Lean Supply Chain Management

Even though Toyota – the Japanese company – was the one who made the lean concept widely well-known with the Toyota production system (TPS), there is a fact shows that lean did not just emerging but it was partially used in the United States. For example in 1908, “Scientific management” made by Frederick W. Taylor was the concept of using scientific method such as standardization to apply with the working process. This scientific idea was criticized to be the initial stage of developing the lean concept, since it helped workers to work in system and ignored the unnecessary jobs. However, Henry Ford is considered to be the first person, who used the lean principles. In 1910, Ford has developed the concept of continuous flow – called Ford’s model T production system (MTPS) – for manufacturing assembly line. This MTPS was to have workers focusing on their individual jobs and moving work from station to station by conveyer until the individual works became a complete unit. However, the MTPS was criticized to be not suitable in the long term production, since it cannot present customers with more variety of products.

In 1950, Taiichi Ohno and Shigeo Shingo have studied the MTPS and the other principles such as just-in-time (JIT) while visiting the US super market, and then developed the “pull system”, which was applied to the continuous flow system of Henry Ford; thereby, helping TPS to emphasize on the process work rather than the individual works or machines. The word “lean” was emerging in 1980 by the Massachusetts Institute of Technology (MIT); in order to describe the TPS. Lean principles help any company to eliminate waste in business activities. By eliminating waste, companies can gain more profitable, flexible, and controllable over the processes. The term “waste” in lean concept is including everything that makes the process flow unsmooth. There are 7 different types of wastes which are waiting time, excess inventory, defect, over production, waste in process, useless motion, and transportation. Lean concept became famous and widely-used in many companies around the world; however, many firms then realized that they cannot gain the highest benefits from the lean system unless their suppliers and customers in the supply chain system became the lean users too. Therefore the lean concept and supply chain concept then merge together into the lean supply chain management.

As said by Toyota that having a good process can show good results than having brilliant people manage the poor process, Toyota then adopted the lean concept into its supply management process. In the Toyota case, Toyota realized that it is not a good idea of choosing the suppliers, who are far away from Toyota’s plants, due to it increases the total cost and difficult to control lead-time. Toyota also thought of too many suppliers as the supply chain waste, so Toyota decided to minimized the number of suppliers as low as possible; to keep the best suppliers rather than the lowest cost suppliers. This idea of lean supply management can help Toyota strengthen its supply chain process. With the short and strong supply process, Toyota then can has more controllable on its supply chain, since the long term strategy is needed in today’s business.

Unlike the traditional supply concept, the lean supply considers the entire flow in the supply chain as the whole process. While the traditional supply concept is focusing on the individuals benefits, the lean supply is looking for the benefits of the integrated chain in a longer-term. In lean supply, too many suppliers are considered to be the waste in supply chain; however, more suppliers can provide more reliable for firms in the traditional supply idea. Whether firms decide to use lean supply concept or the others; it is inevitable to point that lean supply chain management also has pros and cons.

Lean Supply Chain Management Activities

Fundamentally, lean supply chain lowers total cost by shortening the length of supply chain with the lowest number of suppliers. Therefore, any firm should get start by reviewing the current supply system and then create the optimization goal. That is because most of the supply management issues usually come from the level of relationship with suppliers. The more strength in relationship means the less in waste and cost.

Lean Supply Chain Management

According to lean supply concept, companies do need to determine list of key suppliers, who can embark to the lean approach along with companies. The reason is that firms might get the benefits of becoming lean; however, the chain waste might not be eliminated as seen. The waste is just moving to hide in the suppliers’ side, thus it will be back in the form of extended cost, delay problem, quality problem or whatsoever. After determining the key supplier candidates, organizations then need to choose the best key suppliers as first-tier suppliers by focusing on the lead time, because lead time impact is usually the best key factor on selecting suppliers. Additionally, it should be better to select the first-tier suppliers, who already implement lean concept, so the first-tier suppliers can cooperate on optimizing the sub-tier suppliers. Next, firms should discuss the optimization goal with the selected suppliers, in order to map the supply system in the best way. Furthermore, firms should involve with the first-tier suppliers on selecting the sub-tier suppliers, who can afford to optimize the supply system with the lean approach. Therefore, it can be possible to have an opportunity of successful in using lean supply management concept.

