Kristu Jyoti College of Management and Technology

Post Graduate Department of Management studies

OPERATIONS MANAGEMENT
STUDY MATERIAL

Module V | MA HRM | 2nd Semester

Christin Mathew

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 MHRM
SUPPLY CHAIN MANAGEMENT & LEAN SYSTEMS
Module -V

Supply Chain Management: Introduction, Definition, Meaning, Importance, Objectives,

Features, Strategies, Techniques
Contents:
 Introduction to Supply Chain Management
 Definition of Supply Chain Management
 Meaning of Supply Chain Management
 Scope of Supply Chain Management
 Importance of Supply Chain Management
 Features of of Supply Chain Management
 Principles of Supply Chain Management
 Objectives of Supply Chain Management
 Strategies of Supply Chain Management
 Techniques of Supply Chain Management
Introduction to Supply Chain Management
Creating a customer is a major task of marketing. But delivering the goods to the customer so
created is the most critical task. If the product is not available when and where the consumer wants
it, it is sure to fail in the market. And it is this function, that of making available the product at the
place that the consumer wants it, at the time that he wants, which is carried out by the physical
distribution mix, or the place mix. Modern day marketing also calls this function as Supply Chain
Management.
Supply Chain Management -Definition
“Supply chain management is the integration of businesses from end user through original
suppliers that provides products, services, and information that add value for customers.”
“A supply chain is a network of facilities and distribution options that performs the functions of
procurement of materials, transformation of these materials into intermediate and finished
products, and the distribution of these finished products to customers.”
Supply Chain Management -Meaning
SCM has come to focus on the need to look comprehensively at the flow of value delivery to a
customer. Value is delivered through the defined business activity of the organisation in the form of
goods and services. Apart from the value flow, there are two associated flows in a supply chain –
information flow and cash flow.
Scope of Supply Chain Management
Supply Chain Management includes, planning, design, control and implementation of all business
processes related to procurement, manufacturing, distribution and sales order fulfillment functions
of a business. Thus Supply Chain Management includes managing supply and demand, sourcing raw

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materials and parts, manufacturing and assembly, warehousing and inventory tracking, order entry
and order management, distribution across all channels, and delivery to the customer.
Importance of Supply Chain Management
It is said that, today, the supply chain management system is the back-bone of a business
organisation. This statement itself shows how important a component of business, is the supply
chain and its management. Whenever a product is introduced and advertised in the market, a
demand for the product is created. It is at this point that the consumer enquires about the product
in various available retail/wholesale outlets.
At this point it is very essential that the entire market in the country and all the sales counters have
the product, where the customer is able to buy and take delivery. If for any reason the product is
not available at the right place and the right time, it can result in a drop in the customer’s interest
and customer demand. This can have a disastrous effect on the success of the product.
Thus a proper Transportation network design and management is of great importance, as a support
to the sales and marketing strategy. In fact it can be said that without proper transportation
network design and management, there is no way that the sales and marketing strategy can
succeed. Thus it is an effective supply chain management that will ensure an effective Market
Coverage and the availability of the right product at the right places across various locations in the
country.
Another reason why supply chain management is important is because inventory control and
inventory visibility are the two critical elements in any business operation. Inventory control and
visibility have a direct impact on the cost of production and hence a direct impact on the
profitability of the organisation. The lesser the capital locked up in inventory the more will be the
profitability and vice versa.
However visibility of inventory is also a factor that has to be considered. The two have to be
balanced and the right or optimum inventory turnaround has to be established. Every company has
a standard for inventory turnaround that is ideal or optimum for the particular business. Inventory
turnaround is the number of times the inventory is sold and replaced during a particular period.
This period is usually twelve months.
Today inventory or stock of finished goods is held at many distribution centers, wholesale and
retail locations across the country. These may or may not be managed by the organisation itself.
Some could be managed by third parties. Inventory could also be in the pipeline in transportation.
Any loss of inventory anywhere in the supply chain will result in a loss. As such the effective control
of inventory is an important factor of the supply chain management function.
Fundamental Features of Supply Chain Management
Feature # 1. Single Entry:
For various planning and control functions across the supply chain, the responsibility will lie with
single entity. For example, a group consisting of representatives from purchase, manufacturing,
distribution and sales could be the entity for finalising the marketing plan, the despatch plan, the
production plan and procurement plan. This will reduce administrative delays and improve
empathy across the supply chain.

