Book Review: Building a Lean Fulfillment Stream

I just finished reading the latest publication from the Lean Enterprise Institute (LEI) Building a Lean Fulfillment Stream by Robert Martichenko and Kevin von Grabe.

The authors define the critical principles of a lean fulfillment stream and the total cost of fulfillment. A fulfillment stream is:

all of the activities that move materials and information from suppliers to end customers: planning, sourcing, transporting, manufacturing, inspecting, sorting, packing, and consuming, as well as managing the entire process.

The total cost of fulfillment is all of the costs of moving material from one end of the fulfillment stream to the other.

These go far beyond the transportation costs most firms calculate to include the carrying and storage costs of inventory, the cost of material handling equipment and labor, and the management time devoted to gathering all of the information needed to constantly monitor performance. These costs also include all of the transport, inventory, handling, and management costs incurred by customers and suppliers along the fulfillment stream.

The authors list eight guiding principles for creating lean fulfillment streams:

1. Eliminate all the waste in the fulfillment stream so that only value remains.
2. Make customer consumption visible to all members of the fulfillment stream.
3. Reduce lead time.
4. Create level flow.
5. Use pull systems.
6. Increase velocity and reduce variation.
7. Collaborate and use process discipline.
8. Focus on total cost of fulfillment.

The process of understanding and improving the fulfillment stream follows the same process of value stream mapping. The current state data includes total lead time, inventory (average days on hand), inventory carrying costs, and perfect-order execution. The execution of a perfect order is characterized by “8 Rights”:

Right quantity
Right product
Right place
Right time
Right quality
Right source
Right price
Right service

The future state vision must include a plan for these 6 areas of the fulfillment stream:

Customer collaboration
Outbound logistics
Shipping, receiving, and trailer-year management
Material ordering
Inbound logistics
Supplier collaboration

The authors stress collaboration across all functions and firms as the way to minimize the total cost of fulfillment. They use about half the book to describe actions that can be taken in the 6 areas to minimize waste in the fulfillment stream. There is a stronger emphasis on total cost of the fulfillment stream rather than customer value. While they list the steps for improvement there is very little discussion about how to engage those parties in the fulfillment stream for such a successful collaboration.

This book is not written for a beginner and can’t stand on it’s own. Knowledge of VSM, takt time, flow, pull, kanban, supermarkets, leveling, PFEP, and PDCA are a pre-requisite for this book. I would recommend combining this workbook with Learning to See, Creating Continuous Flow, and Making Materials Flow LEI Workbooks.



Building a Lean Fulfillment Stream is a much needed and very complementary addition to the LEI workbook series. The workbook is easy to read with lots of illustrations and examples. It highlights a number of supply chain strategies that Lean organizations will want to understand. This is a good place to start for those lean leaders getting ready to tackle improvements in their supply chain. I recommend adding this book to your Lean library today.

Note: Jon Miller, Karen Wilhelm, and Brian Buck have also written about Building a Lean Fulfillment Stream.

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Lean Quote, July 16, 2010: Leadership

On Fridays I will post a Lean related Quote. Throughout our lifetimes many people touch our lives and leave us with words of wisdom. These can both be a source of new learning and also a point to pause and reflect upon lessons we have learned. Within Lean active learning is an important aspect on this journey because without learning we can not improve.

Feel free to share some of your favorites here as well.

"The leader of the past… is a doer; of the present, a planner; of the future, a teacher. Her job is to develop capabilities; not to plan the company's actions but to increase its capacity to act, its responsiveness, and its repertoire…. This kind of leader doesn't need to know everything; on the contrary, she'll want to be surrounded by people who know a whole lot more but trust her to weigh their competing claims." - Thomas A. Stewart.

Leadership has been well studied and written about throughout history.  Fundamentally, leadership is about the capacity or ability to lead so others will follow.  I believe that leadership could be further defined by these characteristics that make-up the word leadership.

LEADERSHIP:

Lead by Example
Encourage the Heart
Appreciate Diversity
Develop People's Potential
Enable and Empower
Realist
Serve
Help/Coach Where Necessary
Inspire a Shared Vision
Process Challenger

UK management thinker and writer, John Adair, has proposes a short course for leadership. Managers wanting to be leaders would do well to consider:

The 6 most important words... "I admit I made a mistake."

The 5 most important words... "I am proud of you."

The 4 most important words... "What is your opinion?"

