Mohammed Azma

Bachelor’s thesis
Industrial Management and Engineering
2018
Azma Mohammed
CREATING A PFEP TOOL FOR

THE USE OF INTERNAL
LOGISTICS
– Case: Valmet Automotive, Picking Process
BACHELOR’S THESIS | ABSTRACT
TURKU UNIVERSITY OF APPLIED SCIENCES
Industrial Management and Engineering
2018 | 63, 2
Azma Mohammed
CREATING A PFEP TOOL FOR THE USE OF

INTERNAL LOGISTICS
- Case: Valmet Automotive, Picking Process
Plan for Every Part (PFEP) is a lean tool which combines necessary data of all parts related to a
specific plant. This is generated to one view which can be accessed through the members of an
entire organization in question. PFEP can be then used for indicating the areas of development
and the most costly parts of operations, for instance.
As a whole, this thesis aims to create a PFEP tool to enable further development practices in the
internal logistics department of a Finnish car manufacturer, Valmet Automotive (VA) locating in
Uusikaupunki, Finland. The perspective taken regards to the picking process, and to the parts of
Mercedes GLC.
The final PFEP tool to be created has to fulfil three requirements. First of all, it must be functioning
and easily updatable. Moreover, it has to be available to be improved regarding other processes
of internal logistics, and also to be forwarded to an automatized format, later on.
In the beginning of the paper, the theory is presented regarding logistics and lean, the latter one
which is also connected to the ideas behind PFEP in particular. After this, the VA case is
discussed including current development methods and specified requirements for the new PFEP
development tool. In the last part of the thesis, results are shown with illustrative pictures of the
created PFEP, which is then also analysed.
Regarding the created PFEP, the format chosen is an excel. As a base data, forecast demand
and work measurement ones are taken advantage of. Both of them have been already available
in the organization, and with this project they are now been utilized in a correct way for
development purposes. The work done meanwhile is also argumented for specifically, in order to
avoid unnecessary data in the PFEP. In addition to a finished PFEP, some ideas for further
improvement are also presented in the end.
KEYWORDS:
PFEP, Internal Logistics, Picking Process, Logistics Development, Lean Logistics, Lean
Transformation
OPINNÄYTETYÖ (AMK) | TIIVISTELMÄ
TURUN AMMATTIKORKEAKOULU
Tuotantotalouden koulutusohjelma
2018 | 63, 2
Azma Mohammed
PFEP-TYÖKALUN LUOMINEN SISÄLOGISTIIKAN

KÄYTTÖÖN
- Case: Valmet Automotive, Keräilyprosessi
Plan for Every Part (PFEP) on lean-työkalu, joka yhdistää kaiken tarpeellisen datan yhden tehtaan
jokaiseen osaseen liittyen. Tämä rakennetaan yksittäiseen näkymään, johon kaikille kyseisen
organisaation jäsenille annetaan pääsy. Tällä tavalla PFEP-välinettä voidaan käyttää
tunnistamaan yrityksen toiminnan kehityskohteet ja eniten kustannuksia aiheuttavat vaiheet.
Kaiken kaikkiaan tämän työn tavoitteena on luoda PFEP-työkalu suomalaisen autonvalmistajan,

Valmet Automotiven Uudenkaupungin sisälogistiikan kehitystoimien tueksi. Näkökulmana
projektissa on keräilyprosessi ja Mercedes GLC -automallin osat.
Tuloksena syntyvän PFEP-työkalun on täytettävä kolme vaatimusta. Ensinnäkin työkalun on

oltava toimiva ja helposti kehitettävä. Luodun PFEP-välineen on oltava siirrettävissä myös muihin
sisälogistiikan prosesseihin, minkä lisäksi se on voitava automatisoidakin kehityskaaren
edetessä.
Tämän työn alussa teoriaa esitellään logistikan ja leanin kautta. Näistä etenkin jälkimmäinen
yhdistetään PFEP-työkaluun liittyviin käytänteisiin. Seuraavaksi keskitytään VA-tapaukseen
yksityiskohtaisesti, mihin sisällytetään esimerkiksi nykyiset sisälogistiikan kehitysmenetelmät ja
tarkemmat toiveet uuteen PFEP-välineeseen liittyen. Työn päätteeksi projektin tulokset esitellään
havainnollistavin kuvin, jotka myös analysoidaan samanaikaisesti.
Projektin tuloksena PFEP-kehitystyökalu laadittiin excel-formaatiin. Lisäksi sen tietopohjaksi

asetettiin ennustetarpeen sekä työntutkimuksen tiedot, jotka ovat olleet jo olemassa
organisaatiossa valmiina. Tämän työn myötä niitä käytetään nyt oikealla tavalla kehitystoimien
edellyttäjiksi PFEP:in kautta. Kaikki PFEP-exceliin lisätty data on myös hyvin perusteltu tässä
yhteydessä. Tällä tavalla voidaan välttää turhan tiedon määrää työkalussa. Työn lopussa
projektissa valmistuneeseen PFEP-välineeseen ehdotetaan myös muutamia kehitysehdotuksia
jatkoa ajatellen.
ASIASANAT:
PFEP, Sisälogistiikka, Keräilyprosessi, Logistiikan kehitys, Lean-logistiikka, Lean-muutos

CONTENT
LIST OF ABBREVIATIONS 6
1 INTRODUCTION 6
2 LOGISTICS 11
2.1 Internal Logistics 12
2.2 Logistics Costs 14
2.3 Information Systems for Logistics 18
2.4 Management and Development 21
3 LEAN AND “PLAN FOR EVERY PART” (PFEP) 24

3.1 Lean Philosophy 24
3.2 PFEP 31
3.2.1 Management 34
3.2.2 Advantages and Challenges 35
3.2.3 Connections to Lean 38
4 CASE VALMET AUTOMOTIVE 39

4.1 Internal Logistics 40
4.2 Current Development Methods of Internal Logistics 45
4.2.1 Part Information 46
4.2.2 Work Studies and Balancing 46
4.2.3 PFEP 48
4.3 New PFEP Tool 49
5 RESULTS AND ANALYSIS 52
6 CONCLUSIONS 56
REFERENCES 58
APPENDICES
Appendix 1. Interview with the VA Internal Logistics Development Team

FIGURES
Figure 1. Factors affecting the competences of a business 11

Figure 2. Common processes of internal logistics 12
Figure 3. The division of logistic expenses 15
Figure 4. Expenses of warehousing 17
Figure 5. ERP system connected to SCM and other IS 19
Figure 6. JIT and JIS illustrated 30
Figure 7. The common process of VA internal logistics 41
Figure 8. The picking process of VA 42
Figure 9. The process of execution in relation to the new PFEP created 51
PICTURES
Picture 1. Logistics costs of manufacturing and trading companies in Finland presented

as a share of turnover 14
Picture 2. Technology use of logistics service providers in business operations 18
Picture 3. Essential elements of logistics management 21
Picture 4. Different tools of lean manufacturing 26
Picture 5. An illustration of JIS system 29
Picture 6. An illustration of Pick to Sequence 30
Picture 7. Example of how PFEP is connected with the supply chain 32
Picture 8. Part information that PFEP can include 33
Picture 9. An illustration of the PFEP conclusion tab 53
TABLES
Table 1. Example savings resulting from WMS use 20

Table 2. Possible functional roles of PFEP 37
LIST OF ABBREVIATIONS
BOM Bill Of Materials
ERP Enterprise Resource Planning
IS Information System
JIS Just In Sequence
JIT Just In Time
KPI Key Performance Indicator
MRP Material Resource Planning
OEE Overall Equipment Effectiveness
PFEP Plan For Every Part
TCO Total Cost of Ownership
TPM Total Productive Maintenance
VA Valmet Automotive
WMS Warehouse Management System

6
1 INTRODUCTION
The definition of logistics has changed over the years. Since 1960s an enormous leap
has been taken from treating individual logistics functions separately, towards combining
them to a whole entity of supply chain management. To emphasize, the terms “logistics”
and “management of supply chain” are nowadays often used as synonymes to one
another. (Logistiikkaselvitys 2009.) This shift over the decades gives attention to the
integrative nature of logistics and its substantial effects on the functionality of business
operations both in detail regarding certain processes, and in general as a whole.
Created benefits are most importantly resulted as the effectiveness of the operations and
optimized use of resources. This is however a challenge for many companies as they
struggle to integrate their supply chain functions or at worst, they do not even realize the
importance of such actions.
One tool to manage and integrate the variety of different functions within the entire supply
chain, is to introduce an Enterprise Resource Planning (ERP) system, as chapter two
will elaborate further. There are many ways to benefit from the integrative nature of ERP
and all the data retrieved from it, one of which is Plan for Every Part (PFEP). Introduced
by lean manufacturers, PFEP in a way, links value creation to the entire supply chain
(Conrad & Rooks 2016, 7). The aim of PFEP essentially, is to provide easily accessible,
valid and current information in one place for many people at the same time, throughout
the organization (Harris & Harris 2013, 18). In practice, this means creating one view of
all the data seen necessary for each component revolving in one particular plant. All in
all, PFEP can be then used for indicating the areas of development and the most valuable
areas of operations, for instance. This is further discussed throughout the paper, but in
particular in chapters three and four.
As a whole, this thesis aims to have an effect by creating a PFEP tool to enable further
development practices in the internal logistics department of a Finnish car manufacturer,
Valmet Automotive (VA) locating in Uusikaupunki, Finland. Regarding this PFEP, the
format chosen is an excel, while forecast demand and work measurement data are taken
advantage of.
During the spring of 2018 VA started manufacturing two Mercedes models side by side.
To avoid any misinformation that could be the case in the early phases of launching new
operations, the focus of this thesis is directed only towards the parts of Mercedes GLC.
TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Azma Mohammed

7
Moreover, only the parts of picking process are in attention. These two restrictions are
made to keep the research work lean, and steer clear of deadline issues that could have
been an issue due to the wide variety of complex processes of the company.
The main objective set for the project is to construct a functioning and easily updatable
PFEP development tool for the picking process while making research on what kind of
data is needed for such, and how to access it. Another target is to create the tool to act
as a complete PFEP base, that can be further improved to reach beyond picking process
towards the rest of the internal logistic processes, and then ultimately forward the entire
tool to a more sustainable, automatized format.
On the whole, the paper is started with introducing VA and explaining the taken
perspective of logistics, in particular internal one. It is then continued with depicting the
background and details considering PFEP in general, and later focused to the VA case
on hand. The last-mentioned part includes interviews held with the VA internal logistics
development team, while the rest of the thesis is connected to a variety of different
articles and literature. In essence, the case part goes further in explaining the current
development methods used in the internal logistics department of VA, and also the ideas
risen within the company regarding the PFEP tool. The paper is finished with presenting
the final results and analysis of the project, suggesting ideas for further improvement of
the tool, and concluding the entire project in the end.
For confidentiality reasons, some information is left outside the published version of this
paper. This should be kept in mind especially with chapter five presenting the results and
analysis, but also in chapter four and even in relation to conclusions and
recommendations in the end. In each part, the eliminated confidential information is
replaced with a short, general description of the content of the part, with no details. The
attempt is to remain the overall cohesive approach throughout the paper, with respect
for the VA business.
Valmet Automotive
Valmet Automotive, at the time known as Saab Valmet, has been established in 1969 by
the Finnish company Valmet and a Swedish one Saab. The Nordic cooperation started
first producing Saab cars in Uusikaupunki, Finland. In 1992, Valmet took over, and since
then the Finnish company has collaborated with multiple international vehicle
corporations such as Adam Opel AG and Porche AG. Moreover, in the 21st century the
company participated in manufacturing alternative powertrains and electric vehicles from

