Pull Dealer

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CSUN   Management
                           Lean Manufacturing

                     Chapter 4
                                               Principles of Pull

 Pull means that no one upstream should produce a good or
  service until the customer downstream asks for it.
 Start with the real customer demand and work backwards
  through all the steps required to deliver the desired product to
  the customer.
 Pull system allows production of smaller lots of products,
  reduces lead-time.
 Pull system requires focus on setup reduction to enable quick
  change over from one part production to another.

                                       Lean Production for Pull

 Machines should be available 90% of the time and down for
  change-overs about 10% of the time.
 Level Scheduling: Evaluate the range of products to be
  produced every day.
    • Total demand of all products divided by the number of days
      available in the month = daily demand
    • Daily hours available divided by daily demand = takt time
    • Takt time is the time required to produce one piece.
 Establish point of use inventory – deliver raw material and
  supplies directly to location of consumption.
 Establish kanban system – as upstream cell consumes sub-
  assemblies or detail parts, empty tub signals demand for more
  to be made.
    • Kanban: signal card to produce more parts.
                                         Lean Production for Pull

   Work with outside suppliers to establish lean turnaround time.
    • Establish Long Term Agreements and Blanket Purchase Orders
    • Arrange quick loading and unloading.
    • Deliver parts to supplier in the morning, picking up the batch from
      the day before.
    • Deliver parts to supplier in the afternoon, picking up the parts that
      were delivered in the morning.
   As companies learn to pull value through their system, they
    become capable of responding practically instantly to customer
    • Quality is improved when pull and flow thinking are put in place
      together because WIP inventory is reduced.
    • Small lots are produced at short notice

                          The Bad Old Days of Distribution

   Toyota Corona Model in America in 1965
    • High volume sales of cars and service parts
    • Long shipping from Japan
    • Large stocks of parts were stored in a network of warehouses all
      across North America (Parts Distribution Centers – PDCs)
 Toyota Production System (TPS) was just being implemented
  in Toyota‟s supplier plants in 1965.
 PDCs received parts from Japan in large sealed containers in
  large batches shipped in weekly intervals.
    • PDCs had receiving area where containers were opened and parts
      were given to “stockers” with carts who walked the aisles and
      picked parts.
    • Order lead-time was 15 days, ocean shipping time was 38 days,
      and 5 days at PDCs to bin the parts.
    • Total order leadtime = 15+38+5=58 days

                              The Bad Old Days of Distribution

   Toyota dealers placed orders once a week, estimating demand.
   Wrong forecasts caused “created demand” – dramatic waves of orders
    traveling back up the value stream
   Orders were unrelated to actual demand from real customers
   Weekly orders were received at PDCs
     • A “picker” was dispatched to collect the parts from the bins and forward
       them to shipping
     • Parts were delivered via carrier service to the dealer the next day
   Toyota believed that large batches were economic order quantities
    due to savings in shipping costs
     • Since overnight shipping was expensive, dealers ordered large amounts
       of each part whenever they replenished.
     • “Vehicle off road” order system was able to locate and deliver the needed
       part before noon the next day.
   Toyota warehouse network was fully in place in the early 1970s,
    achieving “fill rate” (% parts available from DC on demand) of 98%
   Highest fill rate in the North America auto industry.
                                           Lean Distribution for Pull

   1984 - Toyota started to assemble cars in the US
    • Fremont, CA
    • Developed network of suppliers: tires, batteries, and seats.
   1986 - Toyota opened receiving warehouse for American-made parts
    in Toledo, Ohio
   1988 - Toyota opened huge plant in Georgetown, Kentucky
    • Needed comprehensive suppliers network
   When American competitors like Ford began implementing elements
    of TPS, Toyota executives realized that they never applied any of
    Toyota‟s lean thinking to their North American ware housing and
    distribution system.
    • Maintaining and moving the inventory around required many resources of
      people and time.
    • Rush orders and „hot lists‟ interrupted the pickers routine.
    • Large sizes bins were used, taking large storage space
    • Months of spare parts on hand and large facilities to hold them

                                     Lean Distribution for Pull

   Change order frequency from weekly to daily for just the right
    amount to be shipped to the dealer that day.
   Dealers order daily just the amount sold to customers that day.
   To reduce shipping costs, Toyota shipped parts from its eleven
    PDCs to the dealers in each of the eleven sales regions every
   Day to day consistency of orders without waves allowed
    consolidation of some truck routes.
   Dealers reduced inventories of same parts knowing that any
    part could be delivered within a day.
   Dealers were able to increase the range of part numbers on
    hand to satisfy the customers who wanted their parts RIGHT