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Feature # 2. Inventory Perspective:
The traditional concept of inventories is to serve as a buffer to reduce coordination requirements
across activities. The current concept is that inventory is a buffer to be used as a last resort after
ensuring proper information sharing and coordination. For example rather than quantify the
appropriate inventory to protect oneself against uncertain process yields, working with lower
inventories will highlight the top problem areas where efforts for improving process yields need to
be focused.
Feature # 3. Strategic Decision-Making:
The decisions in the supply chain are viewed as having strategic implications rather than just
operational. For example, rather than being concerned with just sourcing trucks from the market,
one could consider long-term contracts with transporters.
Feature # 4. Systems Approach:
The supply chain from vendor to customer is looked upon as a single integrated system rather than
as many subsystems interfacing with each other.
Feature # 5. Doing what One can do Best:
In the various activities of the supply chain, it is important to focus on what one can do best. This
has implications on outsourcing or even insourcing and building effective partnerships. The more
extensive the logistics requirements and the more uncertainty due to logistics supply, insourcing
would be a right direction; otherwise the general norm in this business today is outsourcing,
usually in the case of consumer goods.

Important Principles of Supply Chain Management –

 Principle 1: Segment customers based on the service needs of distinct groups and adapt the
supply chain to serve these segments profitably.

 Principle 2: Customize the logistics network to the service requirements and profitability
of customer segments.

 Principle 3: Listen to market signals and align demand planning accordingly across the
supply chain, ensuring consistent forecasts and optimal resource allocation.

 Principle 4: Differentiate product closer to the customer and speed conversation across the
supply chain.

 Principle 5: Manage sources of supply strategically to reduce the total cost of owning
materials and services.

 Principle 6: Develop a supply chain-wide technology strategy that supports multiple levels
of decision making and gives clear view of the flow of products, services, and information.

 Principle 7: Adopt channel-spanning performance measures to gauge collective success in

reaching the end-user effectively and efficiently.

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Main Objectives of Supply Chain Management
“The goal of logistics and supply chain management is timely delivery, competitive pricing, mobility,
and flexibility, together with innovative transportation services”.
The basic objective of supply chain management is to ensure minimum cost and maximum
efficiency in every aspect of handling of raw material, component parts and finished goods as they
move from production centre to the final consumer.
Effective supply chain bridges the following gaps that exist between the producer and the
consumer:
(a) Space Gap:
This is the gap caused by the manufacturers and consumers being situated physically away from
each other. Here supply chain moves the goods physically from the point of production to the point
of distribution and fills the space gap. It is a supply chain management system that ensures that
goods produced in one particular place are available for consumption to consumers at their right
place.
(b) Time Gaps:
This is the gap that results because the manufacture of a product takes place at one point in time
however it is required by the consumer at another point in time. Example – sugar is manufactured
just after the harvest of sugarcane and beetroot. However sugar is demanded throughout the year.
Thus the supply chain ensures that excess manufactured product is properly stored when not
required and makes it available when required. It thus fulfills the time gap.
(c) Quantity Gap:
Quantity gap is the difference between the quantities produced and demanded. Certain products, in
order to be profitable have to be manufactured in large quantities. However the demand is limited
and spread over a period of time. For example a publisher cannot publish a small quantity of books.
For the cost of production to be feasible, a particular number of copies of a particular book need to
be published. However the sale is only of a copy per consumer. Thus this quantity gap too is taken
care of by an effective supply chain management system.
(d) Variety Gap:
Customers usually want a variety of products. The more the customer for a product the more
variety is demanded. It is an effective supply chain management system that fills this variety gap
and ensures a wide variety of goods for the customers.
(e) Information Gap:
It is the supply chain that bridges this gap. An information gap exists when either the supplier or
the consumer does not have information about the other. That is the supplier lacks information
about who or where is his consumer and the consumer lacks information about the various
available options that are available to fulfil his product need. Here supply chain supplies the
information and bridges this gap.

