LEAN Supply Chain Planning : The New Supply Chain Management Paradigm for Process Industries to Master Today's VUCA World book cover
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LEAN Supply Chain Planning
The New Supply Chain Management Paradigm for Process Industries to Master Today's VUCA World




ISBN 9781482205336
Published November 26, 2013 by Productivity Press
493 Pages 275 B/W Illustrations

 
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Book Description

Delivering excellent service to all customers is the key imperative for many sustainable businesses. So why do so many supply chains struggle to fulfill customer requirements at competitive costs? The answer is simple: traditional supply chain planning, which was tailored to a predominantly stable and predictable business environment, cannot handle the new challenges in the world of variability, uncertainty, complexity, and ambiguity—the VUCA world.

Companies can either accept the drawbacks that often result in high inventories, poor asset utilization, and unsatisfactory customer service or, they can change their view of the fundamental approach to supply chain management. LEAN Supply Chain Planning: The New Supply Chain Management Paradigm for Process Industries to Master Today’s VUCA World introduces a new paradigm and a new approach to managing variability, uncertainty, and complexity in today’s planning processes and systems.

Introducing a cutting-edge supply chain management concept that addresses current problems in the process industry's supply chains, the book presents powerful methods developed by leading research institutes, process industry champions, and supply chain experts. It explains how readers can change their approach to the fundamental planning paradigms in a manner that will help their organizations achieve higher levels of responsiveness, improved levels of customer service, and substantial increases in cost-efficiencies.

This holistic practitioner’s guide describes how to establish the right accountabilities for performance management and also provides a set of meaningful metrics to help measure your progress. Supplying detailed guidelines for transforming your supply chain, it includes first-hand reports of leading organizations that have already adopted some of the facets of this paradigm and used the relevant instruments to achieve unprecedented improvements to customer service, supply chain agility, and overall equipment effectiveness.

Table of Contents

WHY LEAN SCM TODAY?

Supply Chain Management in Process Industries
Supply Chain Management Must Master the VUCA World
     Supply Chain Management Orchestrates Global Functions and Networks 
     Key Pain Points in Supply Chain Organizations Today 
     Why Leadership is Concerned about the Impact of Volatility
Supply Chain Planning in the VUCA World Today 
     Planning and Control as the Backbone of Supply Chain Management 
          Forecasting and Demand Planning 
          Supply Planning and Production Scheduling 
          Supply and Demand Synchronization 
     The VUCA World Poses NEW Challenges to Supply Chain Planning 
          Variability and Volatility Are on the Rise 
          Uncertainty Keeps You Guessing 
          Complexity Becomes Overwhelming and Synchronization Challenging 
          Ambiguity Leads to Confusion and Inefficiency 
     Today’s Supply Chain Planning Approaches and Their Limitations 
          From MRP to ERP 
          Advanced Planning Systems and Supply Chain Management 
          Drawbacks of Dependency on Forecasts and Ineffective Use of Inventories
Why We Need a Paradigm Shift in Supply Chain Planning Now 
     Traditional Planning Approaches Fail to Deal with the VUCA World 
          The Planning Loop Trap: The Spiral to Inefficiency 
          The Bullwhip Effect: Amplifying Variability along the Value Chain 
          One-Sided Variability Management: Increasing Inventories and Supply Chain Nervousness 
     Common Lean Approaches are Insufficient for Global Supply Chain Synchronization 
          The Promise of Lean Principles in Supply Chains 
          Cyclic Scheduling: Lean Scheduling for Process Manufacturers 
          Limitations of the "Product Wheel" Approach for Managing End-to-End Supply Chains 
     How to Back Out of the Dead End of Today’s Planning 
          Both Common Lean Approaches and Traditional Planning Fail 
          Resolving the Traditional Planning versus Lean Conflict 
          Prepare for the VUCA World by Opting for LEAN SCM
Chapter Summary