8
which Norwegian Think City, electric golf car Garia and hybrid plug-in car Fisker Karma
are examples. Nowadays, VA works together with the German, Daimler AG
manufacturing several models of Mercedes Benz since 2013. (Valmet Automotive 2015,
10.)
Today, Valmet Automotive has a culture that values customer success creation, best
quality performance and collective ways of innovating, offering manufacturing and
engineering services in addition to roof system solutions. All in all, these operations are
divided into three different locations: Uusikaupunki in Finland, Osnabrück in Germany
and Zary in Poland. (Valmet Automotive 2015, 10.) In relation to this paper, it is
necessary to enlarge only on the manufacturing operations of VA, which takes place in
Uusikaupunki. For this reason, the information provided further is related to this location
only.
In Uusikaupunki, VA represents as the only contract manufacturer of automobiles in

Finland and even, one of the three in whole Europe (Nikula 2017). In 2016, the company
was consulted to have a turnover of more than 208 million euros employing over 1400
people (Asiakastieto 2016.) Furthermore, the company has been hitting the Finnish
headlines often during the last few years as enormous leaps have been taken, especially
with the nationwide mass recruitment projects of hundreds of new employees and the
continuous attempt to increase production volumes.
In particular, 2017 was an especially good year for VA in Uusikaupunki as it kept

announcing positive changes nearly all year long. First of all, the company started
working in three shifts while increasing the production volumes according to the plans.
This was accompanioned with almost doubling the employee amount. (Bhose 2017.) In
detail, the recruitment of additional 2000 people was done in only 9 months which gave
the company even more media attention, and a Finnish Growth award on top of
everything (Vuorela 2017). During this, two car models were under manufacturing in
parallel for the first time in the history of VA: Mercedes A-series and Mercedes GLC. At
the same time VA also already had the largest robot welding shop in Finland with nearly
600 robots (Raunio 2016). This latter detail highlights the high production volumes and
efficiency which both depict VA in these few years in particular. During 2017, VA even
reached a new production record with 90 000 manufactured cars, compared to the
70 000 cars of the previous record two years prior, in 2015 (Valmet Automotive 2018a).
In a bigger picture, VA has had a substantial impact by increasing export activities of
Finland. To be precise, the export of automotives increased by 260 % from July 2016 to

9
July 2017, achieving the value of 190 million euros. (Bhose 2017.) In a national level, the
impact that the company has had to the country, and also to the society, is remarkable
in every way so far.
A lot of this success can be explained with the way VA manages its operations. Relating
to this, logistics point of view needs to be taken to support the perspective presented in
this thesis. The strategy set for the logistics and production management of the whole
VA, resonates to throughout the company, also all the way to Uusikaupunki. This strategy
emphasizes the optimization of cash and information flows in particular. The achieved
objective here is the lean material flow for example, with optimizing the stocks using Just-
In-Time methods. Altogether, the company has a way to transfer orders to part and
material orders, that are then sent to part suppliers. As the part and material orders are
connected with car orders, the production can be modified regarding the customer need
in a flexible way. (Valmet Automotive 2018b.)
One way to put emphasis on increasing flexibility within the company, is to move once
outsourced operations inhouse again. This is often the case with most important
business functions. Regarding VA in Uusikaupunki, such measures were taken few years
ago with the internal logistics department answering for the functionality of the whole
logistics operations within the Finnish manufacturing plant (Valmet Automotive 2016). In
detail, VA has operated the internal logistics inhouse since 2016 due to the fact, that the
effect of the department has only increased along the years while the production volumes
have become even higher, especially with the parallel production of two different
Mercedes models. By owning its own internal logistics department the company can offer
more flexibility and has more room to grow as the strategy has set for the future. (Valmet
Automotive 2016.)
When it comes to what the future of VA represents, nearly all signs are growth related.
The aim to grow as a company seems to be what both the company itself, media and
people is expecting. Since early 2018, the company has continued to manufacture two
car models in parallel for the second time as the Mercedes GLC has been accompanied
by a new Mercedes A-series model. Production-wise the volumes for the year are set to
a new record of 150 000 cars (Kankare 2018). In comparison, the current record and
accomplished production for 2017 is 90 000 vehicles (Valmet Automotive 2018a). During
this year, VA will be also growing its employee amount even further and is seen to
become the largest factory in Finland by the end of 2018 (Nikula 2017). According to the

10
latest estimate, the number will be around 4500 people which stands for employing
another 1000 people during this year (Lehtilä 2018).
Furthermore, the future appears to be secured in other ways as well with different new
operations from some of which are already announced. One of them is related to lithium
battery production started with Avant Tecno (Valmet Automotive 2017b). Another one is
the strategic partnership regarding the electric car inspired innovations with CATL, a
provider of battery solutions (Valmet Automotive 2017a).
In relation to all these changes, accurate data management will get even more important
for VA as argued in the article of Talouselämä by Matti Kankare (Kankare 2018). The
PFEP project presented in this thesis is, in a way, supporting this thought as well by
using the available data, and providing a tool for the internal logistics management and
development. The more accurate and on-time the used data is, the more development
can be made enabling the wanted growth in an effective way.

11
2 LOGISTICS
In order to give a basis for the thesis project, it is essential to start with the elements of
logistics, the internal with particular focus. After this, the focus continues towards the
expenses, informations systems and management and development practices related.
All of this, is then connected to the VA case and PFEP creation later in chapter four.
Logistics all in all is one of the most important set of processes within a company. It can
be defined to start from the sourcing of raw materials, parts and other products needed
for the operations, which can be further divided into purchasing, transportation and
storaging. After sourcing, the management of production, sales services for finished
products and distribution follows. In addition, providing the after sales services are often
included in the process as well as a part of logistics chain. (Karhunen etc. 2004, 23). The
essential idea of logistics, is to manage all these processes in a way that the end result
is of the highest quality possible, with the most affordable way for an enterprise
(Karhunen etc. 2004, 23.) In fact, in case of successful optimization, this kind of approach
can often create a remarkable advantage for a company. It can even end up creating a
major compentence for the business against competitors and even disruptors.
As an example, regarding the largest Finnish companies in trading, approximately 43 %

of the competences relate to their logistics strategy. Following the trend, the number for
manufacturing companies is remarkable as well, with 35 %. (Logistiikkaselvitys 2012.)
Competences often result from an unique management of expenses, speed or quality,
all three of which are related to one another. This is illustrated further with Figure 1.
(Sakki 2003, 17).
Figure 1. Factors affecting the competences of a business (Sakki 2003, 17).

12
2.1 Internal Logistics
In the following, internal logistics is further explained shortly, after which the process of
picking process within it, is elaborated on. This, to create a more suiting basis for the
case on hand, which closely relates to the picking process.
While logistics as a whole stands for a wider set of processes, internal logistics takes a
more narrow view with focusing in the logistic actions taken within the borders of the
warehouse or the logistics center only. As can be seen from Figure 2, the process here
starts as the truck or the trailer is being unloaded, and ends as the end-product is finished
and further custom transportation methods are taken care of. As a whole, internal
logistics can be divided with a wider perspective as well to include different operative
phases from reception to delivery, which all are being managed, measured and
developed in effectively thoughout the way. (Lahtinen & Pulli 2012, 85.)
Figure 2. Common processes of internal logistics (Hokkanen & Virtanen 2013, 13).
Picking Process
Picking process is common for all warehouses, and its functions often even require the
most amount of work within the internal logistics point of view. Industrial picking process
is essentially depicted as picking items from the storage area straight for the customer
or semi-manufactured raw materials to the production line. Traditionally, the picker has
a picking list printed which containes the material amount, location and label row-wise.
(Hokkanen & Virtanen 2013, 35-36.)
There are two distinctive methods that are used in to carry out picking. The first one
relates to picking where the picker goes to the item to be picked. In contrast, the other
one demands the required item to come to the picker. (Karhunen etc. 2004, 378.)

13
The last-mentioned method takes place for instance in automated warehouses which
typically are high-rise storehouses with automatic lifts. Another example is a horizontal
warehouse where the picker operates in the end of the main aisle shelves, and the
orbiting place of storages bring then the requested items to the picker according to the
need determined in prior. (Karhunen etc. 2004, 378.)
Picking constructed with the picker going to the needed item is however more commonly
used method than the previously mentioned one. This can be further divided in two
categories according to the way the items are sent to the packaging and dispactching
department. One group is formed by those items which are transferred with a conveyor
locating either in the floor or the ceiling. In a way, the conveyors are used to get
containers emptied by the packaging and dispatching department, in order to fill them
now with new items to be then transferred and sent again, back where it first came from.
In contrast, the other category requires the picker to move independently to the wanted
items, with or without the help of different trucks. (Karhunen etc. 2004, 378.)
The conditions for an effective picking process are essentially determined with a
functioning locator system and well designed picking routes. The latter one is usually
formed by indicating the items of the highest demands which then leads to placing them
in the beginning of the picking routes keeping the distances minimized as a result.
(Karhunen etc. 2004, 378.) This kind of approach eventually leads to a lean and
wasteless way of work, which is the start of an efficient and well optimized picking
process.
However, in order to have a well-functioning process as a whole, other details must be

put in consideration in addition. One aspect to be noticed also, is related to the weight of
the items (Karhunen etc. 2004, 378). This way, the heaviest items are to put in the
beginning, and the most fragile ones in the end of the picking route. The composition
avoids having heavy items on top of fragile ones during the picking (Karhunen etc. 2004,
378). Thus, the picking process and especially the design of it, adds value to the
business by assuring higher quality and less damage within the process.
There are several key components regarding the most efficient picking processes. First
of all, when the picking process has a well functioning locator system and picking route,
the data system can then print customer orders in a way that the items of demand are in
order, according to the progress of the picking route in attention. (Karhunen etc. 2004,
378.) Another component is related to having the number of items picked as high as
possible in relation to the distance taken in each situation. The last element to be taken

14
in account is to update the picking addresses to respond to the changes in the demand.
(Karhunen etc. 2004, 379). This way, all tasks can be developed with the arguments of
the most current data which in its own way leads to higher efficiency.
2.2 Logistics Costs
The expenses of logistics are a substantial part from all the costs related to business
operations. However, it is also clear that having well-desgined logistics functions affect
the company in a positive way by optimizing the use of resources in general, giving
attention to efficiency and also adding to its competences, these amongst other
advantages.
To be precise, in 2011 logistics costs were consulted as a whole to account for around
12.1 % from the annual turnover of Finnish companies, as can be calculated from Picture
1. Following the trend presented by previous years, the transportation costs had the
highest expenses once more with 4.6 %, and inventory carrying costs the second highest
with 3.0 % in relation to the annual turnover. (Logistiikkaselvitys 2012)
Picture 1. Logistics costs of manufacturing and trading companies in Finland presented

as a share of turnover (Logistiikkaselvitys 2012).
Logistics expenses are however not to be treated as a simple expenditure item. Instead
it should be thought as a part of the operating costs, which in a way enable business

15
operations (Logistiikkaselvitys 2012). Furthermore, it is necessary to bear in mind that

the logistics costs should be also always seen in detail, to avoid inaccurate information.
The differences can be remarkable when dealt with different fields or, either
organizational or productional structure (Logistiikkaselvitys 2012). This is why, the
precentage of logistics costs from the annual turnover is not enough of a tool to indicate
if the logistics are well handled or not within a company (Logistiikkaselvitys 2012).
When identifying a variety of logistics expences, it is noticeable that they can be defined
and divided in several different ways, some of which have wider perspective and some
narrower. Regarding this paper, the following divison seen in the next page as Figure 3.
is chosen to give more insight on the matter.
The model divides logistics expenses into direct or indirect costs with a view of optional
/ general costs, or operation related ones. Direct costs are closely tied to the logistics
operations, while indirect ones are more of a challenge to define. Indirect costs which
are related to the operations have more physical visibility and therefore are easier to
recognize. The allocation of indirect costs is however more difficult to be be seen as they
are often related to the internal functions which are then possibly connected to different
operations. (Logistiikkaselvitys 2012).
Figure 3. The division of logistic expenses (Logistiikkaselvitys 2012).
Expenses resonating from warehousing, as mentioned in Picture 1. are consulted as the

third most expensive logistics cost. In the following, this group of expenses is explained
in detail since they relate to the internal logistics perpective taken in this thesis.

