1 - Bozdogan -Lean Supplier Networks, September 2002 ? 2002 Massachusetts Institute of Technology
Lean
Lean
Enterprise
Value
Value
Lean Supply Chain
Management Principles and
Practices
2 - Bozdogan -Lean Supplier Networks, September 2002 ? 2002 Massachusetts Institute of Technology
Lean
Lean
Enterprise
Value
Value
Lean Supply Chain Management
Basics Learning Points
null Lean supply chain management represents a
new way of thinking about supplier networks
null Lean principles require cooperative supplier
relationships while balancing cooperation and
competition
null Cooperation involves
collaborative relationships & coordination
mechanisms
null Supplier partnerships & strategic alliances
represent a key feature of lean supply chain
management
a spectrum of
3 - Bozdogan -Lean Supplier Networks, September 2002 ? 2002 Massachusetts Institute of Technology
Lean
Lean
Enterprise
Value
Value
Theory: Lean Represents a “Hybrid” Approach to
Organizing Interfirm Relationships
null “Markets” (Arm’s Length): Lower production costs, higher coordination costs
null Firm buys (all) inputs from outside specialized suppliers
null Inputs are highly standardized; no transaction-specific assets
null Prices serve as sole coordination mechanism
null “Hierarchies” (Vertical Integration): Higher production costs, lower
coordination costs
null Firm produces required inputs in-house (in the extreme, all inputs)
null Inputs are highly customized, involve high transaction costs or dedicated investments,
and require close coordination
null “Lean” (Hybrid): Lowest production and coordination costs; economically most
efficient choice-- new model
null Firm buys both customized & standardized inputs
null Customized inputs often involve dedicated investments
null Partnerships & strategic alliances provide collaborative advantage
Dominant conventional approach: Vertical integration, arm’s length
relationships with suppliers
4 - Bozdogan -Lean Supplier Networks, September 2002 ? 2002 Massachusetts Institute of Technology
Lean
Lean
Enterprise
Value
Value
Lean Supply Chain Management Differs
Sharply from Conventional Practices
ILLUSTRATIVE
CHARACTERISTICS
CONVENTIONAL MODEL LEAN MODEL
Number & structure Many; vertical Fewer; clustered
Procurement personnel Large Limited
Outsourcing Cost-based Strategic
Nature of interactions Adversarial; zero-sum Cooperative; positive-sum
Relationship focus Transaction-focused Mutually-beneficial
Selection criteria Lowest price Performance
Contract length Short-term Long-term
Pricing practices Competitive bids Target costing
Price changes Upward Downward
Quality Inspection-intensive Designed-in
Delivery Large quantities Smaller quantities (JIT)
Inventory buffers Large Minimized; eliminated
Communication Limited; task-related Extensive; multi-level
Information flow Directive; one-way Collaborative; two-way
Role in development Limited; build-to-print Substantial
Production flexibility Low High
Technology sharing Very limited; nonexistent Extensive
Dedicated investments Minimal-to-some Substantial
Mutual commitment Very limited; nonexistent High
Governance Market-driven Self-governing
Future expectations No guarantee Considerable
5 - Bozdogan -Lean Supplier Networks, September 2002 ? 2002 Massachusetts Institute of Technology
Lean
Lean
Enterprise
Value
Value
Lean Supply Chain Management Principles
Derive from Basic Lean Principles
null Focus on the supplier network value stream
null Eliminate waste
null Synchronize flow
null Minimize both transaction and production costs
null Establish collaborative relationships while balancing
cooperation and competition
null Ensure visibility and transparency
null Develop quick response capability
null Manage uncertainty and risk
null Align core competencies and complementary
capabilities
null Foster innovation and knowledge-sharing
6 - Bozdogan -Lean Supplier Networks, September 2002 ? 2002 Massachusetts Institute of Technology
Lean
Lean
Enterprise
Value
Value
A Set of Mutually-Reinforcing Lean Practices
Translate these Principles into Action
Design supplier network architecture ? Design of supplier network driven by strategic
thrust
? Fewer suppliers; “clustered control”
? Supplier selection based on performance
Develop complementary supplier
capabilities
? Ensured process capability (certification)