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Basic Components of Supply Chain Management
1. Demand planning and forecasting
2. Demand collaboration, i.e., collaborative resolution process to determine consensus forecasts.
3. Order promising, i.e., when can one promise a product to a customer taking account lead times
and constraints.
4. Strategic network optimization, i.e., what plants and distribution channels should serve, what
markets for what products whether monthly — yearly.
5. Production and distribution planning, i.e., coordinate the actual production and distribution
plans for a whole enterprise may be on a daily basis.
6. Production scheduling.
7. Plan of reduction of costs and management of the performance, i.e., diagnosis of the potential and
the indicators, the organization, evaluation and accounting reporting, evaluation and reporting
quality, etc.
Strategies of Supply Chain Management –
Four different strategies can be identified:
(i) Rationalization Strategy
(ii) Synchronization Strategy
(iii) Customization Strategy, and
(iv) Innovation Strategy.
Of course in practice, most firms follow a supply chain strategy that involves a combination of these
strategies, placing varying levels of emphasis on each.
(i) Rationalization Strategy:
Rationalization strategy places greater emphasis on process rationalization that eventually leads to
better net margin. Such a strategy involves closely assessing the processes and working out ways of
reducing wastage wherever possible. It emphasizes on operating expense management, without
reducing customer service.
Examples of execution of rationalization strategy would involve reducing the number of
warehouses or less than full truck load transportation. Typical elements of the rationalization
strategy would involve devices such as transportation optimization, lean manufacturing, and
electronic data interchange (EDI). In this sense this strategy is more traditional than other supply
chain strategies such as synchronization and innovation.
(ii) Synchronization Strategy:
Synchronization strategy involves streamlining the supply chain process so that there is a
flaw¬less, reliable execution of the supply chain process. Synchronization also places emphasis on
cost reduction, not just through process rationalization but by efficiency managing the assets.
Synchronization strategy involves elements such as collaborative inventory management, perfect
order fulfilment, anchor players, and optimal inventory placement. One of the most popular supply

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chain practices that follow from synchronization strategy is JIT inventory management. Both
rationalization and synchronization strategies have the same goal—cost reduction. However, the
two seek to achieve it through different means.
(iii) Customization Strategy:
Customization strategy involves developing specific strategies for profitable customers and
executing it with a view to establishing a long-term relationship with them. Customization
stra¬tegy is associated with responsiveness and flexibility. Responsiveness is measured in terms of
the ‘Velocity’ with which the supplier provides products to the customer, and flexibility is measured
in terms of the ‘agility’ with which the supplier responds to the changing needs of the customer.
The elements of customization strategy involve mass customization, lifetime relationships,
customer profitability management, customer knowledge management, and value analysis.
(iv) Innovation Strategy:
Innovation strategy is different from the principle of innovation—considered as a basic principle of
SCM. The supply chain innovation strategy involves exploiting the competitive advantage generated
by a strong supply chain to introduce successful new products in the market at a much higher rate
than competitors.
Implementing a supply chain strategy essentially boils down to involving the supply chain partners
in developing new products and integrating the supply chain processes among all partners to such
an extent that it becomes possible to constancy innovate and produce new products with
collaboration from tier 1 as well as tier 2 suppliers.
For a company like Apple, developing a constant stream of new products involves working closely
with their partners in research and development (R&D) and other associated activities. The
elements of the innovation strategy involve concurrent product development, rapid and early
prototyping, early supplier involvement, and designing for the supply chain.
Essential Techniques of Supply Chain Management
Any supply chain strategy can be implemented only through strong supply chain techniques. These
techniques form the backbone of the supply chain strategy implementation. Supply chain
techniques are the bunch of activities that the SCM process should incorporate, in order to achieve
the objectives set in the SCM strategy. Supply chain techniques underlie all the elements of the
supply chain strategies. Whichever supply chain strategy is emphasized, supply chain techniques
require adequate attention and application.
According to Jacoby (2010), the essential supply chain techniques are as follows:
Technique # 1. Supply Chain Network Design:
Network design is probably the most critical part of the supply chain management. To achieve the
optimum supply chain performance, it is necessary to establish a purposeful network design
characterized by an optimum division of activities and responsibilities.
Technique # 2. Capacity Planning:
Capacity planning is associated with the ability of the network to respond to changing demand
patterns and market conditions. Ideally, the supply chain strategies should lead to an optimum
utilization of the infrastructure and other facilities.