16
Warehousing, meaning handling and storing items cause operational costs. This
includes the capital expenses or rent payments for the warehousing area. Other
associated and essential costs are related to all the furniture within the warehouse, such
as shelves and containers, electricity, insurance and the maintenance to mention few.
(Sakki 2003, 61.)
One of the most important expense of warehousing is the storage cost. This relates to
the costs of the storaging place but also to the expenses of the production and sales
areas which are connected to the storaged items. Often, nearly half of these areas are
covered with items. The situation could be even so that there is no separate storaging
area and the whole plant or store is a place of storing. The following mentioned formula
can be used in calculating the share of storage cost. (Sakki 2003, 61.)
𝑐𝑜𝑠𝑡𝑠 𝑜𝑓 𝑠𝑡𝑜𝑟𝑎𝑔𝑖𝑛𝑔
𝑠ℎ𝑎𝑟𝑒 𝑜𝑓 𝑠𝑡𝑜𝑟𝑎𝑔𝑒 𝑐𝑜𝑠𝑡𝑠 =
𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟/𝑣𝑎𝑙𝑢𝑒 𝑎𝑑𝑑𝑒𝑑
Another key expense in warehouses is the one of material handling. Throughout a

company, two handling processes can be identified. The first one includes reception,
inspection, sorting, marking, move to the storage place, while the other one starts from
picking and continues with packaging, the preparation of the order and sending. The
costs of phases differ according to the nature of the handling item and operation. This
can be calculated in detail with the formula presented below, which takes into account
both the storaging place but also the production and sales areas in case they are used
as storaging area as well. (Sakki 2003, 62.)
𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑒𝑣𝑒𝑛𝑡𝑠
𝑟𝑒𝑐𝑒𝑝𝑡𝑖𝑜𝑛 𝑎𝑛𝑑 𝑠𝑒𝑛𝑑𝑖𝑛𝑔 𝑒𝑣𝑒𝑛𝑡𝑠/𝑑𝑎𝑦 =
𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑤𝑜𝑟𝑘 𝑑𝑎𝑦𝑠
To go further, the most expensive cost within a warehouse must be then reveiled.
According to the Figure 4. presented in the next page, human resources account for the
most expensive part when it comes to the costs of warehousing. As HR represents with
56.6 % of the warehousing expenses in total, building and site is left second with 28.7
%. (Intolog 2018, Aminoff etc. 2004.) Therefore, from the formulas presented above,
material handling can be interpreted as more expensive. This, as it mainly consists of
salary expenses, all add-on costs included (Sakki 2003, 62).

17
Moreover, when giving attention to the picking process within internal logistics, the
function can account for up to 55 % of the operating cost of the warehouse, with 50 %
being labour involvement related to travels to, between and from locations. (Richards &
Grinsted 2016, 282).
EXPENSES OF WAREHOUSING
building and site

28.7 %
machines and
equipment
warehouse
furniture
ADP and softwares
4.6 % other
56.6 %
1.7 % human resources
3.2 %
5.1 %
Figure 4. Expenses of warehousing (Intolog 2018, Aminoff etc. 2004).

18
2.3 Information Systems for Logistics
Different Information Systems (IS) are needed in each enterprise for a variety of
functions. Essentially, the idea is to offer the best possible service for customers in
question. These kind of systems in a way ensure the fulfilment of those objectives that
the company has set, or at least makes it easier to achieve. Eventually, several
departments leverage from the information given by the systems in use, in particular
when intergrated.
As seen from the Picture 2. there are differences in the use of IS depending on the size
of the company. Without an exception, the largest companies use more technologies in
their businesses. For instance, ERP systems are used by 30 % - 40 % of the large
companies while in comparison, only 10 % - 20 % of the small and 5 % - 10 % of the
micro businesses recognize ERP. (Logistiikkaselvitys 2009.)
Picture 2. Technology use of logistics service providers in business operations (The

Ministry of Transport and Communications 2009).
In relation to this thesis, ERP and Warehouse Management System (WMS) are both
considered as the most important IS for the project. This is why they will be given more
attention as follows.
ERP in essence, describes a wide range of particular information systems that are used
for managing the company as a whole. Typically, ERP is designed to have one common
database which is then used by a variety of modules, such as order management,
financial management and warehouse and material management. One database

19
enables the current data accessability and transparency of information throughout the
organization. On the other hand, it is obligatory to have all information correct and
updated especially regarding the basic information, such as material and production
resources. (Logistiikanmaailma 2018a.)
On a bigger picture, systems support different processes of enterprises. As presented

from the Figure 5. below, ERP is closely connected to Supply Chain Management (SCM),
Manufacturing Execution System (MES) and Product Data Management (PDM), in
particular. Furthermore, the figure also clarifies that ERP supports business operations
in the planning level in particular while some in the operation level as well. The attention
is thus given to the processes of offer and sales in addition to order and delivery.
(Karjalainen etc. 2001, 6.)
Figure 5. ERP system connected to SCM and other IS (Karjalainen etc. 2001, 6).
The requirements for ERP systems differ depending on a company. In essence, having
an unique way of doing business and treating business processes as separate entities
makes the proper desing and use of IS difficult. In relation, networking with another
company adds up to this, making the integration of multiple systems challenging. As a
whole, ERP implementation requires resources and time which should to be taken into
account before beginning the project. If the operations are based on flexibility, the system
needs to be then created this detail in mind as well. (Logistiikanmaailma 2018b.)
Otherwise, the use of information will be inaccurate. In general, Small and Medium-Sized

20
Enterprises (SMEs) tend to have more of this kind of challenges in comparison with
larger enterprises (Logistiikanmaailma 2018b).
Another IS in attention of this paper is WMS which often is included in the general ERP
system of the business. WMS aims to manage both warehousing and operations related
expenses in addition to the obligations related to the offerred service level. Within the
warehouse operations management, the replenishment of the storages and their lot sizes
are defined. In detail, the following functions are included to a well-operating WMS:
transfer of materials and products, reception, move to the storage place, picking,
packaging and delivery. (Logistiikanmaailma 2018c.)
The use of some kind of WMS has many advantages. First of all, as presented in the
previous chapter, over 50 % of all logistics cost are due to the expenses of human
resources. This is why, the optimization of employee amount and their efficiency is
particularly essential, and is one of the objectives of WMS to achieve. In fact, after the
learning cure, cost savings are between 10 and 35 per cent when it comes to the effect
that WMS has to the labour utilization (Richards & Grinsted 2016, 54). This, and other
cost savings by WMS are introduced in Table 1.
Potential cost savings (%)
Labour utilization 10-35
Inventory reduction 5-30
Floor space utilization 10-30
Maintenance 0-10
Shrinkage 50-75
Rolling stock 10-20
Increase shipping accuracy to 99+
Increase data entry accuracy to 99+
Table 1. Example savings resulting from WMS use (Richards & Grinsted 2016, 54).

21
In addition, the system can benefit a company in developing the efficiency of the picking
process, trace orders and products, and reduce the amount of mistakes within logistics
processes of the warehouse. (Logistiikanmaailma 2018c.)
An efficient and well-functioning warehouse operations essentially require a proper

WMS. The importance here is eventually in the functionality of the system, whether it is
suitable for the business environment and company in question. (Karhunen etc. 2004,
386-388.)
2.4 Management and Development
Regarding management, logistics can be divided in five key elements which are
transport, warehousing, inventory, packaging and information processing, as presented
in the Picture 3. (Islam etc. 2012). All of them connect when performing the best logistics
services possible. However, when it comes to this thesis, the most effect resonates
especially from the management of warehousing, inventory and packaging in addition to
the processing of information. The latter one which relates to the project on-going, in
particular. This is why the mentioned three sides of logistics management are next given
further attention.
Picture 3. Essential elements of logistics management (Islam etc. 2012).

22
Warehouse management in detail includes considerations of location, number and size

which are linked to the warehousing policy, type of storage and material handling
equipment (Islam etc. 2012). The type of storages and material handling equipment
relate to the nature of the item. For example, items which are refrigerated or food
products in general, electronics or garments, often require an especial environment in
their storaging and handling.
Particularities of inventory management on the other hand relate to the strategic logistics
decisions: what, how much and where to stock. This is often confused with warehouse
management. To clarify, inventory management focuses on investigating the amount of
stock of the product or raw material that is needed whereas warehouse management is
restricted with the housing perspective of the stock. (Islam etc. 2012.)
In contrast with the previously mentioned areas, information processing deals in a

completely different way. It consist of information systems, forecasting operations and
the control of the operations related to IS (Islam etc. 2012.) When it comes to this thesis
project, PFEP fits to this section because it combines data from different levels and IS,
processing it in the wanted way and then using it for development purposes.
An essential part of logistics management is to have the development aspect alongside

all operations. In the following, few concepts are been taken in consideration relating to
this paper.
First, it is necessary to introduce the identification of processes creating a basis for

actions of development. There are a variety of methods for doing this, but standard flow
charting is one of the most powerful ways for improving work or business processes
(Richards & Grinsted 2016, 282). In essence, basic flow charting method uses symbols
in order to depict operations, activities, decisions, ending and starting points, and links
to the next step which can follow immediately on later on the chart (Richards & Grinsted
2016, 282).
Another essential concept is defining Key Performance Indicators (KPIs). The idea here
is to select few indicators that relate to the business operations the most. In essence,
KPIs are introduced to measure and control performance (Richards & Grinsted 2016,
308). For this reason, using KPIs enable development purposes as well. These can
regard to metrics that can be for example related to financial, customer, process or
people matters, to mention few.

23
Introducing WMS, as presented in the previous chapter, is also key, especially for
creating efficient operations within a complex warehousing environment (Richards &
Grinsted 2016, 52). Therefore, also developing operations become easier with WMS as
more accurate data will be available.

