Title Supplier integration in production

Auteur Tineke Bolhuis S 1590863

Title Supplier integration in production

Key words Lean manufacturing, Value Stream Mapping, Supplier integration in production

Field of Study Business administration

Operations and supply chain management Supervisors RUG G.A. Welker

J.A.C. Bokhorst

Date February 2008

Principal Philips DAP Drachten Internet www.philips.com

Summary With the rising competition level and a relative expensive production compared to production in China, Philips DAP Drachten is looking for ways to improve production at their production plant. Lean manufacturing should provide a good solution. Besides the cost aspect, quality improvements and delivery improvements should also be attempted. First successes are booked in implementing lean manufacturing, now the rest of the production

should become lean. Value stream mapping should create an overview of the situation at the production location.

Supplier integration is a step within lean manufacturing which is not quite yet applied in the production facilities of Philips DAP Drachten. Supplier integration in

production should lead to improvements in production lead time, quality, flexibility and costs. This master thesis project should give a clear analysis of this situation and provide suggestions for improvement. How to organize internal processes to integrate suppliers within production of Philips DAP Drachten according to the lean

manufacturing philosophy.

Auteur Tineke Bolhuis S 1590863

Title Supplier integration in production

Key words Lean manufacturing, Value Stream Mapping, Supplier integration in production

Field of Study Business administration

Operations and supply chain management Supervisors RUG G.A. Welker

J.A.C. Bokhorst

Date February 2008

Principal Philips DAP Drachten

Internet www.philips.com

This master thesis is written as my graduation project by Philips DAP Drachten. With this project I will finish my master Business Administration in the direction ‘Operations and supply chain management’ at the RijksUniversiteit in Groningen. In this preface I would like to thank the following people for their help; Ruben Stappers, my graduation supervisor from Philips, Gera Welker, my graduation supervisor from the RUG, Anne van der Werf for some weekly discussions, my colleagues on the work floor for their help and advise and my family and boyfriend Jan for their believe in me and their support.

With the rising competition level and a relative expensive production compared to production in China, Philips DAP Drachten is looking for ways to improve production at their production plant. Management in Drachten is searching for ways to reduce their costs, to keep being competitive as in China. In Zhuhai China is a comparable Philips production facility. They believe lean manufacturing should provide a good solution.

Besides the cost aspect, quality improvements and delivery improvements should also be attempted with lean manufacturing. At this moment Philips DAP Drachten is

implementing the lean manufacturing approach within a part of their production system.

The part of production process ODF (Order Driven Factory) is put in flow, as an attempt to produce lean. First successes are booked and now the rest of the production should also become lean. Value stream mapping should create an overview of the situation at the production location. These should also define the next kaizen events within production.

Supplier integration in production is my focus point. Supplier integration is a step within lean manufacturing which is not quite yet applied in the production facilities of Philips DAP Drachten. Supplier integration in production should lead to improvements in

production lead time, quality, flexibility and costs. My master thesis project should give a clear analysis of this situation and provide suggestions for improvement. How to organize internal processes to integrate suppliers within production of Philips DAP Drachten according to the lean manufacturing philosophy.

Key words: Lean manufacturing, Value Stream Mapping, Supplier integration in

production

Management Summary

This project will focus on supplier integration in production, how to organise the internal processes to include the external suppliers. DAP Drachten is implementing lean

manufacturing on the production floor. Value Stream Mapping was used as an

implementation and evaluation tool for lean manufacturing. This tool was also guiding in this research. According to own specification and Brown et.al. (2006) lean

implementation starts with improving the physical layout of the manufacturing process.

This followed by a focus on material handling, just in time management and integration of supplier within processes. To implement lean manufacturing is not the goal, the focus is to improve flexibility, quality and make cost savings. Lean manufacturing is a proven method and philosophy to improve those specifications (Singh et all, 2006).

Supplier integration in production can be a specific focus point. Besides that integration fits within the lean manufacturing philosophy it also has its own surplus value. The higher the level of integration with supplier and customer in the supply chain the greater the potential benefits for both (Metters, 1997, Hines et.al. 1998). A good relationship between customer and supplier contributes to reliable information flows, and reliable information flows in turn contribute to high efficiency (Heikkila, 2002). According to Stalk (1988) integration is related to reduction of time. Holmstrom (1994, 1995) sees integration and synchronization of production with demand as a possibility to improve performance and speeding up operations.

This project will be looking at the boundaries and specifications in the internal processes at DAP Drachten. Within integration with the supplier it is important to create a mutual benefit. Suppliers are probably are willing to integrate but they need something in return.

The internal focus helps in creating an understanding in possibilities and focus points for DAP Drachten as well for the suppliers. Besides overall internal integration has a positive effect on external integration, external integration and collaboration among supply chain members always contributes to improving a firms logistical performance (Gimenez and ventura, 2005). Looking at the external suppliers the focus will be on Asian suppliers.

They are the biggest supplier group in volume on geographic level and have relative long throughput times.

Philips DAP Drachten is a relatively complex and large organization. To give a direct scope for this project the focus will be on the Moisturizing Shaving System product family (MSS, an additive shaver). The assembly line for the MSS is put in flow in order to produce according to lean philosophy. Furthermore for the MSS there are parts and subassemblies which are completely outsourced (supplied by Asian supplier). The MSS is the product family with, in comparison to the other product families, relatively many outsourced parts. Expected is that the future direction for DAP Drachten is more towards outsourcing and a pure focus on their core competences.

According to Ahlstrom and Karlsson (1996) the management system affects the change project to lean in three concurrent ways: Technically through its design; Formally

through its role in the organization; and cognitively, through the way in which associates

think about the system. The way of thinking the departments is starting to change and

begins to adopt lean principles. But the lean changes should also occur in design and

formally. Changes in design of the departments should be in the a structure (SAP,

planning). The structure should be supporting the production facilities and all the support departments should their way of working. After the implementation of lean

manufacturing in production their way of working changed. All involved departments should create a shared lean vision and align their visions in away by which all the departments feel their significance. Make the implementation of lean stronger by

implementing the change on formally level for all DAP Drachten. Keep in mind that the production is the core business they does the actual value adding.

For supplier integration in production it is important to create a line of mutual benefit between the involved parties. Suppliers should be chosen for their speed and flexibility, not for their low costs (Fisher, 1997). Creating and designing a responsive supply chain is also accepting that uncertainty is inherent in innovative products (Heikkila, 2002).