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Technique # 3. Risk Management:
Supply chain management requires a seamless, delicate integration of hund¬reds of supply and
processing points. Often, these processing points are separated by thousands of kilometers. It is
only with perfect and accurate coupling, that cost and time advantage in a supply chain can be
realized. However, such a coupling also leads to potential risks. Disruption in any one of these
points could translate into a system-wide disruption.
Technique # 4. Organizational Change Management:
Ultimately, SCM is also an organizational process invol¬ving organizational players including
departments, teams, and informal groups. Embracing SCM involves profound changes within the
organization, including the way activities are organized and personnel interact.
Technique # 5. Performance Measurement and Monitoring:
Developing and implementing performance moni¬toring processes is also very crucial to the
success of a SCM strategy. Erroneous performance metrics, or faulty measurement methodology
could completely derail a well thought out SCM strategy. Performance metrics and measurement
provides the crucial feedback that guides the SCM strategy.
Supply Chain Management Processes

 Planning – the plan process seeks to create effective long- and short-range supply chain
strategies. From the design of the supply chain network to the prediction of customer
demand, supply chain leaders need to develop integrated supply chain strategies.
 Procurement – the buy process focuses on the purchase of required raw materials,
components, and goods. As a consumer, you're pretty familiar with buying stuff!
 Production – the make process involves the manufacture, conversion, or assembly of
materials into finished goods or parts for other productsDistribution – the move process
manages the logistical flow of goods across the supply chain. Transportation companies,
third party logistics firms, and others ensure that goods are flowing quickly and safely
toward the point of demand.
 Customer Interface – the demand process revolves around all the issues that are related to
planning customer interactions, satisfying their needs, and fulfilling orders perfectly.

Elements of Supply Chain Management

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 Plan: It represents a strategic segment of the supply chain management, as you require some sort
of strategy to manage resource utilization for satisfying customer requirements, for goods and
services.
 Source: Selecting the suppliers for supplying raw material to produce the product.
 Make: This segment is all about the production which schedules all the operations essential for
production, testing, packaging, labelling, etc.
 Deliver: It indicates logistics, which starts with the receipt of orders from the customer. Further, it
builds a network of warehouses for storing the product, choosing carriers to deliver the product to
the customer and establishing a system for receiving payments.
 Return: This is the most critical part of the entire system, wherein a network is created to take
back excess or defective products delivered to customers and also providing support services to
those who encounter some problem with its usage.
Types of Supply Chain

 Push Model: In this model, the actual demand determines the inventory to be produced. So, it is
concerned with the individual customer, and it has a marketing-oriented approach.

 Pull Model: As per this model, the customer places the order first, after that the manufacturing of
the product is done. It has a customer-oriented approach.

In a nutshell, Supply Chain Management is nothing but the unification of core business functions,
from the final consumer through suppliers, that supplies goods, services and information, that
assist in the value addition of customers and other parties.

What is supply chain disruption?

In the dictionary, disruption is defined as “disturbance or problems that interrupt an event, activity,
or process.” So, a supply chain disruption definition is a breakdown in the manufacture flow of
goods and their delivery to customers. While the “broken link in a chain” analogy worked in the
past, today’s complex supply networks are rarely so straightforward. You might think of supply

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 chain coordination as more like cogs in a machine that need mesh simultaneously. So, disruption
makes everything stop at once – the proverbial wrench in the works.
What is supply chain disruption management?

To manage supply chain disruptions effectively, you must be able to react immediately when
adverse events strike your operations. Here are few key steps:
 Quickly assess critical events
 Identify any risks related to delivery of goods from your suppliers
 Evaluate the viability of your suppliers
 Secure supply, and ensure that you can meet customer commitments

Particularly following the coronavirus outbreak, many enterprises are realizing that it is not enough
to optimize the cost of supply chain operations. No matter how finely tuned a machine is, disruption
will happen, and the cost of reacting to events is usually many times higher than being ready for
them.

What is supply chain disruption risk?

To clarify a few terms briefly in this context, a threat is an event that could harm your supply
network. A risk is the potential for loss or damage resulting from the threat. Using our idiom, the
wrench is the threat. The risk is that someone could drop the wrench into the machine. Then the
cogs of the machine will stop, and the machine will break down. This causes all kinds of costs,
including repairing the machine, lost production time, and so on. Identifying supply chain
disruption risk is therefore identifying what could go wrong in your supply network, and the extent
of damage when it happens.

