1st Edition

Lean Supplier Development Establishing Partnerships and True Costs Throughout the Supply Chain

    218 Pages 69 B/W Illustrations
    by Productivity Press

    218 Pages
    by Productivity Press

    In the global marketplace, no business is a self-contained island. No matter how effective your internal material movement, to be a future-thinking business, you must go to the next step and develop long-term supplier partnerships built on a dedication to continuous improvement and the basic concepts of Lean implementation.

    Lean Supplier Development: Establishing Partnerships and True Costs Throughout the Supply Chain provides step-by-step instruction on how to build partnerships of mutual improvement and success through supplier development. Offering the same advice that they have successfully applied to corporations across the globe, award-winning consultants Chris Harris, Rick Harris, and Chuck Streeter —

    • Provide criteria on how to choose suppliers that will make good long-term partnerships
    • Demonstrate proven methods for employing Plan for Every Part (PFEP) to link your facility to the supply base
    • Present a true cost model that eliminates guesswork when choosing suppliers to develop
    • Show how to develop and maintain efficient information flow all along your supply chain
    • Use real-world examples to cover likely contingencies
    • Provide a sample quarterly supplier review that you can adapt for your own use

    Lean is a journey, not a destination. It requires flexible leaders at the helm who can readily adjust to ever-changing conditions and it requires like-minded partners all along the supply chain. Finding and developing these partners is not about good fortune, it is all about an uncompromising approach to continuous improvement and the application of systematic methods that will build working partnerships that broaden your definition of what is possible

    Introduction: Why You Need This Book
    The Authors
    Section I SUPPLIERS OR PARTNERS?
    1 Does This Stuff Really Work?

    Introduction
    The Interview
    2 The Supplier Development Philosophy
    Introduction
    Two Different Philosophies
    Conclusion
    3 Key Players in Supplier Development
    Introduction
    The Importance of Communication among Key Players
    Key Players in Supplier Development
    Continuous Improvement Team
    Purchasing
    Material Control
    Product Engineering
    Quality
    Transportation
    The Role of the Key Players (The Advisory Team)
    Conclusion
    4 How to Choose a Supplier for a Long-Term Partnership
    Introduction
    Who Chooses the Suppliers to Develop?
    Attribute 1: Attitude
    Attribute 2: Quality Level
    Attribute 3: Capacity
    Attribute 4: Vital Expertise
    Attribute 5: On-Time Delivery
    Attribute 6: Payment Terms (Pay on Pull)
    Attribute 7: Credit Standing
    Attribute 8: Volume Commodity
    Attribute 9: Flexibility to Package
    Attribute 10: True Cost Model Standing
    Conclusion
    Section II INTERANL OPERATIONS ESSENTIAL TO EXTERNAL SUPPLIER DEVELOPMENT  
    5 The Importance of Internal Operations
    Introduction
    A Lean Supply Chain Is Built around Solid Core Operations
    An Example from Internal Operations
    Solid Internal Material Movement Leads to the Knowledge
    Necessary for Supplier Development
    Conclusion
    6 The Plan for Every Part (PFEP)
    Introduction
    The Need for the Plan for Every Part
    The PFEP
    Correct Amount of Inventory
    The Purchased Parts Supermarket Buffer
    Determining the Supermarket Buffer
    How Often Do You Receive Material?
    What Is the Supplier’s Quality History?
    What Is the Supplier’s On-Time Performance?
    Is the Transportation Method Reliable?
    What Is the Physical Distance to the Supplier?
    Have the Areas Using This Component Been Level Scheduled?
    Correctly Sizing Purchased Component Inventory
    Part Number 14598
    Part Number 14579
    Part Number 14556
    Part Number 14224
    Part Number 14997
    Part Number 14448
    Part Number 10805
    Your Actual Inventory Levels
    Conclusion
    Section III THE TRUE COST MODEL
    7 True Cost Thought Process
    Introduction
    Piece Price versus True Cost
    Why Are You Sourcing/Resourcing?
    Cost Reduction
    Quality Concerns
    Delivery Concerns
    New Products
    Dual- or Multisourcing Requirements
    Production Capacity Concerns (Over/Under)
    Joint Venture Proposals/Agreements
    Conclusion
    8 Change Cost
    Introduction
    Change Costs
    Travel Cost
    Lost Time Cost
    Inspection Cost
    Internal Inspection Costs
    External Inspection Costs
    Testing Cost
    Internal Test Cost
    External Test Cost
    Print Change Cost
    Tooling Cost and Amortization
    Inventory Cost
    Conclusion
    9 Ongoing Cost
    Introduction
    Supplier Visits
    Repacking
    Pay-on-Pull and Consignment
    Inventory Change
    Freight
    Cross-Docking
    Customs and Duties
    Conclusion
    10 Risk Cost
    Introduction
    Risk Costs
    Sorting (Spill Cost)
    Emergency Travel
    Lost Time
    Expediting
    Conclusion
    11 True Cost Sourcing
    Introduction
    Building the Model
    Part and Supplier Data
    Cost of Capital (Cost of Debt)
    Change Cost Inputs
    Travel and Lost Time Cost
    Inspection and Testing
    Print Changes
    Tooling and Tooling Amortization
    Inventory
    Ongoing Cost Inputs
    Travel and Lost Time Cost
    Repacking
    Freight
    Risk Cost
    Cost Comparison Examples
    Conclusion
    Section IV INTERACTION BETWEEN LEAN CUSTOMERS AND PARTNERS
    12 Understanding the Physical Connection between Partner and Customer
    Introduction
    Pull Signals: The Informational Link
    How to Size the Number of Pull Signals between Partner and Customer
    Average Daily Usage (ADU).
    Partner’s Time to Replenish (PTR)
    Transit Time (TT).
    Reorder Period (RP)
    Purchased Parts Buffer (PPB)
    Pull Quantity (PQ)
    Examples of Loop Size Calculations
    Reasons to Drive Down Pull Signal Loop Size
    Conclusion
    13 Receiving Product
    Introduction
    Receiving Windows
    Receiving Boards
    Other Methods of Interacting with Suppliers
    Conclusion
    14 Packaging
    Introduction
    Standard Pack Quantity
    Cardboard Boxes or Plastic Returnable Containers
    Five Standard Sizes
    Conclusion
    Section V Develop a Supplier into a Partner
    15 The Partner Development Team
    Introduction
    Choosing Your First Supplier to Develop into a Partner
    Forming a Partner Development Team
    The Teaching Mentality of the Partner Development Team
    Who Gets the Savings?
    Choosing Future Suppliers to Develop
    Conclusion
    16 The Value Stream Mapping Methodology
    Introduction
    The Value Stream Mapping Methodology
    The Product Family
    The Current State Value Stream Map
    The Future State Value Stream Map
    30/60/90-Day Future State Maps.
    A Comprehensive Work Plan
    Conclusion
    17 The Quarterly Review Process
    Introduction
    The Process
    Who Should Attend the Quarterly Review?
    The Supplier.
    Upper Management
    The Key Players
    The Partner Development Team
    Conclusion
    18 Supplier Development Quarterly Review Agenda
    Introduction
    Location of Meeting.
    Day 1: Continuous Knowledge Improvement and Networking.
    Day 2: Review of Progress
    Additional Notes on Quarterly Reviews
    Conclusion
    Afterword
    Appendix A: The Eight Wastes and Their Relationship to
    Supplier Development.
    Introduction
    The Importance of Material Flow
    Waste 1: Overproduction.
    Waste 2: Waste of Making Defective Products (Rework)
    Waste 3: Waste of Time on Hand (Waiting)
    Waste 4: Processing
    Waste 5: Waste of Movement (Inefficient Machine and Operator Motion).
    Waste 6: Waste of Transportation (Inefficient Transportation of Material)
    Waste 7: Waste of Inventory
    Waste 8: Knowledge
    Appendix B: Sample Standard Supplier Quarterly Review Presentation