                                  From Theory into Practice

   Implementation of pull system in warehousing to respond to
    actual customer demand required years
   The translation of lean concepts into the warehouse required
    great change of mind for the employees and managers.
   Toyota had to convince its employees that the new way of
    thinking will not cause anyone to lose his or her job.
   1989 – bin sizes were reduced, parts were relocated by size
    and by frequency of demand.
   Parts were segregated into small, medium and large categories
    and had own sections in the warehouse.
   Parts demanded most frequently were moved closest to the
    start of the sorting and picking runs
   Length of the aisles was dramatically reduced.

                                           From Theory into Practice

   1990 - standard work and visual controls were introduced by dividing
    the workday into 12 minute cycles.
     • It took about 12 minutes to pick any order of 30 lines of small parts, 20
       lines of medium parts, or 12 lines of large parts
   Progress control board was placed between the receiving dock and
    the shipping dock to show everyone the number of cycles to be
    completed and the time available.
   Each associate was given magnetic markers of a given color and
    placed a marker on the appropriate square on the board each time a
    cycle was completed.
   The progress control board eliminated the need for team leaders to
    supervise their teams.
   Instead, everyone looked at the board observe that one worker was
    falling behind, and provide help once other tasks were finished.
   Visual controls and use of exact cycles made it possible to address
    causes of disruptions in work flow.
   Causes were logged on the control board whenever a cycle took too
                                     From Theory into Practice

   Pacing the processes by controlling completion times eliminated
    working ahead to “beat the system” and reduced errors related to
    picking wrong items.
   In August 1995 Toyota was ready to transition from weekly to daily
    orders from its dealers without the need for additional headcount.
   At the end of 1995, twenty-two pickers were picking 5,300 lines per
    day while the hundred pickers at the Chrysler warehouse were
    picking 9,500 parts using traditional methods: productivity
    difference of 2.5 to 1.
   In 1996 the new Toyota Daily Ordering System (TDOS) was
    combined with the relocation of the PRC for Japanese-sourced
    parts from Japan to Ontario, California
   Replenishment to the PDCs from the PRCs was reduced from 40 to
    7 days.
   The secret to total inventory reduction in complex production is the
    ability to get parts resupplied very quickly from the next level of the
    system, which allows to order in small amount.                        11
                           Technology for Lean Distribution

 Toyota achieved dramatic improvements in productivity and
  space reduction at its PDCs without spending for new
 1994 – the Chicago PDC was fully automated while Toyota‟s
  management focused on direct labor reduction.
    • Productivity per employee lagged behind the other PDCs that
      implemented standard work, visual control, and efficient bin size
      and location.
   Although direct effort was saved in Chicago,
    • The amount of technical support needed to maintain the complex
      system offset the gains in direct labor.
    • The capital costs made the whole approach uneconomic.

                      Level Scheduling Needs Level Selling

   As inventories and handling costs as the North American suppliers and
    warehouses implemented lean techniques, it was possible to offer highest
    quality and lowest cost service and parts to Toyota dealers.
   Special promotions took place to temporarily lower prices and boosted
   Toyota dealers would always have the best deal for their customers.
   1994 – Toyota and its dealers together spent $32 million in the US in
    direct mail, print, and broadcast advertising for “specials”:
     • Offered Toyota owners anything from oil change to complete maintenance
       programs at far below the “normal” price.
     • The net result was a temporary increase in Toyota orders to suppliers to a
       level far above long-term average demand, followed by a dramatic drop in
       orders below average demand.
     • Was costly in both directions
   The solution was “level selling” by keeping prices constant and making
    replacement parts at the exact rate parts were being sold.
                                  Pulling from the Service Bay

   In 1994 Bob Sloane‟s Toyota dealer near Philadelphia kept two
    separate buildings with unstable shelves and dim lighting before
    implementing lean techniques to the Toyota warehousing
    • The physical flow of parts was an non-value-added activity
      compared with the income-producing service bays for car repairs
      and the showroom where cars were sold
    • Three months supply of the average part created an inventory of
      about $580,000.
    • Weekly parts delivery resulted in erratic workload on the stockers,
      and took three days to receive and place in bins
    • Empty bins while computer showed parts were in stock.
   In 1995, after implementing pull in the whole parts distribution
    and manufacturing system, Sloane increased part numbers by
    25% while cutting inventory value to $290,000
    • Added service bays using the empty second parts warehouse.