? Targeted supplier development (SPC, Kaizen)
? Greater responsibilities delegated to suppliers
Create flow and pull throughout
supplier network
? Linked business processes, IT/IS infrastructure
? Two-way information exchange & visibility
? Synchronized production and delivery (JIT)
Establish cooperative relationships &
effective coordination mechanisms
? Joint problem-solving; mutual assistance
? Partnerships & strategic alliances
? Open and timely communications
? Increased interdependence & “shared destiny”
Maximize flexibility & responsiveness ? Seamless information flow
? Flexible contracting
? Rapid response capability
Optimize product development
through early supplier integration
? Integrate suppliers early into design &
development IPTs
? Collaborative design; architectural innovation
? Open communications and information sharing
? Target costing; design-to-cost
Integrate knowledge and foster
innovation
? Knowledge-sharing; technology transfer
? Aligned technology roadmaps
This lecture highlights key enablers & practices by ng on:
? Synchronized production and delivery
? Partnerships and strategic alliances
? Early supplier integration into design and development IPTs
focusi
7 - Bozdogan -Lean Supplier Networks, September 2002 ? 2002 Massachusetts Institute of Technology
Lean
Lean
Enterprise
Value
Value
Synchronized Production and Delivery
Throughout the Supplier Network is a Central
Lean Concept
null Integrated supplier lead times and delivery schedules
null Flows from suppliers pulled by customer demand (using
takt time, load leveling, line balancing, single piece
flow)
null Minimized inventory through all tiers of the supply chain
null On-time supplier delivery to point of use
null Minimal source or incoming inspection
null Effective two-way communication links to coordinate
production & delivery schedules
null Striving for zero quality defects essential to success
null Greater efficiency and profitability throughout the
supplier network
8 - Bozdogan -Lean Supplier Networks, September 2002 ? 2002 Massachusetts Institute of Technology
Lean
Lean
Enterprise
Value
Value
Aerospace Firms Have Faced an Uphill
Challenge in Synchronizing Flow with Suppliers
PERCENT OF SUPPLIER SHIPMENTS TO STOCKROOM/FACTO
W/O INCOMING OR PRIOR INSPECTIONS
10.7
42.2
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
Defense (25) Commercial (9)
(Year: 1993; N= Number of responding business units/c
Defense/Commercial:
than 75% of sales to defen
or commercial markets
More
9 - Bozdogan -Lean Supplier Networks, September 2002 ? 2002 Massachusetts Institute of Technology
Lean
Lean
Enterprise
Value
Value
Supplier Certification has been an Important
Early Enabler of Achieving Synchronized
Flow in Aerospace
PERCENT OF DIRECT PRODUCTION SUPPLIERS OF A TYPICAL AEROSPACE ENTERPRISE
THAT ARE CERTIFIED (1991, 1993, 1995)
7.40
6.86
2.55
15.28
10.86
10.38
5.63
19.62
23.19
20.11
15.63
36.33
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
Industry (48) Airframe (13) Electronics (20) Engines and Other (15)
(N=Number of respondents answering this question for all three years)
1991
1993
1995
10 - Bozdogan -Lean Supplier Networks, September 2002 ? 2002 Massachusetts Institute of Technology
Lean
Lean
Enterprise
Value
Value
Closer Communication Links with Suppliers
Paved the Way for Synchronizing Flow
TYPES OF INFORMATION PROVIDED TO RESPONDING BUSINESS UNITS BY THEIR MOST
IMPORTANT SUPPLIERS ON A FORMAL BASIS, 1989 vs. 1993
48.72
70.51
17.95
83.33
41.03
88.46
19.23
70.51
20.51
52.56
17.95
69.23
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
100.00
1989 (38,14,32,15,16,14) 1993 (55,65,69,55,41,54)
(N=78:
Production Cost Data
SPC Data
Performance Improvement
Actions
Longer-term Business Strategies
& Plans
Financial Information not Publicly
Available
Feedback on Purc/Supplier
Mgmts Operations
Total number of responding business units)
11 - Bozdogan -Lean Supplier Networks, September 2002 ? 2002 Massachusetts Institute of Technology
Lean
Lean
Enterprise
Value
Value
Concrete Example: Engine Parts Casting
Supplier Worked with Customer Company to
Achieve Synchronized Flow
12 - Bozdogan -Lean Supplier Networks, September 2002 ? 2002 Massachusetts Institute of Technology
Lean
Lean
Enterprise
Value
Value
Mastering & Integrating Lean Basics with