Uncertainty can be avoided by cutting lead- times and increasing the supply chain’s flexibility so that it can produce to order or at least assemble the product at the time closer to when demand materializes and can be accurately forecast. If somehow cost is considered more important it is striking with the proposed performance indicators of DAP Drachten at this moment

Looking at lean manufacturing and Just In Time (JIT) principles, cooperation with

suppliers is very important in the assembly industry (Kotabe, 1998). Cooperation is easier to realize if both parties are located close to each other since face-to-face contact

improves the quality of relations. Therefore international sourcing is a less preferred option in this industry (Kotabe, 1998). The future direction of DAP Drachten is according outsourcing and focusing on just the core competences of DAP Drachten, more towards a batch industries. DAP Drachten does a lot of international sourcing with mainly Asian suppliers. Future direction is more and more according to an assembly industry, and international sourcing, by which the industry is now arranged, is less preferred in this industry.

Further supplier integration in production of DAP Drachten can be established by target costing and value engineering. DAP Drachten is already working according to principles of target costing but supplier involvement is less considered. Working together with the suppliers should be a next focus point. Important is, within using this value engineering;

the use of teams of highly skilled workers for several department and use of highly flexible production processes which includes JIT deliveries, zero defect parts, agreements with the supplier on cost reduction curve over the product life cycle life of a product and long term commitment with the supplier to work together for a mutual benefit. But secret to success according to Towill (2005) is to periodically analyze product flows and

thereby ensure that the right pipelines are in place. In lean terms it is important to apply continuous improvement. In dynamic market as for the shavers it is important to stay flexible. The power of DAP Drachten should stay in quality and flexibility to provide innovative quality products on the market. Lean manufacturing as well as supplier integration in production could help in these processes. Looking at the integration

between production and supplier the higher the level of integration the higher the level of

effectiveness.

Index

1. COMPANY DESCRIPTION... 7

1.1 Philips in general... 7

1.2 Philips DAP... 8

1.3 Philips DAP Drachten shavers... 8

1.3.1 Value Stream... 9

1.3.2 Product range ... 11

2 PROJECT INTENTION AND THEORETICAL CONSIDERATION... 12

2.1 Problem analysis ... 12

2.1.1 Background information ... 12

2.1.2 Problem statement and fencing off... 14

2.2 Conceptual model ... 16

2.3 Definition of the problem... 18

2.3.1 Main Question... 18

2.3.2 Objective ... 18

2.3.3 Sub questions ... 18

2.3.4 Research model... 18

2.4 Theoretical consideration ... 19

2.4.1 Lean manufacturing ... 20

2.4.2 Expected achievement after lean manufacturing implementation... 22

2.4.3 Value Stream Mapping... 23

2.4.4 Materials management ... 24

2.4.5 Integration with internal suppliers ... 25

2.4.6 Integration with external suppliers ... 26

3 CURRENT STATE... 28

3.1 Performance indicators... 29

3.2 Purchasing ... 32

3.2.1 Purpose ... 32

3.2.2 Way of working ... 32

3.2.3 Status lean ... 34

3.3 Logistics ... 35

3.3.1 Purpose ... 35

3.3.2 Way of working ... 35

3.3.3 Value Stream Map ... 37

3.4 Production... 39

3.4.1 Purpose ... 40

3.4.2 Way of working ... 40

3.4.3 Value stream map ... 42

3.5 Materials management ... 44

3.5.1 Moulding ... 44

3.5.2 Flow line... 45

3.5.3 Drives & Motors ... 46

3.5.4 Mewa ... 47

3.5.5 SKE... 48

3.5.6 Scrap production ... 49

3.6 Conclusion current state... 51

4 FUTURE STATE... 53

4.1 Conditions before further lean implementation ... 53

4.2 Materials management and integration ... 55

4.2.1 Lean supply... 57

4.2.2 Target costing and value engineering... 58

4.2.3 Just In Time management ... 60

4.3 Conclusion future state ... 61

5 ACTION PLAN... 63

5.1 Action plan for internal processes at DAP Drachten... 63

5.1.1 Issues on organization level ... 63

5.1.2 Issues on department level ... 64

5.2 Action plan for key elements in integrating supplier... 65

6 CONCLUSION ... 67

After word... 70

List of abbreviations... 71

References ... 73

Appendix A Exploded MSS... 78

Appendix B VSM MSS Production overview... 79

Appendix C Measurements performance ... 81

Appendix D Details Case box Honor Tone ... 82

Appendix E Supplier analysis MSS Shaver... 84

Appendix F Asian supplier analysis MSS shaver ... 85

Appendix G Logistics production flows ... 86

1. Company description

This chapter will give a description and introduce the company Philips. First Philips in general will be discussed in paragraph 1.1. After which the Domestic Appliances and Personal care division (DAP) will be given further notice in paragraph 1.2. Paragraph 1.3 will get into DAP Drachten shavers; the production processes and the performance indicators.

1.1 Philips in general

Philips has over 125.800 employees worldwide divided over more than 60 countries.

Philips is one of the largest global electronics companies. In 2006 they had sales over

€26.976 million. The company was founded 116 years ago in 1891 in Eindhoven. Today they are a global company with headquarters in Amsterdam. They are committed to enhancing economic prosperity as well as environmental quality and social equity wherever they operate. Philips has four businesses; Domestic Appliances and Personal care (DAP), Lighting, Medical Systems (MS) and Consumer Electronics (CE). In 2008 they are going to transform these four businesses into three core sectors called;

Healthcare, Lighting and Consumer Lifestyle. The businesses CE and DAP will be fully integrated to form the Consumer Lifestyle sector. The combination of CE and DAP should create a consumer power house with deep consumer insides, and a proven ability to develop, produce and market truly innovative products at higher margins. The

deviation of DAP and CE will not change. Below the recent organization chart of Philips in general is presented. This chart shows the subdivision into the four mentioned

businesses. The black boxes indicate the domain of this study. Shaving and beauty, is an activity of the division DAP. Paragraph 1.2 discusses the subdivision DAP and paragraph 1.3 will elaborate the shaving and beauty activity.