Six causes of supply chain disruption

Supply chains are commonly vulnerable to these six risk categories:

1. Cyber and security (such as ransomware, data theft)

2. Financial and company viability (for example, force majeure, revenue outlook)

3. Geopolitical (such as civil unrest, tariff hikes)

4. Man-made (including fires, explosions)

5. Natural disaster (extreme weather, earthquakes, etc.)

6. Reputational and compliance and (such as conflict of interest, sustainable procurement)

What Should You Do When You Experience Supply Chain Disruption?

1. Reference Your Emergency Situation Plan

What happens when a bridge on your driver’s route collapses? Or a river overflows? What happens
if a supplier is in the middle of a snowstorm and loses power? These “what if" scenarios are
numerous, and though many may seem unlikely to occur, it’s still good to have a contingency plan in

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place. Planning out alternate routes, nearby suppliers, and different shipping and inventory options
can help mitigate the headache you receive when in the middle of an unexpected crisis.

2. Have End-to-End Visibility

According to a study by the Business Continuity Institute, 72% of suppliers who have dealt with a
breakdown in their supply chains have lacked the full visibility needed to come up with a fast and
simple solution. Don’t make the same mistake. Having a thorough and complete understanding of
every element of your supply chain, and the contingency plans set in place from your suppliers, will
help you plan ahead and properly respond when a disruption occurs.

3. Create Open Lines of Communication

In the middle of a crisis, there are lots of things that have to be done. Keeping everyone on the same
page is one of them. If you need to temporarily reprioritize your operations in-house, let your
employees know.

4. Ensure Customer Satisfaction

Hopefully, your customers won’t notice any setback in the supply chain. But in case they do, that
open line of communication we just spoke of needs to extend to them. During an economic
downturn, it's important to let them know if your supply chain has been affected and what you are
doing to address it. Transparency is vital, especially if you hope to have this customer repeat their
order.

5. Supply Chain Vulnerability Audit

Again, mistakes happen. Not every situation can be avoided. And if the challenge you experienced
was unexpected and unaccounted for, it may be time to perform a vulnerability audit. Though it
may take some time away from your regular operations, it’s the first step in preparing for future
surprises. You should evaluate if your solution was worth replicating or if there is a more efficient
way.

6. Document Response Procedures

It may go without saying, but after performing your vulnerability audit, make sure to update your
emergency plan. Document the situation and solution for future reference, should this particular
disruption ever happen again.

Lean manufacturing (lean production)

Lean manufacturing is a methodology that focuses on minimizing waste within manufacturing

systems while simultaneously maximizing productivity. Waste is seen as anything that customers
do not believe adds value and are not willing to pay for. Some of the benefits of lean manufacturing
can include reduced lead times, reduced operating costs and improved product quality.

Lean manufacturing, also known as lean production, or lean, is a practice that organizations from
numerous fields can enable. Some well-known companies that use lean include Toyota, Intel, John

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Deere and Nike. The approach is based on the Toyota Production System and is still used by that
company, as well as myriad others. Companies that use enterprise resource planning (ERP) can also
benefit from using a lean production system.

Lean manufacturing is based on a number of specific principles, such as Kaizen, or continuous

improvement.

Lean manufacturing was introduced to the Western world via the 1990 publication of The Machine
That Changed the World, which was based on an MIT study into the future of the automobile
detailed by Toyota's lean production system. Since that time, lean principles have profoundly
influenced manufacturing concepts throughout the world, as well as industries outside of
manufacturing, including healthcare, software development and service industries.

Five principles of lean manufacturing

A widely referenced book, Lean Thinking: Banish Waste and Create Wealth in Your Corporation,
which was published in 1996, laid out five principles of lean, which many in the field reference as
core principles. They are value, the value stream, flow, pull and perfection. These are now used as
the basis for lean implementation.

1. Identify value from the customer's perspective. Value is created by the producer, but it is
defined by the customer. Companies need to understand the value the customer places on their
products and services, which, in turn, can help them determine how much money the customer is
willing to pay.

