Why Haven’t More Supply Chains Taken the Lean Plunge?

Procurement knows about the value that lean can add, so why have so many failed to implement so far? The key is in understanding how to implement before you start.

Top Management knows that lean can add value, but many still haven’t moved past the initial education stage into full-scale lean supply chain implementation. One reason may be that they haven’t made the paradigm shift as to how to implement lean. 

The Lean Supply Chain is a system of interconnected and interdependent partners that operate in unison to accomplish supply chain objectives. There should be metrics involved to monitor these objectives to ensure success across the supply chain. These metrics should be reviewed frequently to ensure supply chain success.

Secrets to Lean Success

There are nine key objectives that must be accomplished in order for lean to be effectively implemented in the supply chain. However, it’s not enough to know the objectives, organisations need to understand how they are going to achieve this before they start. These objectives can be accomplished as follows:

1. Eliminate all waste in the supply chain so that only value remains 

Creating a smooth flow of products downstream in a supply chain requires all departments and functions in the organisation to work in collaboration: In the supply chain, the seven wastes translate to:

• System complexity – additional, unnecessary, steps and confusing processes
• Lead time – excessive wait times
• Transport – unnecessary movement of product
• Space – holding places for unnecessary inventory
• Inventory – inactive raw, work-in-process, or finished goods
• Human effort – an activity that does not add value
• Packaging – containers that transport air or allow damage
• Energy – (Sometimes called the eighth waste): eliminate wasteful energy in the supply chain: minimise electricity, gas, utilities, etc.

2. Consider advancements in technology to improve the supply chain

There is a wealth of technological options available to procurement to improve their supply chains at each stage. Organisations can look at any other technology that streamlines the supply chain and improves communication and value to the customer. These can, and frequently do, include the following, but should be selected in the way they add value for the individual organisation.

• Workforce Management throughout the Supply Chain, 
• Omni-channel fulfilment, 
• RFID, 
• Supply Chain Management (SCM) systems, 
• Electronic Data Interface (EDI), 
• Trading Partners Interface (TPI-Retail Value Chain Federation), 
• Customer Order Management, 
• Customer Relationship Management (CRM)/Cloud Solutions, 
• Transportation’s Yard Management Systems (YMS) to manage and track freight in the 3PL’s yard outside the warehouse dock doors, 
• GPS for tracking freight.

3. Make customer usage visible to all members of the supply chain 

Flow in the supply chain begins with customer usage. Visibility to customer usage for all supply chain partners is critical. This sets the supply chain pace.

4. Reduce lead time

Reducing inbound and outbound logistics gets us closer to customer demand which results in reduced reliance on forecasting, increased flexibility and reduced waste of “overproduction”. When you create your Sales, Inventory, Operations, and Production Plan (SIOP) monthly, or more frequently, invite your top suppliers and customers to the SIOP meeting. Work in collaboration to reduce lead times and brainstorm how you can create a supply chain that brings value beyond your customers’ expectations.

5. Create a level flow/level load

Levelling the flow of material and information results in a supply chain with much less waste at all critical points in the system.

6. Use pull systems

Kanban Pull systems reduce wasteful complexity in planning and overproduction that can occur with computer-based software programs such as Enterprise Resource Planning (ERP) which creates a Push system with too much wasteful inventory going into the warehouse. Pull systems permit visual control of material flow in the supply chain. You can also use Ship-to-Use (STU) systems. 

Quality Assurance goes to your suppliers, qualifies them for their quality systems, and enables them to ship to a point of use on the production floor to avoid sitting in a warehouse as wasteful inventory.

7. Increase velocity, throughput, and reduce variation

Fulfilling customer demand through the delivery of smaller shipments more frequently increases velocity and throughput to your customers. This, in turn, helps to reduce inventories and lead times and allows you to more easily adjust delivery to meet actual customer need consumption.

8. Collaborate and use process discipline

When all members of the supply chain can see if they are operating in concert with customer need consumption, they can more easily collaborate to identify problems, determine root causes, and develop appropriate solutions to solve any root cause problems. 

Lean’s Value Stream Mapping (VSM) helps break down processes and gives you the ability to rebuild your process more effectively. Utilise Six Sigma’s DMAIC: Define, Measure, Analyse, Improve and Control to solve any problems or roadblocks. 

Lean’s PDCA can also be used: Plan, Do, Check and Act. Any and all members of the supply chain should use these tools to solve problems and reduce costs to increase value to the customer.

9. Focus on the total cost of fulfilment

Make decisions that will meet customer expectations at the lowest possible total cost, no matter where they occur along the supply chain. This means eliminating decisions that benefit only one part of the stream at the expense of others. This can be achieved when all partners of the supply chain share in operational and financial benefits when waste is eliminated.