Figure 1: Organization chart Philips in general 2007

P h i l i p s

D o m e s t i c A p p l i a n c e s a n d

P e r s o n a l c a r e

C o n s u m e r

E l e c t r o n i c s L i g h t i n g M e d i c a l S y s t e m s

D o m e s t i c a p p l i a n c e s

H e a l t h a n d W e l l n e s s

S h a v i n g a n d b e a u t y

C o n n e c t e d d i s p l a y s

A u d i o &

m u l t i m e d i a a p p l i c a t i o n s

P e r i p h e r a l s a n d a c c e s s o r i e s

H o m e n e t w o r k s

P r o f e s s i o n a l s o l u t i o n s

B u s i n e s s s o l u t i o n s

L a m p s

L u m i n a i r e s

L i g h t i n g e l e c t r o n i c s

A u t o m o t i v e , s p e c i a l l i g h t i n g

a n d U H P

L u m i l e d s

D i a g n o s t i c I m a g i n g s y s t e m s

C u s t o m e r s e r v i c e s

C l i n i c a l s o l u t i o n s

1.2 Philips DAP

The Philips division DAP has 8 500 employees world wide in three subdivisions:

- Domestic Appliances, including Kitchen appliances, Beverage appliances, Garment care, Floor care and Water and air purification

- Health and Wellness, includes Oral healthcare (Sonicare) and Mother and childcare

- Shaving & Beauty, including business shaving (Philips Shavers and Norelco), Beauty and grooming

The division DAP has sales and service organizations in the Netherlands, Austria, Poland, the United States, Brazil, China and Singapore. The business units are headquartered in Amsterdam with the exception of oral healthcare which is based in Snoqualmie, USA. The business unit DAP has some innovative products through powerful alliances for example the Senseo (Philips and Douwe Egberts), Perfect draft (Philips and Inter brew), Moisturizing Shaving System (MSS, Philips and Nivea for men) and the dry electric shavers (Philips and AT&T Williams). Philips DAP is worldwide market leader in the area of male shaving. They are also market leader in several other markets like Beauty (Europe, Apac), Oral health care (North America), Food and beverage (Latin America) and Garment care (Europe and Apac).

1.3 Philips DAP Drachten shavers

Philips DAP Drachten shavers (further DAP Drachten) is one of the largest factories within the DAP Shaving & Beauty subdivision. DAP Drachten develops and produces shavers for the world market. DAP Drachten has the vision to be the most important innovation & supply centre of DAP. This can only be achieved with continuous

innovation of new products and a swift and good ramp-up into production. The ramp-up is the start up of a new shaver into production. Both the production department and support departments are on the same site as the research and development department.

Due to this connection DAP Drachten believes it is able to do this ramp-up in a relative short time.

DAP shavers is world market leader and sold 21 million shavers last year (2006) (Philips magazine, 2007). 7 Million Shavers were completely produced in Drachten. The shavers produced in Drachten are mostly for the European market. For the other 14 million shavers, the shaving heads are produced in Drachten but further production is in Zhuhai China. In Zhuhai China there is another production facility of Philips Shavers. Shavers produced in Zhuhai China are mainly intended for the markets in Asia and America. The shaver is produced in several segments (so called ends) to provide the customers different choices. The shavers are produced in; low end, mid end and high end. The divided

segments tell something about the variety of features and price regarding to quality. In

DAP Zhuhai almost only low end appliances are produced.

This project will focus on the production of complete shavers at DAP Drachten. Figure 2 shows the organization chart for the production site of shavers Drachten. At the

production site of DAP Drachten work about 1 600 employees.

G eneral m an ager

Hum an R esources M anagem en t

Fin ance

S upp ly chain

m anagem ent P urchasing & su pply

Research and Develop m ent

Q uality m anagem ent

B usin ess Unit p rojects

P ro ject m anagem ent

Technical develop m ent P rod uction P DF

En gineering O DF

Log istics P roduction O DF

Figure 2: Organization chart DAP shavers Drachten

1.3.1 Value Stream

The production facilities of the shavers at DAP Drachten can be separated in two parts;

Planning or Process Driven Factory (PDF) and Order Driven Factory (ODF). The production at PDF is mostly push based (The order is pushed in the direction of added value, without need of customer influence or a definite customer order, (Schönsleben, 2000)) in contrast to ODF where production is a combination of push and pull based (whereby value added only takes place with customer demand, Schönsleben , 2000).

Figure 3 provides an overview of the production processes of shavers at DAP Drachten.

The figure shows the Value Stream (VS) from supplier to the production facilities to the

Drachten Distribution Centre (DDC) and the National Sales Organization (NSO) of DAP

Drachten. This scope is taken to show the involved parties of DAP Drachten. The red

dotted line shows the production facilities. The black line indicates where the production

moves over from PDF to ODF. The production process will be described in detail in

chapter 3 ‘Current state’.

PDF ODF

Legend:

Production processes

Subdivision production between PDF and ODF MeWa Metaalwaren, the department with metal constructions

SKE Snij en knip elementen, production department which produces the shaving unit, including cap and cutter

PDF Planning Driven Factory

COPD Customer Order Decoupling Point

MOVIN Montage, voedingen en inpakken, Assembly, power supplies and packing ODF Order Driven Factory

DDC Drachten Distribution Centre NSO National Sales Organization

Figure 3: Overview production shavers DAP Drachten

Within the production processes there are differences in PDF and ODF. PDF produces

the shaving heads of the shavers. They produce mainly the caps, cutters (parts for the

shaving unit (see appendix A for subcomponents of shavers), trimmers and other

comparable components. PDF produces with large batches and has mostly dedicated

production lines for product families. Outputs of these processes are mostly intended for

the ODF part of the factory. There are also products which are produced for service

reasons and as parts for the production of Philips DAP in Zhuhai. The production of PDF

caps in the shaving heads is a real special production process. This process took a long

time to develop. Productions of the heads started in 1952. This specialism is developed in

Drachten. DAP Drachten is not willing to board this competence out because they want

to keep their knowledge in-house. This is one reason why DAP Drachten still produces

the shaving heads for DAP Zhuhai. Decoupling is the process of creating independence

between use and supply of material. The decoupling point is the location along the value

added processes, where inventory is placed to create independence between processes or

entities (Schönsleben, 2000). Within logistics the term customer order decoupling point

(CODP) is much used. The CODP is the point in a value-adding process where a product

is linked to a specific customer order. Therefore, downstream from this point production

is order-driven and upstream it is forecast-driven or planning-driven (Hoekstra and

Romme 1992). As can be seen in figure 3, at DAP Drachten this point is between the

PDF and ODF part of the production processes. This point is before the final assembly of

the shavers.