The 3 most important words... "If you please."

The 2 most important words... "Thank you."

The 1 most important word... "We."

The least important word..."I."

How do you define leadership?  What advice would you give to others?

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Good Advice for Anytime

I recently came across a good video that outlines several strategies for dealing with the recession.  These strategies come from Tom Peters, self proclaimed uber-guru, speaker, and author of recently released The Little Big Things: 163 Ways to Pursue EXCELLENCE.

Tom was apparently asked what you can do to deal with tough times.  While he admits there is no secret play book, magic wand to wave, or silver bullet to fix everything he does provide several cleaver strategies.

Some of my favorites from Tom Peters:

You dig deep, deeper, deepest – and always bring a good attitude to work.

You give a new meaning to the idea and intensive practice of "visible management."

You simplify.

You sweat the details as never before.

You learn new tricks of your trade.

You pass old tricks of the trade on to others – mentoring matters now more than ever.

You network like a demon inside the company – get to know more of the folks who "do the real work," and are/can be your most important allies when it comes to getting things done seamlessly and fast.

You network like a demon outside the company – get to know more of the folks "down the line, "who "do the real work" in vendor-customer outfits and can be your biggest allies and champions.

You redouble, re-triple your efforts to "walk in your customer's shoes." (Especially if the shoes smell.)

You leave the blame game at the office door.

You become a paragon of personal accountability.

It seems clear to me that these strategies will work just as well in good times as in bad.

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Do You Know How to Handle Your Constraint?

A recent plant visit was a real lesson in constraint management.  What I have found is that we have a weak knowledge of how to identify a bottleneck and how to effectively manage this constraint.

To discuss this subject it is important to start with defining the distinction between a constraint and a bottleneck.  A constraint is a resource with the highest load.  A bottleneck is a resource that is unable to meet current demand. Manufacturing processes can have multiple bottlenecks.  The constraint is the bottleneck whose performance is directly related to the overall system performance.

The roots of a bottleneck focused approach in operations management can be traced back to the days of Henry Ford. He understood that the workstation with the maximum processing requirement, denoted as the bottleneck, would constrain the output of the system.

Eli Goldratt who authored "The Goal" was one of the first to write about constraint management in what he called "Theory of Constraints".  Goldratt defined 10 principles for managing a constraint.  Note that below the word "bottleneck" is used, but it is often a constraint rather than a bottleneck.

1. Balance flow, not capacity.  During the manufacturing of a product there will inevitably be faster and slower processes.  Therefore effort should be made to achieve continuous flow of materials. 

2. The utilization of a non-bottleneck is determined not by its own capacity but by some other constraint in the system.  It is the bottleneck operation that should govern flow, therefore the capacity and utilization of non-bottleneck resources is mostly irrelevant.

3. Utilization and activation are not synonymous.  A non-bottleneck machine should not be 'activated' all the time because overproduction will result.  Utilization of the machine occurs when the machine is activated to produce at a balanced rate.

4. An hour lost at a bottleneck is an hour lost for the whole system.  Since the bottleneck governs the amount of throughput for the factory, if the bottleneck stops it is equivalent to stopping the entire factory.

5. An hour saved at a non-bottleneck is merely a mirage.  In effect increased capacity at a non-bottleneck is worthless.

6. Bottlenecks govern both throughput and inventory systems.  A factory's output is the same as the bottleneck's output, and inventory should only enter the factory at a rate that the bottleneck is capable of handling.

7. The transfer batch may not, and many times should not, equal the process batch.  A transfer batch is the amount of work in process inventory that is moved along between workstations.  To maintain flow and minimize inventory costs this batch should not necessarily equal the production batch quantity.

8. The process batch should be variable, not fixed.  The system should not be constrained by the artificial requirements that product must be made in one large batch.  The batch size of a bottleneck machine should not necessarily equal the batch size of non-bottleneck machine.

9. Lead times are the result of a schedule, and can not be predetermined.  Pre-specified lead times of typical MRP solution will not reflect the true situation.

10. Schedules should be assembled by looking at all constraints simultaneously.  Constraints may be in the form of machines, labor, and material.  You must consider them all together when scheduling.

These 10 principles can help plan production effectively.  The plant schedule should be organized around the constraint since it determines the throughput of the plant.  It is critically important to learn how to identify bottlenecks, determine the system constraint, and learn to leverage the constraint to your advantage.  All systems have a constraint and this will not change but how you deal with them can.

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Lean Quote, July 9, 2010: Courage to Succeed

On Fridays I will post a Lean related Quote. Throughout our lifetimes many people touch our lives and leave us with words of wisdom. These can both be a source of new learning and also a point to pause and reflect upon lessons we have learned. Within Lean active learning is an important aspect on this journey because without learning we can not improve.

Feel free to share some of your favorites here as well.

"To dream anything that you want to dream.  That is the beauty of the human mind.  To do anything that you want to do.  That is the strength of the human will.  To trust yourself to test your limits.  That is the courage to succeed." - Bernard edmonds, American Writer

History has proven time after time that the power of a thought is the beginning for actions that will alter the future positively. Understanding this, and having the courage to keep going even in the face of all obstacles, allows us to accomplish anything we want.

As you approach the tough decisions that challenge you, recognize these truths about courage:

1. Courage Begins with an Inward Battle - Courage isn't an absense of fear.  It's doing what you are afraid to do.  It's having the power to let go of the familiar and forge ahead into new terrritory.

2. Courage Is Making Things Right, Not Just Smoothing Them Over - Courage deals with principle, not perception.  It's knowing when to stand up and having the conviction to do so.

3. Courage in a Leader Inspires Commitment from Followers - A show of courage by any person encourages others.  But a show of courage by a leader ispires.  It makes people want to follow them.

4. Your Life Expands in Proportion to Your Courage - Fear limits a leader.  But courage has the opposite effect.  Courage not only gives you a good beginnig, but it also provides a better future.

To improve your courage try these three things: 

1. Take fear head on.  Go out and do something fearful simply for the sake of growing courage.

2. Don't avoid confrontation.  Speak with that person in your life truthfully.

3. Don't hold back.  Now is the time to take that first step on that action your too afraid to make.

Courage means trusting yourself to overcome your fears and doing what you are afraid to do. Courage increases conviction and inspires others to confront their fears.  Do you have the courage to succeed and make others succeed.


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Flow Requires “No” Vision

When Henry Ford introduced flow production in 1913, the objective was to drastically reduce throughput time and human effort. Continuous flow is producing and moving one item at a time (or a small batch of items) through a series of processes as continuously as possible.

Flow is one of five key Lean Principles identified by Womack and Jones in their book Lean Thinking. They stressed that you need to make value flow. It was this creation of flow that would make it possible to eliminate waste. When material and information flow continuously, there is less waste in the system. This is true by definition. If there were a lot of waste, material and information would not be flowing.

The most important thing in creating flow is having a vision of what that means. For me I think that requires having some “No” thinking.

No inventory
No subassemblies
No holding containers
No material handling
No backflow or rework
No defects
No inspection
No paperwork
No computer transactions/systems
No downtime
No delays
No cost

Many will say these are not possible within their organization or industry for that matter. But that would miss the point, which is vision: you may not get there within your lifetime, but try – others certainly will.


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Happy Birthday America!

"I pledge allegiance to the flag of the United States of America, and to the Republic for which it stands. One nation under God, indivisible, with liberty and justice for all.”

On July 4, 1776, we claimed our independence from Britain and Democracy was born. Every day thousands leave their homeland to come to the "land of the free and the home of the brave" so they can begin their American Dream.   We encourage all nations to celebrate with America.

To commerate this day of celebration I will leave you with some fun 4th of July Facts from the US Census Bureau.

Patriotic-Sounding Place Names

31, Number of places nationwide with "liberty" in their name. The most populous one as of July 1, 2008, is Liberty, Mo. (30,568). Iowa, with four, has more of these places than any other state: Libertyville, New Liberty, North Liberty and West Liberty.

•Thirty places have "eagle" in their name -- after the majestic bird that serves as our national symbol. (Places include cities, towns, villages and census-designated places.) The most populous such place is Eagle Pass, Texas, with 26,668 residents.

•Eleven places have "independence" in their name. The most populous of these is Independence, Mo., with 110,440 residents.

•Five places adopted the name "freedom." Freedom, Calif., with 6,000 residents, has the largest population among these. (This population total is as of the 2000 Census; no population estimate is available for Freedom because it is a census designated place.)

•There is one place named "patriot" -- Patriot, Ind., with a population of 189.

•And what could be more fitting than spending the Fourth of July in a place called "America"? There are five such places in the country, with the most populous being American Fork, Utah, population 27,06



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