24
3 LEAN AND “PLAN FOR EVERY PART” (PFEP)
There is a clear connection between the essence of PFEP and the ideas of lean. This is
why, this chapter is structured by first identifying lean, and then focusing on the details
of PFEP. The ideas are further connected to the VA case on hand, later in chapter four.
Altogether, there are several terms defining lean nowadays. In relation to this thesis, the
term lean philosophy is being used as a general term through the chapter. This, because
lean philosophy can be seen to be connected and furthermore, to be resulting from the
use of PFEP. In this perspective, lean often relates to a straight-forward and wasteless,
value creating set of operations, to put in a simple way. While lean is further elaborated
on during this chapter, in addition, lean thinking and lean Total Productive Maintenance
(TPM) are chosen to be mentioned as well, to give more insight and connection point to
the PFEP subject.
In the following, the relation between PFEP and lean, is highlighted with primarily,
introducing the philosophy behind lean, after which some of the most important lean
methods to this project and paper on hand, are discussed. As a next step, the details of
PFEP are then made clear, after which the claimed connection to lean is justified.
3.1 Lean Philosophy
Lean became known as short for lean production which was first introduced by the
Japanese automotive manufacturers. Its origins go all the way to the Toyota Production
System (TPS) that attracted attention with its superiority in the 70s. Since then, TPS has
been under continuos development, for around 100 years already. (Six Sigma 2018a.)
In essence, the philosophy aims to apply the principles of quality management to the
world of production. This can be seen as focusing on the optimization of the production
as a whole, instead of paying attention to minor details. The objective here is then to
create value to the customer while putting the needs of the supplier in consideration as
well. In practice, lean results as the maximization of customer satisfaction which is an
indicator for flow efficiency, and supplier satisfaction that is related to resource efficiency.
(Six Sigma 2018a.)

25
In relation to this project, lean TPM and lean thinking are one of the key ideas to be
considerated while indicating the connections to lean. Even though, both ways support
same ideology, and have an focus on recognizing the wasteful behaviours and practices
within the organization, there are also some particularities related.
Lean TPM as itself, sees the root cause of waste with an short-term perspective which
tolerates inferior reliability. Moreover, TPM aims to use improved effectiveness towards
increasing the customer value. In detail, the idea here offers a route map to zero
breakdowns and continuous improvement when it comes to equipment optimization.
(McCarthy & Rich 2004, 25.) Lean TPM is further discussed later in chapter five in
connection to VA related methods.
On the other hand, lean thinking focuses on different sides of the same issues. One
essential point is to seek for reliable processes that support the objectives of the
company. However, what is given most attention is especially related to the identification
of the value creating areas from the operations. (McCarthy & Rich 2004, 25.)
Furthermore, lean thinking continues to define five key principles which all especially
consider lean manufacturing. One of them is to specify the value that is perceived by the
customer. The following ones are to identify the value stream, and to make the value
flow through it. Another principle is to pull the value from the value stream, and finally to
strive for perfection. All in all, these five principles define the philosophy behind lean in
particular. (Lean Manufacturing Tools 2018a.)
In the following, some of the most important methods and tools are presented in relation
to this project. First of all, the ideas of lean material management and lean manufacturing
are discussed. Then, Kaizen, different types of wastes, and the terms Just-In-Time (JIT)
and Just-In-Sequence (JIS) are given attention, after which the focus continues to six
sigma in the last part. All of these, have an angle to this project, either with the way VA
operates at the moment, or how PFEP has an effect as enabling development
opportunities towards leaner operations, for example. To emphasize this, the
connections are drawn in the following, chapter four.
Lean Material Management and Lean Manufacturing
To direct the focus towards lean, it is first important to elaborate on lean material
management which in essence, is in fact guided by lean principles. The use, application
and effectiveness of lean techniques can be reapplied from the original manufacturing
perpective. When it comes to material management, lean must consider both the shop

26
floor and the whole supply chain as well. This, to highlight lean thinking and its principles
instead of focusing on the used tools only. Moreover, the distictintion from lean
manufacturing has to be made in particular. (Flinchbaugh 2005.)
First of all, five essential concepts must me considered when taking a lean approach to
material management. The first one relates to avoiding the information blizzard by
creating systems that provide only filtered information directed for each individual
process, avoiding excess information handling, and this way also unefficiency. Another
idea is eliminating white space that results from not integrating process steps with each
other: the next activity does not continue exactly where the previous one was left. To
emphasize, this is how waste is then created. The third concept regards to right-sizing
everything, which essentially is about the balance between expenses and capital
requirements. When it comes to the fourth concept, the transportation is given particular
attention, as it is suggested to have minimized eliminating wasteful handling processes.
Finally, the fifth concept is about moving away from a tunnel vision, and instead focusing
on achieving a complete view on the operations and material management. The
importance here is that material management is often a hub of information which is
connected to the majority of the rest of the organization. To highlight, if material
managers do not operate lean transfromations with a complete holistic view, then none
of the managers of other functional areas will either. (Flinchbaugh 2005.)
These concepts in mind, the lean manufacturing tools can be then used also to material
management operations. Picture 4. gives a general view of these tools which are in the
following given further explanation.
Picture 4. Different tools of lean manufacturing (Lean Manufacturing Tools 2018b).

27
Kaizen
Kaizen is a lean method which essentially involves the workforce for continual
improvement of processes throughout the organization. The power laying on Kaizen is
measured by the combined power of a variety of creative ideas and small improvements
that develop the business forward constantly. Moreover, the objectives here are related
to eliminating issues associated with different types of waste within the processes. In
practice, every process should be continuously challenged and tested according to
Kaizen. The methods used can be for example suggestion schemes, quality circles and
self-directed work teams. All of these however, require support from the top management
in order to be successful and result as improvements. (Lean Manufacturing Tools 2018c.)
Seven types of Waste
Waste is what Kaizen and other lean methods attempt to eliminate from the operations
of the business. First of all, it is essential to investigate the importance of waste removal
before presenting different types of waste. To put simply, waste is something that does
not add value to the business. (Lean Manufacturing Tools 2018d.) On the other hand,
any other actions that have an negative effect to the operations, can be also seen as
waste.
As price is often an important tradable in the market, it is important to have the costs of
the business as low as possible. This is why, by eliminating wasteful elements from the
processes, a lot of costs are cut at the same time, which in the end, benefits the
enterprise. Moreover, the customer satisfaction is more often achieved better with waste
elimination, as the processes become more lean and straightforward. (Lean
Manufacturing Tools 2018d.)
There are three types of waste according to lean, muda, mura and muri. The first one
stands the famous seven wastes identified by lean. It relates to all the activities or
processes that do not add value to the business. These can be also described as
physical waste. (Lean Manufacturing Tools 2018e.) Seven different mudas are:
tranportations, inventory, motion, waiting, overproduction, over-processing and defects.
Nowadays, failing to use talents, resources or by-products within the organization, is also
seen as wasteful actions, and are added to the list. Another type of waste is Mura which
explains the waste of unevenness or inconsistency. This is often driven by muda, and
can be seen for example as a failed attempt in converting fluctuating demand to more
even one for production purposes. Muri on the other hand means overburdening which

28
in practice is to cause unnecessary stress to the organization, either to the employees

or the processes. The reason for this lays behind Mura and, for example, lack of training
and unclear or non-systematic ways of working. The three different types of waste are
all connected to each other: muda is caused by mura, and mudas are symptoms of failure
in tackling mura and muri. (Lean Manufacturing Tools 2018e.)
Just-in-Time and Just-in-Sequence
One way to eliminate waste is with introducing JIT to the operations which is a
management philosophy which regulates production according to what the customer
wants, when they want it, in the requested quantities and locations they want it.
Moreover, the idea of JIT is not to cause any delay or stocks in the inventory. As a result,
resources can be concentrated to fulfilling the actual needs rather than building excess
stocks. (Lean Manufacturing Tools 2018f.)
In practice, the JIT manufacturing system produces only what the next process in
sequence needs according to the actual customer need, while in conventional
manufacturing the customer need drawn with forecasts. The difference here is that the
traditional method produces in large batches as it is believed to make the machines and
processes more efficient, which however creates long lead times and enormous amounts
of WIP and stock of finished goods of no demand. Another issue is faced, when a
customer suddenly orders items that are not at the time in stock. In essence, these
systems are run by a Material Resource Program (MRP) that aim to schedule every
process in the facility. To prevent difficulties from happening, complex planning is
required. (Lean Manufacturing Tools 2018f.)
To switch from traditional to JIT manufacturing, some requirements must be fulfilled. First
of all, the equipment and machines have to reliable. Furthermore, work cells need to be
well designed and a quality oriented workforce must be set. Also, the opertaions within
the enterprise are better to be standardized while using pull production. The objective
here is to ultimately have a single piece flow, which can howver be difficult to put in
practice for some industries. Finally, the production should flow with the beat set by the
customer. In order to achieve this, the processes must be organized, balanced and
planned for the pull. (Lean Manufacturing Tools 2018f.)
There are some essential benefits that JIT results. These are related to reduction in the
order to payment time, inventory costs, required space and in handling equipment and
other costs. Moreover, JIT reduces lead times and the complexity of planning. In addition,

29
the system also provides imporved quality and productivity while it also highlights
problems faster and empowers employees. (Lean Manufacturing Tools 2018f.)
For many industries JIT is not enough however. JIS is one good example of a system
that can be combined with JIT seamlessly. This regards to a production method of a
more advanced delivery process where parts and components are delivered just in the
sequence as they are needed in the line (Pentas 2016). In an ideal scenario, the person
only picks the next part in the supply queu for assemply, rather than choosing from
different parts. (AllAboutLean 2017.) At the same time, while JIS is in function, feedback
from the manufacturing line can be taken into account for transportation matter from and
to the process location (Pentas 2016).
While other industries are giving increasing traction to JIS, the use of it in the automotive
industry has been a classic example for a long time (Pentas 2016). Since there is a large
number of options in automotives, the industry has a base for JIS with low-volume and
high-mix production type where every vehicle is slightly different than the next one.
Often, JIS is used for example with the car doors, as they have to match the rest of the
car. This is presented in Picture 5. (AllAboutLean 2017.)
Picture 5. An illustration of JIS system (AllAboutLean 2017).

30
This can be then further applied to other car parts as well, especially with the custom
made automotives with particular features that some providers offer. Some part can be
still JIT as these particular parts JIS. This, in addition to the the difference between the
two, is illustrated in Figure 6.
JIS JIT
11F 13T 22T
9T 12F 1F
10F 5F 12T
F T
12F 12T
T
Figure 6. JIT and JIS illustrated (Personal Information. Juhani Kerminen 21.3.2018).
Furthermore, JIS can be implemented in several diffent ways. One of the most common
ways is to have a larger inventory from which the components can be chosen to
sequence according to the need. Moreover, the method can be adjusted to both high-
and low-volume parts. (AllAboutLean 2017.) This can be further developed as pick to
sequence, which has a same basis than the previously mentioned use of large inventory
method, as illustrated in Picture 6.
Picture 6. An illustration of Pick to Sequence (AllAboutLean 2017).

31
In pick to sequence a worker or a computer system picks the required components from
the inventory and organizes a complete sequence for the assembly. (AllAboutLean
2017.)
Six Sigma
Many methods and tools regarding lean implementation and transformations have been
discussed already, while one large group of methods is yet to be presented. Lean six
sigma can be described as one of the most important ones to be discussed next in
relation to the PFEP project on hand.
Six sigma stands for a group of methods and practices that enable a systematic way of
process development. The objective is to minimize the fluctuation in the outcome of the
products, which in the end reduces the amount of waste. This can be done with
investigating the causalities of the processes, and creating successful, radical instead of
incremental, changes to the factors affecting the outcome. The strength within six sigma
lays on its scientific nature as it is based on statistics. In fact, its methods are often used
in problem solving situations, as an assistance for lean implementations. (Six Sigma
2018b.)
3.2 PFEP
As discussed in chapter two, logistics management and development as a whole, require

use of different information systems. One of them, as explained in the previous chapters,
is ERP which is a tool that can be used to manage and integrate the variety of different
functions within the entire supply chain.
There are many ways to benefit from the integrative nature of ERP and all the data
retrieved from it, one of which is PFEP, introduced by lean manufacturers (Chen 2018).
While many companies utilize demand and planning strategies based on spreadsheats
or some other manual modes of data sourcing, they end up lacking visibility and
transparency that in fact, is what PFEP offers (Ostdick 2016.) In this manner, PFEP links
value creation to the entire supply chain (Conrad & Rooks 2016, 7).
The objective of PFEP, essentially, is to provide easily accessible, valid and current
information about every part in the plant, in one place for many people at the same time
(Harris & Harris 2013, 18).