1.3.2 Product range

Output of ODF can be divided in three product families. In production there are different names for the product than on the market. These are the so called project names, they are given by the R&D department. Only after the product is developed and first produced, the marketing department reveals the commercial name. In this time production is already starting. This is the reason why they keep on using the development name within production. The shavers are subdivided by production in the following product families, based on the final output;

- The Cheetah and Corona; two kinds of products which are very similar and are mostly produced on the same production line. Within production these products are treated like one. The marketing name for the corona is Speed XL and the market name for the cheetah is HQ. This product family has been in production for about 3 years.

- The SR1 has as marketing name Arcitec. The production start was in the beginning of 2007; in the autumn of 2007 the product was launched on the market.

- The Merlin is brought on the market as the Robot skin or Moisturizing Shaving System (MSS). The production start of this product family was also in the beginning of 2007, the product was launched on the market autumn 2007. ( This product is shown in appendix A).

The PDF part of production delivers shaving heads for further production in Drachten

(ODF processes) and Zhuhai and they also produce service parts, which are sold separate

from the shaver.

2 Project intention and theoretical consideration

This chapter will observe the problem area of this project. First this chapter will start by making an analysis of the problem by giving information about the background, the problem area methodology and the conceptual model. Secondly it will deepen the problem area through explaining the research intentions. Finally the theoretical consideration will be discussed.

2.1 Problem analysis

The problem analysis contains background information and an introduction of the

problem statement. During this paragraph scientific literature will support several steps to introduce the used subjects, fencing off of the project and to clear out made steps.

2.1.1 Background information

The traditional batch manufacturing focuses on one main theme or production

philosophy; Run as large a batch as is economically feasible in order to avoid a change in equipment. Many times however, this philosophy is contrary to what the customer actually wants, needs, or is willing to hold in inventory (Brown et.al., 2006). Besides that

‘The Customers are no longer willing to wait in a highly competitive global market.

Customers are increasingly willing to shift their source of goods supply. Yet conversely, the industry is also observing outsourcing trends that are in fact adding to lead-times.

Here are two contradictory forces presented that increase complexity in the supply chain (Daiziel, 2007).’ These are relative general problems faced on the market. With the rising competition level and a relative expensive production in Drachten, DAP Drachten is looking for ways to improve production at their production plant. For example comparing DAP Drachten to DAP Zhuhai labour is an important factor to consider. An employee in production of Drachten is 21 times more expensive per hour than one in Zhuhai.

According to Walker (2005) manufacturing executives are struggling to keep their domestic factories in whatever country open. This is trend which is also felt by DAP Drachten.

Lean manufacturing philosophy should give a boost in improving direction for DAP Drachten. Schönsleben (2000) defines lean manufacturing as the minimization of all required resources (including time) for the various activities of the company. It involves identifying waste, that is, all Non Value Adding (NVA) activities in development and production, within the entire logistics network, extending to and including the consumer, and eliminating them (Christopher and Towill, 2000, Naylor et al, 1999). Management at DAP Drachten is searching for ways to reduce their costs, to remain competitive to production in China. They believe lean manufacturing should provide some good solutions. Besides the cost aspect, quality improvement and delivery improvement are significant within lean manufacturing. These key improvements correspond with the order winners of DAP Drachten (Which will be discussed in the beginning of chapter 3;

Current state). Production successes in quality and delivery improvement should lead to

decreasing costs. ‘Lean manufacturing has been a topic of considerable interest in

manufacturing for the past few years. It is now widely acknowledged that organizations that have mastered lean manufacturing methods have substantial advantage in terms of cost and quality over those still practicing traditional mass production (Singh et all, 2006).’

At this moment DAP Drachten is implementing the lean manufacturing approach within their production system. They are ‘trying to do the right thing from customer’s point of view (Liker, 2004).’ Within the factory, in production, there is quite a focus on lean manufacturing. There are several projects to provide the lean philosophy on the work floor and there are projects to make production lines more in flow. The assembly part of the manufacturing process is put in flow, with only small safety stocks on the floor. First successes are booked and now the rest of the production system should also become lean.

The current focus for the implementation of lean manufacturing are mainly at the internal manufacturing processes. One of the next focus points will be the cooperation with other departments, their processes and integrating external processes with production to create a lean flow over the supply chain. These focus points can also be read out of a review by Brown et.al. (2006). They reviewed progress towards lean manufacturing; Value Stream Mapping (VSM) was used to develop an understanding of the existing system and to identify areas for improvement. According to Brown the first area for improvement identified was the physical layout of the manufacturing process. This was followed by a focus on material handling (Like just in time, integrate supplier within process). And the last area for improvement discussed was concerned equipment availability (Brown, et.al, 2006).

During the start of this project the supply chain management team of DAP Drachten made their first VSM overviews. Through Value Stream Mapping (VSM) the next events in getting the factory lean are found. VSM has become a popular method for

implementing lean manufacturing (Lian, Landghem, 2007). A VSM is a visual collection of all actions Value Added (VA) as well as Non Value Added (NVA)) that are required to bring a product (or a group of products that use the same resources) through the main flows, starting with obtaining raw material and ending with the providing goods for the customer (Abdulmalek, Rajgopal, 2007). In January 2007a part of the production process was put into flow. This means there was a physical change within the manufacturing process. The first steps of implementing lean manufacturing where made. This change was made with the introduction of two new products in production (MSS and Arcitec).

On the production floor there are several kaizen events to improve production. Kaizen

events are events with involved people of a selected area to improve and change for the

better. (Greene, Orourke, 2006). Basic at this moment in production of DAP Drachten is

building the blocks of lean manufacturing through standardization and within these

processes involving all the employees (Liker, 2004). The next part would be how to

organize materials handling, just in time and how to integrate suppliers within the

manufacturing process. This project will focus at the internal processes and how to

organize these to include the external supplier.

2.1.2 Problem statement and fencing off

This project will focus on supplier integration in production, how to organise the internal processes to include the external suppliers. DAP Drachten is implementing lean

manufacturing on the production floor. According to own specification and Brown et.al.

(2006) lean implementation starts with improving the physical layout of the manufacturing process. This followed by a focus on material handling, just in time management and integration of supplier within processes. To implement lean

manufacturing is not the goal, the focus is to improve flexibility, quality and make cost savings. Lean manufacturing is a proven method and philosophy to improve those specifications (Singh et all, 2006).

