Operations and Supply Chain Management The Core

412 OPERATIONS AND SUPPLY CHAIN MANAGEMENT
exhibit 12.10
Traditional
Relationship between Lot Size and Setup Cost
Kanban
Total
cost
Holding
cost
Cost
Holding
cost
Cost
Total
cost
Setup
cost
Setup
cost
0
2
4
Quantity
6
8
10
Definitions: Holding cost includes the costs of storing inventory and the cost of money tied up in inventory.
Setup cost includes the wage costs attributable to workers making the setup, and various administrative and
supplies costs. (These are defined in total in Chapter 11, “Inventory Management.”)
0
2
4
Quantity
6
8
10
the average of six hours for U.S. workers and four hours for German workers. (Now, however,
such speed is common in most U.S. auto plants.) To achieve such setup time reduction,
setups are divided into internal and external activities. Internal setups must be done while a
machine is stopped. External setups can be done while the machine is running. Other timesaving
devices such as duplicate tool holders also are used to speed setups.
Lean Supply Chains
Building a lean supply chain involves taking a systems approach to integrating the partners.
Supply must be coordinated with the need of the production facilities, and production
must be tied directly to the demand of the customers for products. The importance of speed
and steady consistent flow that is responsive to actual customer demand cannot be overemphasized.
Concepts that relate to lean network design are discussed next.
Specialized Plants Small specialized plants rather than large vertically integrated manufacturing
facilities are important. Large operations and their inherent bureaucracies are
difficult to manage and not in line with the lean philosophy. Plants designed for one purpose
can be constructed and operated more economically. These plants need to be linked
together so they can be synchronized to one another and to the actual need of the market.
Speed and quick response to changes are keys to the success of a lean supply chain.
Collaboration with Suppliers Just as customers and employees are key components of
lean systems, suppliers are also important to the process. If a firm shares its projected
usage requirements with its vendors, they have a long-run picture of the demands that will
be placed on their production and distribution systems. Some vendors are linked online
with a customer to share production scheduling and input needs data. This permits them
to develop level production systems. Confidence in the supplier or vendor’s delivery commitment
allows reductions of buffer inventories. Maintaining stock at a lean level requires