Letting lean into your supply chain – part of the Lean supply chain supplement

Lean is an approach to improving businesses that focuses on the elimination of activities that don’t add value to customers. In a commercial setting, this is normally indicated by whether or not the customer would be prepared to pay for the activity. The traditional approach is to understand the end-to-end process within an organisation – the value stream.

Lean in the Big Five
Many people are so used to hearing the term ‘lean manufacturing’ that they forget that without the extension into the supply chain, products would at best simply sit at the end of production lines and at worst not even existent, because no raw materials would be available to begin the manufacturing process. The lean supply chain is therefore about applying lean throughout the Big Five elements.

Lean in design
The incorporation of lean in the design area entails collaborative teams that often involve specialists from other organisations who provide technical input that is not available to a single design team. It also encompasses designing products that can be easily sourced and that minimise the part count. For some industries, it also includes design activities that lead to easy recycling or that minimizes energy usage.

The incorporation of lean in design results in reduced product costs, shorter product development times, easier supply and recycling and lower input costs. The design phase makes up around 90% of the overall cost of a product, and therefore has a major impact on the long-term financial performance of the whole supply chain.

Lean in procurement
During the procurement phase, lean supply chains come to life. Lean procurement is concerned with important activities such as rationalising the supplier base so that meaningful relationships can be formed with suppliers. Also, changes are implemented that reduce the time and cost involved in placing orders, while introducing flexibility in supply so that the processes are neither starved nor flooded with stock. Procurement is a two-way process – it involves suppliers and customers.

Making communication easier between the two, combined with selective introduction of technology to improve ordering and the introduction of changes reduces costs and increases the flexibility of the entire supply chain.

Lean in procurement leads to reduced purchasing costs, greater flexibility and fewer stock emergencies; meaning that the rest of the supply chain is lean-enabled.

Lean in manufacturing
Lean in manufacturing is extremely common.

What is less common is the consideration that lean manufacturing can be applied not just to factories, but also to areas such as production engineering and planning.

When lean is applied in manufacturing, it has a positive impact on the lead-time of the whole supply chain, as well as on product costs and quality.

Lean in warehousing
The lean concepts applicable to warehousing include reducing stock levels, increasing pick rates and accuracy and reducing damage, whether it be to staff or to products. The effective introduction of lean in the warehouse will incorporate concepts such as reducing movement distances and handling activities, eliminating delays in unloading and loading and focusing on delivering parts on time, in full (OTIF). Lean-enabled warehouses tend to have higher pick rates, lower returns and improved staff motivation.

Lean in transportation
Counterintuitively, efforts to improve customer service can have a major impact on the quality of shipping decisions. Failure to combine orders, using multiple shipping channels and a tendency towards expensive delivery options are symptoms of poor communication between the manufacturer and the transporter, and inefficiency in the transportation process.

Lean transportation is about introducing concepts like combined multi-stop loads, cross-docking, right sizing equipment and packaging solutions. It also involves developing relationships with the bigger transporters in order to reduce costs and improve delivery performance.

Challenges in the lean supply chain
The first and most obvious problem that people face when attempting to make improvements across an entire supply chain is a lack of robust and professional relationships with suppliers and customers. Another main problem is the chaotic and undefined processes that are the driving forces behind the wrong behaviours in every one of the Big Five elements. This is often compounded by a history of adversarial management styles that have created a supply chain culture that resists change, does not allow for open discussions and inhibits innovation.

We emphasize the phrase: “Overcoming these challenges is not easy”. There is no quick fix or a magic wand. Instead, we propose that there are seven elements to a lean supply chain that build up over time to deliver improved performance, reduced costs and greater flexibility for all organisations that are involved.

1. Remain focused on the voice of the ultimate customer. Think about what they would say was value-adding, and then eliminate anything else.

2. Understand the true end-to-end supply chain using value stream mapping.

3. Create a supply chain that flows, with activities being triggered only when required.

4. Design processes that are able to respond to volatility.

5. Introduce a culture of continuous improvement that is based on measures that drive the right behaviours and create openness and collaboration.

6. Find the suppliers that you can work with and change or eliminate as many of the rest of them as you can.

7. Build the capability of your team and those of your supply partners to enable them to understand how to get the benefits of a lean supply chain.

How the Institute of Operations Management can help
The Institute of Operations Management (IOM), in partnership with Amnis and Unipart provides a wide range of training and support options to help you develop a lean supply chain. Examples of the workshops we are running in 2011 that will help you benefit from the seven elements of a lean supply chain are detailed below: