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

220 Pages·2010·1.743 MB·English

by  Chris Harris, Rick Harris, Chuck Streeter

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

Lean Supplier
Development
Establishing Partnerships and True
Costs Throughout the Supply Chain
Chris Harris • Rick Harris • Chuck Streeter
Productivity Press
Taylor & Francis Group
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New York, NY 10016
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Contents
Preface ............................................................................................xiii
Acknowledgments .......................................................................... xix
Introduction: Why You Need This Book ........................................ xxi
The Authors ....................................................................................xxv
SeCtIon I SupplIerS or partnerS?
1 Does This Stuff Really Work? ......................................................3
Introduction .................................................................................................3
The Interview ..............................................................................................3
2 The Supplier Development Philosophy .....................................11
Introduction ...............................................................................................11
Two Different Philosophies ......................................................................12
Conclusion .................................................................................................15
3 Key Players in Supplier Development........................................17
Introduction ...............................................................................................17
The Importance of Communication among Key Players ........................17
Key Players in Supplier Development ......................................................20
Continuous Improvement Team .......................................................20
Purchasing .........................................................................................21
Material Control .................................................................................23
Product Engineering ..........................................................................23
Quality ...............................................................................................24
Transportation ...................................................................................25
The Role of the Key Players (The Advisory Team) .................................25
Conclusion .................................................................................................26
v
vi  ◾  Contents
4 How to Choose a Supplier for a Long-Term Partnership ...........27
Introduction ...............................................................................................27
Who Chooses the Suppliers to Develop? .................................................27
Attribute 1: Attitude ...................................................................................28
Attribute 2: Quality Level ..........................................................................28
Attribute 3: Capacity .................................................................................28
Attribute 4: Vital Expertise........................................................................29
Attribute 5: On-Time Delivery ..................................................................29
Attribute 6: Payment Terms (Pay on Pull) ................................................30
Attribute 7: Credit Standing ......................................................................30
Attribute 8: Volume Commodity ...............................................................31
Attribute 9: Flexibility to Package ............................................................31
Attribute 10: True Cost Model Standing ...................................................32
Conclusion .................................................................................................32
SeCtIon II Internal operatIonS eSSentIal to external
SupplIer Development
5 The Importance of Internal Operations ....................................35
Introduction ...............................................................................................35
A Lean Supply Chain Is Built around Solid Core Operations .................35
An Example from Internal Operations .....................................................36
Solid Internal Material Movement Leads to the Knowledge
Necessary for Supplier Development .......................................................38
Conclusion .................................................................................................40
6 The Plan for Every Part (PFEP) .................................................43
Introduction ...............................................................................................43
The Need for the Plan for Every Part .......................................................43
The PFEP ...................................................................................................44
Correct Amount of Inventory ...................................................................44
The Purchased Parts Supermarket Buffer ................................................48
Determining the Supermarket Buffer .......................................................48
How Often Do You Receive Material? ..............................................48
What Is the Supplier’s Quality History? ............................................49
What Is the Supplier’s On-Time Performance? .................................49
Is the Transportation Method Reliable? ............................................49
What Is the Physical Distance to the Supplier? ................................50
Have the Areas Using This Component Been Level Scheduled?.....50
Correctly Sizing Purchased Component Inventory ..................................51
Contents  ◾  vii
Part Number 14598 ............................................................................51
Part Number 14579 ............................................................................51
Part Number 14556 ............................................................................52
Part Number 14224 ............................................................................53
Part Number 14997 ............................................................................53
Part Number 14448............................................................................54
Part Number 10805 ...........................................................................54
Your Actual Inventory Levels ....................................................................55
Conclusion .................................................................................................55
SeCtIon III the true CoSt moDel
7 True Cost Thought Process ........................................................59
Introduction ...............................................................................................59
Piece Price versus True Cost ....................................................................60
Why Are You Sourcing/Resourcing? ........................................................60
Cost Reduction ..................................................................................61
Quality Concerns ...............................................................................61
Delivery Concerns .............................................................................61
New Products ............................................................................................62
Dual- or Multisourcing Requirements ......................................................62
Production Capacity Concerns (Over/Under) ..........................................62
Joint Venture Proposals/Agreements ........................................................63
Conclusion .................................................................................................63
8 Change Cost ...............................................................................65
Introduction ...............................................................................................65