Guiding Principles of LEAN SCM Planning: Facing VUCA Challenges

LEAN Demand: How to Cope with Rising Demand Variability
     Accept Uncertainty and Eliminate the Need for Certainty in Execution 
     A View of Aggregated Demand: Be Prepared for Consumption-Driven Supply 
     Stop Using Forecasts to Trigger Manufacturing: Respond to Real Consumption 
          Summary of LEAN Demand Principles
LEAN Supply: How to Get a Grip on Supply Uncertainty and Reliability 
     Manage Demand Spikes with Planned and Right-Sized Safety Stock Buffers 
     Level Production Plans to Create Flow and Stabilize Utilization
     Use Cyclic Production Patterns to Achieve a Common Takt and Regularity       
          Summary of LEAN Supply Principles
LEAN Synchronization: How to Master Complexity and Ambiguity 
     Separate Planning to Slice Complexity for End-to-End Synchronization 
     "Parameter-Driven" End-to-End Supply Chain Planning 
     Establish Visibility and a Collaborative Environment for Synchronization 
          Summary of LEAN Synchronization Principles
Chapter Summary

Fundamentals of LEAN SCM Planning: A Paradigm Shift in Planning
What is the Most Suitable Supply Chain Planning Approach to Follow? 
     The Lean Supply Chain is More About Waste Elimination and Cost Efficiency 
     The Agile Supply Chain is More About Responsiveness and Customer Service 
     The Resilient Supply Chain Is More About Risk- Avoidance and Robustness 
     Trade-Offs among the Common Paradigms in Supply Chain Management 
     How LEAN SCM Combines and Builds upon a New Planning Paradigm
The Building Blocks for LEAN SCM Planning: Concepts and Highlights 
     Flexible Rhythm Wheels Enable Cyclic Planning while Responding to Variability 
     Dynamic Safety Buffers in Planning for Two-Sided Variability Management 
     Cycle Times and Inventory Targets Aligned to Global Takt for Synchronization 
     Separation of Tactical Pre- Parameterization and Planning to Reduce Complexity 
     Enabling IT to Create Global Visibility and Staying Power for Sustainability
How LEAN SCM Planning Drives Corporate Success in the VUCA World 
     Creating a Step Change in Supply Chain Performance
     World-Class Operational Supply Chain Performance Means Financial Success
Chapter Summary

HOW TO DESIGN AND BUILD LEAN SCM

Prepare Your Supply Chain for LEAN SCM
Segment and Strategize Your Supply Chain 
     How Many Supply Chain Strategies Are Needed? 
     Structure Customers and Products to Build Supply Chain Segments 
          Segmentation of the Product Portfolio 
          Segmentation of the Customer Portfolio 
     Assigning Strategies to Defined Supply Chains
Aligning the Supply Chain from a Top- Down Perspective 
     Create End-to-End Transparency in Supply Chains 
          Selecting a Representative Time Period for Observation 
          Selecting a Common Unit of Measure 
          Mapping the Customers 
          Mapping Stock-Keeping Points and Suppliers
          Mapping Production Sites
     Identify and Assess Gaps to Improve Supply Chain Synchronization 
          Inventories 
          Capacities 
          Global Takt 
          Global Lead Time 
     Adopt Three Measures for Preparing the Supply Chain 
          Network Design: Strengthen the Foundation for Agility 
          Demand Variability: Shape it Proactively 
          Portfolio Complexity: Get Rid of Unprofitability
Aligning the Supply Chain from a Bottom-Up Perspective 
     Gain Transparency into Local Value Streams 
          Product Family Analysis 
          Flow Path Mapping 
     Analyze Value Streams to Prepare the Shop Floor for LEAN SCM 
          Current State Map 
          Key Shop-Floor Performance Metrics That Matter for LEAN SCM 
          Lead Time 
          Value-Added Time 
          Changeover Time 
          Takt 
          Inventory 
          Utilization 
          Overall Equipment Effectiveness 
          Transportation Data 
          Information Flows 
          Planning Mode 
     Aim for Leveled Flow Design 
          Ensuring Stable and Efficient Processes 
          Allocating Products to Manufacturing Lines 
          Product Portfolio Analysis
          Resource Portfolio Analysis
          Allocation of Products to Resources 
          Focused Leveling of Product Flows
Chapter Summary

