How Toyota turns workers into problem solvers February 22, 2006
Posted by Lawrence Loucka in : Lean , add a commentToyota’s reputation for sustaining high product quality is legendary. But the company’s methods are not secret. So why can’t other carmakers match Toyota’s track record? Harvard Business School professor Steven Spear says it’s all about problem solving.
How Toyota turns workers into problem solvers
Little’s Law February 21, 2006
Posted by Lawrence Loucka in : Definitions, Lean Sigma , add a commentThe inventory in a process is related to the throughput rate and throughput time by the following equation:
W.I.P. Inventory = Throughput Rate x Flow Time
This relation is known as Little’s Law, named after John D.C. Little who proved it mathematically in 1961. Since the throughput rate is equal to 1 / cycle time, Little’s Law can be written as:
Flow Time = W.I.P. Inventory x Cycle Time
What Little actually said was, "The average number of customers in a system (over some interval) is equal to their average arrival rate, multiplied by their average time in the system." A corollary has been added: "The average time in the system is equal to the average time in queue plus the average time it takes to receive service." The application to office work is also counter intuitive for many business leaders. Stuffing more projects, goals, assignments on a critical resource is almost always guaranteed to slow things down, yet we do it all the time. Recent observations of a purchasing group made this clear; releasing yearly contracts, all in a huge batch, made a normal one week purchase order turn around become more than a month. If there are no controls over the number of projects-in-process, then there can be no control over the lead time.
References:
http://en.wikipedia.org/wiki/Little’s_law
Warehousing Maturity February 15, 2006
Posted by Lawrence Loucka in : Consulting, Logistics , add a comment
Recently a supply chain executive asked me to rate his warehousing operations. “OK, on what scale?” I said, trying to be honest and at the same time not insult this hardworking leader. Here’s what we came up with:
Level 1: Transactional / Reacting - inventory record accuracy, receiving, putaway, pick and pack, shipping
Level 2: Productivity - integrated RF barcode, pick waves, ASN’s, returns management
Level 3: Integration - cross docking, value-added services, global supply chain inventory visibility, transportation management, analytics
Level 4: Demand / Supply Chain - postponement, pull replenishment, merge-in-transit, VMI, customer collaboration, supplier collaboration, supply chain transparency, advanced demand data
Many operations I’ve visited over the past few years are operating at Level Zero; poor inventory accuracy, chronic treasure hunts and fire drills, low inventory turns, high excess and obsolete inventory. Warehousing operations are rarely the cause and often the victim of the lack of a holistic and systemic view of supply chain operations.
My supply chain executive was relieved to hear that his operations were better than most, but disappointed to realize that there was still a long way to go on the journey.
Inventory and Demand Analysis February 12, 2006
Posted by Lawrence Loucka in : Lean Sigma, Logistics, Supply Chain , 2commentsABC Analysis can be used to assign the appropriate level of control and review frequency based on the annual dollar volume of each item. Classical ABC Inventory Analysis places:
- greater expenditure on supplier development for A items than for B or C items
- tighter physical control on A items than on B and C; cycle counting A items more frequently than C
- greater expenditure on forecasting A items than on B or C
- different replenishment or order policies for A items than on B or C
C items are often handled with simple techniques of min/max or reorder point. Some practitioners make the mistake of trying to apply kanban to either A or C items. What is missing is an understanding of demand linearity (or demand variability). ABC Analysis is typically based strictly on volume, or annual value. This approach would then treat both very predicable and highly volatile A items in the same manner. But one size doesn’t fit all… What’s missing is a little statistical understanding of the item demand pattern. Does consumption happen smoothly and regularly or are there big spikes in demand? When you take the standard deviation of the demand history and plot it against volume you get a demand segmentation like so … 
Tale of Two Business Systems February 7, 2006
Posted by Lawrence Loucka in : Economy, Lean , add a comment
by James Womack
In the fall of 1990, Dan Jones, Dan Roos, and I co-authored The Machine That Changed the World, our description of lean enterprise. On page 253 we forecast that 1991 or 1992 would be the moment of crisis as the full power of lean (represented by Toyota) threatened to topple mass production (defended by General Motors). And in 1992 GM nearly did go bankrupt.
However, as usually happens with forecasts, we were off in our timing. The moment of truth was actually delayed 15 years. What now seems certain is that Toyota will pass GM in 2006 to become the world’s largest industrial enterprise and that GM and Ford will undergo a profound transformation, whether led by current managers or by someone else.