Enterprise VSM Expanding Horizons September 12 th , 2018 By Arvind Srivastava, Corporate MBB/IE, IATF Lead Auditor
Agenda Why EVSM? What is EVSM? How does EVSM Benefit? Source: 50-50-20 Lean Management Book Coming Soon!! Turkish Russian French
What is VSM? • Practical application of SIPOC. • Material and Information Flow.
Sample Lean Tools to Support VSMs VSMs leverage different types of “time” in their analysis. It is important to clarify the concepts of these terms: 1. Lead Time (LT): The total amount of time between the recognition of a required task, operation or process and its completion. Elements can include order entry, material purchase, setup, queue, processing, shipment and other activities. 2. Cycle Time (CT): The total time needed to complete a transformation from one status to another. The time it takes from one finished unit to the completion of the next finished unit. One of the most frequently observed errors with CT is that people think that the CTs can be added up to equal the total LT; it almost never will. There are three key reasons: 1. Parallel processing, 2. Queue or Inventory Time and 3. Rework processing 3. Takt Time: This is the pace or beat that is needed to match the process output to the customer demand. Takt is very different from CT because it is the calculation of what is needed where the CT is the measure of what it is . The goal is to balance the CT to achieve the Takt.
What is the relevance of EVSM? • How do we know that we have an optimum Lean system in place with full visibility to the processes of our internal customers and suppliers • to ensure we are able to get the best value out of our inbound supply chain and • then deliver that best value throughout the outbound supply chain? • How do we know that New Product Development (NPD) is effective and efficient? • How do we know that we have the necessary advance information about our markets so that we are able to respond to changing market conditions in an optimal timeframe? • How do we ensure that billing processes are aligned to receive payment from the customers on time? • How do we know that the Supplier or Outside Service Provider (OSP) development processes are efficient so that we are able to both receive and deliver products and services on time?
What does EVSM cover?
How does EVSM look?
How do I start? • At a glance it can look overwhelming. However, when stepped through logically, it is powerfully revealing. • It follows the same logic of a regular VSM with the customer at the top right corner, suppliers at the left, operations in the middle and OSPs (if there are any) at the right. • The key difference is that all of the plants are now treated as one entity. The impact of the slowest or highest cost producing site becomes glaringly obvious. • We found it critical that each of the site’s internal VSMs be as optimized as possible prior to completion of the enterprise level review. For simplicity, we have partitioned the E-VSM into five key sections: 1. Customer order placement within the organization and its communication to the plants. 2. Inbound supply chain (suppliers) delivering raw materials to the plants. 3. Plants producing the products. 4. Plants providing semi-finished products to be processed by OSPs. 5. Plants delivering to the customers directly or via warehouse/final processing center.
1. Customer Order Processing and Communication to Plant • Customer orders are received from the production planning function through various channels, such as Electronic Data Interface (EDI), email or fax and are consolidated via an internal sales function. • The output of this process is fed into all the plants. An internal sales function consolidates the orders . The data box for internal sales function contains the following information: 1. P/T: Min (Process Time) 2. L/T: Days (Lead Time) 3. %C&A: Percent Complete & Accurate) 4. Quantity of Associates 5. IT Systems: PLEX
2. Inbound Supply Chain Delivering Raw Materials to the Plants • Adjacent figure illustrates the concept of delivery of supply chain components; from raw materials to and through sub- assembled goods. • This model shows the supply of raw materials and key components to differing sites. • The data in the box for suppliers might detail: 1. Daily Production 2. Daily Shipment in Units shipped 3. DIOH Days
3. Plants Planning and Producing to Meet Customer Requirements • The producing sites are the center of the E-VSM in Figure. • Material planning notes may be included at the top of each box for each site. This planning is fed from the inside sales, customer kanbans (as applicable) and the sales forecast (based on product type). • Inside the data box, each plant describes the following information: 1. Daily Production (Takt): Seconds 2. Daily Shipment: a. Each Warehouse Identified b. Customers (By Type) a. Production Leadtime: Days 1. Days for Key Component Streams: Days 2. Days for Finished Goods: Days • The data box for each of the plants is supported by its own VSM.
4. Plants Getting the Semi-finished Products Processed by OSPs • OSPs are a critical aspect of process flow as they can significantly impact LT due to their own location and internal process efficiencies. • They may also be customer directed for sub-assembly processes. • Sometimes OSPs can act as a buffer to accommodate significant fluctuations in the customer demand; such as products coming from overseas. • An OSP data box might include the following information: 1. Daily Production 2. Daily Shipment Units shipped 3. DIOH Days • The value of including OSPs in the E-VSM is similar to that of including suppliers in the VSM;
5. Plants Delivering to the Customers Directly or via Warehouse/Final Processing Center • Depending upon the nature of the product, they are generally either directly shipped to a customer or to a warehouse for short term storage and subsequent shipment. • At Accuride, one of the warehouses acts as a vertically integrated OSP and provides further value add for a dedicated customer. This is common in the OEM world where product is requested in a specified sequence. • Ultimately all the products end up at the customer’s locations via their receiving teams. • In a VSM or E- VSM, this is at the other end of the customer’s data box and completes the loop, which started at the left side of the production planning box. • For warehouses, DIOH is the most important metric directly linked to the plant lead times via the PFEP (Discussed later in this section).
Tying all together • The scope of this E-VSM is to cover all the processes involved from the customer order entry to the customer delivery. • The E-VSM cross-functional team needs to have the necessary decision making team members involved in the process for it to be effective. • The team needs to have permission to try things to see if they will work; this approach is conservative and has not adversely affected customers even though we’ve had an occasional upward inventory tick. • Critical team members include those who have ownership and decision making authority for: a. Plants: Production Control/Supply Chain; Operations; Lean b. Warehouse: Director/Management c. Corporate a. Master Black Belt/Industrial Engineer/Facilitator b. Supply Chain c. QLMS d. Engineering d. Sales/Marketing e. Inside Sales
Results • Even though the sites had independently reduced their lead times by an average of ~50 percent , the E-VSM evaluation added onto the entire organization another layer of lead time reductions ranging from ~40 percent in the Warehouse to 3-25 percent across the various product lines. • The warehouse saw the largest impact due to the transparency at the sites. • This was achieved by just managing the transactional flows at the enterprise level. Remember, very little to no value add is being performed across these processes.
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