Change Costs .............................................................................................65
Travel Cost .........................................................................................66
Lost Time Cost ...................................................................................66
Inspection Cost ..................................................................................67
Internal Inspection Costs ..........................................................67
External Inspection Costs ..........................................................67
Testing Cost .......................................................................................69
Internal Test Cost .......................................................................69
External Test Cost ......................................................................69
Print Change Cost ..............................................................................69
Tooling Cost and Amortization.................................................................71
Inventory Cost ...........................................................................................71
Conclusion .................................................................................................72
viii  ◾  Contents
9 Ongoing Cost .............................................................................73
Introduction ...............................................................................................73
Supplier Visits ............................................................................................73
Repacking ..................................................................................................74
Pay-on-Pull and Consignment ..................................................................76
Inventory Change ......................................................................................77
Freight ........................................................................................................80
Cross-Docking ...........................................................................................81
Customs and Duties ..................................................................................81
Conclusion .................................................................................................83
10 Risk Cost ....................................................................................85
Introduction ...............................................................................................85
Risk Costs ..................................................................................................85
Sorting (Spill Cost) .............................................................................86
Emergency Travel ..............................................................................87
Lost Time ...........................................................................................87
Expediting..........................................................................................87
Conclusion .................................................................................................87
11 True Cost Sourcing ....................................................................89
Introduction ...............................................................................................89
Building the Model ...................................................................................89
Part and Supplier Data ......................................................................90
Cost of Capital (Cost of Debt) ...................................................92
Change Cost Inputs ...........................................................................92
Travel and Lost Time Cost .........................................................92
Inspection and Testing ..............................................................94
Print Changes .............................................................................94
Tooling and Tooling Amortization ............................................94
Inventory ....................................................................................95
Ongoing Cost Inputs .........................................................................95
Travel and Lost Time Cost .........................................................96
Repacking ..................................................................................96
Freight ........................................................................................96
Risk Cost ............................................................................................97
Cost Comparison Examples ..............................................................97
Part Number 14579 Comparison ...............................................98
Part Number 14224 Comparison ...............................................99
Part Number 10805 Comparison ...............................................99
Contents  ◾  ix
Conclusion ...............................................................................................105
SeCtIon Iv InteraCtIonS between lean CuStomerS anD
partnerS
12 Understanding the Physical Connection between Partner
and Customer ...........................................................................109
Introduction .............................................................................................109
Pull Signals: The Informational Link ......................................................109
How to Size the Number of Pull Signals between Partner and
Customer .................................................................................................111
Average Daily Usage (ADU) ............................................................111
Partner’s Time to Replenish (PTR) ..................................................112
Transit Time (TT) ............................................................................112
Reorder Period (RP) .........................................................................112
Purchased Parts Buffer (PPB) ..........................................................113
Pull Quantity (PQ) ...........................................................................113
Examples of Loop Size Calculations ......................................................113
Part Number 14598 ..........................................................................113
Part Number 14579 ..........................................................................114
Part Number 14556 ..........................................................................114
Part Number 14224 ..........................................................................116
Part Number 14997 ..........................................................................116
Part Number 14448..........................................................................117
Part Number 10805 .........................................................................117
Reasons to Drive Down Pull Signal Loop Size ......................................118
Conclusion ...............................................................................................118
13 Receiving Product ....................................................................119
Introduction .............................................................................................119
Receiving Windows .................................................................................119
Receiving Boards.....................................................................................121
Other Methods of Interacting with Suppliers .........................................124
Conclusion ...............................................................................................125
14 Packaging ................................................................................127
Introduction .............................................................................................127
Standard Pack Quantity ..........................................................................127
Cardboard Boxes or Plastic Returnable Containers ...............................129
Five Standard Sizes .................................................................................130