2. Map the value stream. This principle involves recording and analyzing the flow of information
or materials required to produce a specific product or service with the intent of identifying waste
and methods of improvement. Value stream mapping encompasses the product's entire lifecycle,
from raw materials through to disposal.

3. Create flow. Eliminate functional barriers and identify ways to improve lead time. This aids in
ensuring the processes are smooth from the time an order is received through to delivery. Flow is
critical to the elimination of waste. Lean manufacturing relies on preventing interruptions in the
production process and enabling a harmonized and integrated set of processes in which activities
move in a constant stream.

4. Establish a pull system. This means you only start new work when there is demand for it. Lean
manufacturing uses a pull system instead of a push system.

5. Pursue perfection with continual process improvement, or Kaizen. Lean manufacturing

rests on the concept of continually striving for perfection, which entails targeting the root causes of
quality issues and ferreting out and eliminating waste across the value stream.

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Seven lean manufacturing tools and concepts
Lean manufacturing requires a relentless pursuit of reducing anything that does not add value to a
product, meaning waste. This makes continuous improvement, which lies at the heart of lean
manufacturing, a must.

Other important concepts and processes lean relies on include:

 Heijunka: production leveling or smoothing that seeks to produce a continuous flow of

production, releasing work to the plant at the required rate and avoiding interruptions.
 5S: A set of practices for organizing workspaces to create efficient, effective and safe areas for
workers and which prevent wasted effort and time. 5S emphasizes organization and
cleanliness.
 Kanban: a signal used to streamline processes and create just-in-time delivery. Signals can
either be physical, such as a tag or empty bin, or electronically sent through a system.
 Jidoka: A method that defines an outline for detecting an abnormality, stopping work until it
can be corrected, solving the problem, then investigating the root cause.
 Andon: A visual aid, such as a flashing light, that alerts workers to a problem.
 Poka-yoke: A mechanism that safeguards against human error, such as an indicator light that
turns on if a necessary step was missed, a sign given when a bolt was tightened the correct
number of times or a system that blocks a next step until all the previous steps are completed.
 Cycle time: How long it takes to produce a part or complete a process.
Lean vs. Six Sigma
Six Sigma is an approach to data-driven management, similar in nature to lean, which seeks to
improve quality by measuring how many defects there are in a process and eliminating them until
there are as little defects as possible.

Both lean and Six Sigma seek to eliminate waste. However, the two use different approaches since
they address the root cause of waste differently.

In the simplest terms, where lean holds that waste is caused by additional steps, processes and
features that a customer doesn't believe adds value and won't pay for, Six Sigma holds that waste
results from process variation. Still, the two approaches are complementary and have been
combined into a data-driven approach, called Lean Six Sigma.

The Push System of Inventory Control

The push system of inventory control involves forecasting inventory needs to meet customer
demand. Companies must predict which products customers will purchase along with
determining what quantity of goods will be purchased. The company will in turn produce enough
product to meet the forecast demand and sell, or push, the goods to the consumer.

An example of a push system is Materials Requirements Planning, or MRP. MRP combines the
calculations for financial, operations and logistics planning. It is a computer-based information

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system which controls scheduling and ordering. It's purpose is to make sure raw goods and
materials needed for production are available when they are needed.

Disadvantages of the Push System

Disadvantages of the push inventory control system are that forecasts are often inaccurate as
sales can be unpredictable and vary from one year to the next. Another problem with push
inventory control systems is that if too much product is left in inventory. This increases the
company's costs for storing these goods. An advantage to the push system is that the company is
fairly assured it will have enough product on hand to complete customer orders, preventing the
inability to meet customer demand for the product.

Pull System of Inventory Control

The pull inventory control system begins with a customer's order. With this strategy, companies
only make enough product to fulfill customer's orders. One advantage to the system is that there
will be no excess of inventory that needs to be stored, thus reducing inventory levels and the cost
of carrying and storing goods.

An example of a pull inventory control system is the just-in-time, or JIT system. The goal is to
keep inventory levels to a minimum by only having enough inventory, not more or less, to meet
customer demand. The JIT system eliminates waste by reducing the amount of storage space
needed for inventory and the costs of storing goods.

Disadvantages of the Pull System

One major disadvantage to the pull system is that it is likely that a company will run into ordering
dilemmas, such as a supplier not being able to get a shipment out on time. This leaves the
company unable to fulfill the order and contributes to customer dissatisfaction.

