Lean Supply Chain

The main goal of Lean Manufacturing is to eliminate activities that don't add value (waste) in the manufacturing processes.

When a company has gone through the Lean Manufacturing Improvement Process, waste also has to be eliminated in the Supply Chain Processes.

The main supply chain processes are

• purchasing and procurement
• demand planning (forecasting)
• production planning
• material handling
• warehousing
• distribution
• customer service

When lean strategies are applied to these processes, companies will achieve

• lower inventory costs
• improved responsiveness to demand fluctuations
• closer integration with suppliers and customers
• increased market share
• higher levels of customer satisfaction

Let's have a look at 3 Supply Chain Processes: lean procurement. lean warehousing and lean transportation.

1. Lean procurement means applying Lean principles to the procurement process:

• focus on value
  • for every activity that is performed in the procurement process, ask the question: is the customer prepared to pay for this activity?
• analyze the value stream
  • value stream mapping: explained here
• eliminate wastes
  • in analogy to the lean manufacturing wastes (overproduction, rework, motion, excess transportation, excess inventory, overprocessing, waiting), look for purchasing and procurement activities that can be eliminated
  • build effective collaborative supplier relationships: e-procurement simplifies and makes electronic most of the interactions with the suppliers
  • increase supplier relationship visibility
  • measure and improve supplier performance
  • reduce administrative tasks

• try to create flow for products and data

  • eliminate bottlenecks in administration:
    • approvals
    • RFP's
    • status inquiries
  • empower users to perform purchases with pre-set spending limits
• establish pull from the customer
  • limit purchases until they are actually needed
  • limit purchases to the needed quantity
  • automate purchasing (integrate procurement software with inventory software)
• improve continuously: involve suppliers in the continuous improvement process

2. Lean Warehousing

There are different processes associated with warehousing. These processes are:

• receiving
• storing
• picking
• sorting
• packing
• shipping

When we compare lean warehousing to lean manufacturing, we have to do with higher variability and lower predictability.

However, different measures can be taken to eliminate non-adding-value activities in the warehouse.

• rearranging layout and routings
• movement of best-selling items to ideal picking and storage locations
• optimization of the storage medium
• choosing the right picking style
• application of the "touch once" principle
• application of new technologies
  • barcode
  • RFID tags
  • optimization software
• discipline to eliminate damaged materials
• cross-docking: movement from one truck to another

Also some lean tools applied in lean manufacturing have valuable application in the warehouse:

• value stream mapping
• 5S
• team building
• mistake proofing
• kanbans
• standardized work
• kaizen events

The same as with Lean Manufacturing, there is no end to the process of reducing effort, time, space, cost, and mistakes. Continuous improvement is a must in warehouse activities.

A lean warehouse allows companies

• to serve customers faster
• with less space
• less inventory
• and with more accuracy.

3. Lean Transportation

Increasing shift from "push" to "pull" requires more flexibility and responsiveness from the transportation companies.

This can be achieved by:

• gaining visibility in all your transportation operations
  • inbound
  • intra-company
  • outbound
• use of transportation management systems
• development and management of carrier relationships
• establishment of core carrier programs: leveraging volumes with fewer carriers
• implementation of a carrier performance management programs
• sharing of information between business partners
• consolidation of shipments
• optimization of freight and transportation modes

The main benefits of Lean Transportation are:

• better on-time delivery
• reduction of delivery variability
• better capacity availability
• inventory reduction
• cost reduction

I have a gift that will help you get started easily with a Lean Supply Chain: it's a downloadable PDF file (266 pages) which you can get free as a Supply Chain Coaching Member.