32
The vital information provided relates then to the entire value chain and includes details,
such as the hub of origin, dimensions of the product, packaging, storage condition,
location within a warehouse and manufacturing lead time, amongst other. This applies
from production to delivery, and regards to each part of the fabrication process, which
are all accounted for and recorded. (Ostdick 2016.)
All of this information is often already existing in the organization, while PFEP acts to
combine them to one place creating, mentioned visibility to the supply chain, as Picture
7. visualizes (LeanPro 2018). This is further argumented for, later in this chapter.
Picture 7. Example of how PFEP is connected with the supply chain (LeanPro 2018).
Steps to be taken while creating a PFEP
PFEP gives the supply chain leaders a 360-degree view of the inventory and
procurement policies on hand. (Chen 2018). To start with, PFEP has to be set for a
particular plant only. Thus, it can not subject to multi-plant operations as one. (Ostdick
2016.) In a way, PFEP can be described as the DNA of the facility in attention (Harris &
Harris 2013, 17).
Often, the best way to start the creation of PFEP is to put together a particular task force
and give only little involvement to line management (Harris etc. 2003, 18). Moreover, in

33
order to go further with the PFEP creation, certain steps can be followed while aiming for
the most beneficial PFEP.
First of all, it is essential to start with gathering all the data, which a lot of it is already
stored in the ERP system of the plant (Chen 2018). This is best to be put in practice for
all parts in the operations, including: consumables, cardboard, dunnage and even
hardware. The reason for this lays behind the fact that only in this way the benefiting
and, on the other hand, issue-causing elements of the value stream can be seen.
(Conrad & Rooks 2016, 18.) The data gathering can be then done either manually or in
an automated way, the latter one which offers more validating of data with analytics. The
objective here is to highlight areas where data can be improved in order to have analytics
more robust. Alongside all this, it is important to have the data in use as reliable as
possible. (Chen 2018.) Picture 8. presents some common part details that the PFEP is
beneficial to contain. It is however needed to keep in mind, that PFEP represenets a
plant in particular, meaning the PFEP can include more, or less from the variety of
information available than described below.
Picture 8. Part information that PFEP can include (Bartholomew 2015).
The second step is related to analyzing the data. This can be done manually for example
with excel by using logic based rules and formulas in the aim of understanding and
classifying the data on hand. Another way is to go above excel, towards artificial
intelligence (AI) and machine learning platfroms. The idea is to have algorithms in place,

34
and having them upkept both for the time being and also for the future. This is why,
perhaps the cloud based systems might be offering more in this perspective. (Chen
2018.)
Third step regards to the complying of the PFEP. The supply chain of the enterprise must
be on-line with the rules set by the PFEP. Moreover, the ERP systems must be kept
updated, not only once a year or even every quarter, but exactly when it is needed as
new procurement policies, demand and inventory plans are changed for example. This
approach is important to have, especially with the most important parts within the
operations. A good advice is to perform a product-quantity analysis in order to identify
the top 5 % of the parts which represent between 70 and 80 % of the monthly spend.
After this, all parts can be mass updated every month or quarter. As in the second step,
this can be done manually or have it done with more efficient technological solutions. All
in all, it is however important to include minimal day-to-day manual management with
the PFEP. This is how the efficient functioning of PFEP can be indicated which also gives
more advantages. (Chen 2018.)
Furthermore, it is suggested to have a team within the organization working on the steps
mentioned. This, essentially because a team within the enterprise perhaps has more
long-term objectives while creating a PFEP, which then usually ends up resulting to more
advantages for the entire organization. (Chen 2018.)
3.2.1 Management
All in all, maintenance and management of PFEP are important aspects which ensure
that there is only one version of truth when it comes to the parts revolving in the plant. In
essence, there are two keys that lead to a succesfull use of it to the managed supply
chain. First of all, it is essential to include every part to the PFEP, relate it to the Bill Of
Materials (BOM) in use and match it to what is actually being built through the value
stream. (Conrad & Rooks 2016, 17-18.)
Another aspect regards to the ownership of PFEP. (Conrad & Rooks 2016, 17-18.) In
general, it is beneficial to have one point of contact that is responsible for controlling
changes, coordinating timing and documenting each change relating to the PFEP. This
is crucial because PFEP must be created with the sense of ownership and control. To
go further, everyone in the organization should be able to view, access and print the

35
PFEP or some elements of it. However, it is not suggested that everybody would be also
able to alter, delete or even add items to the system. All in all, it is beneficial to appoint
a PFEP coordinator, who in essence would work as a point of contact, keeping the
information of the PFEP pure, current and more than anything, usable. (Conrad & Rooks
2016, 18.)
In the case of large facilities however, it might be worthy to consider several PFEP
assistants in addition. These assistants would then manage the PFEP through the
product-family value stream relating to them, alltogether creating a complete PFEP for
the entire plant. To conclude, having one PFEP manager, with some assistants, if
necessary, usually leads to a more defined PFEP. (Harris etc. 2003, 19.)
3.2.2 Advantages and Challenges
All in all, PFEP results as benefiting the organization, and in particular the facility it is
designed for, but also creating some issues in the process. In the following, some most
common advantages and challenges are discussed in relation to PFEP.
Advantages resulting from the use of PFEP
Although, many companies already have existing strategies to gather data and
informations comparable to that of PFEP solutions, they are however inable to curate,
share, review or analyze this data in real-time which then results as disadvantages
(Ostdick 2016.) In detail, plants operating without PFEP, often have more inventory,
people than they need and they run out of parts more easier and have excessive storage
needs in the other hand. (Bartholomew 2015.)
These are some of the issues that are usually tackled with PFEP. Once created, PFEP
has many other advantages as well.
First of all, it is essential to take look at the value proposition of PFEP. In practice, PFEP
enhances the capacity of the company for agility and flexibility through the whole supply
chain. There are three main value propositions that PFEP offers. The first one relates to
control which can be related to inventory, distribution or even transportation. All in all,
the information that PFEP offers through the supply chain, can be used to adjust and
monitor the production and movement of parts without actually interfering to the existing
organizational structure. Secondly, PFEP provides greater problem solving methods with
giving power to manage the inventory, identify deman solution and implement data-

36
supported solutions. This way it is then possible to identify gaps or bottleneck and take
neded actions to avoid or solve these issues thoroughout the supply chain. The third
value offered relates to the integration with powerful technology, which happens when
incorporating PFEP with the modern BOM strategy. This as a whole is a driver for
maintaining a lean and efficient supply stream. To go futher and blending PFEP with
other modern computing and processes platforms, the increase and productivity
becomes even clearer while making PFEPs capacity higher in providing centralize,
accessible entry point for data sourcing and analysis as well. (Ostdick 2016.)
In practice, the analysis drawn form the PFEP can be used for example, as an argument
for informed decion-making processes within the organization (Harris & Harris 2013, 18.)
In a long run, PFEP also ends up maximizing every inventory euro, by balancing the
entire supply chain with as little inventory as possible and minimal shortages. (Chen
2018.) PFEP also helps the plant to realize which category its parts fall into. As a result,
the production can be scheduled and run effectively according to the information offered.
In fact, when PFEP is fully implemented, it often affects as nearly 50 % of reduction in
inventory. (Bartholomew 2015.)
Furthermore, there are also other ways to use the information gathered in the PFEP. For
example, they can be used further to manage the material handling system, size markets
and storage rack which contains purchased parts and design timed delivery routes and
kanbans. (Bartholomew 2015.) Moreover, the information can also act as a tool to equip
the operating team as to be better skilled, while the processes itself can be shown
possibilities to be accelerated, or even automated. (Chen 2018.)
The use of PFEP alongside other systems, such as BOM management boosts the
benefits even further providing adjustment capabilities based on both inventory and
demand, at the same time allowing in-depth calculations and analysis to identify gaps
within the areas discussed and more. (Ostdick 2016.)
When it come to advantages relating to specific areas of the business, PFEP can be
used in many ways. As the subject of this thesis relates to the internal logistics, it is an
aim to present this area in particular. Within internal logistics, PFEP can be used to boost
especially the planning which includes facility, cell, supermarked layout and internal route
development. Moreover, PFEP can also affect the determination of best storage and
delivery method in a positive way by argumenting on usage and container quantity.
(Conrad & Rooks 2016, 55.)

37
In addition, the advantages to other parts of the business are presented in Table 2.
below. This, to create an overview in how multidimensional PFEP in fact is.
BUSINESS
ROLE OF THE PFEP
AREA
Sales forecasts finished goods, scrubs data in the PFEP, standardizes parts and level load demand
Logistics manages incoming deliveries, water spiders and suppliers
Sourcing negotiates long term agreements relating to lean and productivity targets and incentives, and removes
riggers from MRP
Finance helps data scrubbing, sets up monthly supplier billing and implements audit controls for suppliers
Production Follows procedures of the PFEP.
IT supports systems changes relating to the coding parts from assets to floor stock, flattens the BOMs,
helps to scrub data and develops data tool needed to feed the spreadsheet
Supplier helps in transitioning suppliers and to certifying partnering suppliers towards dock to stock, helps
Quality suppliers get lean and ensures process capabilities required, helps with supplier report cards
Production enables in-process quality controls and plans

Quality
Table 2. Possible functional roles of PFEP (Protzman etc. 2016, 17-19).
Challenges related to PFEP
There are several issues regarding the creation and also managing of PFEP. It is
however needed to kept in mind, that both the challenges and the solutions to solve them
can vary according to the type and the needs of the plant, as PFEP is unique to every
facility.
On of the most common, challenges coming across relates to the gathering and
compiling the data of hundreds or thousands of parts, in addition to including every part
within the plant. One solution could be to start PFEP with one manufacturing cell at a
time, as some managers have done in the past. (Bartholomew 2015.)
Another major challenge with PFEP is the tuning of it. This often requires a lot of time
and manual excel analysis, which then results as limiting the frequency of optimization.
To avoid this, there are some solutions offered by new technologies which are based on
lean supply chain best practices. (Chen 2018.)