Supplier integration in production can be a specific focus point. Besides that integration fits within the lean manufacturing philosophy it also has its own surplus value. The higher the level of integration with supplier and customer in the supply chain the greater the potential benefits for both (Metters, 1997, Hines et.al. 1998). A good relationship between customer and supplier contributes to reliable information flows, and reliable information flows in turn contribute to high efficiency (Heikkila, 2002). According to Stalk (1988) integration is related to reduction of time. Holmstrom (1994, 1995) sees integration and synchronization of production with demand as a possibility to improve performance and speeding up operations. Besides high efficiency, reduction in time and speeding up operations of course there are other benefits, mainly all these integration processes lead to a reduction of the bullwhip effect in the entire supply chain (Heikilla, 2002).

This project will be looking at the boundaries and specifications in the internal processes at DAP Drachten. Within integration with the supplier it is important to create a mutual benefit. Suppliers are probably are willing to integrate but they need something in return.

The internal focus helps in creating an understanding in possibilities and focus points for DAP Drachten as well for the suppliers. Besides overall internal integration has a positive effect on external integration, external integration and collaboration among supply chain members always contributes to improving a firms logistical performance (Gimenez and ventura, 2005).

In production processes of DAP Drachten and supplying processes there are relative long throughput times. Due these relative throughput times several risks are intercepted by inventory. Within the throughput time production demands can change due to a different request from the NSO ‘s (National Sales Organization). Sales could are rise faster as expected. And besides the rising demand there are a lot of transportation risks. In this relative long time several things could happen intern of extern which are adding to inventory levels: scrap in own production, problems at own production or at the supplier, adverse wind on the boat, or strikes. To prevents shortage of part and modules on the production line a higher amount of inventory is taken in account at DAP Drachten.

Material management should provide insights in the integration of suppliers in

productions. The way a supplier in flexible and able to change in amounts will probably

have a positive influence on the supplier integration in production and performance.

Figure 4 provides a general overview of the production situation at DAP Drachten and the involved departments in supplier integration. The overview is split at organizational level and at a level of involved departments. The main focus of this project is materials management and the supplier integration in production on organizational level. Internally is this relationship influenced on department level by the departments ; Purchasing, Logistics and Production. There are more influencing parties, for example in the research and development processes, but in this project they are not mainly taken into account. In appendix B this focus will be further explained, as well as in chapter 3. The focus in this project is looking at the internal suppliers and departments and how they influence the integration of external suppliers.

Figure 4: General overview plant DAP Drachten

Philips DAP Drachten is a relatively complex and large organization. To give a direct scope for this project the focus will be on the Moisturizing Shaving System product family (MSS, an additive shaver). The assembly line for the MSS is put in flow in order to produce according to lean philosophy. This way the last processes of assembly and packing are put into a direct line connection with fewer inventories on the work floor and in the warehouses. Furthermore for the MSS there are parts and subassemblies which are completely outsourced. The MSS is the product family with, in comparison to the other product families, relatively many outsourced parts. Expected is that the future direction for DAP Drachten is more towards outsourcing and a pure focus on their core

competences. This idea was considered during the development of the MSS shaver and the main reason why they outsource parts and complete units. The MSS is taken as scope for this project because it contains the ideas of the future direction for DAP Drachten

External suppliers for DAP Drachten can be classified on geographic level: Dutch suppliers which mostly deliver on a daily basis, European suppliers (Excluding the Netherlands) which deliver on a weekly basis. And the Asian suppliers which mostly also deliver on a weekly basis but the lead time is longer. From Asia the transportation on

Supplier Production Distribution

centre

Purchasing Logistics Production

Procurement Planning

boot takes at least 6 weeks. The average lead time from point of ordering to delivery is mainly 12 to 40 weeks. The Asian supplies are the largest supplier group on geographic level. They take more than 50 % of the total financial input turnover. This is of because of the subassemblies like; the power plug, power supply and driving unit are purchased from Asian suppliers (see Appendix A the subcomponents of the MSS). The value of these parts in comparison to other subcomponents is relative high. With a relative long throughput time (6 till 12 weeks) and the large group of suppliers, the Asian suppliers will be the first focus looking at the external supplier integration in production.

Written below is a list of fencing off points in this project:

- Philips DAP Drachten Production - Lean manufacturing philosophy

- Involved departments and processes from purchasing, logistics and production - Supplier integration in production

- How to organise the internal processes to include the external suppliers - Supplier production relation from buyer point of view (DAP Drachten) - MSS Product family

- Asian suppliers - Throughput times

- Materials management; Inventory

2.2 Conceptual model

After the problem analysis the area around the problem is known. The main focus of this

project how to organize internal processes to include the external suppliers, supplier

integration in production. To create an overview in the knowledge which is required for

this project, a conceptual model provides a method for problem analysis. A conceptual

model gives a visual overview of the fencing off of the project area, a selection of

variables and their relation to each another (Baarda, Goede, 2006). Basic assumption

within formulating the conceptual model should be the question; which elements and

variables should provide knowledge to achieve the postulated goal of the project (Baarda,

Goede, 2006).

Figure 5: Conceptual model

The conceptual model is shown in figure 5.. The model is in first place designed for the production facilities. The internal DAP processes and departments are leading in the design of the model. In lean manufacturing the focus is on value adding activities for the customer. These are the demands in real terms. On the other hand lean manufacturing should also be a basic concept within the model. Which are the restrictions from a lean perspective? Lean manufacturing and the production facilities determine the requirements and restrict the direction within this project. The possibilities and constraints from the supplier could also play a role in requirements and restrictions. These will be observed but not sorted out in specific (the reason for the dotted line).

VSM is a way of implementing and evaluating lean manufacturing which is already used on the production floor of DAP Drachten. This method could also provide insight within the integration process from supplier within production. VSM will give a current state of the production facilities of MSS and status lean, both will be guides for determining the future state. For the conceptual model of this project materials management will be the focus point. Major focus is throughput time reduction, material management

improvement and inventory reduction (because of all the ‘waste categories’ inventory is

the one that creates tremendous delays, cycle delays in the process, as well as covers up

problems (Dittman, J., P., 2004)) . Figure 5 provides the conceptual model, The elements

used in this conceptual model will be attended in the theoretical consideration paragraph

2.4.

2.3 Definition of the problem

This paragraph will deepen the problem area. The main question and the sub questions will be described and the paragraph will finish with the research model for this project.

2.3.1 Main Question

How to integrate the suppliers within production of Philips DAP Drachten to create an optimal flow for the MSS product family?

