Many
firms today are realizing their inter-connectivity to each other and their
habitual dependence on one another for success. In order to be successful these
firms must be keen to improve their standing. By maintaining lean practices and
instilling lean cultures into their employees and work environment firms are
able to realize this success. These lean practices and cultures lead to firms
transforming their habits based on customer demand rather than by supplier
constraints. Lean supply chain thinking not only aims to decrease waste but it
also looks to decrease lead time and operational expense(s) while improving
velocity to the rate of consumption. The lean supply chain is not a project or
a function; rather it is a culture that must be fully embraced levels of each
of the collaborating firms such as supplier and customer, and second tier
customer(s)/supplier(s). Lean firms seek to match the demand of the customer
(pull system) by ordering in smaller and smaller batch sizes, and by reducing
lead times (and increasing velocity) within their supply chain network.
What is the lean supply chain?
The
lean supply chain is a systems approach to understanding where costs are hidden
(bottlenecks), and how these bottlenecks can be eliminated throughout the
supply chain network. Bottlenecks refer to the constraints on the supply chain
which does not allow a firm to meet customer demand efficiently (time, cost,
material utility etc.). These bottlenecks and inefficiencies are sometimes
hidden by high levels of inventory which can lead to even more significant
waste. The key to implementing a lean supply chain first comes from the
understanding of its basic principles and guiding theories. There are three key
principles to understand and utilize throughout the lean supply chain
processes. The three keys are: one-piece flow(reducing batch sizes in the
ordering and manufacturing processes to match customer demand rather than
machine/supplier constraints); process standardization and continuous
improvement (maintaining processes that only add value for the customer and
understanding that a process can be continuously improved upon to eliminate
inefficiencies. This also adds into the learning culture and problem solving
culture which is key to lean strategy as well); and also waste elimination
(understanding where waste is in the supply chain and removing it to obtain
higher utilization of materials and costs).
How does the lean supply chain function?
In
practice, the lean supply chain aims to reduce overall fulfillment costs within
the supply chain, for each party involved including: suppliers, manufacturers,
and customer(s). There are several functions of the lean supply chain that do
decrease the overall fulfillment costs and eliminate waste for each party
involved as well (which also reduces costs). Lean supply chain must absolutely
be approached from a systems perspective, which will allow for supply chain
professionals to understand the impact on specific cost areas throughout a firm
and for the entire supply chain as a whole. One-piece flow and batch size
reduction are instilled in practice to match customer demand with actual output
of a manufacturing/service firm. Firstly, inventory reduction leads to lower
risk of obsolescence in a product, and also as more shipments are made (smaller
ordering sizes) there is more material flowing through the supply chain at a
higher velocity but also to a steady beat, or takt. The process called a pull
system is then created as the customer’s order drives the supply chain rather
than more constrictive supplier constraints higher up the supply chain.
Ordering smaller batches in a higher frequency (to match customer demand)
eliminates a vast majority of storage costs, levels the volume flow within a
firm and this ripple effects the entire supply chain as orders are received in
a more level volume manner creating stability. So, what stage of lean is your
firm currently in?
http://www.leancor.com/blog/lean-supply-chain-the-culture-that-must-be-fully-embraced/