1. Lean Material Flow in
Production Operations
Tom Pettit
VP Global Manufacturing & Supply Chain
Pentair Inc.
SCOPE East Conference
April 12, 2010
2. Any statements made about the company’s anticipated financial
results are forward-looking statements subject to risks and
uncertainties such as continued economic growth, including the
strength of housing and related markets; the ability to integrate
acquisitions successfully and the risk that expected synergies
may not be fully realized or may take longer to realize than
expected; foreign currency effects; retail and industrial demand;
product introductions; and pricing and other competitive
pressures as well as other risk factors set forth in our SEC
filings. Forward-looking statements included herein are made as
of the date hereof, and Pentair undertakes no obligation to
update publicly such statements to reflect subsequent events or
circumstances. Actual results could differ materially from
anticipated results.
3. This Workshop Will…
Describe Who Pentair Is
Highlight Pentair‟s Lean Management System, and
Show Its‟ Impact
Provide you with information to create a material
movement plan from the receiving door to the
shipping door
This Workshop Will Not Go Into Detail On:
Logistics Network Optimization
Plant to Plant, or Supplier to Plant to Customer
material movement.
3
4. Who Is Pentair?
Global Diversified Manufacturer Revenue By Segment
$3 Billion Revenue, 10% ROS Technical
Products
13,000 Employees
~ 30%
Customers in 195 Countries
40 Factories. $1.2B DM Spend Water
~ 70%
Strong Position Across Multiple Global Markets
5 Water Divisions: 2 Flow, 2 Filtration and 1 Pool
– Global Markets: Residential, Industrial, Municipal,
Commercial, and Agricultural
Portfolio Focused
1 Technical Products Division: Serving Electrical & On Two Attractive
Electronics with protective enclosures
Markets
– Global Markets: Industrial, Commercial, Telecom,
Datacom, Medical, Aerospace, Defense
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$3B Global Manufacturer Serving Water & Technology Markets
* On Continuing Basis
5. We Participate In Entire Water Cycle
Well Municipal
Industrial
Treatment / Storage /
Distribution
Desalination Flow of Water Flow of Water
Commercial
Surface
Waste Waste
Residential
Water Water
Pentair Solutions:
Agricultural
Desalination Pumps, Well Pumps, Municipal Pumps, Residential
Filtration, Residential Pumps, Agricultural Pumps, Industrial and
Commercial Pumps and Filters, Foodservice Filtration, Pool
Equipment … Many, Many Others
5
6. What is Lean to Pentair?
…the relentless pursuit to
eradicate waste and improve velocity
in all processes within our organization!
Waste is anything that doesn‟t add value
for our customers.
6
7. Pentair Integrated Mgmt System (PIMS)
PIMS
Is Pentair’s operating excellence system, built on Lean
Provides Pentair team members with the methodology,
processes and tools to reduce waste & improve velocity
Drives a culture of “Improving Every Day”
Helps us become world class and create sustainable
value for customers, team members, and shareholders
Applies to All Functions…. Enterprise Lean
Cuts Across Functional, Divisional, and
Supplier/Pentair/Customer Boundaries
7
PIMS Is How We Manage Our Business
8. Pentair Operating Excellence -- PIMS
• Begins with our
• Centers Around Customer People
• Focuses on Reducing Waste • Talent aprocesses
That Doesn‘t Add Value to a sustainable
Customer results
• ―Winning Right‖
Culture -- respect for
& engagement of all
• SQDCC Focus – • Active Leadership
Safety, Quality, • All Mgrs trained
Delivery, Cost, Cash
• Creates value
through Growth &
ROIC • Fact Based
• PIMS Goals:
OTD >95%
PPM improved by 50%
5% Productivity
DIOH improved 50% • Sustainable Improvement
Sales Per Sq Foot up through 7 Lean Transformation
50% Disciplines
8
9. PIMS Has Demonstrated Results
Op Margins
PIMS‘ Proof of Concept – Technical Products Div.
