January 2013 | Sponsored | Knowledge Base

The Lean Supply Chain: A Field of Opportunity

Tags: Lean

Robert Martichenko is CEO, LeanCor, and Instructor, the Lean Enterprise Institute and the Georgia Tech Supply Chain and Logistics Institute, 859-866-1179

Businesses all around the world are familiar with the value of lean principles. The current conditions of globalization and competitive environments require operating a lean business now more than ever. Lean principles teach to eliminate waste and focus only on those things that result in customer value—ultimately building business cultures that focus on problem solving. Once you have every team member empowered to solve problems every day, the results are extraordinary.

While many companies have embraced lean in manufacturing processes, they have yet to un-tap the wealth of opportunity lean brings to the supply chain. Senior executives often acknowledge lean can add value, but many still haven't moved past the education stage into full-scale lean supply chain implementation. One reason may be that they haven't made the mental leap as to how to accomplish this task. The Lean Supply Chain is a system of interconnected and interdependent forces that operate in unison to accomplish overarching supply chain objectives. These objectives are accomplished in alignment with 8 key principles, these principles are:

  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 organization to work in harmony. The seven types of waste in manufacturing are well known. 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, wip, or finished goods
    • Human effort—activity that does not add value
    • Packaging—containers that transport air or allow damage
  2. Make customer consumption visible to all members of the supply chain. Flow in the supply chain begins with customer consumption. Visibility to customer consumption for all supply chain partners is critical for acting as the "pacemaker" of the supply chain.
  3. 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".
  4. Create level flow. Leveling the flow of material and information results in a supply chain with significantly less waste at all nodes in the system.
  5. Use pull systems. Pull systems reduce wasteful complexity in planning and overproduction that can occur with computer-based software programs such as material resource planning (MRP), and they permit visual control of material flow in the supply chain.
  6. Increase velocity and reduce variation. Fulfilling customer demand through delivery of smaller shipments more frequently increases velocity. This in turn helps to reduce inventories and lead times and allows you to more easily adjust delivery to meet actual customer consumption.
  7. Collaborate and use process discipline. When all members of the supply chain can see if they are operating in takt with customer consumption, they can more easily collaborate to identify problems, determine root causes, and develop appropriate countermeasures.
  8. Focus on total cost of fulfillment. Make decisions that will meet customer expectations at the lowest possible total cost—no matter where they occur in the supply chain. This means eliminating decisions that benefit only one part of the stream at the expense of others. This is the real challenge, but can be achieved when all members of the supply chain share in operational and financial benefits when waste is eliminated.

Lean Supply Chain Implementation Results

LeanCor customers have gained the benefits of:

  • Increased customer fill rate and customer satisfaction
  • Supply chain visibility and increased performance measurement
  • Inventory velocity and inventory reduction
  • Distribution center and transportation cost reduction
  • Increased supplier performance
  • Reduction in "Total Cost" of the entire supply chain

The New Role of the 3PL

The new role of the 3PL will not just be to transport and store, but rather to serve as a trusted partner in the lean journey by identifying problems, implementing solutions, and adding value in global and complex supply chains. The relationship with the 3PL needs to move from transactional to one of long term partnership and commitment.