Lean Supply Chains and how to get there?
The manufacturing sector has undergone enormous change in the last twenty years. Globalisation, technology advances and the growth of emerging market economies have driven ever-increasing competition. One response by the Multinational sector has been a new focus on optimising global supply chains. Companies in Ireland have adopted to these changes and have moved their manufacturing facilities up the value chain and expanded their activities so that many have become strategic sites for their parent companies.
As these corporations focus on optimising their global supply chains, there is a unique opportunity for Irish based Multinational’s to increase differentiation amongst their peers, by assessing and streamlining their broader supply chains.
Fortunately, the adoption of Lean techniques and “Lean Thinking” that have proven so effective in improving performance within these companies have also been shown to be equally applicable across the broader supply chain. The principles of pull, level-loaded work and synchronisation from one step to the next are relevant whether those steps are within one company or between a supplier and customer in a broader network. The phrase “Lean Enterprise” is often used to denote a cooperative effort to implement Lean beyond a single company, by including suppliers, partners, and customers who must all interact in the creation of value.
The trend to implement Lean beyond the “four walls” of an individual company and expand its use to the broader multi-organisation enterprise has evolved over several decades from the Toyota production system (TPS) in the 1960’s to a focus across the wider enterprise including subsidiaries, distributors, third-party contractors and other involved parties of today.
In the past ten years the Lean supply chain has been derived from the strong need and desire within industry to apply the core principles of Lean Thinking right through the supply chain, from raw material supplier to end consumer. There is recognition that real competitive advantage can be leveraged from a sharp focus on the supply chain. This growing emphasis on Lean coincides with the development and use of advanced information and planning systems to capture ‘real-time’ information. A paradigm shift from a forecast-driven to a demand-driven model has occurred with continued refinement of demand forecasting.
Key aspects of Lean supply chain management
Customer Relationship Management
This involves working openly with key customers to ensure a ‘win-win’ ethos. It is critical to be close to the customer in order to understand their needs, values and requirements. Excellent companies utilise such intelligence in a proactive fashion often enabling them to actually anticipate customer needs. At a secondary level, this close customer contact ensures processes such as end distribution and inventory levels are adjusted and controlled to suit the demand which helps in the elimination of demand variability and non-value-added activities.
Customer Service Management
Very often companies no longer sell a single product but include additional service level needs to suit customer requirements. For example, this may be regular free updates with the purchase of a computer software program and direct links to technical experts for solutions to problems encountered. Or the realisation, because of changing market dynamics, that more product information must be supplied. Constantly seeking improvements and new ways of adding value for the customer are essential.
This is a key element in ‘leaning’ the supply chain because customer demand is one of the biggest sources of uncertainty. A responsive sales forecasting team is a primary requirement. Integrating this team with the demand planners and schedulers is an essential element of a more responsive supply chain. Striving to break away from the ‘silo’ mentality is a dilemma for many larger organisations, but it needs to be dealt with effectively.
Order Fulfilment and Logistical Flow
This involves the smooth integration of planning, manufacturing and logistics. This must be done not just within the enterprise but across the supply chain. Regular projects need to be undertaken that analyse distribution facilities and capacity, pipeline inventory and transportation operations. The key is visibility because suppliers must be able to ‘see’ into their customers’ operations and customers must be able to ‘see’ into their suppliers’ operations. This involves close liaison with upstream and downstream partners and suppliers.
Manufacturing Flow Management
Organisations must leverage manufacturing services and sourcing for flexibility and efficiency. In addition to JIT and Lean operations, many leading companies have developed highly sophisticated outsourcing and subcontracting of different parts of their production or service needs. Others have collaborative partnerships with suppliers.
Supplier Relationship Management
The aim is to strive for long-term strategic supplier agreements that lead to ongoing collaboration. It can be a highly challenging objective, given that many suppliers will aim to retain an independent stance. However, leading companies have shown how effective these arrangements can be if approached with a win-win mentality. They encourage suppliers to make the Lean transformation and involve them in Lean activities. Deepening trust and undertaking mutually beneficial, innovative process improvements will in the long term achieve real gains and cost benefits.
Product Development and Commercialisation
Time to market is dependent on smart design that allows for ease of manufacture and assembly. Experienced project and product development teams need to be in place to monitor and reduce cycle times and lead-times. You can create obvious competitive advantages by designing a process system that is Lean yet adaptable and easily altered to allow for upgrades and advances.
The issue of environmental awareness has become of vital importance to organisations. Manufacturers are being forced to ensure that a high level of materials used in manufacturing can be recycled. This means that manufacturers and their suppliers need to agree on compliance specifications and have facilities and processes in place to re-use and re-process the materials.
What Leading Edge Group can do for you
Over 27 years experience working across international supply chains delivering projects associated with the following:
- Centralized Procurement
- Planning and Scheduling
- Customer Service
- Cash-to-cash cycle management (order-pay to receipt of goods)
- Inventory optimization and reduction
- Packaging optimization
Leading Edge Group works with over 30 specialized consultants and staff with experience that spans the entire supply chain. We only hire practitioners from industry, in line with our philosophy of offering tangible results. Our customers have reaped the benefits of this practical approach. In association with our clients and strategic partners, Leading Edge Group has developed unique business and supply chain diagnostic models. We have built our products and services around these models to assist clients gain a competitive advantage in supply chain management.
The Leading Edge Group has developed proprietary tools, methods, and techniques to help organizations:
- Assess their current supply chain performance
- Identify major opportunities for improvement
- Develop a roadmap and action plan for execution
- Project manage the change program implementation
These programs include setting agreed project charters incorporating timelines, responsibilities, and resource plans; defining major goals and performance targets and the proper management and utilization of people and resources.
Our knowledge and experience has been gained through working in the following supply chain areas:
- Strategic Planning
- Sales & Operations Planning
- Forecasting / Demand Scheduling
- Master Production Scheduling
- Material Planning
- Capacity Planning
- Inventory & Routing
- Warehousing & Distribution
If you are interested in learning more about how we can help your Supply Chain, then get in touch.