Supply Chain Excellence: Excellence through Lean Thinking!

Editor's Note: Take a look at our featured best practice, Lean Daily Management System (LDMS) (157-slide PowerPoint presentation). The concepts of Lean are straightforward and can be easily understood. In comparison to technical engineering projects, implementing Lean designs is relatively simple. However, many attempts to implement Lean production end in disappointing results. Why is it so challenging to achieve successful [read more]

Also, if you are interested in becoming an expert on Process Improvement, take a look at Flevy's Process Improvement Frameworks offering here. This is a curated collection of best practice frameworks based on the thought leadership of leading consulting firms, academics, and recognized subject matter experts. By learning and applying these concepts, you can you stay ahead of the curve. Full details here.

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Editor’s Note: Vishnu Rayapeddi is a recognized pioneer of Lean Management and founder of Productivity Solutions.  He is the author of the popular Supply Chain Fundamentals 5-modules series on Flevy.   You can view all of his Supply Chain and Lean training materials on Flevy here.

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In my previous article, I briefly introduced the concept of Lean as part of the definition of Supply Chain Excellence, which is “…while minimizing waste and being open to embrace change.”

So, why is it important that we minimize waste?  In today’s world, Supply Chain Management has become more global, more complicated, more demanding, and less forgiving. Also, the trade barriers are down, competition is up, stakes are higher and margins are lower.

Lean Thinking is a business philosophy that has been widely applied in Toyota and many other businesses and industries worldwide and is designed to improve the value proposition to customers, reduce waste, smooth out peaks and troughs of activity, and make individual’s work life easier.  The benefits of a “Lean supply chain” are:

• Speed and responsiveness to customers,
• Reduced inventories,
• Reduced Costs, and
• Improved Customer Satisfaction.

 Lean Supply Chain in essence can act as a competitive weapon by enabling the member companies to align themselves with each other and to coordinate their continuous improvement efforts. This synthesis enables even small firms to participate in the results of lean efforts. Competitive advantage and leadership in the global marketplace can only be gained by applying lean principles to the supply chain. Thought, commitment, planning, collaboration, and a path forward are required.

Based on the SCOR model I mentioned in the previous article, we can say that every aspect of the  supply chain has to go through a “lean” transformation…

• Supply Chain Strategy,
• Lean Planning,
• Lean Suppliers,
• Lean Manufacturing,
• Lean Warehousing,
• Lean Transportation, and finally,
• Lean Customers.

But, all along, we have another component called the “Lean Office.” Please note that, Lean Thinking for the Office is important wherever there are administrative processes.

Path Forward to a Lean Supply Chain

• Lean is a cooperative process for survival and for success. Supply chains that want to grow and continue to improve must adopt lean.

• Lean concepts require an attitude of continuous improvement with a bias for action.

• The concepts of lean apply to all elements of the supply chain, including support departments such as product development, quality, human resources, marketing, finance, purchasing, and distribution.

• The challenge is to bring all of these areas out of their traditional silos and make them work together to reduce waste and create flow.

• Duplication and a lack of appropriate and timely communication run rampant in these traditional organizations.

• A lean supply chain is proactive and plans for the unexpected by positioning all resources for effectiveness.

• Downturns in demand can be addressed without layoffs or significant productivity losses.

Lean Supply Chain Design

Follow these high level guidelines to for Lean Supply Chain design.

• Lean it out! – Select or develop lean sources;

• Eliminate Duplication! – Move from “buying” to allowing suppliers to manage delivery;

• Let Demand Drive the Supply Chain! – Allow consumption not forecast drive the supply chain;

• Optimize! – Eliminate waste in the supply chain, Outsource non-core competencies – Not core business, Compress – balance freight, cost of value, quality, Collaborate to reduce total costs;

• Focus! – Focus on the customer;

• Delivery Frequency! – Deliver only cost drivers more frequently.

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Process Improvement involves analyzing and improving existing business processes in the pursuit of optimized performance. The goals are typically to continuously reduce costs, minimize errors, eliminate waste, improve productivity, and streamline activities.

As we continue to deal with COVID-19 and its economic aftermath, most organizations will prioritize Business Process Improvement initiatives. This is true for a few reasons. First, Process Improvement is one of the most common and effective ways of reducing costs. As the global economy slows down, Cost Management will jump to the forefront of most corporate agendas.

Secondly, a downturn typically unveils ineffective and broken business processes. Organizations that once seemed agile and focused during periods of growth may become sluggish and inefficient when demand drops off.

Lastly, COVID-19 has expedited Digital Transformation for most organizations. One of the quickest and most impactful forms of Digital Transformation is Robotic Process Automation (RPA). Thus, we have included numerous RPA frameworks within this Stream.

Learn about our Process Improvement Best Practice Frameworks here.