Prime was Necessary for Achieving
Synchronized Flow
null 6S -- Visual factory
null Total productive maintenance
null Quality control
null Process certification
null Mistake proofing
null Setup reduction
null Standard work
null Kaizen
13 - Bozdogan -Lean Supplier Networks, September 2002 ? 2002 Massachusetts Institute of Technology
Lean
Lean
Enterprise
Value
Value
Supplier Partnerships & Strategic Alliances
Ensure Substantial Performance
Improvements
null Long-term relationships and mutual commitments
null Intensive and regular sharing of technical and cost
information
null Mutual assistance and joint problem-solving
null Customized (relationship-specific) investments
null Risk-sharing, cost-sharing, benefit-sharing
arrangements
null Trust-building practices -- “one team” mindset;
collocation of technical staff; “open kimono”
null Progressively increasing mutual dependence -- shared
fate discouraging opportunistic behavior
null Self-enforcing contracting driving continuous
improvement
14 - Bozdogan -Lean Supplier Networks, September 2002 ? 2002 Massachusetts Institute of Technology
Lean
Lean
Enterprise
Value
Value
Supplier Partnerships & Strategic Alliances
Bring Important Mutual Benefits
null Reduced transaction costs (cost of information
gathering, negotiation, contracting, billing)
null Improved resource planning & investment decisions
null Greater production predictability & efficiency
null Improved deployment of complementary capabilities
null Greater knowledge integration and R&D effectiveness
null Incentives for increased innovation (through cost-
sharing, risk-sharing, knowledge-sharing)
null Increased mutual commitment to improving joint long-
term competitive performance
15 - Bozdogan -Lean Supplier Networks, September 2002 ? 2002 Massachusetts Institute of Technology
Lean
Lean
Enterprise
Value
Value
Major Lean Lessons for Aerospace Industry
null Supply chain design linked to corporate strategic thrust
null Fewer first-tier suppliers
null Greater supplier share of product content
null Strategic supplier partnerships with selected suppliers
null Trust-based relationships; long-term mutual commitment
null Close communications; knowledge-sharing
null Multiple functional interfaces
null Early supplier integration into design
null Early and major supplier role in design
null Up-front design-process integration
null Leveraging supplier technology base for innovative solutions
null Self-enforcing agreements for continuous improvement
null Target costing
null Sharing of cost savings
16 - Bozdogan -Lean Supplier Networks, September 2002 ? 2002 Massachusetts Institute of Technology
Lean
Lean
Enterprise
Value
Value
Chrysler: Supplier Partnerships
Speed Development
Length of
Product
Development
Cycle
LH Cars (98E)
160 Weeks*
JA; Cirrus/
Stratus (95)
184 Weeks
Neon (94)
180 Weeks
LH Cars (93)
183 Weeks
Dakota
Truck (87)
232 Weeks
K-Car (81)
Minivan (84)
Shadow (87)
234 Weeks
* Estimated
Source: Dyer (1998)
17 - Bozdogan -Lean Supplier Networks, September 2002 ? 2002 Massachusetts Institute of Technology
Lean
Lean
Enterprise
Value
Value
EARLY SUPPLIER INVOLVEMENT IN IPTS IN U.S. MILITARY
AEROSPACE GRAMS: IMPACTS
ON PRODUCIBILITY AND COST
20.0
77.8
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
Group A (With) Group B (Without)
Firms facing producibility and cost problems
% of responding firms in Group A(4/20)
% of responding firms in Group B(7/9)
Numerator(s): N=4,7: Number of affirmative responses to this question (i.e., faced producibility and cost problem) in each group (i.e., Group A
and Group B)
Denominator(s):R=20,9: Total number of respondents to this question in each group
Sample Size: S=29: Maximum possible number of respondents to any question in the survey (Group A:20 ; Group B:9)
WITH: supplier involvement in IPTs
WITHOUT: Without early supplier involvement in IPTs
EARLY: Before Milestone
SOURCE: Lean Aerospace Initiative Product Development Survey (1994)
Aerospace: Early Supplier Involvement in
IPTs Impacts Producibility and Cost
DEVELOPMENT PROPRODUCT
With early
18 - Bozdogan -Lean Supplier Networks, September 2002 ? 2002 Massachusetts Institute of Technology
Lean
Lean
Enterprise
Value
Value
Early Supplier Involvement: Key Success
Factors
FIRMS WITH EARLY SUPPLIER INVOLVEMENT IN IPTS IN U.S.