38
Furtheremore, as discussed earlier in this chapter, the best way to start the creation of
PFEP is usually to put together a particular task force and give only little involvement to
line management. This however leads to issues when it comes to the management and
maintenance of the PFEP and eventually leads to accuracy problems. (Harris etc. 2003,
18.) For this reason, every enterprise and plant should come up with solutions that best
suit their operations in order to tackle this challenge as well.
3.2.3 Connections to Lean
As presented previously in this chapter, PFEP is a key step towards lean organization
since it ensures visibility of every individual part movement (LeanPro 2018). Through the
supply network, in addition to visibility, also speed is ensured with PFEP, which both
relate to some of the most important principles of lean management (Ostdick 2016).
In practice, PFEP can be seen as a first step in creating a lean material-handling system,
and even as a essential element when moving the enterprise towards lean
transformation. The reason for this, mainly lays on the fact, that PFEP gatheres all the
information related to the parts to one place which increases the detailed attention put
into the materials, parts and operations in this perspective. Furthermore, PFEP offers
accurate, and also a wide range of information about the parts, which is highlighted with
the following example: As most companies use MRP to manage their purchased parts,
they end up storing 50 % air in their parts racks according to their system. PFEP, on the
other hand offers precise information of the part in each stage in the supply chain.
(Bartholomew 2015.) The latter one which, essentially leads to leaner operations as with
MRP.
Moreover, PFEP also serves a foundation for Kaizen, the continuous improvement
practices, within the material-handling systems of the plant. (Bartholomew 2015.) This
relates to lean in an unavoidable way, as learned previously in this chapter. For instance,
with PFEP implementation, some companies have experienced long-term
improvements, such as reduced days of inventory, increased productivity and boosted
on-time delivery practices. (Bartholomew 2015). In addition to these reasons, PFEP can
be seen having a connection to lean also since, PFEP does not create value as itself,
but it is however an essential element in supporting value-creating activities with
providing needed, accurate and timely information in an easy-access way. (Harris etc.
2003, 21.)

39
4 CASE VALMET AUTOMOTIVE
This part of the paper is dedicated for describing VA as a company, in the perspective of
the PFEP topic. In relation to the chapters two and three, it is an objective now to link
those ideas presented there, to the details within the VA. The idea is then to create a
connection between the theory discussed, and practical research and work done. The
latter one which is shortly introduced in the end of this chapter, and further discussed in
chapter five where the results and analysis of the paper are given attention.
In the following, the structure of the internal logistics within VA is first introduced. In
particular, the one of the picking process is in focus. After this, the implementations of
lean methods and philosophy taken in place throughout the processes of internal
logistics, are then presented. The aim here is to connect the internal logistics of VA with
the theory presented in chapter two, and especially to argument each lean method
discussed in chapter three with the way VA operates its internal logistics.
The chapter continues then to depict the current development methods in use of VA
internal logistics department, which are also connected to the PFEP in creation. First of
all, the development method based on part information is given attention. After this, the
focus continues towards work studies and balancing, which are some fundamental
methods used within VA. Finally, the PFEP in previous use of the VA internal logistics
department is described with a surface level perspective. As a whole, this part is closely
related to theory and literature as the previous chapters. It is however essential to have
it in the case section and not in the theory part, as it essentially describes the VA in
particular, not for example PFEP or the data set in it, in general.
Chapter is ended then with presenting some details of the new PFEP in creation during
this thesis project. In essence, the requirements and objectives are further explained
from the introduction part. Moreover, the process of execution is also elaborated on, in
order to give valid insight in relation to the results and analysis of the project presented
next in chapter five.
In addition to the data collection methods already explained for the distinctive parts, other
information in this chapter is based on the interview held with both the management level
and shop floor personnel of VA internal logistics, in particular the development team.
Some parts are given attention, especially with a written interview, created for the internal
logistics development team of VA, in the responsibility of Kalle Karvanen and Juhani

40
Kerminen. The interview base, and questions created 20.3.2018 can be seen from
Appendix 1, while the answers, received 5.4.2018 are given source markings within the
text, to either Karvanen or Kerminen depending on the question.
To be yet mentioned, as an international company, English is the official language of VA.

However, the internal logistics department in Uusikaupunki plant operates mainly in
Finnish within the plant. Therefore, the interview held and attached to this paper, was
also adjusted to the supportive Finnish language.
4.1 Internal Logistics
Regarding the case of VA on hand, it is necessary to focus on the internal logistics view
in specific. In this chapter, it is of benefit to keep in mind the internal logistics theory
presented earlier, in chapter two, as the processes of VA essentially follow the pattern
with some distinctive specifications. These matters of internal logistics and in particular,
of picking process are then introduced now. This, in order to create a complete view on
the case.
In addition, the internal logistics of VA includes the use of several lean methods, which
links are introduced in this part as well. Alongside this, it is necessary to keep in mind
the ideas of chapter three where the methods, presented here, are discussed more in
depth. All this is essential to be discussed, before focusing on the practical thesis work
made in this project.
Structure of Internal Logistics
As many processes within VA, the internal logistics consists of multiple complex set of
processes. This is often the case with large companies and plants, especially the ones
related of automotive manufacturing. The reason for this lay on the fact, that cars include
thousands of parts, from smaller ones to bigger ones, which all require a specific type of
processing.
In particular, VA has also faced changes in its manufacturing operations quite often
during the last few years, which in essence affects the processes as well, especially
when it comes to the internal logistics. Moreover, VA continuously attempts to improve
its internal logistics processes, which then creates even more changes.

41
Essentially, VA has considered different strategies for different parts. In detail, all the
components within the VA operations end their way either to the assembly or the welding
shop. The path to get there is then planned separately for each part relating to the nature
and the use of the part. The most common process is presented in Figure 7.
Figure 7. The common process of VA internal logistics.
First of all, the unloading area is chosen from three different ones within the plant and
several others related to the external storages around the southern Finland area. The
unloading and reception area are most usually the same, but they must be treated as
two different functions. While the unloading consists of the physical move of the products,
during the reception the incoming loads are being checked, whether if they consist of
correct amounts and of correct components. Moreover, the loads are being taped with a
code, matching the one coming from the supplier. This, in order to check the products to
the systems of the plant. After this, the loads are moved inside to wait for the distribution
to the storaging area.
The distribution is made with trucks, which operate according to the IS in use in the plant.
In practice, the system names an storage area that the particular items must be moved
to throughout the plant.
The storaging area can vary, in addition to the many external storages, from multiple
ones within the plant as well. These are automatic, shelve or floor storages, from which
the first-mentioned ones have a more distinctive process, while the last two are more
related to each other.
One distinctive feature with the internal logistics process of VA, is the additional storaging
types. First type is constructed for the parts which are planned and synchronized for

42
particular cars. Another one is set for those parts that require especial attention in
handling and must be documented with focus, such as the keys for the vehicle.
The process then is continued with the use of IS. In detail, the assembly or the welding
shop places orders which then are received by different types of trucks (forklift, carriage
or transit) depending on the components and locations. The parts are then distributed to
the picking areas, which after this continue their path further according to the picking
process presented next, or directly for use of the assembly or welding shop.
Picking Process
From the process described above, the picking one is in particular focus next. This,
because the created PFEP in this thesis project is focused only on this part of the VA
internal logistics. In order to give more insight, Figure 8. presents the picking process.
Figure 8. The picking process of VA.
In detail, all of those items included in the picking process, have one common unloading
and receiving area. From there, they are moved to either shelve or the floor storage
areas.
There are other picking processes as well within the operations of VA, but they are
however treated as separate kind of processes. These are for example the ones in
external storages, automatic storage, and additional picking storage. Related to the case
in attention, these indepentendent picking processes are left outside of the focus.
From the storaging area, the components are then moved and placed to identified
picking areas, where the picking can start once an order is placed from the assembly.
The ready picked components are, after this, distributed directly to the assembly.

43
In essence, VA has divided picking components into two groups: large and small picking.
The differentiation of the two is mainly based on the size and the requirement of different
trucks for distribution. Moreover, while small picking is accomplished with the help of
speech control, large picking is planned to be imporved towards it as well in the nearby
future, if proven effective for it.
Inspite of these differences, both pickings include more or less similar types of parts,
which are synchorinized or repacked parts, in addition to parts which are picked based
on part numbers requiring certain features. Parts to be synchronized, as discussed
previously, stand for how JIS takes place in the VA manufacturing, which was explained
in chapter three with detail. Repacked components on the other hand are the most simple
ones, as the functions with them only include moving of the parts from original packages
to the picking carts or similar ones which suit the assemply line better. Items which are
to be picked based on part numbers can relate to different colours of same parts, for
example. This gives an indication for JIT production which was further elaborated on in
chapter three.
On a side note, those components requiring picking are perhaps the minority from all
parts revolving in the VA plant. In detail, only the components of assembly can be picked,
if necessary, in the case of VA. Moreover, synchronized parts, as explained previously,
are the only actual group which are all meant to be picked. All in all, having components
requiring picking is not beneficial for the company, since they add steps to the process.
In fact, it is an objective of several projects of VA, to minimize the picking components in
the future, in order to increase the efficiency within the operations (Personal Information.
Kalle Karvanen 5.4.2018).
Implementations of Lean
In relation to the internal logistics of VA, there are several elements of lean that regard
to the way VA operates. As JIT and JIS were discussed previously in this chapter, the
rest of the theory and lean methods presented in chapter three, are now to be linked to
practical examples regarding the VA case, and PFEP thesis project in attention.
First of all, it is to be announced, VA has an continuous attempt for introducing ideas of

lean manufacturing and material management with implementing supportive methods.
In fact, the development measures towards leaner operations is a constant objective in
several different projects.

44
In essence, VA gives a basis for its internal logistics operations with six sigma
methodology. This, for example meaning the control of the products are attempted to be
done in a way, that would not create any excess processes or use of space. (Personal
Information. Juhani Kerminen 5.4.2018.)
To put additional focus on development, the internal logistics of VA has continuos

improvement initiatives in place, where employees can suggest both incremental and
radical changes for the benefit of the operations. This is then supported with different
compensations.
When it comes to efficiency, its indicator is created with specific KPIs, examples of which
presented in the end of chapter two, and Overall Equipment Effectiveness (OEE) values
that VA has identified in prior. Those, give then reason for areas and objects of
improvement which are this way supported with arguments. (Personal Information.
Juhani Kerminen 5.4.2018.)
In short, OEE relates to lean TPM, presented in the beginning of chapter four. Lean TPM
can be also identified as a lean manufacturing tool, in one perspective, which in detail,
improves the reliability and efficiencies of the equipments and machines under utilization
in the organization with a team. The ultimate objective is to improve processes and
equipments continuosly by improving OEE. (Lean Manufacturing Tools 2018g.)
OEE can be then described as a metric for TPM which is gained through measuring the
six big losses. These are defined as breakdowns, setup and adjustment losses, idling
and minor stoppages, reduced speed, defects and rework, and start-up losses. (Lean
Manufacturing Tools 2018g.) In practice, OEE identifies the percentage of planned
production time which is in truth, productive with supporting TPM initiatives.
In addition to the mentioned ones, some other lean methods are presented in the end of
the following subchapter. This because they relate to the new PFEP in creation. They
can however still be seen as lean implementations of VA since there are projects and
objectives within them, put in place in order to be achieved. This thesis project acts as a
good example in this perpective.

