From the Archives of a Common Sensei Volume 27: EARLY LOCAL PARTS ORDERING FLOW

For those of you who have been following our blog of early Toyota learnings, this volume is another piece of the bigger picture that spells out our initial efforts (1990) regarding “Local Parts Ordering”.  This volume needs to be linked with earlier volumes in order to begin to understand the reasoning behind the parts flow thinking.  I suggest that it would be helpful to look back at Volume 7 (Supply Cycle Analysis), 16 (JIT Vs BATCH!  Is It For You?), 18 (Total Cost Management and Supply Chain Management), 19 (The Importance of Parts Consolidation as Related to Just-in-Time) and 22 (Concept of Component Sequencing Parts Staging for Assembly) to better understand how parts supply advanced beyond the attached 1990 process.

Traditionally, many companies have ordered parts based on forecasted projected need, which was most often determined by the forecast handed down from the Sales Department.  This in turn may have also been based on the projections of the Marketing Department, who in turn may have founded their numbers on the profit projections.  There is no need for me to try to reason why the profit projections were on target with reality or not!

At Toyota Industrial Equipment, the basic philosophy was to: 1) Establish a method to receive and distribute material in the most cost efficient, timely, and orderly manner, and 2) Provide a base method/procedure on which improvement would take place.  The attached workflow for ordering local parts is only one piece of the entire component ordering picture.  By using the bill of materials for your products, you will have to make some decisions regarding where your parts will be coming from and how they will be used in the assembly/subassembly process.  It is critical to determine which components you will need to order locally versus those to be imported.  Additionally, it is critical to know those components you will need to project monthly requirements/orders for versus those that can be reordered using a just-in-time (JIT) approach.  In most cases, even JIT components will need a monthly forecasted requirement, but they are not delivered and stored in the same way batch components require, using plant floor or warehouse space, additional handling, and associated equipment.  Try to start by considering customer order demand and required components AS THEY ARE NEEDED during the build process, working from the customer back to the beginning of the assembly process.  Determine how the necessary parts will be supplied, staged, and used in each operation.  Provide enough parts for each operation and model mix to assure flow continuation.  This calculation will help establish the model parts requirements and will help in determining ideas on how to receive and stage parts.

In the attached drawing (rough and hand drawn at the time), it even shows how rejected parts were handled and resupplied prior to implementing a more refined JIT approach.  Please keep in mind that the ordering process arrangement we had with suppliers included quick turn around (even for rejects).  The reward for suppliers agreeing to such quick ordering turns included Net 30 days/25 Prox) payment agreement for parts supplied to specifications.  Rejected parts took considerably longer to receive their compensation.  Also, we maintained logs of reject percentages for every supplier which played into ongoing negotiations when it came time for renewal consideration.

The integration of the forecasting, ordering (incl. Kanban), receiving, staging, pull usage, and reordering should be a step beyond the method included in the attached drawing.  Hopefully, this volume regarding Local Parts Ordering Flow will help as you evaluate your current methods and help generate new thinking on how to improve as your organization moves forward.

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In continuation of these blog postings (From the Archives of a Common Sensei), volume 25 discusses how we approached Problem Solving during those early days (early 1990’s) while developing Toyota Industrial Equipment. The documents included here are pre-computerization and clearly demonstrate we didn’t need everything computerized – especially problem solving!  The attached documents are in their rough condition but, are actual examples of a systematic method used for problem resolution, particularly in the following areas:

On the document entitled Procedure for Problem Solving, we have provided the procedural flow guideline for problem solving, especially for Managers and other Leaders (of course in conjunction with all those affected).  On the slide marked Problem Solving Activity, we provide a look at the process used to evaluate and resolve problems and advance opportunities.

Additional documents included provide examples of the Kaizen Activity Report (before and after changes), the Kaizen Report Format, The Bi-Weekly Report of Activity, and the Implementation Schedule for Policy Management.  The Implementation Schedule for Policy Management is used to track the various tasks against established policies of Cost, Quality, Delivery, Safety, and Morale. Additionally, it keeps track of the method, target dates, person/in charge, and lays it out in a schedule for tracking simplification.

The documents in this volume of From the Archives of a Common Sensei we feel it is essential to stress that although the documents included here are not the prettiest, they are valued examples that can show you the basics of value-added problem solving (resolution).  Standardized use of these documents (or similar) will aid in the development of a true problem solving (love those opportunities) culture.  As your organization matures, it will become stronger because of standardized problem solving as described here.

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