MILITARY AEROSPACE PRODUCT DEVELOPMENT PROGRAMS: KEY
SUCCESS FACTORS
55.0
11.1
40.0
22.2
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
GroupA (With) GroupB (Without)
EARLY SUPPLIER INVOLVEMENT IN IPTS
Established co-located IPTsincluding suppliers
Used commercial parts
Numerator(s): N=11,8 (Group A) ;1,2 ( Group B): Number of affirmative responses to this
category of practice/implementation ( i.e., co-located IPTs, use of commercial parts)
Denominator(s): R=20,9: Total number of respondents to this question in each group
Sample Size:S=29: Maximum possible mumber of respondents to any question in the survey (Group A:20 ; Group B:9)
NOTES
Early: Before Milestone 1
With / Without: Early supplier involvement in IPTs (before Milestone 1)
question in each group, by
Lean
Lean
Enterprise
Value
Value
Evolution of Early Supplier Integration
in the Aerospace Industry
Arm’s length; interfaces totally
defined and controlled
Collaborative; but constrained by
prior workshare arrangements
Collaborative and seamlessly
integrated, enabling architectural
innovation
Virtual Team
w/o boundaries
Prime
Key Suppliers
Subtiers
“Old” Approach “Emerging”
Lean
Prime
Key Suppliers
Subtiers
“Current”
Lean
Collaborative with rigid
organizational
interfaces
Prime
Key Suppliers
Subtiers
Rigid vertical
FFF interfaces
and control
ARCHITECTURAL INNOVATION: Major modification of how components in a
system/product are linked together
?Significant improvement in system/product architecture through changes in form/structure,
functional interfaces or system configuration
?Knowledge integration over the supplier network (value stream perspective ; prime-key
suppliers-subtiers; tapping supplier technology base)
20 - Bozdogan -Lean Supplier Networks, September 2002 ? 2002 Massachusetts Institute of Technology
Lean
Lean
Enterprise
Value
Value
Summary: Architectural Innovation Yields
Significant Benefits
Case Studies
Key Characteristics
Case Study A
(SMART MUNITION
SYSTEM)
Case Study B
(ENGINE NOZZLE)
MAKE-BUY; DESIGN
RESPONSIBILITY
? Early supplier integration
into IPT
? Teaming with key
suppliers to optimize
design
? New joint design and
engineering approach
based on make-buy
? Prime retains design control
SUPPLIER ROLE ? Collaborative design
? Suppliers given design
responsibility and
configuration control
? Part of joint design team
? Component design
responsibility
? Joint configuration control
SUPPLIER
SELECTION;
AGREEMENT
? Competitive pre-sourcing
? Commercial pricing
? Long-term commitments
? Long-term warranty
? Supplier downselect after
joint preliminary design
period
? CPFF
? Not-to-compete
agreements
PROCESS;
RELATIONSHIPS
? Collocated teams
? Open communications;
knowledge-sharing
? Worksharing
? Electronic linkages
? Gov’t part of team
? Collocated teams
? Concurrent engineering
? Knowledge-sharing
? Electronic linkages
? Government involvement
MAJOR DRIVERS Cost Performance
ARCHITECTURAL
INNOVATION
Guidance control unit
redesigned from modular to
integrated system
architecture
Riveting, rather than welding,
resulted in redesign of
interfaces and how components
are linked together
MAJOR BENEFITS
? Over 60% reduction in
unit cost
? Cycle time:
to 48 mo. (down by 25%)
? Win-win for value stream
? Five-fold reduction in unit
cost
? Cycle time reduction not as
important
? Substantial risk reduction
? Win-win for value stream
64 mo. down
21 - Bozdogan -Lean Supplier Networks, September 2002 ? 2002 Massachusetts Institute of Technology
Lean
Lean
Enterprise
Value
Value
Summary of Key Practices Enabling
Architectural Innovation
null Pre-sourcing; long-term commitment
null Early supplier integration into IPTs; IPPD; co-location; joint
design & configuration control
null Leveraging technology base of suppliers (key suppliers; tooling
suppliers; subtiers)
null Workshare arrangements optimizing supplier core competencies
null Retaining flexibility in defining system configuration
null Open communications; informal links; knowledge-sharing
null Target costing; design to cost
null Supplier-capability-enhancing investments
null Incentive mechanisms (not to compete agreements; long-term
warranty); maintaining trade secrets
null Government part of the team; relief from military standards and
specifications
Lean
Lean
Enterprise
Value
Value
Electronic Integration of Supplier
Networks:
null Important success factors include:
null Clear business vision & strategy
null Early stakeholder participation (e.g., top management support; internal process
owners; suppliers ; joint configuration control)
Challenge: Electronic integration of supplier networks for technical
data exchange as well as for synchronization of business processes
Early Results
null Migration/integration of specific functionality benefits of legacy systems
into evolving new IT/IS infrastructure
null Great care and thought in experimental IT/IS projects into
fully-functional operational systems
null Electronic integration of suppliers requires a process of positive
reinforcement -- greater mutual information exchange helps build increased
trust, which in turn enables a closer collaborative relationship and longer-term
strategic partnership
null Close communication links with overseas suppliers pose a
serious security risk and complex policy challenge
scaling-up
22 - Bozdogan -Lean Supplier Networks, September 2002 ? 2002 Massachusetts Institute of Technology
23 - Bozdogan -Lean Supplier Networks, September 2002 ? 2002 Massachusetts Institute of Technology
Lean
Lean
Enterprise
Value
Value
Fostering Innovation across Supplier Networks Ensures
Continuous Delivery of Value to all Stakeholders
null Research: Case studies on F-22 Raptor avionics subsystems -- what incentives,
practices & tools foster innovation across suppliers?