           Pulling from Service Bay to Raw Materials

 By the end of 1996, Toyota‟s new pull system was in place
  throughout North America
 The request of the customer arriving in a Toyota dealer service
  bay became the trigger for pulling parts through four
  replenishment loops going all the way back to steel blanks.

           Local                                           Flow
                      Suppliers    Toyota
          Part                                  PDC
          Flow                                             Toyota
                                                 Just the Beginning

   Between 1982 and 1990, Toyota reorganized its service and
    crash parts business in a manner identical to the new North
    American pattern, except that it took two additional steps:
    • It created Local Distribution Centers (LDCs) in each metropolitan
      area (jointly owned with the dealers)
    • Tool all the parts stock out of the dealerships with the result that
      Toyota dealers in Japan only carry three-day supply of forty
      commodity parts like windshield wipers blades.
    • It then encouraged dealers to work with every customer to
      preschedule maintenance so that parts needs could be precisely
      predicted in advance.
    • “Milk run parts delivery vehicle cisrculates from the LDC to every
      dealer every two hours, and practically every car can be repaired
      the same day with no need for express freight from the PDC at the
      next level up the system.

                                                Is Chaos Real?

 With lead-times and inventories essentially disappearing, what
  would happen when customers can pull value instantly from raw
  materials into reality?
 Could chaotic markets exist and force organizations to instantly
 The end-use demand of customers is quite stable, chaos in the
  marketplace are in fact self-induced.
 The consequence of the long lead times and large inventories in
  the traditional world of batch-and-queue overlaid with relatively
  flat demand and promotional activities – like specials on auto
  service – which producers employ in response.

                 Do We Really Need a Business Cycle?

   If we get rid of lead times and inventories to give people what
    they want when they want it, the demand will stabilize for
    another reason:
    • The damping effect on the traditional business cycle.
 Economists believe that about 50% of the down-swing of
  economic activity in business cycles is due to consumers and
  producers working off the inventories built up toward the top of
  the cycle.
 Similarly, about 50% of the upswing is due to building up new
  inventories in expectation of higher upstream process:
    • “Buy raw materials now to get a bargain before prices go up”
 Most applications of JIT, even in Japan, have involved Just-in-
  Time SUPPLY, not Just-in-Time PRODUCTION, and batch
  sizes have not been reduced by much.
 Nothing has happened over the years except to push
  inventories one step back up the value stream toward raw
  materials.                                                          18
                       Pulling Value in Pursuit of Perfection

   You now should be able to:
   See the need to precisely specify value
   Identify every step in the value stream for specific products.
   Introduce flow
   Let the ultimate customer pull value from its source.

                                         Post-it Note Exercise

   Divide into two teams (5 to 8 per team), batch team and a pull team
   Clear the table, so nothing is in the way
   Each team member needs a pen or pencil
   Object is to get 10 post-it notes completed with the words Lean
    Manufacturing on each sheet, times the number of team members
   Each person on the batch team is to write the words Lean
    Manufacturing on each sheet. When all 10 sheets are done then
    push to the next person.
   Pull team writes the company name on one sheet at a time using
    kanban rules.

           I’m the Customer and all I want is my 10
           Post-it Notes!
                       Continuous Flow Production

•   Flow of products in a level manner through the
    production operations. The ideal situation is one piece
    flow at and between processes.
•   The intent of flow production is to increase the velocity
    of products and make the production cycle predictable.

                                       Incoming Orders Flow
                 Planning Stations

                              Work coming In

        Etch for Pent

                               Quick turn      Decorative

Work is Pulled Into Anodize Line


                                           Summary of Benefits
 Work flow levels are reduced and progress is visible at a glance
 The ability to cross train is enhanced
 Work team members take ownership of full process and can help
    each other
   Quick problem identification and feedback
   Reduced Cycle Time
   Improved quality through cycle of learning
   Information flow and decision making enhanced
   Value-added ratio improved
   Reduces transportation waste
   Reduces material handling
   Helps to identify root causes of quality problems
   Allows for equipment dedication
   Drives set-up times down

                    Homework Assignment
   Questions:
    1. What do you think are the key reasons continuous
       improvement takes so long to implement?
    2. Which types of waste Pull production helps eliminate?
       Explain how it is done.
    3. Explain the advantaged and possible disadvantages of
       using Pull production system to improve the business
   Read Lean Thinking Chapter 5 - Perfection
    • Pages 90 - 89
Questions? Comments?


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