Push-Pull System

Some companies have come up with a strategy they call the push-pull inventory control system,
which combines the best of both the push and pull strategies. Push-pull is also known as lean
inventory strategy. It demands a more accurate forecast of sales and adjusts inventory levels
based upon actual sale of goods. The goal is stabilization of the supply chain and the reduction of
product shortages which can cause customers to go elsewhere to make their purchases. With the
push-pull inventory control system, planners use sophisticated systems to develop guidelines for
addressing short - and long-term production needs.

Jidoka
By definition, Jidoka is a Lean method that is widely adopted in manufacturing and product
development. Also known as autonomation, it is a simple way of protecting your company from
delivering products of low quality or defects to your customers while trying to keep up your takt
time.
Jidoka relies on 4 simple principles to ensure that a company would deliver defect-free products:

1. Discover an abnormality
2. Stop the process

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 3. Fix the immediate problem
4. Investigate and solve the root cause

These 4 steps can be applied in various ways depending on your industry and can serve as a steady
foundation for achieving continuous improvement of your process.
The purpose of Jidoka is to free equipment from the necessity of constant human attention,
separate people from machines and allow workmen to staff multiple operations. This has important
psychological and practical effects that contribute greatly to “Continuous Improvement.

What is 5S?

5S is a system for organizing spaces so work can be performed efficiently, effectively, and safely.
This system focuses on putting everything where it belongs and keeping the workplace clean, which
makes it easier for people to do their jobs without wasting time or risking injury.

5S Translation

The term 5S comes from five Japanese words:

 Seiri
 Seiton
 Seiso
 Seiketsu
 Shitsuke

In English, these words are often translated to:

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  Sort
 Set in Order
 Shine
 Standardize
 Sustain
The Origins of 5S – 5S & Lean Manufacturing

5S began as part of the Toyota Production System (TPS), the manufacturing method begun by
leaders at the Toyota Motor Company in the early and mid-20th century. This system, often
referred to as Lean manufacturing in the West, aims to increase the value of products or services for
customers. This is often accomplished by finding and eliminating waste from production processes.

Lean manufacturing involves the use of many tools such as 5S, kaizen, kanban, jidoka, heijunka,
and poka-yoke. 5S is considered a foundational part of the Toyota Production System because until
the workplace is in a clean, organized state, achieving consistently good results is difficult. A messy,
cluttered space can lead to mistakes, slowdowns in production, and even accidents, all of which
interrupt operations and negatively impact a company.

By having a systematically organized facility, a company increases the likelihood that production
will occur exactly as it should.

Benefits of 5S

Over time, the 5S methodology leads to many benefits, including:

 Reduced costs

 Higher quality

 Increased productivity

 Greater employee satisfaction

 A safer work environment

WHAT IS TPM?

TPM (Total Productive Maintenance) is a holistic approach to equipment maintenance that strives
to achieve perfect production:

 No Breakdowns
 No Small Stops or Slow Running
 No Defects

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 Why use the TPM Total Preventative Maintenance technique?

 Improved operational efficiency, reliability & quality

 Lowers operating costs
 Allows the business to better meet the customer’s quality and delivery needs
 Improves machine life and thus helps the business long-term
 Empowers staff and teaches the team new skills
 Allows highly trained maintenance staff to focus on value-adding work

For a detailed look at the benefits of the TPM technique and how it can be implemented in your
business why not speak to a specialist today

Toyota Production System (TPS)

The most noteworthy method to come from this time is now known as the Toyota Production
System, or TPS. Taiichi Ohno and Eiji Toyoda, two Japanese industrial engineers largely considered
to be the founders of the Toyota system, summarized the system with these three objectives:

 Design out muri (overburden)

 Design out mura (inconsistency)

 Eliminate muda (waste)

TPS explicitly defines eight types of waste, which provides a helpful framework that continues to be
relevant in Lean manufacturing to this day:

 Waste of overproduction

 Waste of time on hand (waiting / idle time)

 Waste of transportation

 Waste of processing

 Waste of excess inventory

 Waste of movement

 Waste of making defective products

 Waste of underutilized workers

The Toyota Way includes 14 principles, which are often organized into these four main
ideas:

1. Long-Term Philosophy: Make management decisions based on long-term philosophy, even at the
expense of short-term financial goals.

