Contents
Introduction: What the Book Is All About………………………………….xvii
Reader’s Guide…………………………………………………………………………. xxv
About the Author and the Motivation for This Book………………. xxxiii
Acknowledgments……………………………………………………………….. xxxvii
Part I Why LEAN SCM Today?
Chapter 1 Supply Chain Management in Process Industries………… 3
1.1 Supply Chain Management Must Master the VUCA World………….5
1.1.1 Supply Chain Management Orchestrates
Global Functions and Networks……………………5
1.1.2 Key Pain Points in Supply Chain Organizations Today……………………6
1.1.3 Why Leadership is Concerned about the Impact of Volatility……………………7
1.2 Supply Chain Planning in the VUCA World Today…… 8
1.2.1 Planning and Control as the Backbone
of Supply Chain Management……………………….9
1.2.2 The VUCA World Poses New Challenges
to Supply Chain Planning……………………………11
1.2.3 Today’s Supply Chain Planning Approaches and Their Limitations………..17
1.3 Why We Need a Paradigm Shift in Supply Chain Planning Now…………..21
1.3.1 Traditional Planning Approaches Fail to Deal with the VUCA World….22
1.3.2 Common Lean Approaches are Insufficient for Global Supply Chain
Synchronization…………………………………………..27
1.3.3 How to Back Out of the Dead End
of Today’s Planning……………………………………..32
Chapter Summary…………………………………………………………….35
Chapter 2 Guiding Principles of LEAN SCM Planning: Facing
VUCA Challenges……………………………………………………. 37
2.1 LEAN Demand: How to Cope with Rising
Demand Variability…………………………………………………37
2.1.1 Accept Uncertainty and Eliminate the
Need for Certainty in Execution………………….38
2.1.2 A View of Aggregated Demand: Be
Prepared for Consumption-Driven Supply……………….39
2.1.3 Stop Using Forecasts to Trigger
Manufacturing: Respond to Real
Consumption………………………………………………41
2.2 LEAN Supply: How to Get a Grip on Supply
Uncertainty and Reliability……………………………………. 43
2.2.1 Manage Demand Spikes with Planned
and Right-Sized Safety Stock Buffers………….. 43
2.2.2 Level Production Plans to Create Flow
and Stabilize Utilization………………………………45
2.2.3 Use Cyclic Production Patterns to
Achieve a Common Takt and Regularity…… 46
2.3 LEAN Synchronization: How to Master
Complexity and Ambiguity…………………………………… 48
2.3.1 Separate Planning to Slice Complexity
for End-to-End Synchronization………………….49
2.3.2 “Parameter-Driven” End-to-End Supply
Chain Planning……………………………………………50
2.3.3 Establish Visibility and a Collaborative
Environment for Synchronization……………….51
Chapter Summary…………………………………………………………….53
Chapter 3 Fundamentals of LEAN SCM Planning: A
Paradigm Shift in Planning………………………………………. 55
3.1 What Is the Most Suitable Supply Chain
Planning Approach to Follow?………………………………. 56
3.1.1 The Lean Supply Chain is More about
Waste Elimination and Cost Efficiency………. 56
3.1.2 The Agile Supply Chain is More about
Responsiveness and Customer Service…………57
3.1.3 The Resilient Supply Chain Is More
about Risk- Avoidance and Robustness………..58
3.1.4 Trade-Offs among the Common
Paradigms in Supply Chain Management……59
3.1.5 How LEAN SCM Combines and Builds
upon a New Planning Paradigm………………….61
3.2 The Building Blocks for LEAN SCM Planning:
Concepts and Highlights……………………………………….. 66
3.2.1 Flexible Rhythm Wheels Enable Cyclic
Planning while Responding to Variability……67
3.2.2 Dynamic Safety Buffers in Planning for
Two-Sided Variability Management…………….71
3.2.3 Cycle Times and Inventory Targets
Aligned to Global Takt for Synchronization..73
3.2.4 Separation of Tactical Pre-
Parameterization and Planning to
Reduce Complexity……………………………………..75
3.2.5 Enabling IT to Create Global Visibility
and Staying Power for Sustainability……………78
3.3 How LEAN SCM Planning Drives Corporate
Success in the VUCA World……………………………………81
3.3.1 Creating a Step Change in Supply Chain
Performance………………………………………………..81
3.3.2 Better Service Leads to Customer
Satisfaction and True Competitive
Advantages………………………………………………….82
3.3.3 World-Class Operational Supply Chain
Performance Means Financial Success……….. 84
Chapter Summary…………………………………………………………….85
Part II How to Design and Build LEAN SCM
Chapter 4 Prepare Your Supply Chain for LEAN SCM………………. 89
4.1 Segment and Strategize Your Supply Chain…………… 90
4.1.1 How Many Supply Chain Strategies Are
Needed?……………………………………………………… 90
4.1.2 Structure Customers and Products to
Build Supply Chain Segments………………………92
4.1.3 Assigning Strategies to Defined Supply
Chains…………………………………………………………95
4.2 Aligning the Supply Chain from a Top-