Full Year Op. Margins By ―Era‖
18%
16%
14% ~12% to 15.5%
12%
―high‖
10% 5.4% to 13.3%
6.5% to 10.3%
8%
6% ―low‖
4%
Sales CAGR
2%
6% 1% 7% TBD
1990 to 1997 1998 to 2003 2004 to 2009e 2010 - 2014
―Pre-Lean Era‖ ―Early Lean-Era‖ ―Lean-Mature‖ But,
But, Dot.com Bust High Commodities
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Increased Returns and Reduced Variability of Returns
* Goodwill and Restructuring Charges Adjusted out of Op Margin Calculation
10. PIMS Results In Water Business
“Turn Around Story” -- Pool Division Sanford, NC
Improvement
Safety 55% Now Best in Class From Already Low 2.5 OSHA Recordable
Quality 28% Significant Reduction in Warranty Costs Thru Redesigns
Delivery 24% Increased On-Time-Delivery to 95%
Cost 9% Lean Manufacturing Drives Direct Labor Productivity
Cash 19% Inventory Days On Hand Reduced Through SIOP, Material Flow
Talent Culture Process
• Doubled & Strengthened • Engaged Leadership; 1. Strategy Deployment
Lean Talent President Involved 2. Value Stream Mapping
• Using Rotational Program • Reinforced Through 3. Transformation Planning
for Hrly & Salary Personnel Layered Audits
4. Kaizen Activity
• Strengthened Production • Daily Gemba Walks
Leadership & Maintenance 5. Managing For Daily
• Monthly Scorecard &
Improvement; Layered Audits
• Restructured & Lean Transformation
Strengthened Mat‘ls Talent Reviews 6. Return to #1
Focused On ―Four Walls‖ To Produce Great Results 10
11. Pentair‟s Lean Ranking
Lean Value Creation -- Super Factory Rankings
Superfactory 20 -- Pentair Ranking
(Based on Total Shareholder Return of Lean Cos.)
16
10
6
1 Goal
2007 2008 2009
PIMS Is Creating Shareholder Value for Pentair 11
12. How? -- PIMS Lean Disciplines
7 PIMS Transformation Disciplines
Strategy Deployment
JUST-IN-TIME AUTONOMATION
- what‟s needed (JIDOKA)
- when needed - Respect for people
- where needed TPS - Autonomous
- in quantity needed
The Roots of “Lean” - Defect-free
- Detects abnormalities
Visual Management & MDI MDI Control Boards / Daily Gemba Walks
Making Material Flow Excellent Part Presentation / Timed Deliveries
Creating Continuous Flow Single Piece Flow / Linked Process Cells
5S and Standard Work Impeccable 5S. High Quality.
Transformation Planning Value Stream Maps / Transformation Plans
Process Evidence
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13. Creating Continuous Flow links
Material Flow and People Flow
Making Materials Flow links Information Flow,
Material Flow, and People Flow.
Keep people inside the cell working continuously!
Move material into cell from outside operators‘ work area
NO INTERRUPTIONS of the workers
13
14. Why Material Flow Management?
Poor Material Flow Material Flow Benefits
Half of Production Delays
Are Due to Material Shortages Better On-Time Delivery
(>95%) & Lead Time….
2/3 of Material Delays Customer Satisfaction
Internally Caused
Improved Logistics Costs
Floor Space Is Consumed
Greater Labor Productivity
By Material
(DL & IDL)
High Resources Are Devoted
Improved Inventory Levels
to Finding, Delivering, &
Expediting Material Reduced E&O
Many Injuries Are Caused By Increased Safety
Fork Trucks
Material Flow Drives Better Delivery, Cost, Cash & ROIC14
14
15. Pentair Lean Material Flow Focus
Lean ―Micro‖ ―Macro‖
= +
Material Flow Material Flow Material Flow
Plant Level Logistics Network
Material Movement and Transportation
Optimization
Pentair’s Material Flow Vision:
Common Material Flow Processes
Replenishment Driven By Consumption (“Pull”)
With Integrated Logistics That Are Optimized At
An Enterprise Wide Level.
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16. “Micro” Material Flow
Pentair Material Flow Principles
1. Develop a Plan for Every Part (PFEP)…DNA
2. Create a Single Purchased Parts Supermarket
Design & Execute A 3 Year Plant Flow Plan…
Eliminate Fork Trucks Everywhere But Docks
3. Pull Parts from Supermarket and Suppliers/
Intercompany, Based on Usage
4. Optimize Scheduling Using Every Part Every Interval
5. Replenish Cells Using Precise, Timed Delivery Routes…
Regular Bus Route vs. Ad Hoc Taxi
6. Position Material Optimally at Operator Fingertips
7. Build Strong Materials Supply Mgmt Talent 16
16
17. 1. Develop A Plan For Every Part (PFEP)
Part Number Number used to identify the material in the facility
Description Material name (Frame, bolt, nut, yoke)
Daily usage Average amount of material used in a day
Usage per assembly Number of parts required for 1 finished product
Hourly usage Maximum number of pieces used per hour
Standard container quantity What: Database created to gather and
Piece count of material in 1 container
Containers used per hour
Usage location
maintain information about all part numbers in
Maximum number of containers required per hour
Process/areas where the material is used (cell 14)
Storage location the manufacturing process.
