The Journey to Continuous Supply Chain Improvement
For the past several years, businesses have focused on cutting supply chain and logistics costs. Their efforts have been partially successful, but they have left a lot on the table, not only in terms of cost reduction opportunities, but also productivity and quality.
Applying lean manufacturing principles to supply chain and logistics operations is one way businesses have reduced their costs. Lean is a team-based form of continuous improvement that focuses on identifying and eliminating waste—activities that do not add value for the customer. After all, customers are ultimately paying for the end product or service, which to them is the value-added effort of transforming raw materials into finished goods. By this definition, activities that don't add value to the customer—such as product being stored, inspected, or delayed—are 100-percent waste.
In most supply chains, the full cycle time—when material or information enters the supply chain until it is delivered to the customer—is primarily waste. Little of this processing time is value-added from the customer's viewpoint.
Many lean manufacturing professionals refer to this cycle time as dock-to-dock time. The shorter the dock-to-dock time, the more lean the manufacturing process. The same can be said of your supply—and demand—chain.
In lean terms, supply chain and logistics areas are frequently viewed as a box (one activity, such as warehousing) or a line (transportation) on a value stream map, which is a form of process flow mapping unique to lean. Value stream mapping separates value-added and non-value-added activities starting at the customer and working its way through the system back to the supplier.
Many concepts and tools in the lean practitioner's toolkit can be applied to your supply chain and logistics function. Some are relatively simple and easy to understand, such as 5S-Workplace Organization, Visual Workplace, and Layout. Others, such as Batch Size Reduction, Quick Changeover, and Total Productive Maintenance (equipment-related waste), are more complex. All require ongoing training, support, and commitment from both management and the rank and file.
To get started requires a fundamental understanding of what is non-value-added or waste in the eyes of both the ultimate customer and the parties downstream who you are giving material or information to.
Taiichi Ohno of Toyota defines the Seven Wastes as:
A good way to remember these wastes is the acronym TIMWOOD. Many lean practitioners add an eighth waste: Underutilized employees, or Behavioral waste.
Lean principles can be competitive weapons and a great advantage in tough economic times. Once you and your team start considering the opportunities to reduce waste, you'll wish you had started on the lean journey sooner.
Parts of this column are adapted from Lean Supply Chain & Logistics Management (McGraw-Hill; 2012) by Paul A. Myerson with permission from McGraw-Hill.