See discussions, stats, and author profiles for this publication at: https://www.researchgate.net/publication/265097065 An Application of Value Stream Mapping in International Logistics System Article CITATIONS READS 0 266 4 authors, including: Rafael Silviano Gutierrez University of Texas at El Paso 10 PUBLICATIONS 133 CITATIONS SEE PROFILE Some of the authors of this publication are also working on these related projects: DR PIKE , I WILL BE IN YOUR OFFICE ON APRIL 8TH. TO APRIL 16. WITH THE PURPOSE OF REVIEWING THIS 4 TH EDITION OF OUR BOOK. View project All content following this page was uploaded by Rafael Silviano Gutierrez on 22 December 2014. The user has requested enhancement of the downloaded file. An Application of Value Stream Mapping in International Logistics System Rafael S. Gutierrez, Ph.D., Haydee Barajas, Maria E. Galaviz, and Luis C. Martinez Department of Mechanical and Industrial Engineering University of Texas at El Paso 500 West University Avenue El Paso, Texas 79968-0521 Abstract This paper describes the application of a lean logistics approach for the part procurement and customer shipping network for an international manufacturing organization. The objective is to improve Company’s logistics system by identifying current problems in transportation and inventory using Lean Manufacturing Principles. This study includes the mapping of the entire logistics system to identify the problems of the company, and logistics concepts to improve inventory and transportation resource utilization and customer satisfaction. Keywords Value stream mapping, logistics 1. Introduction The authors developed this study as a Senior Project course requirement in the Industrial Engineering program at the University of Texas at El Paso, the industrial project study was focused in the analysis of the international logistics system for a major manufacturer of industrial gloves in El Paso-Juarez area to provide potential areas of improvement and recommendations. The Company has grown into a global operation organization with manufacturing plants in Asia, Europe, Mexico, and the United States with distribution centers in the United Kingdom, France, Germany, Belgium, India, Southeast Asia and North America. This project was focused on their two manufacturing operations in El Paso- Juarez area. The trucks that move finished goods to Europe and Charlotte have to be fully loaded and trucks used to transport product to Canada and Asia may transport partial carrier loads (LTL). A methodology was developed to improve customer service, resource utilization, and finished goods and raw materials transportation. The toolkit applied consisted of the use of value stream mapping, inventory analyses, and simulation tools, prior implementation with the objective to validate recommendations 2. Literature Review The most important step in implementing lean manufacturing is the Value Stream Mapping as Womack and Jones [7] said “Identifying the value stream for each product line is the next step in lean thinking.” In the book called “Learning to See”, Rother and Shook [6] gave a better definition of “value stream mapping” which is known as “Material and Information Flow Mapping”. A value stream map basically is a drawing that represents the total supply chain. A supply chain is a global network that is used to deliver products and services from raw materials to end customers through and engineered flow of information and physical distribution [1]. Transportation and inventory play vital roles in supply chain management. As Bertazzi and Speranza [3] indicated that the total transportation cost can be drastically reduced if the frequencies of transportation are reduced or minimized. In most practical systems, the transportation costs are volume dependant because of this, by utilizing efficiently the trucks capacities, transportation costs are minimized. Mahmoud [5] considered that the creation of a central stocking point by consolidating is a powerful economic force in the strategic planning of logistics systems. Substantial economies of scale result from the necessary aggregate safety stock being reduced whenever decentralized inventories are centralized into fewer points. Inventory levels are often the cause of increased costs in companies. Exchange curves are tools that provide an optimal range for operation of the inventories. These curves provide a range of optimal A/r ratio of values that will result in different options for the number of replenishments per year (N) and the total dollar value of inventory (TCS). Exchange curves can be used by upper management to decide on backorder policy. Specifically, the exchange curve shows the trade-off between average dollar value of aggregate inventory versus the maximum allowed backorder delay [2]. 3. Methodology 3.1 Survey of Existing Operations A survey of existing operations to map and document the current process flows for finished goods and raw material was developed to identify problems, resource utilization levels and current practices of doing business. Likewise, future needs were identify to assess the space and equipment requirements. Overall process and material flow charts are required to identify the complexity of the manufacturing operations. This information was gathered through observation and direct interviews with employees in the facility. Total Value Stream Maps were created for the manufacturing and distribution facilities including, Current State Map, Problem Identification Map and Future State Map. Two major problems were identified: inventory levels and transportation problems. Based on the information gathered, raw materials were transported in trucks which they were loaded to 50% of their capacity. The finished goods inventory stayed in their facility up to three days for customers shipments. 