Q. What is lean manufacturing in the context of SCM? Distinction b/w lean production and mass production.

What is mass customization? Ans:

What is Mass Customization?

The customization and personalization of products and services for individual customers at a mass production price is called Mass Customization. Standardization Product-driven Increases market share Increases potential for sensitive markets Customization Customer-driven Increases differentiation price Increases share of customers

Need for Mass Customization: Increased competition from domestic and global companies Drive to reduce investment inventories Need to improve customer service Reduced cycle times Requirement for increased flexibility Some of these strategies that have been successful in the transition from a make-to-stock (MTS) to a build-to-order (BTO) business model are: 1. Supply Chain Management (SCM): extending beyond ERP systems to encompass the entire range of processes inside and outside of the company that add value to customers. 2. Virtual enterprise: developing networks of partnerships with both customers and suppliers to become more responsive and cost effective, and to add value to the supply chain. 3. Modular product design: using the many tools of product definition to develop highly customizable products, while reducing costs. 4. Agile manufacturing: improving the capability of the plant to turn on a dime. 5. The Web: capitalizing on the Internet to gain more rapid access and use of information throughout the virtual enterprise and at lower IT costs. 6. Best-of-breed IT: supporting the companys strategy with astute blending of the most suitable software tools.

Difference between Production:

Customer Satisfaction

Mass

Production

&

Lean

Leadership Organization External Relations Information Management

Mass Production Makes what engineers want in large quantities at statistically acceptable quality levels By executive command and coercion Individualism and Military style bureaucracy Based on price Poorbased on abstract reports generated by and for managers Obedience and Loyalty, subculture of labor strife Large scale inventories, minimal skills, massive inventories Maintenance by Specialists Isolated Genius model Forecasting Assembly line, batches

Lean Production Makes what customers want with Zero Defects and only in quantities wanted by the customers By vision and broad participation Team based operations and flat hierarchies Based on long term relationship building Information rich management based on visual control systems maintained by employees Harmonious culture based on long term development Human scale machines, cell type layout, multi skilling, one piece flow, Zero inventory Autonomous Maintenance Team Based model Customization Single piece flow

Culture Production

Maintenance Engineering Demand Management Manufacturing Lean Manufacturing

Lean is about doing more with less: less time, inventory, space people and money. Lean Manufacturing (also known as the Toyota Production System) is, in its most basic form, the systematic elimination of waste -

overproduction, waiting, transportation, inventory, motion, overprocessing, defective units - and the implementation of the concepts of continuous flow and customer pull. The following five areas drive lean manufacturing/production: 1. cost 2. quality 3. delivery 4. safety, and 5. morale.

Basic Elements of Lean Manufacturing

The basic elements are waste elimination, continuous one piece workflow, and customer pull. When these elements are focused in the areas of cost, quality and delivery, this forms the basis for a lean production system.

The lean production concept was to a large extent inspired by the Kaizen - the Japanese strategy of continuous improvement. Employee empowerment and promotion among them of a way of thinking oriented at improving processes, imitation of customer relationships, fast product development and

manufacturing, and collaboration with suppliers are the key strategies of leading lean companies. Characteristics 1. Non-value added activities or waste are eliminated through continuous improvement efforts 2. Focus on continuous improvement of processes - rather than results - of the entire value chain 3. Single-piece flow / small lot production: achieved through equipment set up time reduction; attention to machine maintenance; and orderly, clean work place 4. Pull reduction / Just-in-time inventory control 5. Production is based on orders rather than forecasts; production planning is driven by customer demand or "pull" and not to suit machine loading or inflexible work flows on the shop floor. 6. Minimal inventories at each stage of the production process.

Benefits of Lean Manufacturing Waste reduction by 80% Production cost reduction by 50% Manufacturing cycle times decreased by 50% Labor reduction by 50% while maintaining or increasing throughput Inventory reduction by 80% while increasing customer service levels Capacity in current facilities increase by 50% Higher quality Higher profits Higher system flexibility in reacting to changes in requirements improved More strategic focus Improved cash flow through increasing shipping and billing frequencies Integration of Lean manufacturing and SCM Integrated Supply Chain Management is a processing-oriented, integrated approach to procuring, producing and delivery products and

services to customers. It has a broad score that includes sub-suppliers, suppliers, internal operations, trade customers, retail customers, and end users. It covers the management of material, information and funds flows Effective SCM enables you to make informed decisions along the entire supply chain from acquiring raw materials to manufacturing products to distributing finished goods to the customers. Supply Chain Management (SCM) is concerned with three core aspects of a companys operations: Material Supply Goods Production Product Delivery to Customers Key factors associated with successful SCM implementations: 1. An overriding, pervasive customer focus. At every stage in the supply chain, the ultimate customers needs are understood and forced into the decision making 2. Advanced use of IT 3. .Quantitatively based performance management 4. Use of cross-functional teams. 5. Attention to human factors and organization dynamics Process 1: Lean companies Reduce the number of suppliers for each commodity of purchases to a minimum, a few or often only one

Reduce the Supply Base

Traditional companies Deal with many suppliers, so many that it is impractical to fully understand the capabilities of any one of them (quality, capacity, cost structure, or technical capabilities)

Benefits of Lean:

Speeds development and fulfillment operations because fewer and more dependable suppliers make fewer mistakes to cause disruptions Permits much more time to be spent with a supplier to develop a close relationship and understand his capabilities Makes you a major customer of your important suppliers which allows you to influence quality, price, delivery schedules, and capacity decisions

Process 2:

Term Partners
Lean companies Develop supplier partners, especially in the commodities key to their company's growth and future success

Develop Strategic LongTraditional companies Do not develop long-term relationships, but change to another supplier at the first disagreement on price or delivery

Benefits of Lean

Allows frank discussion of growth and capacity planning Allows frank discussion of quality and reliability improvement plans and exchange of very detailed product failure data (Ford/Firestone example?) Allows technology discussions detailed enough to produce a better solution for both companies than could result from an arms length relationship

Process 3:

Certify Suppliers
Traditional companies Do not certify or use a system that is not considered relevant by

Lean companies Use cross-functional teams to certify suppliers Create and use a certification process that challenges suppliers and makes them proud to be certified

Benefits of Lean

Lets the supplier know your standards Makes the supplier proud Makes the supplier strive to please your company Produces better suppliers, cutting mistakes and confusion to create leaner operations

Process 4:

Technologies

Connect to Suppliers with Internet

Traditional companies Have communication difficulties caused by foreign languages and distant time zones Fail to get the word to all with a need to know

Lean companies Use Internet technology to connect to their suppliers Find that the Internet technology makes it much easier to establish and follow consistent business processes with suppliers

Benefits of Lean:

Reduces confusion, making your company leaner Provides an official place for publishing many types of information and data Reduces headcount at both companies Brings your key suppliers closer, improving the partnership

Process 6:

Fulfillment

Collaborate with Suppliers in

Lean companies Choose strategic suppliers that help them grow in capacity, quality, technology, flexibility, etc. Make buying decisions based on the total cost of ownership Inform suppliers as soon as new orders arrive

Traditional companies Keep suppliers in the dark regarding growth, technology, product introductions, etc. Select suppliers based on the unit part price, and select the lowest bidder every time

Benefits of Lean:

Lets strategic suppliers plan their capacity, technology, etc. Treats the supplier as an extension of your plant, fully utilizing his capabilities Lets suppliers start as soon as orders are received Keeps parts and subassemblies arriving on-time Lets suppliers make suggestions that lead to improvements Lowers cost of parts, and provides opportunities to share gains