When all suppliers are identified, firms then should cooperate with suppliers to document the macro value stream map (MVSM); in order to understand and improve the supply chain system. Due to the supply system is normally a complicated system, it is very difficult to communicate and cooperate along the stream line; thus the MVSM will help in these activities.

Any improvement project cannot be successful, if there is no person or team to directly take responsibility. To develop lean supply approach, companies need to build the core team, who will monitor on lean improvement and take responsibility in communication. The member of the core tem should consist of people from various departments – operation, procurement, human resource, and so on – and from suppliers. In addition, the core team should at least have one person, who is the lean expert; in order to play role as a lean consultant.

It is essential for organizations to continually improve and monitor the supply system; in order to sustain the implementation. As any typical project, there is no end-point in lean supply management too. Companies must prepare to move forward into the future. Firms need to create the culture in lean supply management for the entire stream process in both internal and external. In creating lean culture, it requires a good leader to continually advance the project.

Continued evaluation has to be review frequently in order to sustain lean supply chain management approach. This is because there are always changes in doing business. Firms might need to change some activities to achieve the lean approach. If the measuring ways are not match with the changes, firms will get the wrong results and might fail in sustain lean.

In order to sustain the lean approach, firms should celebrate the success of using lean supply chain management to all participants. This is for encouraging people and to let people realize on the important of using lean supply chain management. In addition, firms might show the results of lean supply chain management: lower cost, lead-time, inventory; to attract suppliers to have great passion of becoming leanness.

Advantages of Lean Supply Chain Management

In the long term business, lean supply chain management can serve and play role as a good strategy. By following lean approach, firms can eliminate the unnecessary activities along the supply chain and increase value to the deliverables, since lean supply concept is focusing on optimizing the performance of supply chain process and provide more value to the customers.

Lean supply chain management can integrate with both the internal and external aspects along with the supply process. The internal factor in supply management is focusing on the relationship linkage, while the external aspect is considering the operations amongst the suppliers or contractors. Generally, there are five aspects in both internal and external aspects, which many firms cannot fully integrate by using the traditional supply chain management: product flow, information flow, customer needs, upstream and downstream linkage, and the cash flow. By eliminating wastes in the supply process, firms can lower their operational cost, which results in more efficient value-added in goods and services. Basically, most production flow is driven with the “push system”, which tends to keep inventory in a high level in order to response to the forecast. In lean supply management approach, it suggests companies to use the “pull system” that helps companies map and re-design the process to response to the true drivers. Not only the product flow becomes more liquidity, the actual demand from the end consumers can drive the supply chain process via the effective information flow, due to the supply process becomes lean. Since the lean supply chain management aims to minimize the number of suppliers as low as possible; to maintain only the best suppliers, the relationship between firms and their suppliers then can possibly be improved effectively. Fundamentally, when the whole supply process becomes more efficiency and effective, the cash flow in the process then results in positive side too.

Disadvantages of Lean Supply Chain Management

Like the other management concepts, lean supply chain management also has the disadvantage side too. When companies become leanness with fewer suppliers, companies might face the problem of erupted chain, if their suppliers meet with the severe risks. For instance, there was a fire at the Philips semiconductor plant in New Mexico in March 2000. On that time, Ericsson – one of Philips’ customers – did not have a contingency plan of additional suppliers. Ericsson chose to wait its suppliers, Philips, and thus Ericsson faced with a long delay in production line and had huge losses in phone business.

Furthermore, lean supply chain management is not suitable for unpredictable market. Due to lean supply management is focusing on optimizing the process to do less but gain more, firms might not be able to catch the rapidly changes on demand. That makes lean supply management do more positive effect on the commodities rather than fashion products.

Moreover, firms, who use lean supply management with improper balancing, will not success on acquiring new customers. By using the lean supply chain management concept, most firm only focus on the voice of customers (VOC), which helps firms maintain their customers. However, VOC does not have more powerful on expanding the new customers. In contrast, the voice of the market (VOM) can provide the information on market dynamic, which precisely one of the competitive drivers that helps companies stay competitive in market share aspect.

One thought on “Lean Supply Chain Management

  1. In the lean logistics, Organizations are stuck in a constant cycle that pushes them to improve their business in order to gain a competitive advantage. They consistently feel the stress to reduce costs, time and inventory. One way that has proven to improve an organization substantially is a supply chain process known as Lean Logistics.

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