Address (location) where the material is stored
Order frequency Frequency material is ordered from the supplier (Weekly, monthly, as required)
Part #’s
Container type Type of container (expendable, returnable)
Container weight Usage Volume & Locations
Weight of empty container
1 part weight Weight of 1 unit of material
Total package weight
Packaging Size & Quantity
Weight of a full container of material
Container length Kanban cards
Length or depth of the container
Container width Width of the container
Container height Supplier Information
Height of the container
Shipment size Size of a standard shipment in days (1 week shipment = 5 days)
Carrier Why: THE PFEP IS THE DNA OF YOUR PLANT!
Company providing parts transportation services
Transit time Travel time required from the supplier to the facility (in days)
Enables Material & Information Flow
# of cards in loop Number of pull signals that are in the system
Essentials: Supermarket Sizing/Layout,
Supplier Name of the material supplier
Supplier city
Inventory Levels, Reorder Points
City where the supplier is located
Supplier state State where the supplier is located
Supplier country Country where the supplier is located
Supplier performance rating Supplier performance rating that includes on-time delivery, quality, etc. 17
18. 2. Create A Single Purchased Parts
Supermarket
Receiving
and Entrance
Shipping and
office
Dock
area
• Inventory is EVERYWHERE –
• There may be a warehouse, but
Before Operations • Material is not easily found and
Office Area
• The market is not used to
Material scheduled replenishment
Flow…. Denotes one skid of inventory
Empty Area
• Inventory stored everywhere should never be Empty Area
Due to Floor mistaken for point of use (POU) Due to
Floor space
space Gained • Just because it is in or near the ‗AREA‘ of Use
in Creating Gained in
does NOT mean it is POU. Creating
Continuous
Flow • Inventory must meet the criteria of Right: Place,
Continuous
Activities Time, Quantity, Position, Quality Flow
Activities
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19. Cell
1 Cell
2 Cell Cell Entrance
3 4
and
Receiving office
and area
Shipping
Dock • Supermarket is sized, controlled and
staged via PFEP
After • Located by receiving for quick delivery
Operations
• Parts
Material Office Areamay be usedCell multiple locations of
in
Cell
the operations 5
6
Flow
Cell
9 Cell
7
Cell
10 • Supermarket is a
controlled level of
Cell
inventory with a specific location
8
for each item
• Can be phased in, but get to 1 location
Cell
Cell Cell Cell 14
11 12 13 19
20. Supermarket Elements
Sized Racks Address System
Colum Rack Rack
n T64 1 2
Row B 1 2 3 4 5 C 1 2 3 4 5 C
B B
A A
Rack Rack
Row 1 2
1 2 3 4 5 C 1 2 3 4 5 C
A
B B
A A
Order Cards Re-order board
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21. Supermarket Example
Before – Legacy Storage After -- Supermarket
• 1 Part Per Pallet Location • Several Parts Per Pallet Location
• Large & Small Material co-mingled • Material Arranged by Size & Value Stream
• Wasted Space • 30-50% Less Space
• Unclear if over/under stock levels • Visual Indicators Tell If Excess/Short
22. 2. Design & Execute A 3 Year Plant
Flow Plan… Eliminate Fork Trucks Everywhere But Docks
Why:
Need deliberate, disciplined, prioritized plan for transformation
What
Plant Layout planning to enhance flow and free up space
Consolidate Purchased Material
Create WIP Markets for upstream processes
Relocate Material and Cells to support Receiving, Production, and Shipping
Move cells and machines to support continuous flow
Aisles & Material Handling: One Way, Two Way, People Only
AutoCad of current state and future state plant layout
How
Up front value stream mapping
Plant layout kaizens, updated at least twice/year
22
23. Plant Layout And Flow – Plant X in 2008
• Material Scattered
Throughout
• Limited flow from
Receiving to
Production cells to
Shipping
• Value Stream cells
not co-located
23
24. Plant Layout And Flow – Plant X Today
• Material aggregated
into fewer locations
• Beginning flow
improvement from
Receiving to Cells to
Shipping
• Value Stream co-
location underway
