LEAN Supply Chain Planning: The New Supply Chain Management Paradigm for Process Industries to Master Today's VUCA World, 1st Edition (Hardback) book cover

LEAN Supply Chain Planning

The New Supply Chain Management Paradigm for Process Industries to Master Today's VUCA World, 1st Edition

By Josef Packowski

Productivity Press

493 pages | 275 B/W Illus.

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pub: 2013-11-26
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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.

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

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

Subject Categories

BISAC Subject Codes/Headings:
BUS053000
BUSINESS & ECONOMICS / Quality Control
BUS076000
BUSINESS & ECONOMICS / Purchasing & Buying
TEC020000
TECHNOLOGY & ENGINEERING / Manufacturing