2.3.2 Objective

Lean manufacturing should provide as a basic philosophy to improve performance by increasing quality, increasing flexibility and reducing costs.

2.3.3 Sub questions

To answer the main question several sub questions are developed. The main question is split up in sub questions.

1. What benefits will Philips DAP Drachten gain from integrating suppliers with production?(Chapter 2.4 Theoretical consideration)

2. Which factors and requirements influence the internal processes and involved departments of the MSS product family in order to create lean manufacturing and supplier integration? (Chapter 3 Current state)

3. What is the current situation of supplier integration in production? (Chapter 3 Current state)

4. How to optimize the internal DAP Drachten processes of the MSS product family to integrate suppliers in production according to the lean manufacturing

philosophy? (Chapter 4 Future state)

5. Create an action plan of steps to make before supplier integration in production in a lean way? (Chapter 5 Action plan and conclusion)

2.3.4 Research model

The research question and sub questions are used for the construction of this report. An

overview is given based on the model of the de Leeuw (1996). He states five phases in

doing research. Each of these phases will be appointed in this project, but not every phase

with the same amount of detail. Focus will be on diagnosing and providing an action plan

for the redesign phase. After these phases there will be a conclusion. Figure 6 shows an

overview of these phases including the used research method and the chapter in which it

will be described. This project is practice directed.

The sub questions are divided by chapter and by research phase of de Leeuw (1996). The theoretical consideration will provide background information and criteria and factors of how to integrate suppliers within production. During the entire project several stages will be theoretical constructed. VSM is used to analyze the current state at DAP Drachten and is used to develop ideas about a future state. The current state and future state are both part of the diagnosis phase. In the future state ideas of what could be implemented are investigated. The GAP analysis is a result and consequence of VSM. What are the main differences between the current and future state. At last an action plan should provide some steps of how to organize DAP Drachten to achieve elements from the future state.

Figure 6: Research model (Based on the model of de Leeuw, l996)

2.4 Theoretical consideration

The theoretical consideration will provide information for the explanation of the conceptual model and research question. First lean manufacturing and its elements like VSM will be explained. Further the topic of VSM, materials management and supplier integration (inter and extern) will be discussed. This paragraph shows benefits which DAP Drachten will gain from integrating suppliers with production?(sub question 1) This paragraph should provide some theoretical support and criteria of how to integrate

suppliers into production.

2.4.1 Lean manufacturing

After the main research is described, the theoretical construct is designed in a conceptual model. In this conceptual model variables are described and their expected influences on each other. Within lean manufacturing the customer demand is central, value adding is all what the customer wants and the rest could be seen as non value adding or non value adding but necessary. The lean philosophy is a basic in this project. Lean manufacturing is a method to eliminate waste. In lean terms waste can be categorized within the three M’s; Muda (waste categories), Muri (Unreasonable burden of people and or machines) and Mura (Unleveled workload of people and or machines) (Liker, 2004). Implementing lean manufacturing is not the goal but it is a way and philosophy to reduce waste. The focus of most lean manufacturing efforts is about waste, eliminating muda. The other two M’s are just as important to making lean work. These three terms work together as a system (See figure 7).

Figure 7; The three M’s can be seen as a system, model by Liker 2004

Muda are waste activities that lengthen lead times, because of, for example extra movements to get parts or tools, create excess inventory or result in waitingtime(Liker, 2004). Muda’s waste categories are easy to recognize and also tangible within identifying waste. But important is to consider the elimination of waste in all the three M’s. The waste categories of muda show, in terms of visual management, Non Value Adding (NVA) activities. For this project the focus will be on Muda to create a clear view and measurement points of waste in general.

Within the context of waste different authors have extended the list of manufacturing waste (Singh, et.al, 2005). Singh et all (2005) ranked various categories of waste depending upon their impact on the organization (Table 1). The first three places are taken by; Waiting, Overproduction and Defects. In the current situation at DAP Drachten lean manufacturing implementation projects are mainly focused on the internal value adding processes. The part of production directly related to the production floor. Waiting, Overproduction and defects are more direct related to internal processes of production of DAP Drachten. For this project the external processes are more significant. The waste categories unnecessary inventory and transport are more influencing these external

Muda Waste

Muri Overburden Mura

Unevenness

related processes to production, the relation and integration between supplier and production. The objective of inventory management is to balance conflicting goals like keeping stock levels down to have cash available for other purposes and having high stock levels for the continuity of the production and for providing a high service level to customers. Many firms have undertaken re-engineering efforts to improve the efficiency of their supply chains with the goal of better matching supply with demand so as to reduce the costs of inventory and the customer service times (Arda and Hennet, 2006).

Transportation is an issue within the production facilities but could also provide information about elaborate lines from supplier to production. From a lean perspective, inventory adds to lead-time as well as transport. This project will focus on inventory levels (in a broader perspective of materials management); this because it can be better influenced by internal value adding processes from DAP Drachten.

1. Waiting

2. Overproduction 3. Defects

4. Unnecessary inventory 5. Transport

6. Inappropriate processing 7. Energy

8. Unnecessary motion 9. Inappropriate design 10. Human potential

Table 1: Rank of various wastes depending upon their impact on an organization )listed by Singh et all, 2004)

The general goal of lean manufacturing is to reduce waste in terms of human effort, inventory, time to market, and manufacturing space and to become highly responsive to customer demand while producing world class quality products in the most efficient and economic manner. (Singh, et.al, 2005) The lean manufacturing philosophy is a method to achieve these achievements not a separate goal. These achievements by handling lean manufacturing are made by using, for example, Total Production Maintenance (TPM), Just in Time (JIT), 5 S, kanban, Value Stream Mapping (VSM) and kaizen events. The table (Table 2) shows a sum of these most common lean terminologies (Greene, Orourke, 2006).

Terminology Definition

Total productive maintenance (TPM) A series of methods that ensures every piece of equipment in a production process is always able to perform its required task

Just In Time (JIT) A method of inventory management in which small

shipments of stock are delivered as soon as they are needed

5 S The lean approach to converting the waste of motion into

work; Sort, Shine, Sweep, Standardize and Sustain

Kanban A production control system that uses visual signals to control the flow of material during the manufacturing process.

Kaizen Continuous improvement based on knowledge

Value stream All activities that a company must undergo to design

procure, produce and deliver its products to specified customers

Value Stream Mapping (VSM) An intelligent process flow map that shows the sequence and movements of information, material and actions is a company’s value stream.