45
4.2 Current Development Methods of Internal Logistics
The focus of the development measures of the internal logistics department of VA, is at
the moment related to constructing an efficiency indicator of h / car, which essentially is
argumented for, with the new PFEP in creation.
As presented in the introduction chapter of this paper, during the spring of 2018, VA
started manufacturing two different Mercedes models in parallel. Naturally, these kinds
of changes create its own challenges which often regard to the aspects of optimization
(Personal Information. Kalle Karvanen 5.4.2018). In particular, the relation between
space and efficiency is in question (Personal Information. Kalle Karvanen 5.4.2018).
The changes affect the organization as well. While before, the development of the
internal logistics was centralized for one bigger team, it is now sectioned in many smaller
teams which are specialized in different areas. One team who was particularly important
for this paper, was the team of work studies and measurement, for example.
The new organization constructed for these new changes and objectives, is however
seen to benefit the company as a whole. In essence, it is thought to enable the boost
within the operations in multiple different areas at the same time, which is an
improvement from previous. (Personal Information. Kalle Karvanen 5.4.2018.)
In relation to the future challenges, one of them regards to the overlapping of projects,
especially when it comes to the biggest ones. Moreover, to find skilled and competent
personnel for whom the work can be delegated to, is another obstacle. The department
believes however that with the new organization most of these challenges, amongst
others can be tackled. (Personal Information. Kalle Karvanen 5.4.2018.)
In the following, as explained in the beginning of this chapter, the current development
methods in use of VA internal logistics department, are now explained, this in connection
to the PFEP in creation. All in all, methods given attention are part information, work
studies and balancing, in addition to the PFEP had in use previously in the VA internal
logistics department. From these, the last one is discussed with a surface level
perspective, while the other two relate closely to which the new PFEP information is
created from.

46
4.2.1 Part Information
The first method of development used within the internal logistics department of VA, is
part information. Regarding the picking process, this information is, especially to plan
and develop the picking areas or routes. Moreover, they can be taken advantage of while
planning which functions the parts affect in the operations. (Personal Information. Kalle
Karvanen 5.4.2018.)
The challenge here is often related to the accuracy of the part information (Personal
Information. Kalle Karvanen 5.4.2018). In a way, this process can be further improved
with PFEP implementation, since in essence it arguments for accurate information, also
in relation to parts. This kind of development then could lead to better optimization of
storages, and to more efficient operations (Personal Information. Kalle Karvanen
5.4.2018).
Moreover, part information related to the forecast demand of specific period is used as
one information base used for the PFEP created in this thesis project. This then would
further emphasize the importance of accurate of part information, especially if PFEP is
meant to have of the most use in the future.
4.2.2 Work Studies and Balancing
Another method used for development purposes in relation to the VA case, is the one
related to work studies and balancing. These are both ideas fundamentally inserted in
the operation ways of VA. In the following, related ideas are presented in appropriate
ways.
The essence of work studies lay on the aim of improving the efficiency of the operations.
Objectives are then related to investigating the best practices for the work in perfomed.
In addition, another target is to find the best possible circumstances for the work (Uusi-
Rauva etc. 2005, 490).
Work studies also have multiple perspectives that vary regarding the objectives taken.
The aspects in question, are related to economical, technological and employee ones.
(Teknologiateollisuus ry 2011, 6.) In relation to this paper, and in particular to the case
in discussion, the economical and technological perspective are in especial attention.

47
These, in the focus to the expense cutting and new processes developing actions
(Teknologiateollisuus ry 2011, 6).
Moreover, work studies can be divided into four different areas, which are methods
studies, the institutionalization of the work, occupational instruction and guidance, and
work measurement (Uusi-Rauva etc. 2005, 490).
Methods studies essentially relate to the systematic development of the work which aims
to the efficient, economical and safe way of working. The second one, institutionalization
of work relates then to ensuring that all work, made by different employees is made with
as efficient ways. On the other hand, occupational instruction and guidance ensures that
all employees are on top of the best, most efficient and safe methods for the work.
(Teknologiateollisuus ry 2011, 6-7.)
Work Measurement
While the already mentioned areas relate closely to the way VA operates and develops
its operations also within the internal logistics, the last area of work studies, work
measurement has a connection directly to the thesis and case on hand. Therefore, this
area is discussed in the following with a more focus.
Work measurement in detail aims to find out the time that is taken by the employee to do
the work. This is done with standard ways of work measurement, as mentioned later in
this subchapter. It is also an objective to do the research in ordinary circumstances.
Furthermore, it is of benefit if the work is remeasured multiple times, in order to ensure
the accuracy of the time taken with taking an average from the measurements. This,
because same work can be done with different durations at different times. As a result,
an average time is drawn which indicates the duration that the task requires from a
professional employee. This can be further applied for example, to the investigation of
the lead time of operations. (Vartiainen 1994, 125.)
There are also different stages to work measurement. First, the research must be
informed. Then it is essential, that the work methods are identified, and then the work is
sectioned with descriptions of each. It is also necessary to measure durations at different
times, after which the end result can be calculated with an average. As a last step, the
results must be presented and documented as needed. (Teknologiateollisuus ry 2011,
25).

48
In detail, work measurement research can be conducted in different ways. Some

common ways are experimental research, clock time research in division to normal time
and time usage research, motion time research, time calculations research and standard
time systems. (Teknologiateollisuus ry 2011, 24.) In relation, work measurement
methods used by VA were researched further during the process. This is not however
covered in this paper for confidentiality reasons.
The connection between Work Measurement and Lean
As described in the previous, chapter three, lean is based on developing those processes
of the operations which create value to the customer. This, while eliminating all waste s
within it. The objective is then to construct a flow where products move without a stop in
the value chain. Thus, work methods and processes are both being standardized, and
production is evened. (Teknologiateollisuus ry 2011, 21.)
In the same chapter, Kaizen, was presented as one of the lean methods depicting
continuous improvement. This essentially, is something that also work studies and work
measurement methods can be connected to, as they can lead us towards a leaner way
of operating. (Teknologiateollisuus ry 2011, 22.) One of the most important reasons for
this is, that the flow creation throughout the production requires time related information
from the manufacturing processes. This is often indicated with lead time, which can be
research with work measurement methods, as explained earlier in this chapter.
(Teknologiateollisuus ry 2011, 21.) This is how, work measurement is connected to
kaizen, and eventually, to lean operations.
4.2.3 PFEP
VA has aimed to put together a complete PFEP to be used in the internal logistics
development. However, for the moment, there is no PFEP in use, because of some
issues risen.
The PFEP related to the operations was constructed in 2015, which then faced the end
of its cycle life a year later, in 2016 (Personal Information. Kalle Karvanen 5.4.2018).
This was due to information, and on the other hand also, to organization related
transformations. For the time it was in use however, it was efficient and enabled, for
example the simulation of different changes, such as packaging or function related ones
(Personal Information. Kalle Karvanen 5.4.2018).

49
4.3 New PFEP Tool
In the following, the creation of new PFEP tool is described based on the requirements
and objectives set for it, some of which are already been presented in the introduction
and previous chapters of this paper. Moreover, few connections to lean implementations
and this way relating to the complete objectives of VA, are also given attention. After this,
the process of execution is also introduced, before the results and analysis are put in
focus next, in chapter five.
Requirements and Objectives
The requirements of the new PFEP are essentially related to the data retrieval, which
are based on the forecast demand and work measurement results of VA, as revealed in
the introduction. These are not however presented in detail here, in relation to
confidentiality matters.
With these required data sources, the essential objective of the new PFEP, is to enable
development practices in the internal logistics department of VA. Essentially, for this
project the data collection of Mercedes GLC parts within the picking process are set on
focus.
The aim is then, to construct a functioning and easily updatable PFEP development tool
for the picking process while making research on what kind of data is needed for such,
and how to access it. In practice, after constructing the PFEP, the information wanted to
be drawn as a first step, is to have a complete time of work for each part (Personal
Information. Juhani Kerminen 5.4.2018).
Another target is to create the tool to act as a complete PFEP base. This can be then, in
the future, further improved to reach beyond picking process towards the rest of the
internal logistic processes, and then ultimately forward the entire tool to a more
sustainable, automatized format.
In essence, the PFEP after this project, should attempt to be a basis for the research
made, in a way that it can be of functional use with updating only some necessary base
information (Personal Information. Juhani Kerminen 5.4.2018).

50
New PFEP empowering Lean Operations of VA
As for the lean implementations which are aimed to be achieved with the new PFEP,
several are in focus. Thus, this section is a continuation of the previous subchapter
related to the connection between chapter three and the actual lean regarding actions
taken by VA.
First of all, PFEP affects as giving reason in measuring, following and later on, also
simulating the results of the operations with having them defined. For example, this leads
then to a complete view on the Total Cost of Ownership (TCO) of the operations.
(Personal Information. Juhani Kerminen 5.4.2018.)
The impact of TCO regards to the fact, that it gives a complete view on the costs of
purchasing put in place in the operations. This way, it considers the costs of the purchase
through its entire life cycle. In essence, the idea is not to define the expenses with every
detail included. Instead, the objective of TCO is to bring out the most essential expense
factors, especially those of long-term purchases with high monetary value. Thus, it
enables more effective decision-making process, for instance. (Logistiikanmaailma
2018d.)
For these reasons, it is clear that TCO essentially is an important element leading to a
lean organization. By having TCO model as a base for the operations, lean methods
have a more efficient outcome, which can be indicated with additional cost savings, for
example. This applies also to the case of VA, especially with the new PFEP as
presented.
In addition, as VA bases its operations to six sigma methodology, it also avoids all kinds
of wasteful processes and work, which is the essence of lean as chapter three also
discusses. In relation, PFEP is attempted to have linked with other production models
and areas of business, in the future. This meaning, that eventually, the PFEP is not only
meant to be a tool to develop internal logistics operations, but also to have it as a
complete base to indicate expenses in relation to the complete TCO of the company.
(Personal Information. Juhani Kerminen 5.4.2018.)

51
Process of Execution
The process of execution regarding the PFEP was at the same time complex and simple.
What made the process complex, related mainly to the abstract nature of the topic. In
detail, the path includes every step from introduction to the internal logistics processes,
and to the drawing ideas for further improvement of PFEP, as can be seen in Figure 9.
• Interviews and observations (shop floor + management level)

• Process charts
PROCESSES
• Planning of the PFEP

• Data introduction + filtering and collection of essential data
PFEP • Construction of Excel tabs and formulas
• Interviews, tests and observations

• Ideas for further improvement
ANALYSIS
Figure 9. The process of execution in relation to the new PFEP created.

52
5 RESULTS AND ANALYSIS
The results of the practical work done for this paper are next presented and analysed.
For this chapter, the ideas discussed prior, in the case section should be in particular
attention, in order to achieve a complete understanding.
In addition to the work done and presented so far in the previous chapters, the practical
part of this thesis project culminates to the construction of the actual PFEP. The format
chosen here is excel as a first step, since it offers wanted flexibility and easy access.
There are many pros in using excel in the early phase of building the platform. First of
all, the PFEP is better to have first fully constructed and formulated before it can be
transferred to a more sustainable format. This is particularly significant in the case of VA,
since the company has a variety of complex processes within its operations, and as
PFEP is wanted to be as accurate as possible, the changes to the platform are daily in
this step. Thus, excel offers a low obstacle for changes and error-corrections.
Moreover, during this thesis project it was seen of most benefit to start with a format and
program which is already familiar to the student speaking, especially because of the time
limitations set for the project. This way, all the time available, was directed towards the
actual work, and not to the learning process required to get familiar with a new program,
instead.
As mentioned in the beginning of chapter four, English is the official language of VA.
Despite this, the operations within Uusikaupunki plant are mainly reached in Finnish.
Thus, the written work and PFEP done are also adjusted to the supportive Finnish
language. Some ideas presented in this chapter are now however translated to English,
in particular for this thesis on hand, to emphasize the most crucial elements of the project.
All in all, in the following, the work done is introduced in detail. This is then supported
with illustrating screenshots taken from the actual PFEP excel made with an appropriate
perspective, respecting confidentiality details.
The Finished PFEP
First of all, as it has been established previously, the data used in this PFEP is related
to the forecast demand, providing needed part information and the demand of a specific
period of time in attention. Another data source is related to the work measurement
results. These are not however elaborated on further here for confidentiality reasons.

