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Lean manufacturing is often characterized by high ve­locity in product manufacturing, and achieved when pro­cess changes lead to reduced lead times, shorter time to market, and improved on-time delivery. Lean manufac­turing targets increased efficiency, reduced waste, faster cycle time, and improved quality. Increased shipment lin­earity occurs as actual shipments match planned ship­ping volumes—"hockey stick" shipment spikes are minimized. Lean manufacturing can lower overall enter­prise infrastructure costs (including overhead and costs below the gross margin line). Point-of-use (POU) delivery (direct from supplier to the using factory floor/work center location) and outsourcing are two demand-based tech­niques to help achieve lean manufacturing.


Outsourcing and POU are two tools that can achieve


      decreased product cycle times (produc­
tion activities are concurrent versus se­

      lower supply chain costs (fewer purchase
orders, receipts, parts tracking, and

      optimized direct labor headcount and
floor space cost control

      an external buffer to ramp up or down
as business volumes change

      better focus on core competencies

      lower indirect material costs (lower in­
ventory holding costs)

      higher inventory turns, improved cash
flow, and reduced working capital needs

      improved ability to make part delivery
problems visible

      reduced lead time variability via fixed
supplier delivery schedules.


Sales and marketing provide forecasts to the master scheduler, who prepares a planning

bill of materials. This planning bill of material should identify annual percentages for high-usage parts and subassemblies (where 100 percent is high usage, 50 per­cent is average usage, and minimum thresholds need to be established). Purchasing identifies suppliers of high-usage parts and subassemblies, and negotiates to build up minimum supplier-managed inventory balances.

If parts are currently delivered to a warehouse, an as­sessment is made as to whether parts can directly move from the supplier's dock to the factory floor (POU). If subassembly parts are delivered to a warehouse, stored,

pulled, integrated, and tested, an assessment of out­sourcing can be made.

The most capable suppliers are qualified for POU or outsourcing. Performance targets for delivery, qual­ity, and pricing are negotiated. The supplier is trained, first articles are built and inspected, and conversion to POU or outsourcing occurs. Supplier performance is monitored and reviewed (measuring both on-time de­livery and quality). Floor stock is a subset of POU de­livery. Figure 1 outlines a possible process planning flowchart.

When planning for outsourcing and POU possibili­ties, evaluate current orders and forecasts at a regular (monthly or quarterly) interval. Create a planning bill of material to identify high-usage parts and assemblies by percentage. High-usage parts and assemblies should be candidates for POU and outsourcing. Conduct a cross-functional review with marketing, engineering, the master scheduler, production control, manufacturing, purchasing, and quality. Assess the timing and impact of engineering change orders (ECOs)—(use as is, modify, or scrap parts being replaced).

Tie POU and outsourcing strategies together to re­duce cycle times. Synchronize external factory deliver­ies to maximize production efficiency. Review the existing factory floor layout and, when necessary, change layouts to ensure efficient supplier delivery to a main flow line.

To Be Continued

For balance of this article, click on the below link:

Lean Manufacturing Articles and click on Series 13


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