Table 2: Lean terminology (Greene, Orourke, 2006).

2.4.2 Expected achievement after lean manufacturing implementation

There are several elements in which performance could increase after the implementation of lean manufacturing. The four measurement areas for lean transformation, in most literature, are measured under the umbrella of the lean manufacturing family of measures:

Quality, costs, delivery and safety, cost can be seen as an indirect result of delivery performance and quality improvement (Brown, Collins, MC Combs, 2006). As could be read in the background information lean manufacturing was implemented at DAP

Drachten to keep competitive on cost level and gain savings. Besides the cost aspect lean manufacturing should provide flexibility and quality improvements. It is difficult to predict performance after lean implementation. The way lean manufacturing is

implemented and who is involved is also leading. This paragraph uses several researches to predict performance after lean manufacturing implementation.

Kaynak 2003, investigated the influences of total Quality Management (TQM) practices on firm performance. Lean manufacturing is a quality management concept. (Anderson, Eriksson, Torstensson, 2006). Values within TQM and lean manufacturing have the same objective, increase external and internal customer satisfaction with a reduced amount of resources (Hellsten and Klefsjo, 2000). TQM and lean have many similarities, especially concerning origin, methodologies, tools and effects (Anderson, Eriksson, Torstensson, 2006). For this reason the results of the investigation of Kaynak (2003) could also be used to predict effects of firm performance level.

Kaynak (2003) found a direct relation between inventory management performance and

quality performance. This relations shows that improvements in quality, productivity and

on time delivery are partly due to reduced inventories. Kaynak found that an indirect

relationship of inventory management and a direct effect of quality management on

financial and market performance, validated by the notion that improvements in operating

performance result in increased sales and market share. Thereby providing a competitive

edge to companies. This project uses the model of Kaynak to predict effects of the

integration process on firm performance (figure 8). The internal process measurements

are described in appendix C. For this reason DAP Drachten should not expect direct

financial performance result. Performance improvement should start at the level of

process management and inventory performance.

Figure 8: Expected firm performance after implementation of lean manufacturing

2.4.3 Value Stream Mapping

At this moment DAP Drachten is implementing the lean manufacturing approach within their production system. Value Stream Mapping (VSM) is used for implementation and evaluation of lean manufacturing. DAP Drachten is trying to ‘do the right thing from customers point of view (Liker, 2004).’ The basic lean concepts are leading within the implementation of lean manufacturing. Liker (2004) put them in a format for kaizen workshops. Output of these processes should be kaizen events, events to change for the better. Figure 9 shows the flow of basic lean principles (Rother, Shook, 2003). These can be used for implementation and should be repeated after each event to keep continuous improvement within lean manufacturing. VSM is a method that should help in this process and in making priorities.

Scope of business process

What is value added to the customer Measurable objectives

Ideal state

Process steps, Process flow

Identify Value Added and non value added Eliminate non value added

Challenge non value added – required, Question why Creative leap and kaizen burst

What? When? Who?

Training and communication plan

Begin

Make necessary reorganizations around value streams

Establish process requirement Visually track progress Continuous improvement

Figure 9 Basic concepts of lean manufacturing (Rother, Shook, 2003) W ho is the custom er

C urrent state m ap

F uture state m ap

Im plem entation plan

D o it

E valuate

Qu a lity p erfo rm an ce

Pro ces s m an ag e m en t Inve nto ry pe rfo rm a nc e

Fin an cial p e rfo rm a nce

VSM has become a popular method for the implementation of lean manufacturing (Lian, Landghem, 2007). It is divided into two components: detailed mapping (Hines, Rich, 1997) (Singh, et.al, 2005) and big picture mapping (Womack, Jones, 1996). A value stream map is a visual collection of all actions Value Added (VA) as well as Non Value Added(NVA) and Non Value Added But Necessary (NVABN)) that are required to bring a product (or a group of products that use the same resources) through the main flows, starting with raw material and ending with the customer (Abdulmalek, Rajgopal, 2007).

Value stream mapping is a collection of tools that helps researchers and practitioners to identify waste in individual value streams (Hines et all, 2000).

First something about detailed mapping, the current state, which keeps in view the finer details of the manufacturing operations. The actions of a specified area are drawn which note all activities that are required for a product or handling (Abdulmalek, Rajgopal, 2007). The various activities are grouped into three main segments; Value Added (VA), Non Value Added But Necessary (NVABN) or Non Value Added (NVA) (Singh, et.al, 2005). NVA activities do not make the product or service more valuable. These are termed pure waste and involve unnecessary actions that should be eliminated, some of the examples are; increased waiting time, unnecessary inventory, inspection, etc. (Singh, et.al, 2005). Waste can be termed as anything other than the minimum amount of equipment, material, parts, space and time that are essential to add value to the product.

Waste uses the resources but does not add value to the product (Singh, et.al, 2005). The current state within VSM provides an overview of activities and specifies all waste within these.

Secondly a VSM provides a blue print for implementation of the lean manufacturing concepts with defining a future state. The future state describes how the information and materials should flow while minimizing and eliminating the various types of waste present in the manufacturing system defined by the current state. (Rother, Shook, 2003, Singh, et.al, 2005) A future state can be used as guideline for developing kaizen break through events for the coming months (Brown, Collins, MC Combs, 2006).Kaizen is a term that combines the two words from the Japanese vocabulary good and change, commonly referred to change for the better. Kaizen is a continuous improvement mindset that pursues elimination of waste (Brown, et.al, 2006).

The method of VSM is used as a modelling activity for this project. The steps are taken in a broader scope than just this project. Only the relevant issues will be taken into account.

Basically the current state and future state are chapters within this report.

2. 4.4 Materials management

There are several definitions of materials management. According to Ammer (1969) materials management is concerned with the flow of materials to and from the

manufacturing departments. Arnold (1991) finds materials management a coordinating function which is responsible for the planning and controlling of the materials flow. Its objectives are to provide the required service level and to maximize the output of a firm.

Lyson (2000) uses in his book a definition by the institute of logistics. He uses the

definition of materials management which integrates the flow of supplies into, through and out of the organization to achieve a level of service which ensures that the materials are available at the right place at the right time of the right quantity and quality and at the right costs. It includes the functions of procurement, materials handling and storage, production and inventory control, packaging transport and associated information systems and their associated information systems throughout the supply, service and distribution sectors. Further in his book Lyson (2000) translates the definition of materials management into the input phase of logistics management. The definition of Lysons (2000) is also leading as the definition of materials management is this report.