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2. The Right Process Will Produce the Right Results: A relentless emphasis on process is critical for
sustainably delivering value. This means creating a continuous process flow, using a “pull” system
instead of a “push” system (as we’ll explain later), balancing capacity and demand, standardizing
repeatable tasks and processes, and creating a culture of “stopping the line” when errors occur, so
that problems can be fixed as soon as they arise.

3. Add Value to the Organization by Developing Your People: People are an organization’s greatest
asset. Invest in them, support them, encourage their growth, and treat them with respect by
continuously working to improve the environment in which they operate. This includes employees,
customers, vendors, and suppliers.

4. Continuously Solving Root Problems Drives Organizational Learning: Every “mistake” is a teachable
moment. By analyzing, studying, and openly discussing when and how things go wrong,
organizations can learn and grow. The role of leaders is to prioritize learning over perfection – to
experience and problem solve issues as they arise, and share learnings so that the same mistakes
are not repeated.

All four of these concepts can be found in modern implementations of Lean manufacturing.
However, throughout the twentieth century, TPS concepts were often left out as companies formed
their own ideas of how Lean manufacturing could contribute to their success.

Poka Yoke
Poka Yoke is a Japanese phrase that means error prevention. It was developed in the sixties of the
previous century by Shigeo Shingo from Japan. He was an engineer at the Toyota car
factory. Toyota is still the most famous multinational business using Poka Yoke today.

Poka Yoke is used to prevent and resolve defects during the production process, eliminating the
need for quality control after the process. Poka Yoke is a frequently used method in Lean
Manufacturing and Six Sigma to ensure as little errors in a production process as possible. A ‘poka’
is an ‘inadvertent error’ and ‘yokeru’ is Japanese for ‘preventing’. Poka-Yoke is any mechanism in a
Lean manufacturing process that helps to avoid mistakes. Its purpose is to eliminate product
defects by preventing, correcting, or drawing attention to human errors as they occur.
Stages in Poka-Yoke

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What Is Kanban?
Kanban is an inventory control system used in just-in-time (JIT) manufacturing. It was developed
by Taiichi Ohno, an industrial engineer at Toyota, and takes its name from the colored cards that
track production and order new shipments of parts or materials as they run out. Kanban is the
Japanese word for sign, so the kanban system simply means to use visual cues to prompt the action
needed to keep a process flowing.

Decreasing the size or number of kanbans within the system will increase the systems sensitivity to
changes or problems. This is often the best way to highlight issues within the process and to drive
improvements.

Implementing a Kanban System means that:

 Earlier processes never push production onto later processes

 Nothing is ever made without Kanban authority
 Nothing is made if there are no Kanbans
 You have to be able to identify defects as close to the source as possible
 You cannot operate with large batches or lots of plan changes
 Where possible demand should be smoothed

Ideal Environment for Kanban Implementation

The following are the ideal conditions required for the use of Kanban.

 Regular demand from the customer; if your customer demand is highly irregular and
difficult to predict it can be hard to hold Kanban stocks in the traditional supermarket style.
You may end up holding larger than necessary stock and work in progress levels without
some careful thought about organizing your system.
 Low product variation; if you make many hundreds or even thousands of different
products then you will not want to hold stocks of them all as this could easily increase the
amount that you hold.
 Clear flow; facilities that are organized in a silo style with all similar processing being done
in one location are hard to control with a kanban system; although not impossible by any
means. A better arrangement is one in which all processes are organized together to
provide a flow line or cell.
 Small dedicated machines; many companies will invest in large all singing all dancing
machines that will service all products that they make.
 Quick changeovers; many machines and processes can take a long time to set up to run a
new product or variant. This again drives large batches and can create significant
bottlenecks within your production. The use of Single Minute Exchange of Die (SMED)
techniques can make a significant impact in this area.
 Repeatable and reliable processes; if machines are prone to breaking down and
processes are not repeatable then it will be hard to control any form of production system
let alone Kanban..
 Reliable suppliers; your suppliers are a vital part of your process and you will need to
ensure that they are able to support the kanban processes that you wish to implement
reliably.

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