Strategic LEAN Supply Chain Planning Configuration

What to Produce: Replenishment Modes 
     Sell What You Make: Forecast-Based Push Replenishment 
     Make What You Sell: Consumptionbased Pull Replenishment 
          Make-to-Order 
          Inventory Replenishment Level (IRL) 
          Buffer Management
How to Produce: Production Modes 
     Kanban and Its Advancements for Process Industries 
     Product Wheels and Rhythm Wheels for Cyclic Production Planning 
          General Idea of Rhythm Wheel Planning and Scheduling: What You Need to Know 
          Key Benefits: Why Your Company Should Put the Rhythm Wheel on Its Agenda
     How to Manage Variability with Different Rhythm Wheel Types 
          The Classic Rhythm Wheel 
          Breathing Rhythm Wheel 
          High-Mix Rhythm Wheel 
Supply Chain Mode Selection: Combining Production and Replenishment Modes 
     Define the Configuration Scope of the Supply Chain Segment 
     Analyze Key Impact Dimensions of Mode Selection 
          Replenishment Mode Evaluation 
          Production Mode Evaluation 
     Select the Appropriate Supply Chain Modes 
          Interaction between Replenishment and Production Modes 
          Supply Chain Interdependencies 
     Evaluate Your Decision Quantitatively
The Strategic Renewal Process to Configure Agile Supply Chains 
     What Information Base Is Needed on a Strategic Level? 
          Strategic Input 
          Demand Input 
          Supply Input 
          Performance Feedback 
     Establish Sustainable Renewal of Supply Chain Modes 
     Ensure Supply Chain Agility Through Regular Mode Renewal 
     Who Is Involved to Enable Governance for Supply Chain Agility? 
          Supply Chain Excellence Center 
          Supply Chain and Market Planners 
          Supply Chain Board
Chapter Summary

Tactical LEAN Supply Chain Planning Parameterization
Setting Up the Parameters for LEAN Production Modes 
     Classic Rhythm Wheel Design to Enable Flow in Stable Environments 
          Production Sequence 
          Cycle Time
     Breathing Rhythm Wheel Design to Manage Higher Demand Variability 
          Minimum and Maximum Cycle Time Boundaries 
          Factoring Types 
     High-Mix Rhythm Wheel Design to Manage Diverse Product Portfolios 
          Determination of Production Rhythms 
          Implementation of Production Rhythms 
          Balancing Production Rhythms
Setting Up the Parameters for LEAN Replenishment Modes 
     How Stocks Are Structured for Variability and Uncertainty 
          Cycle Stock 
          Pipeline Stock 
          Demand Safety Stock 
          Supply Safety Stock 
     Right-Size the Parameters to Enable Consumption-Based LEAN Replenishment 
          Inventory Replenishment Level 
          Buffer Management
Synchronize Parameters to Achieve an End-to-End LEAN Supply Chain 
     Synchronize Supply Chain Cycle Times to a Global Takt 
          Determination of Global Takt 
          Bottlenecks as Pacemakers of a Supply Chain Takt 
          Synchronization of Takt Parameters to a Global Takt 
     Build on Dynamic Inventory Target Setting to Smooth Cycle Time Oscillation 
          Where to Hold Stock in the Supply Chain
          How to Right-Size Inventory Positions 
          How to Balance the Four Effects Impacting Efficient Safety Stock Allocation
The Tactical Renewal Process to Parameterize LEAN Supply Chains 
     What Information Base You Need 
     Establish Regular Renewal of Planning Parameters 
     Alignment of Planning Parameters for the LEAN Supply Chain 
          Communication of Renewed Parameters 
          Release of Renewed Parameters in the IT Systems 
     Who Is Involved in Keeping the Supply Chain LEAN Through Synchronized Parameters? 
          Supply Chain Planner 
          Local Planner 
          Market Planner
Chapter Summary

