Lean supply chain and its effect on product

cost and quality: A case study on Ford Motor

Company
By: H.M. Wee, Simon Wu

Supply Chain Management: An International Journal, Vol. 14

Is: 5 pp. 335 341

Presented by:
Umair Majeed
13008087011

Table of Contents

Abstract
Introduction
Lean supply chain
Value stream mapping (VSM)
VSM measurable and improving tools
VSM case study Ford Lio Ho Motor Company
Findings and recommendations
Conclusion

Abstract
Purpose : To analyze how Toyota continuously and
consistently achieve its success through continuous
waste elimination and the objective of long term
philosophy.
Design/methodology: The methodology used is the
case based approach (CBA), which described lean
supply chain (LSC) through value stream mapping
(VSM).
Findings: VSM is beneficial in cost reduction, quality
enhancement and lead time reduction. This paper
also provides a four step process to implement
VSM.

Introduction
General Motors (GM), Ford & Chrysler dominated the
global market in 20th century but in 1994 Toyota became
the global No. 2 motor manufacturer by overtaking Ford
and in 2008 Toyota replaced GM to be the largest
automaker globally.
Kiichiro Toyoda President of Toyota set up the companys
objective:
to use small lot size with cheaper vehicles to compete with
the cost of American motor companies by continuously
reducing cost, creating continuous material flows, process
standardization and waste elimination.
US and Europe believed that only mass production leads to
reduction in manufacturing costs while Toyota managed to
achieve low manufacturing cost with smaller volume and
shorter lead times with help of lean manufacturing.

Lean Supply Chain

The term lean also known as TPS means a
series of activities to eliminate waste, reduce
non-value added (NVA) activities, and improve
value added (VA) activities . Waste is defined as
anything that interferes with the smooth flow of
production
The eight wastes described in TPS are:
overproduction, waiting, conveyance, over
processing, excess inventory, movement, defects
and unused employee creativity.
Lean supply chain identifies all types of waste in
the value stream chain and seeks to eliminate
hem (Rother and Shook, 1999; Abdulmalek and
Rajgopal, 2007).

Value Stream Mapping

The VSM is a lean supply chain tool used by TPS
to identify between wasteful and necessary
value-adding activities. The lean VSM links all
processes from raw material to final consumer.
It begins by listing all operations, and classifies
them into VA and NVA.
VSM includes activities of:
a) production flow from raw material input to
finished good delivery;
b) design flow from concept to launch; and
c) material and information flow the combination
of
production and design flow.

VSM Benefits
VSM has the following benefits:
Provides a complete visual flow (material and
information) to support decision making.
Highlights and exposes the wastes.
Demonstrates the close linkage between
information and material flow.
Develops a plan to eliminate waste and
continuous improvement.

VSM Process

Conduct on site study of the current process,

including 5M Man, Machine, Material, Method,
and Message.
Identify VA as well as NVA operations in order to
draw a visual Current State Map (CSM).
Identify wastes and bottleneck for lean
improvement .
After data collection and analysis, set up
challenging target with measurable indicators.
Use continuous improved idea with measurable
target using brainstorming to draw future state
map (FSM).
Perform gap analysis between CSM and FSM, one
can discover problems, and countermeasures to
implement, evaluate and follow-up problems.

VSM Measurable
FTT (first time through): Percentage of units that
complete a process and meet quality at the first
time. (Not scrapped, rerun, retested or returned)
BTS (build to schedule): Build to schedule reveals
how well a plant executes plans to build the right
products at the right time in the right sequence.
DTD (dock to dock time): Dock to dock time is the
elapsed time between unloading raw materials
and releasing finished goods for shipment.
OEE (overall equipment effectiveness): OEE is a
measure of the availability, performance
efficiency and quality rate of a piece of
equipment.

 Value rate: The percent of all value added time.

A/T: Available time (excludes meal time)Total
present time Break time.
T/T: Takt time (customer demand rate) Available
time/Schedule volume.
C/T: Cycle time (Available time Average down
time - Defects time)/Schedule volume.
W/T: Working time of each operator.
VA: Value added time (customer wishes to pay).
NVA: Non-value added time (normally includes
waste).

VSM Improving tools

Descriptions for improving tools:
Visual Factory, it is a visual management tool.
Quick Change Over, which is used to reduce
operation time or change over time
Error Proofing, it is a fool proofed device to prevent
defects.
Ford TPM, it is a total productive maintenance
program used for equipment improvement.
Safety, focus on safety and ergonomic
improvement.

VSM case study Ford Lio Ho Motor Company

Ford Lio Ho Motor Company is located in Chungli
city, Taiwan, is an affiliate of global Ford Motor
Company.
The main products include passenger car,
commercial car and SUV.
Ford Lio Hos vision is to become a competitive
company by applying new technology, improve
quality and human resource management.
Ford Lio Ho introduced Lean Manufacturing Design
(LMD) to the Initial Application Area (IAA) in 1990
and implement Ford Production System (FPS), based
on the lean production concept to achieve
continuous waste elimination.

Step I : Problem Finding

Collect the measurable indices from current
situation, such as FTT, OEE, C/T, W/T

Step (2). Idea finding

According to the above root causes, we define the task as:
1. Apply pull system concept to build sequential parts
feeding and JIT kanban to reduce NVA (pick up time) and
wastes (walking, waiting).
2. Set up error proofing devices and visual aids for critical
process control to promote the quality of first time
through.
3. Practice total productive management (TPM) to reduce
machine breakdown and use quick change over tool to
reduce setup time.

Step (3). Obstacle finding

The Five-Why analysis (5-why) is a logic diagram depicting

the cause and effect relationship for searching root cause
and generating the intermediate or final task.

Step (4). Solution finding

After identifying the obstacles and tasks, formulate the
solution for achieving future state map (FSM).
1. Identify working space for kitting and sequential
feeding,
2. Re-design sequential rack for common used,
3. Re-balance works to identify surplus manpower from
NVA reduction,
4. Set up JIT kanban for directly parts supply from
suppliers.
5. Set up error proofing devices and visual aids to promote
the quality of first time through (FTT).
6. Practice frequently TPM (total productive maintenance)
and apply quick change over to improve performance
for aging equipments to improve OEE.

Findings and
recommendations

Conclusion
This study shows how VSM supports the
lean supply chain and identifies potential
opportunities for continuous improvement
to eliminate waste.
NVA wastes were continuously eliminated
from the supply chain process which
resulted in a shortened lead time and
improvement in business performance.

ANY QUESTIONS ?