Down Perspective………………………………………………….. 99
4.2.1 Create End-to-End Transparency in
Supply Chains……………………………………………. 99
4.2.2 Identify and Assess Gaps to Improve
Supply Chain Synchronization…………………..105
4.2.3 Adopt Three Measures for Preparing
the Supply Chain……………………………………….113
4.3 Aligning the Supply Chain from
a Bottom-Up Perspective……………………………………… 120
4.3.1 Gain Transparency into Local Value
Streams………………………………………………………121
4.3.2 Analyze Value Streams to Prepare the
Shop Floor for LEAN SCM………………………. 123
4.3.3 Aim for Leveled Flow Design…………………….130
Chapter Summary…………………………………………………………..137
Chapter 5 Strategic LEAN Supply Chain
Planning Configuration…………………………………………. 139
5.1 What to Produce: Replenishment Modes……………….141
5.1.1 Sell What You Make: Forecast-Based
Push Replenishment…………………………………..142
5.1.2 Make What You Sell: Consumption-
Based Pull Replenishment………………………….143
5.2 How to Produce: Production Modes………………………150
5.2.1 Kanban and Its Advancements for
Process Industries………………………………………150
5.2.2 Product Wheels and Rhythm Wheels for
Cyclic Production Planning……………………… 154
5.2.3 How to Manage Variability with
Different Rhythm Wheel Types…………………158
5.3 Supply Chain Mode Selection: Combining
Production and Replenishment Modes………………….167
5.3.1 Define the Configuration Scope of the
Supply Chain Segment……………………………….168
5.3.2 Analyze Key Impact Dimensions
of Mode Selection………………………………………170
5.3.3 Select the Appropriate Supply Chain
Modes………………………………………………………..182
5.3.4 Evaluate Your Decision Quantitatively………185
5.4 The Strategic Renewal Process to Configure
Agile Supply Chains………………………………………………188
5.4.1 What Information Base Is Needed on
Strategic Level?…………………………………………..189
5.4.2 Establish Sustainable Renewal of Supply
Chain Modes……………………………………………..191
5.4.3 Ensure Supply Chain Agility through
Regular Mode Renewal………………………………193
5.4.4 Who Is Involved to Enable Governance
for Supply Chain Agility?…………………………..194
Chapter Summary…………………………………………………………..196
Chapter 6 Tactical LEAN Supply Chain Planning
Parameterization……………………………………………………. 199
6.1 Setting Up the Parameters for LEAN
Production Modes…………………………………………………201
6.1.1 Classic Rhythm Wheel Design to Enable
Flow in Stable Environments……………………. 203
6.1.2 Breathing Rhythm Wheel Design to
Manage Higher Demand Variability………….211
6.1.3 High-Mix Rhythm Wheel Design to
Manage Diverse Product Portfolios……………216
6.2 Setting Up the Parameters for LEAN
Replenishment Modes………………………………………….. 222
6.2.1 How Stocks Are Structured for
Variability and Uncertainty……………………… 223
6.2.2 Right-Size the Parameters to
Enable Consumption-Based LEAN
Replenishment………………………………………….227
6.3 Synchronize Parameters to Achieve an End-to-
End LEAN Supply Chain……………………………………… 234
6.3.1 Synchronize Supply Chain Cycle Times
to a Global Takt………………………………………… 236
6.3.2 Build on Dynamic Inventory Target
Setting to Smooth Cycle Time Oscillation… 245
6.4 The Tactical Renewal Process to Parameterize
LEAN Supply Chains…………………………………………….253
6.4.1 What Information Base You Need……………..255
6.4.2 Establish Regular Renewal of Planning
Parameters……………………………………………….. 256
6.4.3 Alignment of Planning Parameters for
the LEAN Supply Chain…………………………… 263
6.4.4 Who Is Involved in Keeping the Supply
Chain LEAN through Synchronized
Parameters?……………………………………………… 264
Chapter Summary…………………………………………………………. 267
Chapter 7 Operational LEAN Supply Chain Planning
Execution……………………………………………………………… 269
7.1 How to Execute Planning and Sequencing with
Rhythm Wheels…………………………………………………….270
7.1.1 The Replenishment Trigger Report
as a Link between Production and
Replenishment…………………………………………..271
7.1.2 Handling of Demand Signals with
Rhythm Wheels…………………………………………274
7.2 How to Level Production with Factoring……………… 277
7.2.1 Use Cycle Time Boundaries to Stabilize
the Asset Takt…………………………………………… 277
7.2.2 Use Upper Factoring When the Cycle
Becomes Too Long…………………………………….279
7.2.3 Use Lower Factoring When the Cycle
Becomes Too Short…………………………………… 282
7.3 Effective Monitoring of Planning Execution in
LEAN SCM………………………………………………………….. 284
7.3.1 What Should Be Monitored?…………………….. 284
7.3.2 Operational LEAN Production KPIs to
Monitor Asset Performance……………………… 286
7.3.3 Operational LEAN Replenishment KPIs
to Evaluate Inventory Parameterization…… 289
Chapter Summary…………………………………………………………. 292
Part III What to Implement and
Transform for LEAN SCM