Operational LEAN Supply Chain Planning Execution
How to Execute Planning and Sequencing with Rhythm Wheels 
     The Replenishment Trigger Report as a Link between Production and Replenishment 
     Handling of Demand Signals with Rhythm Wheels
How to Level Production with Factoring 
     Use Cycle Time Boundaries to Stabilize the Asset Takt 
     Use Upper Factoring When the Cycle Becomes Too Long 
     Use Lower Factoring When the Cycle Becomes Too Short
Effective Monitoring of Planning Execution in LEAN SCM 
     What Should Be Monitored? 
     Operational LEAN Production KPIs to Monitor Asset Performance 
          Cycle Time Attainment 
          Run to Target 
          Cycle Time Variation 
     Operational LEAN Replenishment KPIs to Evaluate Inventory Parameterization 
          Service Level 
          Target Inventory Attainment 
          Dead Stock Ratio
Chapter Summary

WHAT TO IMPLEMENT AND TRANSFORM FOR LEAN SCM

Build an Organization for LEAN SCM
Below the Ground: The Prerequisites for LEAN SCM 
     Management Buy-In and Mobilization for LEAN SCM 
          Top-Management Buy-In 
          Mobilization of the Organization 
     Ensuring Leadership and Commitment across Functional Borders 
          Cross-Functional Leadership 
          Commitment of the Organization 
     Shift in Mindsets and Accountabilities in the SCM Community 
          Shifting the Mindsets of the SCM Community
Above the Ground: The Visible Enablers for LEAN SCM 
          What Is the Right SCM Organization Model for LEAN SCM? 
          Typical Supply Chain Organizational Models in Process Industries 
          Transition of the Supply Chain Organization Model Requires Harmonization 
     Integration of LEAN SCM Processes with the Existing Planning Processes Framework 
          Strategic Renewal Process 
          Tactical Renewal Process 
          Ensuring Process Governance 
          Roles within the Tactical Renewal Process 
          Roles within the Strategic Renewal Process 
     Mapping Roles and Responsibilities to Renewal Processes 
          Mapping of Responsibilities within the Tactical Renewal Process 
          Mapping Responsibilities within the Strategic Renewal Process 
          Consideration of Capabilities and Resources
Managing Change and Transition for LEAN SCM 
     Focus Areas of Change Management 
     Key Activities of Change Management 
          Change Planning and Benefits Tracking 
          Communication and Stakeholder Management
          Leadership and Change Network Management
          Shift in Accountabilities
          Organizational Alignment 
          Capability Development
     Valuable Tools for Change Management in LEAN SCM
Chapter Summary

Performance Management for LEAN SCM
Role of Performance Management in LEAN SCM 
     Key Objectives of Performance Management for LEAN SCM 
          Performance Measurement 
          Performance Analysis 
          Planning and Directing 
          Renewal of Planning 
          Strategic Decision Making 
     Orchestrating Supply Chain Planning Processes Successfully 
          Integration of Performance Management into LEAN SCM Planning Processes 
          Enabling Effective Configuration and Renewal of LEAN SCM Parameters 
     How the LEAN SCM Paradigm Changes Your Performance Management
How to Measure LEAN SCM Performance 
     Metrics to Link Tactical and Operational LEAN Supply Chain Planning 
     Metrics for Linking Strategic and Tactical LEAN Supply Chain Planning 
     Metrics for Assessing the Maturity of a Supply Chain for LEAN SCM 
Five Points to Consider for Successful Performance Management 
     Develop a Balanced and Comprehensive System of Metrics 
     Effective Target Definition for Performance Tracking
     Systematic and Regular Performance Analysis for Sustainability 
     Create Clear Responsibility for Metrics 
     Use Data Management and IT Systems for Support
Chapter Summary

The Planning System Landscape for LEAN SCM
The Evolution of IT Planning Systems 
     MRP II: Consideration of Capacity but Captured in the Automation Trap 
          Consideration of Capacity Requirements
          Automation Trap
     ERP: Functional Integration but Lost in the Details 
          Functional Integration 
          The Lost-in-Details Trap 
     APS: Supply Chain Integration but Caught in the Optimization Trap 
          Supply Chain Integration 
          The Optimization Trap 
     The Forecast Myth: An Overarching Obstacle 
     IT for LEAN Planning: How to Escape the Optimization Trap and the Forecast Myth
Enabling LEAN Planning: How to Leverage Past IT Investments 
     Enterprise Resource Planning 
     Master Data Management 
     Market Demand Planning (APS Module) 
     Supply Network Planning (APS Module) 
     Detailed Planning and Scheduling (APS Module)
LEAN Planning Add-Ons to Complete the IT System
     Configuring and Renewing Tactical LEAN SCM Parameters 
          Stock Parameter Configurator 
          Rhythm Wheel Designer 
     Planning and Adjusting Production Based on Actual Consumption 
          Rhythm Wheel Heuristic 
          Factoring Tool 
     Performance Monitoring for the Renewal Process 
          Rhythm Wheel Monitor 
          Stock Monitor
Chapter Summary

