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The Lean, Mean Supply Chain Machine

By Clifford F. Lynch

DC Velocity, March 2006

We’ve all heard the term "lean and mean." Indeed, many of us consider our own organizations to be just that. Unfortunately, what that usually means is that our "downsized" staffs are scrambling to do more with less and that no one’s paying much attention to improving processes (they’re too busy fighting fires).

Until recently, "lean" principles have mostly been applied to manufacturing processes. Only a handful of companies, most notably Toyota, have applied the concept to their supply chains. According to the SCM Research Center, 50 percent of all U.S. manufacturers report that they’re using some lean manufacturing techniques, while only 10 percent have expanded the concept beyond the production line.

But it can be done – though perhaps not easily. For openers, "lean" is difficult to define. Ask five people for a definition, and you’ll receive five different answers. One of the better definitions I’ve seen comes from Jamie Flinchbaugh of the Lean Learning Center, who has written that "[L]ean systems give people at all levels of the organization the skills and a shared way of thinking to systematically drive out waste through designing and improving … activities, connections, and flows." What I like about this definition is that it acknowledges that going lean involves more than tools, that creating a lean supply chain requires a new mindset throughout the company.

In fact, the decision to go lean requires mindset adjustments for parties well beyond the company’s walls. Toyota, for example, has raised "lean" to an art form not only for itself, but also for most of its suppliers. Volumes have been written about Toyota’s lean philosophy, but essentially, it’s a quest to determine what customers really want and then work with customers, suppliers and associates to eliminate waste and non-value-added activities.

With the right leadership, those principles can unquestionably be applied to the supply chain. For example, the first step would be to abandon your "push" inventory replenishment strategy and convert to the "pull" method. Under the "pull" system, product shipments are triggered – or "pulled" – by customer demand, not "pushed" on a DC at the manufacturing plant’s convenience.

Obviously, you’ll have to involve your own suppliers because they will need to receive that demand signal. A great deal of collaboration and cooperation will be required. Fuji Cho, CEO of Toyota, said, "We are only as strong as our weakest supplier."

The second step, although admittedly tedious, is to map your entire supply chain process and eliminate any activities that don’t add value. This so-called "value-stream mapping" is not something we’ve done a lot of in logistics, but a skilled mapper can find a surprising amount of waste in almost any system. The next step, of course, will be to eliminate as much of that waste as possible.

The potential payoffs are tantalizing. By eliminating waste, a company can boost value for the customer, cut costs, reduce errors, increase productivity, reduce space requirements, and more. But that’s no reason to stop! There’s always room for improvement.

The journey to lean supply chain management is an endless one. The must be an ongoing process, which implies rigorous adherence to a continuous improvement program. Encourage your employees to constantly work toward rooting out waste.

The overall goal of your supply chain should be to achieve perfection. In the words of one of my personal heroes, Vince Lombardi, "Perfection is not attainable. But if we chase perfection, we can catch excellence."

 

 

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