In this volume of From the Archives of a Common Sensei, we are providing an example of the “Supplier Rating System for Parts and Raw Materials”. This example provides a foundational, but beneficial, means for evaluating your suppliers by rating their performance against your expectations. At Toyota Industrial Equipment, in the early days (1994), we assessed supplier performance against the foundational classifications of quality, cost, and delivery. Within these categories, we used sub-categories to provide additional detail and validation. These in turn were rated using a 6 (exceptional) to 1 (unsatisfactory) scale. By using the calculations on page 2 through page 7 to provide data for each supplier delivery, you can transfer those points to page one to calculate the overall picture for that specific supplier’s delivery. By accumulating these ratings, they can be used as valuable input to future supply contract winner negotiations and determination. Couple this type of supplier rating with physical operations visits and financial review and you will have a surprisingly good view of how that supplier will perform in the future.
For More Information or help with your transformation effort, contact us at http://www.per-strat.com
For some of you reading this volume of our blog discussing JIT vs Batch ordering systems, this discussion might seem elementary or simplistic, but this is how we got started in the early days of Just in Time ordering in the United States. We often see blogs and articles that address various components of the Toyota ordering system or other JIT ordering systems, but much of this thinking converted to practice, began in this basic model. Yes, we had an MRP/early ERP system (even in the mid-90’s) to help facilitate ordering. The basic early US JIT model projected out 3-6 months at a time and was locked 1 month. The actual delivery of domestic components was “pulled” from the suppliers using Kanban (component order release cards or “signals”) from our production lines to the appropriate supplier of the needed component. This is referred to in the following graphic as “POU or Point of Use/Demand” signal. To be clear about this little history discussion, this approach at Toyota Industrial Equipment was not my first exposure to JIT ordering. Years earlier I became student of Eliyahu Goldratt and his book The Goal (1984) when it was originally published. While working for a British company (an American startup) in the early ‘80’s, it occurred to me that the business could be much more profitable and more responsive to our growing customer base, and at the same time maintain a tighter control on the throughput quality if we could “pull” the materials from our suppliers and through the manufacturing process on an as needed basis. Since the products we were making were high pressure gas cylinders, the quality was of utmost importance. Since the steel was an expensive commodity, part of our thinking was to negotiate only with suppliers who were willing to set a month’s supply of steel on site from which we could pull our needs and pay the supplier as it was used. We also determined that by efficient operations, we could process the product and ship to our customers on an as needed basis, which in fact provided us with the opportunity to basically get paid by our customers prior to having to pay the suppliers of our most expensive material. This thinking grew as I moved to another company (Carlyle Compressors) a division of Carrier Corp. in the mid ‘80’s, about the time Goldratt came out with The Goal. We had the opportunity to streamline the ordering and production processes by building on some of what I had learned at the cylinder manufacturing company and by absorbing the concepts the Eli Goldratt and his OPT system (Optimized Production Technique).
Overall, this resulted in an end-to-end pull system approach that was facilitated by the OPT ordering system and an in process “pull” technique using Kanban signaling. This was so successful (thanks to the Union participation and the multi-skilled workforce), that the racks in the manufacturing areas were no longer needed and the materials coming from suppliers were synchronized so that we either had direct delivery from the supplier to the production dock, or we had no more than one day of supply in our “cross-docking” operation. Another example of building on what we can learn by doing: Following the Carlyle Compressor experience I was asked to join Raymond Corporation (Industrial Equipment) and proceeded to work with the management and workforce there to develop the same techniques learned from the above previous experiences. These were all prior to being recruited by Toyota Industrial Equipment in 1987 to initiate site selection and startup operations along with the staff from Japan.
Why am I expounding on this history? For me, the path to excellence in manufacturing and the use of JIT vs. Batch ordering and processing to fulfill customer requirements was one of good fortune and being selective of which opportunities to capitalize on and which could further my knowledge of customer satisfaction, product or service quality, and associate participation and learning.
The Toyota thinking; it is okay to develop an improvement idea, do the nemawashi (support building by communication) necessary with those involved, act on the idea, and if it does not work as planned, make improvements.
The above graphic is an example of our crude thinking while developing our local (domestic) parts ordering system which was to build to eventually develop approximately 70% of our component supply. It shows how the initial concepts allowed for projection of requirements for 3 to 6 months, a one-month lock, with weekly updates. It also shows how the actual demand pull was based on manufacturing usage. If changes were required in the schedule, adjustments were made by movement of multi-skilled associates and/or reallocation of work.
If you have already mastered JIT, I would challenge you to figure out where improvements can be made. By the way, this thinking is not only for manufacturing! I have seen it applied to governmental operations as well! Think in terms of VA, military (all branches), anywhere were various requests or orders are processed. I encourage you to let your imagination work overtime and see if you can apply some out-of-the-box thinking.
For More Information or help with your transformation effort, contact us at http://www.per-strat.com
From The Desk Of A Common Sensei 