Lean supply chain management

Lean supply chain management (lean SCM) uses principles of lean manufacturing in order to reduce waste and increase value for customer and every enterprise in the chain. Lean manufacturing is limited to one company and can cover relations with supplier, while lean SCM works throughout the chain. It is applicable to:

• Procurement,
• Manufacturing,
• Warehousing and
• Freight management
• Reverse logistics.

Lean supply chain management is applicable in the case of products characterized by the following features:

• Long life cycle
• Predictable demand
• Low frequency of introduction of new variants

A typical example is the automotive industry.

Supply chain integration

Integration of enterprises in the supply chain becomes more and more popular approach to business. It helps reducing costs and increasing performance. In order to optimise integrated supply chain lean supply chain management methods can be applied. The enterprises can share information systems (see below), research and development (R&D), quality control, etc.

Supply chain management improvement

Lean Supply Chain Management is used in the production process, and logistics and distribution of products. For each process, the basic idea of Lean SCM is the prevention or reduction of all actions or events which do not increase the value of the end product. Those events are called waste. There are several lists of waste types:

• 7 wastes of lean - the base one
• 7 wastes of services
• 7 wastes of software development

The most important element for the application of Lean Supply Chain Management in the production process is a good knowledge of the organization and its functioning. It involves obtaining and providing the necessary information, and consequently making the right decisions based on it.

Tools of lean supply chain management

Lean supply chain management uses all tools of lean manufacturing and some tools of lean development including:

• Jidoka - allowing immediate removal of production problems
• Hansei - self-awarenes in order to improve
• Andon - visualisation of process and problems related to quality
• Just in time - pull production system; reducing inventory kept during the production process
• Poka yoke - reducing number of occasions for defects
• Heijunka - production levelling
• Kaizen - continuous improvement
• Genchi genbutsu - modification of organizational culture
• Nemawashi - change management
• Kanban - organization of production process
• Muda mura muri - concept of removal of waste
• Gemba - transparency of processes and work in workplace

Information systems used in lean SCM

In case of lean SCM in the logistics and distribution, information is very important. The process of its acquisition and use, which aims at minimizing transportation costs and inventory. The most commonly used IT systems are:

• ECR
• VMI
• CPFR
• Quick Response

See also:

• Principles of Supply Chain Management

Examples of Lean supply chain management

• Just-in-time (JIT) Delivery: This is a key principle of lean SCM that involves managing the flow of materials in the supply chain so that the right materials are delivered to the right place at the right time. This requires that all parties involved in the supply chain have a thorough understanding of what is needed, when it is needed, and how it will be delivered.
• Vendor-managed Inventory (VMI): This is a process where the supplier is responsible for managing the inventory levels at the customer’s location. This allows for suppliers to have a better understanding of inventory needs and reduce the lead time of production.
• Cross-Docking: This is a lean SCM practice that involves receiving goods from a supplier and immediately shipping them to another location without any intermediate storage. This reduces the amount of time needed to process the shipment and increases efficiency.
• Kaizen (Continuous Improvement): Kaizen is a Japanese philosophy that focuses on continuous improvement in all aspects of operations. This is applied to lean SCM by constantly analyzing the supply chain and identifying areas where efficiency can be improved.
• Collaborative Planning, Forecasting, and Replenishment (CPFR): This is a practice that involves collaboration between a supplier and customer to create a forecast of demand, plan for inventory, and replenish inventory as needed. This helps to improve the accuracy of demand forecasting, reduce inventory levels, and increase customer satisfaction.

Advantages of Lean supply chain management

• Lean supply chain management helps to reduce costs and optimize value by eliminating non-value-adding activities. It helps to improve supply chain visibility, optimize inventory levels, minimize lead times, increase customer satisfaction and reduce waste.
• Lean SCM enables companies to collaborate better with suppliers, distributors and customers to improve accuracy and reduce cost. It also helps to gain better insights into customer demands, allowing companies to create better strategies and plans to meet them.
• Lean SCM streamlines operations by focusing on the essential processes and eliminating unnecessary steps. This enables companies to reduce time-to-market and increase efficiency.
• Lean supply chain management helps to improve communication and collaboration between different departments and stakeholders in the supply chain, leading to better coordination and faster problem-solving.
• Lean SCM helps to reduce costs by eliminating redundant processes, improving efficiency and optimizing the use of resources. It also helps to improve the flow of information, leading to better decision-making.

Limitations of Lean supply chain management

• Lean supply chain management is limited by its focus on cost-cutting and efficiency. This can lead to an emphasis on short-term gains over long-term sustainability, which can create problems in the supply chain in the future.
• Lean SCM is also limited by its reliance on collaboration. It can be difficult to get the collaboration of all parties involved in the supply chain, which can reduce the effectiveness of the lean principles.
• Lean supply chain management is also limited by its lack of flexibility. Once the processes have been implemented, it can be difficult to modify or adapt them to changing customer needs or market conditions.
• Finally, lean SCM is limited by its focus on process optimization. While this is important, it can lead to a lack of visibility and control over other aspects of the supply chain such as customer service, inventory management, and supplier relationships.

Other approaches related to Lean supply chain management

The following are other approaches related to Lean supply chain management:

• Just-in-Time (JIT) : This approach focuses on reducing inventories and increasing the efficiency of operations by delivering the right product, at the right time, in the right quantity and of the right quality.
• Kaizen: Kaizen is a Japanese term meaning "change for the better." It is a philosophy of continuous improvement that focuses on small, incremental changes over time.
• Total Quality Management (TQM): TQM is a process-oriented approach that focuses on improving quality by eliminating defects and reducing variation.
• Agile Manufacturing: Agile manufacturing is a process that uses teams and technology to respond rapidly and efficiently to customer demands.
• Value Stream Mapping (VSM): VSM is a tool used to identify and eliminate waste in the supply chain. It helps to identify areas and processes that can be improved or streamlined.

In summary, Lean supply chain management is just one of many approaches related to improving efficiency in the supply chain. Other approaches include Just-in-Time, Kaizen, Total Quality Management, Agile Manufacturing, and Value Stream Mapping. All of these approaches have the same goal: to reduce waste and increase value for customers and enterprises in the supply chain.

Lean supply chain management — recommended articles

Agile supply chain management — Agile manufacturing — Kanban methodology — Efficient Consumer Response — Toyota production system — Agile supply chain — Lean management — ISO 9001 — Just in time

References

• Bruce M. and Daly L. (2004), Lean or agile, a solution for supply chain management in the textiles and clothing industry?, International Journal of Operations&Production Management Vol. 24 No. 2, p. 151-170
• Childerhouse P. and Towill D.(2000), Engineering supply chains to match customer requirements, Logistics Information Management, Volume 13 No. 6, 2000, p. 337-345
• Lamming R., (1996) Squaring lean supply with supply chain management, International Journal of Operations & Production Management, Vol. 16 Iss: 2, p. 183-196