sure that suppliers don’t fail is the next step__and it is a daunting task, considering how much of the supply chain is outside our direct control. There always will be uncontrollable events with the power to cause disruption. However, some disruptions can be avoided__if employees become aware of the problems in a timely fashion. 

To begin with, every supplier should use binary signals that indicate “send” or “don’t send,” with no room for ambiguity. Consider making these signals visual so they can be understood at a glance. Next, establish a single point of contact, such that only one person in the entire organization is permitted to communicate with the supplier. While this approach requires discipline, limiting contact to one person eliminates repetitive questions, meetings, and interruptions.

Finally, ascertain each part’s product family and the interval of that family from each supplier. A product family is a group of products that have similar process flow and work content; an interval is how long it takes to cycle through the mix of part numbers in a product family. Once product families and intervals are defined at the supplier, on-time delivery can be ensured. For example, if all of the parts produced are in one family at the supplier with an interval of six days, it’s possible to establish a guaranteed manufacturing time for any part in the family of no more than six days. 

Where the parts fall within that interval__meaning, if they are produced on the first or the sixth day__is important to know because it affects supplier flexibility over change requests. Over time, it’s important to educate suppliers on the benefits of shortening the interval. Not only does a smaller interval result in shorter ship windows and response times, but it also enables faster identification and resolution of issues. For example, if a batch of parts is discovered to be defective because of a misaligned tool, fewer parts will be scrapped if the interval is three days instead of six.

In addition, having an understanding of the supplier’s interval and where products fall within it enables the creation of an effective early warning system. If the system reveals that a supplier is going to be late, then there is an opportunity to enact a backup plan, such as temporarily giving more work to another supplier, drawing on buffer stock, a combination of the two, or something else entirely. The point is, by establishing and understanding the supplier’s interval, it’s possible to know with certainty exactly what will be required to produce and ship parts. This is essential information that facilitates quick and effective action when something in the supply chain goes wrong.

Kevin J. Duggan is an expert in applying advanced lean techniques to achieve operational excellence and founder of the Institute for Operational Excellence. He is the author of three books on the subject: Design for Operational Excellence, Creating Mixed Model Value Streams, and The Office That Grows Your Business. Duggan may be contacted at kduggan@instituteopex.org.


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