Chapter 8 Build an Organization for LEAN SCM……………………. 297
8.1 Below the Ground: The Prerequisites
for LEAN SCM…………………………………………………….. 299
8.1.1 Management Buy-In and Mobilization
for LEAN SCM…………………………………………. 300
8.1.2 Ensuring Leadership and Commitment
across Functional Borders………………………… 302
8.1.3 Shift in Mindsets and Accountabilities
in the SCM Community…………………………… 304
8.2 Above the Ground: The Visible Enablers
for LEAN SCM…………………………………………………….. 307
8.2.1 What Is the Right SCM Organization
Model for LEAN SCM?…………………………….. 307
8.2.2 Integration of LEAN SCM Processes
with the Existing Planning Processes
Framework…………………………………………………310
8.2.3 Mapping Roles and Responsibilities to
Renewal Processes……………………………………..316
8.3 Managing Change and Transition for LEAN SCM…..319
8.3.1 Focus Areas of Change Management…………319
8.3.2 Key Activities of Change Management………321
8.3.3 Valuable Tools for Change Management
in LEAN SCM………………………………………….. 324
Chapter Summary…………………………………………………………..327
Chapter 9 Performance Management for LEAN SCM………………. 329
9.1 Role of Performance Management in LEAN SCM….. 330
9.1.1 Key Objectives of Performance
Management for LEAN SCM…………………….330
9.1.2 Orchestrating Supply Chain Planning
Processes Successfully………………………………..333
9.1.3 How the LEAN SCM Paradigm Changes
Your Performance Management………………..335
9.2 How to Measure LEAN SCM Performance……………337
9.2.1 Metrics to Link Tactical and Operational
LEAN Supply Chain Planning…………………..338
9.2.2 Metrics for Linking Strategic and
Tactical LEAN Supply Chain Planning………339
9.2.3 Metrics for Assessing the Maturity of a
Supply Chain for LEAN SCM…………………… 341
9.3 Five Points to Consider for Successful
Performance Management…………………………………… 344
9.3.1 Develop a Balanced and Comprehensive
System of Metrics…………………………………….. 344
9.3.2 Effective Target Definition for
Performance Tracking……………………………… 345
9.3.3 Systematic and Regular Performance
Analysis for Sustainability……………………….. 347
9.3.4 Create Clear Responsibility for Metrics……. 348
9.3.5 Use Data Management and IT Systems
for Support……………………………………………….. 349
Chapter Summary…………………………………………………………. 350
Chapter 10 The Planning System Landscape for LEAN SCM……… 353
10.1 The Evolution of IT Planning Systems………………….. 354
10.1.1 MRP II: Consideration of Capacity but
Captured in the Automation Trap……………..355
10.1.2 ERP: Functional Integration but Lost in
the Details………………………………………………… 356
10.1.3 APS: Supply Chain Integration but
Caught in the Optimization Trap………………357
10.1.4 The Forecast Myth: An Overarching
Obstacle……………………………………………………..358
10.1.5 IT for LEAN Planning: How to Escape
the Optimization Trap and the Forecast
Myth………………………………………………………….358
10.2 Enabling LEAN Planning: How to Leverage
Past IT Investments……………………………………………… 360
10.2.1 Enterprise Resource Planning……………………361
10.2.2 Master Data Management………………………… 362
10.2.3 Market Demand Planning (APS Module)…… 362
10.2.4 Supply Network Planning (APS Module)……. 363
10.2.5 Detailed Planning and Scheduling
(APS Module)…………………………………………… 363
10.3 LEAN Planning Add-Ons to Complete the IT
System………………………………………………………………….. 365
10.3.1 Configuring and Renewing Tactical
LEAN SCM Parameters……………………………. 366
10.3.2 Planning and Adjusting Production
Based on Actual Consumption…………………. 368
10.3.3 Performance Monitoring for the
Renewal Process…………………………………………372
Chapter Summary…………………………………………………………..379
Chapter 11 The LEAN SCM Journey………………………………………… 381
11.1 Building Strong Commitment and Leadership
for LEAN SCM…………………………………………………….. 382
11.2 Creating a Holistic LEAN SCM Architecture………. 384
11.3 Establishing LEAN SCM Program Management…. 388
Chapter Summary…………………………………………………………. 390
Part IV How Your Industry Peers
Gained Benefits by LEAN SCM
Chapter 12 Read How Top-Industry Players Share Their
Experiences with LEAN SCM…………………………………. 393
12.1 Motivation and Approaches to LEAN SCM…………..393
12.1.1 AstraZeneca’s Lean SCM Journey…………….. 394
12.1.2 Eli Lilly’s Synchronized Lean Production…. 400
12.1.3 Buffer Management at Novartis……………….. 409
12.1.4 Leveled Flow Design to Enable LEAN
Planning…………………………………………………….417
12.1.5 AstraZeneca Excellence with Rhythm
Wheel Takted Site…………………………………….. 425
12.1.6 The LEAN Production Initiative at PCI:
A Company of BASF………………………………… 432
12.2 Why LEAN SCM: Summary of Key Benefits……….. 437
Bibliography…………………………………………………………………………….. 439
Index……………………………………………………………………………………….. 441