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Slide 7.1 Chapter 7: Just-in-time and the agile supply chain Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011 Slide 7.2 Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011 Slide 7.3 Just In Time • Just In Time – JIT’ An inventory strategy companies employ to increase efficiency and decrease waste by receiving goods only as they are needed in the production process, thereby reducing inventory costs. • Used by Japanese automotive manufacturers Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011 Slide 7.4 Lean Thinking • Is a way to recognize and eliminate wasteful activities from the supply chain in order to increase product flow and speed. • Organizations that incorporate lean thinking into their supply chain can benefit from improved customer service, reduced environmental impact by reducing waste and even overall corporate citizenship. Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011 Slide 7.5 Lean thinking invites to analyze business processes systematically to establish the base line of value adding process and identify the incidence of these seven wastes Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011 Slide 7.6 Figure 7.3 Basic tasks in a car assembly plant Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011 Slide 7.7 Types of waste 1. Waste of overproduction 2. Waste of waiting 3. Waste of transporting 4. Waste of Inappropriate processing 5. Waste of unnecessary inventory 6. Waste of unnecessary motions 7. Waste of defects Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011 Slide 7.8 Figure 7.4 Lean thinking principles (Source: After Womack and Jones, 2003) Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011 Slide 7.9 Principles of lean thinking Lean thinking is a cyclical route to seeking perfection by eliminating waste and thereby enriching value from customer perspective. The customer should not pay for the cost, time and quality penalties of the wasteful process in the supply chain ▪ Specify value- Value from customer perspective ▪ Identify the value stream- Identify the whole sequence of process along the supply network Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011 Slide 7.10 Principles of lean thinking ▪ Make value flow- means eliminating the seven wastes and can be implemented by applying the key factors such as minimizing delays, inventories, defects ▪ Pull scheduling-Implies that demand information is made available across the supply chain. ▪ Seek perfection-Is achieved by getting better gradually and squeezing waste out at every step. Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011 Slide 7.11 Agility in Supply chain • Is a practical approach to organizing logistics capabilities around changing end- customer demands • where development, sourcing, logistics and sales are designed to adapt quickly to changes in demand or customer preference • Agile strategy is concerned with assigning capacity so that products can be made rapidly to meet demand Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011 Slide 7.12 Table 7.1 Comparison of lean supply with agile supply: the distinguishing attributes Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011 Slide 7.13 Table 7.2 Further characteristics of lean and agile supply Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011 Slide 7.14 Application of Lean thinking ▪ Order to replenishment ▪ Order to production ▪ Product development Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011 Slide 7.15 Model of Agile Capabilities • Market sensitive – Supply chain is capable of reading and responding to real demand • Virtual – Information-based supply chain, rather than inventory-based. Agile supply chain Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011 Slide 7.16 Model of Agile Capabilities • Network based – EDI and internet enable partners in the supply chain to act upon the real demand • Process integration – Collaborative working between buyers and suppliers, joint product development, common systems and shared information Agile supply chain Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011 Slide 7.17 Sales and Operations Planning for Agility Factors for Successful S&OP 1. Ongoing routine S&OP meeting 2. Structural meeting agenda 3. Pre work to support meeting inputs 4. Cross functional participation 5. Participants empowered to make decisions 6. Responsible organization to run process 7. Unbiased base line forecast to start process Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011 Slide 7.18 Sales and Operations Planning for Agility 8. Joint supply and demand planning 9. Measurement of the process 10. Integrated demand –supply planning technology 11. External inputs to the process Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011 Slide 7.19 Product Design for agility ➢Design for manufacture and assembly ➢Concurrent engineering ➢Design for supply chain Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011 Slide 7.20 Manufacturing for agility ▪ Agility-responding to changes-requires responsive and flexible manufacturing ▪ Can be adapted quickly to new products ▪ Can accommodate changes in mix range of variants ▪ Involvement of minimum cost or time penalties Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011 Slide 7.21 Supply chain partnerships for agility • Relationship could be described as success factor of many agile supply chains • Dependent on a network of supply chain partners that collaborate to meet the end customer needs by availing resources Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011 Slide 7.22 Combining Lean and Agile Three main approaches to combining lean and Agile Hybrid Strategies Appropriate market condition Pareto Analysis across a product range-80:20 Use lean methods for the volume lines and agile methods for the slow movers High levels of variety Demand is heavy skewed toward a small proportion of the product range De-coupling Point The aim is to lean up to the decoupling point and agile beyond it, as in form postponement Product design allows for this so the product remain generic in the early stage of manufacturing Separate volatile and base demand for a given SKU Meet the forecastable element of demand using lean principles and use agile principles for the less predictable demand When base level of demand can be confidently predicted from past experience Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011 Slide 7.23 • Application of leagility: the de-coupling point approach Harrison and van Hoek, Logistics Management and Strategy: Competing Through the Supply Chain, 4th Edition, © Pearson Education Limited 2011

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