null Major finding: Innovation by suppliers is hampered by many factors. This seriously
undermines weapon system affordability.
null Excessive performance and testing requirements that do not add value
null One-way communication flows; concern for secrecy; “keyhole” visibility by
suppliers into product system architecture
null Little incentive to invest in process improvements due to program uncertainty;
limited internal supplier resources; often narrow business case
null Major subcontractors switching rather than developing subtier suppliers
null Yearly contract renegotiations wasteful & impede longer-term solutions
null Recommendations:
null Use multiyear incentive contracting & sharing of cost savings
null Improve communications with suppliers; share technology roadmaps
null Make shared investments in selected opportunity areas to reduce costs
null Provide government funding for technology transfer to subtiers
24 - Bozdogan -Lean Supplier Networks, September 2002 ? 2002 Massachusetts Institute of Technology
Lean
Lean
Enterprise
Value
Value
Quick Review of Aerospace Progress
null Aerospace industry has made important strides in supplier integration, but
this is only the beginning of the road
null Production: Supplier certification and long-term supplier partnerships --
process control & parts synchronization
null Development: Early supplier integration into product development critical
null Strategic supply chain design is a meta core competency
null Implementation efforts have required new approaches
null Re-examination of basic assumptions (e.g., make-buy)
null New roles and responsibilities between primes and suppliers
null Communication and trust fundamental to implementation
null Aerospace community faces new challenges and opportunities
null Imperative to take “value stream” view of supplier networks
null Focus on delivering best lifecycle value to customer
null Need to evolve information-technology-mediated new organizational
structures for managing extended enterprises in a globalized market
environment
25 - Bozdogan -Lean Supplier Networks, September 2002 ? 2002 Massachusetts Institute of Technology
Lean
Lean
Enterprise
Value
Value
Lean Supplier Networks Offer Significant
Competitive Advantages
null Exhibit superior performance system-wide --
greater efficiency, lower cycle time, higher quality
null Not an accident of history but result of a dynamic
evolutionary process
null Not culture dependent but are transportable
worldwide
null Can be built through a proactive, well-defined,
process of change in supply chain management
26 - Bozdogan -Lean Supplier Networks, September 2002 ? 2002 Massachusetts Institute of Technology
Lean
Lean
Enterprise
Value
Value
Key Questions for Aerospace
Enterprise Management
null Does the size, structure and composition of the supplier network
reflect your enterprise’s strategic vision?
null Has your enterprise created partnerships and strategic alliances
with key suppliers to strengthen its long-term competitive
advantage?
null Are major suppliers as well as lower-tier suppliers integrated into
your enterprise’s product, process and business development
efforts?
null Has your enterprise established mutually-beneficial arrangements
with suppliers to ensure flexibility and responsiveness to
unforeseen external shifts?
null Does your enterprise have in place formal processes and metrics
for achieving continuous improvement throughout the extended
enterprise?