3.2 Analysis of shipping and storage consolidation The first problem analyzed was the transportation and storage consolidation for finished goods and raw materials. The rationale considered for this analysis was based on that manufacturing facilities share a raw materials warehouse, close located to their manufacturing facilities, trucks were not loaded at full capacity, and manufacturing facilities were required of daily shipments of raw materials. The rationale for consolidation of finished goods inventory was based on commonality of customers, proximity between facilities, production facilities share shipping criteria: full trailers for Europe and USA, and make-to-order shipments for Canada and Asia. 3.3 Simulation Modeling for What-If Scenario Assessment Based on the raw material and finished goods consolidation analysis, simulations were created using the simulation software Arena 5.0™ [4]. The simulations were created with the purpose of providing the company with a useful instrument to effectively apply proposed consolidation schemas. These simulations can be used as tools for transportation planning and cost estimations since the number of orders, order sizes and delivery dates can be input in the models. The program would then deliver an estimate of the number of trucks needed as well as the transportation cost for the consolidation of materials. 3.4 Validation using Simulation of the Overall Transportation and Storage Consolidation The analysis consisted of developing dynamic conditions for the recommendations of transportation and storage consolidation. These simulations were proposed as tools for transportation planning and cost estimations. The simulation modeling tool provided an estimate of the number of trucks needed as well as the transportation cost for the consolidation of finished goods and raw materials. The simulation effort provided us that 3 days is the lowest cost value for the number of days waiting to consolidate a truck load. 3.5 Analysis of Future Total Value Streams Once the results from the consolidation schemas, simulations, and Exchange Curves were obtained, there was necessary to construct the Future Total Value Stream Maps of both facilities to demonstrate the improvements made with respect to the original Current Total Value Stream Maps. The most important improvement was in raw material inventory, days in inventory were reduced from 4 days to 1 day. The finished goods inventory remained the same given that both manufacturing facilities are shipping at the same rate that they are producing. Regarding the transportation problem, the number of days that a truck waits to comply with the customers’ shipping requirements was reduced from 3 days to only 1 due to the use of consolidation of finished goods orders. As a consequence of the results mentioned above, the total time in plant was significantly reduced from 13 to 9 days. The main improvement in facility B was reflected in the raw material inventory. The inventory time in storage was reduced from 30 days to only 1day. The finished goods inventory decreased from a range of 2 to 3 days to one day. As in the facility A, facility B produces at the same rate that is shipping. However, this facility did have a reduction of inventory due to the fact that the transportation issue was forcing to delay finished goods shipments from the warehouse, was resolved with the consolidation. Pertaining to the number of days that a truck waits to comply with customers’ shipping requirements, it remained the same, since unlike facility A, facility B does keep its finished goods in the warehouse while waiting to consolidate a truck load. All these improvements led to a decrease of the in facility time from 44 days to only 14. Table 1 is shown a comparison between current and future state. Table 1. Comparison between Current and Future Total Value Stream Maps. Company Facility Performance Measure Facility A Facility B RM Time in Storage FG Time in Storage Waiting Time In-Plant Time RM Time in Storage FG Time in Storage Waiting Time In-Plant Time Total Value Stream Maps Current (Days) Future (Days) 4 1 1 1 3 1 13 9 30 1 2-3 1 1 1 44 14 4. Project Suggestions from Employees After the completion of this initial effort, company employees participate in group discussions to review, analyze and identify the impact of these changes in the current transportation and methods for all the operating procedures of the logistics operations. Flow diagrams and lean manufacturing concepts were used as a basis of understanding these operating procedures. Furthermore, recommendations and new ideas were discussed and approved to improve the value stream maps and current organization practices. 5. Conclusions The use of value stream mapping was required to state a clear understanding and awareness of the Organization’s dynamics. The toolkit applied in this study was proposed to the organization and was selected from a variety range of tools. The use of simulation tools with value stream mapping offers opportunities to reduce gaps between practitioner’s expectations and potential outcomes before implementation. Currently, the organization is applied the recommendations of this study in their practices in transportation and consolidation of shipments. References 1. Alber, K.L. and W. T. Walker, 1997, “Supply Chain Management: A Practitioner’s Approach, ” The Educational Society for Resource Management, pp.203-210. 2. Aucamp, D.C., 1997, Aggregate backorder exchange curve, IIE Transactions, v 22. pp. 281-287. 3. Bertazzi, L, and M. Speranza, 1996, Minimization of Logistic Costs with given Frequencies, Pergamon, vol. 31. No. 4 pp. 327-340. 4. Kelton, D. W., Sadowski, R.P., and D. A. Sadowski, 1998, Simulation with Arena, New York: McGraw Hill. 5. Mahmoud, M. M, 1992, Optimal Inventory Schemes: A Portfolio Effect Analysis, Journal of Business Logistics, v 13.No. 1, pp.193- 213. 6. Rother, M., and J. Shook, 1998, Learning to See, Lean Enterprise Institute, MA. 7. Womack, J P., Jones, D. T., and D. Roos, 1990, The machine that Changed the World: The story of Lean Production,,New York: Harper Perennial. View publication stats