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25. Plant Layout And Flow – Plant X in 2011
• Material aggregated into
one Supermarket & few
WIP Markets
• Clear flow from Receiving
to Production cells to
Shipping
• Value Stream co-located
• Significant space freed up
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26. Plant Layout – Plant Y Before & After
No clear definition between Mfg & Warehouse Areas
Before Little Flow
Material Material Material Material
Production Production
After Material flows smoothly into, through, and out of facility
Finished
Supermarket Production Goods
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27. Material Movement – Defined Flows
Before After
• Fork lift managed • No forklifts
• Ad Hoc Movement • One Way Pick Aisles
• Random Storage • Fixed locations
• No visual signals • Clear visual signals
28. Material Flow Beyond Your Fall Walls
Too often suppliers are expected to „pay‟ for our unwillingness to
improve ourselves
Assemble a cross functional team to go see what is truly happening
Typically we‟re the ones creating disruption in our suppliers‟ operations
Across Company
Multiple sites
Start by creating
Single site
material flow here
Process Level
Start By Improving Flow Within Your Site First 28
29. 3. Pull Mat‟l Based on Consumption
Door To Door Material Movement
Pull Systems:
Information
G. Supplier A. Customer
• Link cells together…. ONLY WHEN A
System
SINGLE CELL IS NOT POSSIBLE
• Trigger production activity
• Trigger movement between cells…
High Mix
Incoming Created between cells Make To Stock
Receiving Takt Image Takt Time
• Require discipline
Delivery Loops
F. E. Process 1 D. Process 2 C. Final
B. Finished
Supermarket Assembly Goods
Pull From Customer To Production To Supplier 29
30. Pull Replenishment –
Kanban Card & Info Flow In Plant
Need to Order
Cards picked up
Parts Supermarket
once per day
Supplier
Scan/Fax
Already
Ordered
On Order
A B C
Receiving / Staging Area 30
31. 4. Schedule Upstream Components
Using Every Part Every Interval
What Is EPEI? Why Use EPEI?
• Scheduling methodology • Balance productivity and
delivery
Optimizes changeovers and
sequencing • Reduce lead time and inventory
Very helpful for high mix • Produce based on customer
processes (like machining, demand / pull
molding, and fabrication)
How to Do It? EPEI Scheduler Using Kanban Board
• Begin With PFEP Data
• Add Production Data (Run
Times, Changover Times, etc.)
• Run Calculations • Mixed Product Scheduling
• Pull Based rather than MRP
• Create Scheduling Board/Wheel
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32. Example – Lean Scheduling
Before After
Hunt & Peck Schedule Vs Orderly Schedule
1. Operators perform jobs FIFO, or 1. Heijunka Board Sets Operator Work
based on preference
2. Efficiently Incorporates High Mix, MTO:
2. Inefficient change-over sequencing
Set-Up, Sequencing, & Takt Image
3. Long lead time, high inventory 3. Improves velocity, reduces inventory
33. 5. Replenish Cells Using
Precise, Timed Delivery Routes
Fork Truck
Movements
Tugger
Movement
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34. Delivery Route Principles
Timed, hourly deliveries to the cell
Inventory delivered in schedule order – to the
operators „fingertips‟
5 routes
1. Purchased parts / RM
2. WIP
3. Expendable parts
4. MRO
5. Trash
Standard Work For Delivery Team (Picker, Driver)
2 hours of inventory at cell, line side
Minimize forklift in plant – eliminate from shop floor
35
35. Delivery Route Example
Benefits of Timed Delivery Routes:
Productivity of Direct Labor and Indirect Labor
Standardize the amount and timing of material delivery to
the production process
Inventory
Floor space
36
36. Route 1
Cell
1 Cell
2 Cell Cell Entrance
3 4
and
Receiving office
and area
Shipping
Dock
Timed Operations
Delivery Office Area Cell
Cell
6
5
Routes Route 2
Cell
9 Cell
7
Cell
10
Cell
8
Route 3
Cell
Cell Cell Cell 14
11 12 13 37
37. Various Conveyance Devices
Manual and Mechanical
Hand Carts
Hand Carts – Simple, Low Cost Tugger With Standard Shelf Carts
Tugger With Standard Custom Carts Hand Jack Tugger 38
38. 6. Position Material Optimally
At Operator Finger Tips
Why? What?