53
All in all, with this data base, one great Excel document was created, including six
different tabs, each of them which have a purpose of its own, as will be presented next.
✓ Linear process charts

✓ Forecast demand base
✓ PFEP conclusion tab
✓ Picking calculations (picking)
✓ Time values
✓ Change indicator
The linear process charts relate to the process investigation of the internal logistics
department presented already in the case section of chapter four. Adapted to the excel
format, the processes can be now easily checked if needed, especially when figuring
causalities for new calculations.
As for the forecast demand base, it is there for easy access to filtering, especially in
relation to the tab creation for other processes, since picking is now completed. The
data in this tab acts as a base, meaning new, current data can be updated to here from
the ERP system when wanted, which then updates the formulas in the other tabs
automatically.
The PFEP conclusion tab, next gives attention to the h / part calculations based on each
particular process investigated. In essence, this tab does not include any other columns
that are not of use in this point. This, to only conclude the result information drawn from
the other tabs yet to be presented. For now, the h / part is completed for the picking
process according to the objectives, as can be seen from Picture 10. below. This formula
is further explained later on in this chapter.
Picture 9. An illustration of the PFEP conclusion tab.

54
The following tab presents the picking calculations for h / part in this case, as one
objective of the paper. Essentially, the objective was to eliminate every information
column that was of no use for the picking process regarding the parts of Mercedes GLC.
For confidentiality reasons, these steps are left outside the the published version of this
paper.
The content of this tab can be however explained shortly. The first two columns relate to
the identification of the part, while the next three explain the locations where each
process takes part. This gives valuable information about the handling of the part:
different locations for storaging and unloading often relate to different work measurement
times for example, which has a major impact in this case. The last three columns are
then the ones that are in particular attention in this project. One of them is related to
batch labels, which essentially represent as one of the most important identificators for
picking parts in VA. Every picking part has a certain label, and each label consist of a
certain group of picking parts. The essence of a batch label is mainly system related,
and is not in fact seen on the shop floor. Thus, they are used for more efficient picking
organization and operation.
The explanation of the remaining tabs (including details for values drawn from work
measurement studies) are left outside the published version of this paper for
confidentiality reasons. In relation the specific calculation methods and formulas for the
resulted h / part were also further investigated during the thesis process, but left
unexplained in this context for the same reason.
Further Analysis of the PFEP created
In relation to this project, full analysis is provided to VA. In the perspective of this publicly
published paper however, only some general matters of analysis can be discussed, while
most is left unpresented due to confidentiality.
When analyzing the finished PFEP, and comparing it with the old, outdatet PFEP, the
benefits are obvious. New PFEP is now fully updatable and can be even worked with
regarding the picking process as it is. Current data can be implemented to the Excel
created and the formulas are constructed with a sustainability aspect kept in mind.
The only manual work relating to this PFEP is now the values of work measurement. In
the case of new processes which then would require new work studies and possibly new
values, they must be inserted to the Excel manually. It was an attempt to create a linkage

55
between the file of work studies with the PFEP, but it was not seen sustainable, and thus
it was decided to keep this step manual for now.
The actual h / part constructed with the PFEP is then consulted regarding sensible values
in a general level. This can be then used in the case of VA to indicate the perormance of
the operations and to assess the effects of changes, for example. In addition, change
requirements sent from Daimler, can be issued with reliable arguments got from the
PFEP. Also, future changes can be simulated better with this tool. (Personal Information.
Juhani Kerminen 5.4.2018.)
All in all, as explaind throughout the paper, this PFEP created acts essentially as a
development tool. It empowers leaner operations and more efficient process
development. As one example the PFEP describes in which parts most of the resources
of the plant lay, especially in the perspective of expense. These can be then optimized
as wanted, if seen unreasonable.
Thus, the created PFEP can be now used as a development tool for the picking process.
It can be also implemented further to concern other processes of internal logistics, and
even to processes of VA in a more general level if wanted, as well. The simple,
accessible basis is already created for these actions, with the picking process acting as
an initial example. As wanted, a way to automatized format is also presented in the
conclusion part, later in this paper.
Practical Challenges with the PFEP
Some practical and possible challenges are next drawn in this part of the analysis. Here,
a discussion in the form of an interview, as presented in Appendix 1, made with the
internal logistics development team of VA, is taken adventage of, in particular.
One major challenge is seen to be the possible false interpretation of the PFEP tool.
Another issue could be created if the tool is taken apart in relation to some particular
sections, which then result the PFEP to give faulty outcome. This can then affect as
decreasing efficiency and possibly increasing expense factors, when data is forwarded
with false basis. In order to keep this misuse from happening, the appropriate training
must be put in use for those who will be using the PFEP. (Personal Information. Juhani
Kerminen 5.4.2018.)

56
6 CONCLUSIONS
To conclude, the starting point of this project was that VA had an outdated PFEP, which
was already in the end of its life cycle. In this basis, research regarding PFEP was
conducted: the theory base was found to link PFEP to the ideas of logistics and lean.
After this, the case of VA was given more attention, in order to provide a framework in
which the creation of the new PFEP could be inserted. Later on, the work made was
presented and further analysed.
Key findings here are related to the complexity of VA internal logistics. In a way, this was
a bottleneck in the creation of PFEP: the processes must be clear enough before
preparing for this work. A solution provided during this project, was offered via process
charts illustrated for each process related to the internal logistics of the plant. In this
basis, PFEP is created now for the picking process, and it can be improved this way to
other processes as well. Moreover, the importance of certain measures and values are
particularly emphasized with the picking process as taken in consideration in this work
as well. The formulas created for h / part thus support these ideas and offer valuable
information to the PFEP.
The most critical challenges related to this thesis project were also concluded and
elaborated on during the process. This is not however covered in this paper for
confidentiality reasons.
In relation to concluding ideas, some suggestions for further improvement are offered as
an addition outcome of this thesis project. This relating to both the development of PFEP
created so far, and the way VA performs its operations as well.
Suggestions for further improvement
While the creation of PFEP started here with illustrating and clarifying the processes of
VA internal logistics, the first suggestion relates to this. In order to keep all the
development work linear, it is important to have the processes clarified for all the
members of the organization, and update those when developed further. One idea could
be to introduce a communicative intranet, or similar, where information regarding this is
communicated in real time. This could be then implemented to other issues necessary
to have them updated constantly. As a result, this would enable the development of
PFEP, and also reduce the amount of calls, emails and meetings in a daily basis

57
regarding other work as well. This should be of particular attention as an suggestion.

Especially when, as witnessed VA bases its operations to constinuous development.
Some of the other suggested improvements related to this section, for example regarding
the used data, is also offered in the end of the PFEP project. Those suggestions are not
however covered in this paper for confidentiality reasons.
One specific area of improvement to be yet mentioned, relates to labels and designations
revolving in the VA plant. In detail, it would be of most benefit, if those would be linked
to each other. At the moment, it is not obvious which label and work measurement regard
to which part in each situation. To have linear naming system would make the
development work less of a challenge, especially now when the internal logistics is facing
the production of two car models in parallel, which seems to be the operating model in
the future as well. In the case of PFEP, the collection and linking the data would be made
more reachable with this suggestion, as well.
Another idea is also to have the PFEP fully updatable, which is at the moment already
achieved, apart for the work measurement values which were reasoned for previously in
this paper. To have all this data automatically updated would be another target to aim
for.
The Excel created so far can be further developed with different macros, and essentially
forward to a more sustainable, automatized format, for example to Microsoft Access,
which is already in the consideration of VA internal logistics. An ultimate goal is to have
the PFEP Excel created now as a data base, where different departments, not only
internal logistics but also others, would add the data relating to the. This would be then
used by Access, which would offer a way to do the development work in an organized
and sensible way with the data being as accurate as possible.

58
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Appendix 1 (1)
Interview
The interview conducted in 20.3.2018 for the internal logistics development team, in the
responsibility of Kalle Karvanen and Juhani Kerminen. The answers were received in
5.4.2018 via email, which are referred to throughout the paper. In these cases, either
Karvanen or Kerminen is marked as source, depending on the question.

Appendix 1 (2)

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Bachelor’s thesis

Industrial Management and Engineering

CREATING A PFEP TOOL FOR

TURKU UNIVERSITY OF APPLIED SCIENCES

Industrial Management and Engineering

CREATING A PFEP TOOL FOR THE USE OF

PFEP-TYÖKALUN LUOMINEN SISÄLOGISTIIKAN

Kaiken kaikkiaan tämän työn tavoitteena on luoda PFEP-työkalu suomalaisen autonvalmistajan,

Tuloksena syntyvän PFEP-työkalun on täytettävä kolme vaatimusta. Ensinnäkin työkalun on

Projektin tuloksena PFEP-kehitystyökalu laadittiin excel-formaatiin. Lisäksi sen tietopohjaksi

PFEP, Sisälogistiikka, Keräilyprosessi, Logistiikan kehitys, Lean-logistiikka, Lean-muutos

3 LEAN AND “PLAN FOR EVERY PART” (PFEP) 24

4 CASE VALMET AUTOMOTIVE 39

5 RESULTS AND ANALYSIS 52

Appendix 1. Interview with the VA Internal Logistics Development Team

Figure 1. Factors affecting the competences of a business 11

Picture 1. Logistics costs of manufacturing and trading companies in Finland presented

Table 1. Example savings resulting from WMS use 20

BOM Bill Of Materials

ERP Enterprise Resource Planning

JIS Just In Sequence

JIT Just In Time

KPI Key Performance Indicator

MRP Material Resource Planning

OEE Overall Equipment Effectiveness

PFEP Plan For Every Part

TCO Total Cost of Ownership

TPM Total Productive Maintenance

WMS Warehouse Management System

TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Azma Mohammed

TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Azma Mohammed

In Uusikaupunki, VA represents as the only contract manufacturer of automobiles in

In particular, 2017 was an especially good year for VA in Uusikaupunki as it kept

TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Azma Mohammed

TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Azma Mohammed

TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Azma Mohammed

As an example, regarding the largest Finnish companies in trading, approximately 43 %

Figure 1. Factors affecting the competences of a business (Sakki 2003, 17).

TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Azma Mohammed

2.1 Internal Logistics

TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Azma Mohammed

However, in order to have a well-functioning process as a whole, other details must be

TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Azma Mohammed

2.2 Logistics Costs

Picture 1. Logistics costs of manufacturing and trading companies in Finland presented

TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Azma Mohammed

operations (Logistiikkaselvitys 2012). Furthermore, it is necessary to bear in mind that

Figure 3. The division of logistic expenses (Logistiikkaselvitys 2012).

Expenses resonating from warehousing, as mentioned in Picture 1. are consulted as the

TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Azma Mohammed

Another key expense in warehouses is the one of material handling. Throughout a

TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Azma Mohammed

building and site

Figure 4. Expenses of warehousing (Intolog 2018, Aminoff etc. 2004).

TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Azma Mohammed

2.3 Information Systems for Logistics

Picture 2. Technology use of logistics service providers in business operations (The

TURKU UNIVERSITY OF APPLIED SCIENCES THESIS | Azma Mohammed

On a bigger picture, systems support different processes of enterprises. As presented