The LEAN SCM Journey
Building Strong Commitment and Leadership for LEAN SCM
Creating a Holistic LEAN SCM Architecture
Establishing LEAN SCM Program Management
Chapter Summary

HOW YOUR INDUSTRY PEERS GAINED BENEFITS BY LEAN SCM

Read How Top-Industry Players Share Their Experiences with LEAN SCM
Motivation and Approaches to LEAN SCM 
     AstraZeneca’s Lean SCM Journey 
          Company Profile 
          Executive Summary 
          Company’s General Situation 
          Lean Challenge 
          Approach 
          Results/Benefits
     Eli Lilly’s Synchronized Lean Production 
          Company Profile and Case Summary 
          Executive Summary 
          Company’s General Situation 
          Lean Challenge 
          Approach 
          Results/Benefits 
     Buffer Management at Novartis 
          Company Profile 
          Executive Summary 
          Company’s General Situation 
          Lean Challenge 
          Approach 
          Evolving from "Push" to "Pull" 
          Selection of Products Being Suited for Pull Replenishment 
          Alignment of the Push/Pull Boundary 
          Operationalization of Buffer Management 
          Buffer Size Determination 
          Assignment of Replenishment Intervals 
          Assignment of Minimum Order Quantities 
          IT Support as Key Enabler for Buffer Management 
          Results/Benefits 
     Leveled Flow Design to Enable LEAN Planning 
          Company Profile 
          Key Facts 
          Executive Summary 
          Company’s General Situation 
          Lean Challenge 
          Approach 
          Results/Benefits
     AstraZeneca Excellence with Rhythm Wheel Takted Site 
          Company Profile and Case Summary 
          Executive Summary 
          Company’s General Situation 
          Lean Challenge 
          Approach 
          Results/Benefits 
     The Lean Production Initiative at PCI: A Company of BASF 
          Company Profile and Case Summary 
          Executive Summary 
          Company’s General Situation 
          Lean Challenge 
          Approach 
          Results/Benefits
Why LEAN SCM: Summary of Key Benefits
Bibliography
Index

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Reviews

Our Lean Supply Chain Visibility initiative reshaped our operations and supply chain management operating model with fundamental new global capabilities to realize end-to-end lean and agile supply chains and a step change in information systems.
—Andy Evans, Head of Global SC Planning, AstraZeneca

It is not about improving the accuracy of the forecast and reducing the amount of uncertainty in the future, it is about eliminating the need for certainty.

— Ronald W. Bohl, Senior Director of Supply Chain, Eli Lilly

Controlling and monitoring of inventory has long been fully integrated into supply chain functions. Transportation and warehousing cost management are also key tasks for supply chain managers. From an end-to-end perspective, what really counts is what remains visible and measurable for our customers. It is not only about key performance indicators and delivery service but also the ability to properly communicate accurate and meaningful supply chain information in a multi-cultural and cross-functional environment across geographies.
—Christophe Vidonne, Head of Supply Chain Management, and Dr. Ralph Billo, Head of Global Supply Chain Management at Novartis AH

There is no better planning concept than the Rhythm Wheel, I am convinced of this.
—André Wulff, former Planning Head, AstraZeneca Germany

To meet our challenging goals we need a systematic and scientific approach for sustainable improvement of our processes. LEAN SCM is developing and providing the roadmap.
—Thomas Semlinger, Head of Production PCI Europe / BASF Construction Chemicals E-EBE

If your company lives through a lean journey, this book will be a helpful compass throughout all the stages of it.
—David Smith, Executive Vice President of Operations, AstraZeneca