Operator Productivity Position Material To Minimize
Keep people inside the cell Wasted Motion
working continuously! Create Convenient Racks
Support the Operators -- Replenish Material From
NO INTERRUPTIONS Outside of the Cell
BEFORE AFTER
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Support Operator Work. Reduce Wasted Motion.
40. Material Presentation Example
BEFORE AFTER
• Walking, Reaching. • At Operator Fingertips
• Consuming Floor Space • Tight Footprint
41
41. Material Presentation Example
BEFORE AFTER
• Operator Must Reach & Bend • No Operator Bending
• Takes Up Large Floor Space • Denser Footprint
42
42. Material Presentation Example –
5 Days POU Vs. 2 Hrs Line Side Inventory
BEFORE AFTER
POU (Point of Use) all Inventory PFEP driven 2 hour line side
43. Material Presentation Racks
Kanban
Card Slot
• Two Bin Kanban
• Great Access For Operators
Return Slot
For Bins
44
44. Material Presentation Example –
Old Batch Quantity Vs. 2 Hour Lineside
Before After
Result – Productive,
Happy Team Members
45. 7. Build Top Talent & Culture
From To
Materials Supply Mgmt Materials Supply Mgmt Talent as
Talent as „after thought‟ key focus
Limited expertise and depth Hiring & promoting top talent
Limited lean skills Deep lean material skill
Limited career pathing #2 in plant. Path to bigger roles
Projects in spare time Dedicated transformation teams
Handoffs in the Process Materials Supply Manager as the
(Buyers, Planners, Rcvg) “One Neck to Grab”
Inconsistent methods, Common methodologies driven
limited training by significant training
Culture of Culture of
“Or” “And”
Production-dictated Production Control
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Materials Supply Mgmt Talent Is Critical To Transformation
46. How To Sustain Good Material Flow?
Material Flow Audit Process
Teach people the purpose of audits
Audit the PROCESS, not the people
Learn by doing
Discuss results
Create action plan (Root Cause, Counter Measures)
3 kinds of audits
Purchased parts market
Delivery route audit
Pull signal (Kanban card audit)
47
47. Before “Micro” Material Flow
Too much inventory
Raw material stored in
multiple locations
MRP generated push
replenishment
No standard material
delivery routes
No standard address
systems
Fork trucks delivering
material one pallet at a
time and returning
empty
48
48. After “Micro” Material Flow
50% Less Inventory
Level loaded schedule driven
by customer demand
Raw material stored in a single
purchased parts supermarket
near Receiving—developed by
PFEP
Mini-WIP markets at point of
manufacture
Timed material delivery routes
Pull system replenishment
Standard address systems
Parts delivered directly from
Supermarket to operator
fingertips
Fork trucks restricted to
Shipping & Receiving areas
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49. Material Movement Summary
Suppliers
• Multiple Deliveries a Day Docks
• Measured On Time Delivery
• Material moved from Dock to
• Usable Standard Pack (Qty Control)
Supermarket
• Future: Sequenced to Schedule
• Placed in unique, fixed location in
Supermarket
• Future: Ready to be delivered
Supermarket
• Future: Frequent Deliveries Skip Supermarket. Direct
to Cell as Sequenced-to-Schedule
Tugger Delivery Upstream Processes
• Timed, hourly deliveries to the cell (e.g., Machining,
Molding, Fabrication)
• Inventory delivered in schedule order – to the operators „fingertips‟
• Kanban / Demand
• 5 routes (Purch parts / RM, WIP, Expendable parts, MRO, Trash) replenishment
Final Assembly Cells
• Eliminate Variation from Std Work in Assy & mat‟l movement • Scheduling owned and
WIP Parts Buffer
• 2 hours of inventory at cell line side controlled by Materials
• Minimize forklift in plant – eliminate from shop floor
Foundation:
Customer demand drives production
Machines
scheduling and material flow
External and internal pull replenishment,
based upon EPEI
“4 wall material flow” essentials: PFEP,
supermarket, scheduling, timed
delivery/pick-up 50
50. SUMMARY
Lean Material Flow Provides Benefits in Safety, Delivery,
Cost and Cash
Pull Systems And A disciplined Plan For Every Part Are
The Underpinnings
Consolidated Supermarkets, Timed Delivery Routes, and
Parts Presentation Are How We Improve Flow
Make a Disciplined, Prioritized 3 Year Plant Flow Plan
Focus on Processes, Talent, and Culture
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