1st Edition

LEAN Supply Chain Planning The New Supply Chain Management Paradigm for Process Industries to Master Today's VUCA World

By Josef Packowski Copyright 2014
    496 Pages 275 B/W Illustrations
    by Productivity Press

    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.

    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

    Biography

    Josef Packowski

    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