9 Steps to Establish the Lean Supply Chain!

Lean Supply Chain

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Blog post written by Chuck Intrieri at http://theleansupplychain.com 

 

Top management knows that lean can add value, but many still haven’t moved past the initial education stage into full-scale lean supply chain implementation.

One reason may be that they haven’t made the paradigm shift as to how to implement lean. The Lean Supply Chain is a system of interconnected and interdependent partners that operate in unison to accomplish supply chain objectives.

There should be metrics involved to monitor these objectives to ensure success across the supply chain. These metrics should be reviewed frequently to ensure supply chain success.

These objectives are accomplished as follows:

1. Eliminate All Waste in the Supply Chain So That Only Value Remains

Creating a smooth flow of products downstream in a lean supply chain requires all departments and functions in the organization to work in collaboration.  In the supply chain, the seven wastes translate to:

  • System complexity—additional, unnecessary, steps and confusing processes
  • Lead time—excessive wait times
  • Transport—unnecessary movement of product
  • Space—holding places for unnecessary inventory
  • Inventory—inactive raw, work-in-process, or finished goods
  • Human effort—activity that does not add value
  • Packaging—containers that transport air or allow damage
  • Energy-(Sometimes called the eighth waste): eliminate wasteful energy in the supply chain: minimize electricity, gas, utilities, etc.
2. Consider Advancements in Technology To Improve The Supply Chain

The following are a great list of technology investments that should be at the top of the list in the quest for the lean supply chain:

  • Workforce Management throughout the Supply Chain,
  • Omni-channel fulfillment, RFID,
  • Supply Chain Management (SCM) systems, Electronic Data Interface (EDI),
  • Trading Partners Interface (TPI-Retail Value Chain Federation),
  • Customer Order Management,
  • Customer Relationship Management (CRM)/Cloud Solutions,
  • Transportation’s Yard Management Systems (YMS) to manage and track freight in the 3PL’s yard outside the warehouse dock doors,
  • GPS for tracking freight,
  • a Transportation Management System (TMS),
  • and any other technology that streamlines the supply chain and improves communication and value to the customer.

To drive further value, look for technology providers in the logistics and supply chain space who can integrate these systems together.

3. Make Customer Usage Visible To All Members of The Supply Chain

Flow in the lean supply chain begins with customer usage. Visibility to customer usage for all supply chain partners is critical. This sets the supply chain pace.

4. Reduce Lead Time

Reducing inbound and outbound transportation logistics gets us closer to customer demand which results in reduced reliance on forecasting, increased flexibility, and reduced waste of”overproduction”.  When you create your Sales, Inventory, Operations and Production Plan (SIOP) monthly, or more frequently, invite your top Suppliers and Customers to the SIOP meeting. Work in Collaboration to reduce lead times and brainstorm how you can create a Lean Supply Chain that brings value beyond your customers’ expectations.

5. Create a Level Flow/Level Load

Leveling the flow of material and information results in a lean supply chain with much less waste at all critical points in the system.

6. Use Pull Systems, Like Kanban

Kanban Pull systems reduce wasteful complexity in planning and overproduction that can occur with computer-based software programs such as Enterprise Resource Planning (ERP) which creates a Push system with too much wasteful inventory going into the warehouse. Pull systems permit visual control of material flow in the supply chain.You can also use Ship-to-Use (STU) systems.  Quality Assurance goes to your suppliers, qualifies them for their quality systems and enables them to ship to a point of use on the production floor to avoid sitting in a warehouse as wasteful inventory.

7. Increase Velocity, Throughput and Reduce Variation

Fulfilling customer demand through delivery of smaller shipments, more frequently increases velocity and throughput to your customers… This, in turn, helps to reduce inventories and lead times and allows you to more easily adjust delivery to meet actual customer need consumption.

8. Collaborate and Use Process Discipline

When all members of the lean supply chain can see if they are operating in concert with customer need consumption, they can more easily collaborate to identify problems, determine root causes, and develop appropriate solutions to solve any root cause problems. Lean’s Value Stream Mapping (VSM) helps break down processes and gives you the ability to rebuild your process more effectively. Utilize Six Sigma’s DMAIC: Define, Measure, Analyze, Improve and Control to solve any problems or roadblocks. Lean’s PDCA can also be used: Plan, Do, Check and Act.  Any and all members of the lean supply chain should use these tools to solve problems and reduce costs to increase value to the customer.

9. Focus on Total Cost of Fulfillment

Make decisions that will meet customer expectations at the lowest possible total cost, no matter where they occur along the supply chain. This means eliminating decisions that benefit only one part of the stream at the expense of others. This can be achieved when all partners of the  lean supply chain share in operational and financial benefits when waste is eliminated.

Lean Supply Chain Implementation Results

lean supply chain six sigmaCustomers can gain the benefits of:

  • Increased customer fill rate and customer satisfaction
  • Supply chain visibility and increased performance measurement
  • Risk Management
  • Inventory velocity and inventory reduction
  • Distribution center utilization of 5S, Kaizen/Continuous Improvement, and Lean Six Sigma and transportation cost reduction: example: use your or your Third Party Logistics (3PL) provider partner’s Transportation Management System (TMS) to optimize your freight so you add value and reduce costs by using the most effective lanes and routes.
  • Increased supplier performance: reduction in lead times and creating cost reduction as your suppliers are the experts in their respective fields. Have your suppliers implement an occasional
  • Supplier Day Conference to look for cost reduction through Value Analysis.
  • Reduction in “Total Cost” of the entire supply chain

 

Check out A “Don’t Touch” Strategy will Dramatically Lean out your Supply Chain! 

#Lean #SupplyChain

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