In the current world and till a few months back, we heard about material shortage, manufacturing delays due to raw material unavailability and closure of manufacturing facilities across the world. So, the term that came up is have we stacked ourselves with sufficient inventory i.e. inventory that can sustain this big a pandemic or disruption in the world. Most companies did not do that and that resulted in the shortage. But the question is how regular is such disruptions and do we always have to have a backup for such? The answer is no because if we stack up our inventories to such levels, there is a risk of non-utilization and finally waste. So, in normal scenarios, there need to be balance between the inventory stock levels with their production, utilization thus reducing waste. This is where lean supply chain comes in. It is a business model which creates value for the customers with the reduction or elimination of non-value-added activities minimizing waste.<\/p>\n
There are various areas in supply chain where optimization to reduce waste is addressed i.e. manufacturing, transportation and informed, repeated customers. There are mainly seven wastes identified \u2013 overproduction, inventory, motion, defects, over-processing, waiting and transport. Overproduction causes wastes in terms of scrap or excess inventory. Unprocessed inventory, storage waste, waste on transportation and containers used are some of the inventory related wastes. Wasteful motion in terms of person or machine movement, Defects due to product standards and design leads to an increase in waste. Overprocessing leads to waste of raw materials, human labor. Waste also happens due to time wasted on waiting for slow or halted production processes. Transportation also adds to wastage to time and money with no value add. So the objective of lean supply chain is to get these wastes minimized as that would mean reduced costs, improved communication & coordination, increased efficiency and improved customer satisfaction.<\/p>\n
But there are several considerations that the organization should considered before plunging forward.<\/p>\n
a.\u00a0\u00a0\u00a0\u00a0\u00a0 Lean as a Growth Strategy i.e. reduce waste, increase productivity to lower cost of goods sold and increase profitability.<\/p>\n
b.\u00a0\u00a0\u00a0\u00a0\u00a0 Lean Leadership \u2013 Coach & align teams for a common goal enabling them with tools and decision making.<\/p>\n
c.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Supplier Relationship \u2013 Ability to receive material from supplier as and when needed without the necessity of additional storage.<\/p>\n
d.\u00a0\u00a0\u00a0\u00a0\u00a0 Process Excellence \u2013 Align manufacturing, warehousing & transportation processes with minimal waste and rework.<\/p>\n
e.\u00a0\u00a0\u00a0\u00a0\u00a0 Integration \u2013 Involve various departments across the organization to work towards a common goal.<\/p>\n
f.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Information Systems \u2013 Ability to look at data and identify areas of pain and resolve them.<\/p>\n
With all these considerations in place, lean supply chain mainly focusses on four main elements:<\/p>\n
i.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Lean Production \u2013 Align manufacturing processes in such a way that there is minimal waste, defects and waiting between different steps.<\/p>\n
ii.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Lean Procurement \u2013 Align with suppliers to obtain raw materials or semi-finished products as and when needed.<\/p>\n
iii.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Lean Inventory \u2013 Ability to maintain minimal stock levels with minimal storage requirements and wastages.<\/p>\n
iv.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Lean Logistics \u2013 Ability to align factories and warehouses to avoid minimal movement of material or personnel.<\/p>\n
Out of the above elements, lean production has the most impact and there are various techniques that are in place \u2013<\/p>\n
a.\u00a0\u00a0\u00a0\u00a0\u00a0 Leveled production \u2013 Smoothing out the quantity or type of production over a period.<\/p>\n
b.\u00a0\u00a0\u00a0\u00a0\u00a0 Continuous improvements \u2013 Incremental process improvements and effective documentation<\/p>\n
c.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Efficiency through a customer-first approach \u2013 Understanding customer expectations & needs and bring in efficiency to reduce waste<\/p>\n
d.\u00a0\u00a0\u00a0\u00a0\u00a0 Total Productive maintenance (TPM) \u2013 Focus of equipment maintenance<\/p>\n
e.\u00a0\u00a0\u00a0\u00a0\u00a0 Streamlining processes \u2013 Deliver products on time<\/p>\n
f.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Respect for Humanity \u2013 Aligning employees with company goals<\/p>\n
g.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Develop error free processes and quality procedures<\/p>\n
There are various tools for lean supply chain. But before I go there, we would like to talk about the five principles for lean:<\/p>\n
1.\u00a0\u00a0\u00a0\u00a0\u00a0 Define value: Customer value alignment through surveys, interviews, and analytics.<\/p>\n
2.\u00a0\u00a0\u00a0\u00a0\u00a0 Map the value stream: Identify areas that contribute to the values.<\/p>\n
3.\u00a0\u00a0\u00a0\u00a0\u00a0 Create flow: Operational alignment to reduce waste and run smoothly.<\/p>\n
4.\u00a0\u00a0\u00a0\u00a0\u00a0 Establish Pull: Manufacture products based on demand.<\/p>\n
5.\u00a0\u00a0\u00a0\u00a0\u00a0 Pursuit of perfection: Make lean as a part of organization culture.<\/p>\n
The various tools levers that can help here \u2013<\/p>\n
a.\u00a0\u00a0\u00a0\u00a0\u00a0 Value stream mapping \u2013 Tool to identify the flow and point areas of waste<\/p>\n
b.\u00a0\u00a0\u00a0\u00a0\u00a0 Increased quality using Six Sigma & TQM<\/p>\n
c.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Elimination of redundancy<\/p>\n
d.\u00a0\u00a0\u00a0\u00a0\u00a0 JIT Inventory<\/p>\n
e.\u00a0\u00a0\u00a0\u00a0\u00a0 Vendor management<\/p>\n
Not only these tool levers, but also there is a need for technology investments in terms of<\/p>\n
–\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Workforce management across supply chain<\/p>\n
–\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 RFID and GPS devices<\/p>\n
–\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Omnichannel ordering & fulfillment.<\/p>\n
–\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Trading partners with EDI and customer interfacing<\/p>\n
–\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Transportation management systems to manage material movement and track freight.<\/p>\n
And many more.<\/p>\n
With the lean supply chain in place, there is a direct impact on accounting. Accurate, timely information are provided for decision making thus impacting cash flows, profitability, customer value and growth. Eliminate waste in accounting processes with financial controls. Lean culture is supported by motivating investment in people providing actionable and continuous improvement in all levels of the organization.<\/p>\n
With so many benefits in supply chain and even accounting, why is that all organizations do not traverse the path of lean supply chains. There are multiple reasons for which this initiative in an organization gets held back.<\/p>\n
a.\u00a0\u00a0\u00a0\u00a0\u00a0 Lack of Leadership Buy-in<\/p>\n
b.\u00a0\u00a0\u00a0\u00a0\u00a0 Poor Foundation in terms of mistakes, mistiming and inconsistency.<\/p>\n
c.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Too many moving parts \u2013 dependence on multiple third parties<\/p>\n
d.\u00a0\u00a0\u00a0\u00a0\u00a0 Lack of knowledge<\/p>\n
e.\u00a0\u00a0\u00a0\u00a0\u00a0 Fear<\/p>\n
f.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Absence of Benchmarks<\/p>\n
g.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Blindly Copying Others<\/p>\n
So, what is the thought process in your organization? Have you implemented the lean principles? If yes, what is the difference that you see in your organization? This document discusses on the details of lean supply chain, the advantages of going on the path and challenges that it brings in.<\/p>\n
<\/p>\n
Please feel free to share your feedback\/questions in the comments section or via email.<\/p>\n","protected":false},"excerpt":{"rendered":"
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