Lean has hit the mainstream — sort of.
In a report issued earlier this year, Boston-based technology consultancy AberdeenGroup wrote that fewer than one in five manufacturing enterprises (18 percent) have fully embraced and implemented Lean Manufacturing principles. Nevertheless, 90 percent of the manufacturing executives surveyed said that their enterprises are committed to Lean and pursuing the well-documented benefits that Lean can yield, according to "The Lean Benchmark Report."
But with Lean becoming widely accepted — if not yet widely adopted — in both discrete and process industries, the question arises, "Is Lean Manufacturing good enough anymore?" If your competitors are all reading the same business books and attending the same conference sessions explaining how to do Lean on the plant floor, will just doing Lean within the "four walls" of your enterprise still give you a competitive advantage? Or is it merely the cost of entry into the market these days?
The time is right, it seems, to take Lean outside your company. It's time for Lean Supply Chain.
Necessary, But Not Sufficient
Of course, Lean Manufacturing has continued to prove its value over the years. For example, a study released in April by Manufacturing Insights, an advisory firm headquartered in Framingham, Mass., showed that companies with high levels of maturity in their Lean initiatives (as well as their Six Sigma programs) are achieving significant benefits and competitive advantage. "Lean companies are growing revenue more rapidly, at higher profit margins and with more productive asset usage," write Bob Parker and Jay Holman, authors of the report, "Lean Six Sigma, 1Q06 Update: Lean Continues to Show High Performance."
The Manufacturing Insights report included a case study that showed how DuPont was combining Lean with Six Sigma and the Supply Chain Council's Supply Chain Operating Reference (SCOR) model to sustain momentum in its productivity improvement. In fact, Lean has always been about the supply chain to some extent. In the 1980s, when the U.S. automotive sector began implementing just-in-time production based on Lean principles derived from the Toyota Production System, a major focus was "pulling" parts and assemblies onto the production line just at the moment they were needed. Building a smooth flow of material along a streamlined value chain to eliminate waste necessarily involved suppliers, who were expected to support the OEMs' Kanban replenishment initiatives.
But the focus in the automotive industry's Lean initiatives remained on optimizing within the OEM's plant. Stephanie Miles, who is vice president for commercial services at global trade management solutions provider Management Dynamics (East Rutherford, N.J.), offers a simple explanation for why this kind of internally focused Lean is necessary but no longer sufficient to compete in today's "supply chain vs. supply chain" market. "Lean can help you optimize and save five minutes out of the manufacturing process, but if it gets lost in the supply chain, you might lose five days in the delivery cycle time," says Miles. In other words, all the Lean Manufacturing in the world won't save you if you don't have your value chain in order downstream to your customer and back upstream from your suppliers. If your suppliers are holding excess inventory on a just-in-case basis to ensure that they can meet your just-in-time mandate, the cost of holding that inventory ultimately is going to get factored into the total supply chain cost for the finished product.
What Is Lean Supply Chain?
One of the challenges in discussing Lean Supply Chain is coming to an understanding of what exactly that phrase means. The problem is that while Lean Manufacturing has been fairly well defined as a strategy for eliminating waste through continuous improvement programs, Lean Supply Chain still means different things to different people, depending on their rank and role in the supply chain, according to Gary Latham, an APICS-certified, 20-year veteran of the automotive and transportation industries. Latham currently is director of industry marketing in the Automotive Group at WhereNet (Madison Heights, Mich.), a provider of radio frequency identification (RFID) and real-time location systems for tracking and tracing assets in the supply chain.