27 - Bozdogan -Lean Supplier Networks, September 2002 ? 2002 Massachusetts Institute of Technology
Lean
Lean
Enterprise
Value
Value
Emergence of Strategic Supplier Partnerships has been a
Central Feature of Aerospace Industry’s Transformation
in the 1990s*
null Survey: 85% of firms established production-focused supplier
partnerships involving long-term agreements (LTAs) with key
suppliers
null Major reasons:
null Reduce costs 97%
null Minimize future price uncertainty 85%
null Mutual performance improvement 85%
null Chief characteristics:
null One or more products, 3+ years 97%
null Multi-year design/build 49%
null On-going (evergreen) 24%
*Responding firms with LTAs; based on an MIT Survey (1994-95)
28 - Bozdogan -Lean Supplier Networks, September 2002 ? 2002 Massachusetts Institute of Technology
Lean
Lean
Enterprise
Value
Value
Case study: Major producer of complex airframe structures
Months
REDUCED CYCLE TIME
(Main Product
Order-to-Shipment, months)
36
12
0
5
10
15
20
25
30
35
40
1989 1997
Percent of all
supplier
IMPROVED SUPPLIER DELIVERY
(Dock-to-Stock, w/o prior inspection)
0%
75%
0%
10%
20%
30%
40%
50%
60%
70%
80%
1989 1997
sh
ip
men
t
s
19971989
REDUCED SUPPLIER DEFECTS
(Defects found at factory floor)
7.10%
2.90%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
20.00%
Rejectio
n
s
as %
o
f
all
incoming
sup
p
lier shipmen
t
s
Case Study Results Show Significant Performance
Improvements by Building Integrated Supplier Networks
through Supplier Partnerships
29 - Bozdogan -Lean Supplier Networks, September 2002 ? 2002 Massachusetts Institute of Technology
Lean
Lean
Enterprise
Value
Value
Supplier Partnerships Driven by Strategic Corporate
Thrust to Develop Integrated Supplier Networks
95
100.0
0
50.0
Established strategic supplier partnerships
null Procurement dollars under long-term agreements(%)
null “Best value” subcontracts as % all awards
75
83.0
0
76.4*
Improved supplier quality and schedule
null Procurement (dollars) from certified suppliers
null Supplier on-time performance (% of all shipments)
1.9
7
4.9
13
Improved procurement efficiency
null Procurement personnel as % of total employment (%)
null Subcontracting cycle time (days)
162542
Reduced and streamlined supplier base
null Number of direct production suppliers
AFTERBEFORE
KEY PRACTICES
BEFORE: 1989 AFTER: 1997 *Refers to 1991
(%)
Lean
Lean
Enterprise
Value
Value
Focus on Early Supplier Integration
Historic opportunity for achieving BEST LIFECYCLE VALUE in
aerospace weapon system acquisition through early supplier
integration into design and development process
null Nearly 80% of life cycle cost committed in early design phase
null Design and development of complex aerospace systems calls on core
capabilities of numerous suppliers, providing as much as 60%-70% of end
product value
null Supplier network represents an enormous beehive of distributed
technological knowledge & source of cost savings
null What are better ways of leveraging this capability for more efficient product
development in aerospace sector?
null Worldwide auto industry experience provides critical lessons
30 - Bozdogan -Lean Supplier Networks, September 2002 ? 2002 Massachusetts Institute of Technology
31 - Bozdogan -Lean Supplier Networks, September 2002 ? 2002 Massachusetts Institute of Technology
Lean
Lean
Enterprise
Value
Value
Lean Difference:
Lean Difference: Significantly lower
development cost and shorter cycle time
Average engineering
hours per new car
(millions of hours)
Average development
cycle time per new car
(months)
Prototype lead time
(months to first
engineering protoype)
US
Japan
US
Japan
US
Japan
3.4
1.7
50%
61
45
11.8
6.5
26%
45%
Source: Clark, Ellison, Fujimoto and Hyun (1995); data refer to 1985-89.
Auto Industry
32 - Bozdogan -Lean Supplier Networks, September 2002 ? 2002 Massachusetts Institute of Technology
Lean
Lean
Enterprise
Value
Value
Lean Difference: Auto Industry
Supplier Role in Design
Lean difference starts with significant supplier role in design and
development
1980’s
(1985-89)
1990’s
(1992-95)
US Japan
3%
81%
16%
8%
62%
30%
58%
30%
12%
39%
55%
6%
Supplier Proprietary Parts
Supplier Designed
“Black Box” Parts
Assembler Designed
Detail-Controlled Parts
Source: Clark, Ellison, Fujimoto and Hyun (1995)
Percent of total cost of parts purchased from suppliers