    Biography

    Chris Harris

    Most companies struggle to move beyond the four walls of their business during a lean journey. Many lean leaders have never ventured to the great world of the unknown related to the supplier, but for lean to reach continued breakthrough levels of performance, lean supplier development is required to extend throughout the entire supply chain. Conversations around supply chain lean activity abounds in the consulting world, but few people can bring real life success stories, experience and processes to the picture as Rick Harris, Dr Chris Harris and Chuck Streeter. Their personal, hands on experience is evident once again in this book, their latest venture in true kaizen. They have the unique ability to shoot straight at the target and never talk over the head of the audience. The reader is able to understand the thinking process and then begin implementation starting with the opening lines of the book. This book is not just thoughts, but a detailed process of why, how and when to begin and implement lean supplier development. If your company accelerated improvement with Rick’s red book and shot life into it with the green book, this book will take performance of the total supply chain to an all new level. Let Rick, Chris and Chuck help you enjoy, not fear, the journey!
    —Mark Gooch, VP Lean Enterprise, Pentair, Inc.

    Rick and Chris Harris' practical knowledge from so much work in the field helping businesses with lean transformations shines through in this piece of work. The book can be viewed as a checklist adaptable to any business striving to develop an effective supply chain. Be careful not to miss the real gems they offer in the simple and sometimes subtle warnings of traditional behaviors that could impede future success.

    — Kathryn A. Miller, Vice President, Lean Enterprise & Quality, Parker Hannifin

    For most manufacturing based businesses direct material costs account for 40-60% of COGs. It is therefore absolutely IMPERATIVE that your supply base become LEAN practitioners if your company is to fully capture the strategic and operational benefits of becoming a truly LEAN Enterprise. Rick and Chris Harris provide a roadmap to accomplishing that goal.  Read it, understand it, adopt the principles yourself, convert your supply base and watch your top line revenues and bottom line profits grow! 
    — Rick Dauch, President and CEO, Acument Global Technologies