Looking at the mentioned waste elements in paragraph 2.4.1, unnecessary inventory was a focus point. Inventory management is also one of the focus points within materials management. Unnecessary inventory is caused by excessive storage, and delay of information regarding the products, which results in excessive inventory and costs, and could lead to poor customer service (Singh, et.al, 2005). Inventory is a waste element which is relatively easy to measure. Within lean manufacturing the objective of

improvement, besides reducing the lead time, is to also increase customer satisfaction. In addition, increased productivity and an inventory reduction are common effects of successful lean projects. (Anderson, Eriksson, Torstensson, 2006). Inventory and lead time issues maybe viewed as two related issues since the more inventory the longer the lead time. (abdulmalek, Rajgopal, 2007)

Going back to the production basics; Large batches that have quality flaws, which must be reworked, translate into delays in shipping to the customer. To buffer these kinds of problems many manufacturers increase run quantities, or hold higher amounts of inventory to hide these delivery problems to the customer. However, higher inventories result in increased inventory holding costs and eventually the customer must bear these additional costs (Brown, et.al, 2006). All these amounts of high inventory before, within and after production with finished goods increase the throughput time. These long throughput times limit a company in reacting and shifting in customer demand, by which they could possibly react by increasing their inventory amounts. A high inventory means maintaining large warehouse storage and manufacturing floor space. This limits a

company’s opportunity to expand into new product offerings and grow the core business into new markets (Brown, et.al, 2006).

2.4.5 Integration with internal suppliers

The relationship between the departments and their internal suppliers and customers are discussed in this paragraph. The mutual relationship between concerned parties in the internal processes of DAP Drachten are discussed. The internal organization can classify the relationship according to internal needs. A major obstacle faced by manufacturers building a lean organization is departmentalization. (Brown, et.al, 2006)

Departmentalization according to Daft (1983) is the manner in which work is subdivided

in an organization. Within departmentalization communication and response to the needs

of the internal downstream customer are critical and coupled with one peace flow, which

also form the foundation of the lean systems (Brown, et.al, 2006).

Change of how the job is done in just one department, will affect the other departments (Thilmany, 2005). Change of implementing lean manufacturing in one department can also affect other departments. Typically, an organization begins a lean implementation on the manufacturing floor. Experts put together teams of employees from all departments to look at that process from front to back. Yet the manufacturing process does not really begin on the factory floor. It is also influenced by the financial, marketing and engineering departments (Thilmany, 2005). Human processes will also influence the relationship within departments in the form of intangible barriers. These barriers seem to exist to protect the individual departments’ culture and interests; however these barriers often block communication (Brown, et.al, 2006). Another possible relation of distance within departmental relations could be the cost view of an enterprise. It puts each of the relationships in competition with one another, driving whole pieces of the operation to become more distant. This approach drives more total inventory and more total cash into a longer network, resulting in less responsiveness to customer demand. (Walker, 2005)

2.4.6 Integration with external suppliers

Companies in fast growing industries need to be constantly developing their supply chain efficiency (Heillika, 2002). Supply chain management involves integration, co-ordination and collaboration across organizations and throughout the supply chain; this means that supply chain management requires internal (intra organizational) and external (inter organizational) integration (Gimenez and Venture, 2005). The paragraph before

discussed a bit about internal integration and mutual relationship. This paragraph focuses more on external integration. External integration refers to the coordination and

collaboration with other supply chain members (Stock et.al., 1998). In this paragraph external integration refers to the integration process between buyer and supplier or in terms of this report integration between production and supplier.

Integration along the supply chain is a topic of interest and importance because it can be considered a source of competitive advantage (Gimenez and Ventura, 2005, Birou et.al., 1998). To get a feeling what integration is in the supply chain the measurements of integrative processes, of Frohlich and Westbrook (2001) to measure arcs of integration, are used; access to planning systems, sharing production plans, joint EDI access / network, knowledge of inventory mix and levels, packaging customization, delivery frequencies, common logistical equipment / containers, and common use of third party logistics. To create effective supply chain management is challenging for both the customer and the supplier, success in building requires close co-operation between the two parties at several stages in the building process (Heikkila, 2002). Information sharing (Moncka et.al, 1998), resource dependence (Handfield ,1993) and trust in terms of

reliability and trust in the partner’s benevolence (Kumar et.al., 1995) positively influence a partnership (Heillika, 2002) and the level of integration between production and

supplier. Overall internal integration has a positive effect on external integration, external integration and collaboration among supply chain members always contributes to

improving a firms logistical performance (Gimenez and ventura, 2005). Besides

integration in general the higher the level of integration with supplier and customer in the

supply chain the greater the potential benefits (Metters, 1997, Hines et.al. 1998)

To create a lean relationship with your external supplier, the basic idea should be mutual beneficial relationships. The purchasing department can take on the active and the

effective role by applying the lean supply principles as much as possible (Barla, 2003).To better manage supply bases many firms dropped redundant suppliers and consolidated volumes with their most trustworthy suppliers, mutually beneficial relationships (Trully, 2003). The trend within lean manufacturing is to create optimal relationships with trustworthy suppliers on a mutual beneficial relationship.

Integration processes also have an effect on materials management. A good relationship between customer and supplier contributes to reliable information flows, and reliable information flows in turn contribute to high efficiency (Heikkila, 2002). According to Stalk (1988) integration is related to reduction of time. Holmstrom (1994, 1995) sees integration and synchronization of production with demand as a possibility to improve performance and speeding up operations. Besides high efficiency, reduction in time and speeding up operations of course there are other benefits, mainly all these integration processes lead to a reduction of the bullwhip effect (Heikilla, 2002). The Bullwhip effect is an exhibit of dynamic behaviour in supply chains. This shows how small changes at the demand side of a supply chain are progressively amplified for operations further back in the chain (Slack, et.al. 2001).

After performance expectations of lean manufacturing implementation the integration process can also tell something about performance. Weele (2005, figure 10) measured the level of integration in time with effectiveness. In his investigation he sees effectiveness as cumulative savings and combines stages in time with phases in purchase and supplier management. As can be seen the higher the level of integration, the higher the level of effectiveness. External integration and value stream integration, integration including suppliers and a cross functional focus provides customer value. Customer value is one of the key aspects of lean manufacturing and according to this model will lead to

effectiveness.

Figure 10: Mature phases purchase and supplier management model of van Weele, 2005