A Lean Supply Chain Manifesto

In an age of extended global supply chains, when companies must be demand-driven and agile, what does Lean really mean?


That level of collaboration, however, may require that companies rethink their relationships with their partners. "Communication and sharing of information really is one of the keys to eliminating waste in the whole supply chain," says Darren Dolcemascolo, senior partner with EMS Consulting Group Inc. (Carlsbad, Calif.) and author of Improving the Extended Value Stream: Lean for the Entire Supply Chain (Productivity Press, 2006). "But you have to overcome the usual paradigm of adversarial relationships with your suppliers. Because once you start talking to suppliers about letting you see and understand their processes, they're going to say, ‘Hey, we don't want you in here looking at our process. None of our other customers are doing that.' It's difficult to overcome that, but you have to start by building trust with all the suppliers in the value stream."

Ron Nussle, Jr., C.P.M., who is president of ICR Enterprises, a Union City, Calif.-based procurement and supply chain consultancy, urges companies to apply the Golden Rule to their relationships with suppliers when working with them on Lean or any other initiative. "If your supplier thinks that you have its interests in mind as well, it will be more willing to work with you on continuous improvements and to make investments that help give you better quality, cost, service and on-time delivery," says Nussle, who is co-author, with Jim Morgan, of Integrated Cost Reduction (Reed Business Press, 2004).

That sounds like common sense, of course, but Nussle, who went through extensive supply chain transformations at Honeywell Aerospace, Cessna Aircraft Co. and Lam Research Corp., says it's all too easy to start out with best intentions and then slip back into the "take the savings and run" mentality as an initiative progresses. "You have to keep thinking about what your suppliers' business needs are and how they match your business needs," he says.

One best practice that Management Dynamics' Miles recommends for ensuring consistent alignment of metrics and goals among supply chain partners is to institutionalize regular forums to review the performance of the supply chain as a whole, as well as each individual partner's performance against agreed metrics. The goal, Miles emphasizes, is not to beat up one side or another for failing to meet any specific metrics, but to examine root causes and share best practices for getting that metric back on track. "You really need to engage with your partners to improve the process together rather than just pointing out which metrics were off the plan," Miles says.

The Case for Lean

Ironically, even as economic forces are pushing increasing numbers of companies to pursue Lean Supply Chain initiatives, other macro trends are making it increasingly difficult to be successful with such projects. Colin Snow, vice president and research director with Ventana Research, a performance management research and advisory services firm based in San Mateo, Calif., points to increased global sourcing as one such factor. "The minute you go global, you've increased distance and lead times," Snow says. The greater distances make it that much harder to coordinate with suppliers and keep them focused on Lean goals. The increased lead times force companies to constantly make trade-offs between different transportation modes: Putting your goods on a plane costs significantly more, but it reduces the idle time that the goods are in transit, whereas ocean freight costs less but can increase the overall amount of inventory in the supply chain and certainly increases the time that you're holding the inventory.

Colin Snow, vice president and research director, Ventana Research

Still, Snow believes that the imperative for companies to become more agile and flexible — so that they can respond more quickly to changes in demand — is making Lean Supply Chain a mandatory initiative for enterprises. "The consumer is more fickle, and demand is becoming more and more variable, and meanwhile, nobody wants to hold the inventory," he notes. That means that companies sourcing overseas must ensure that their suppliers are running as part of an integrated Lean supply chain, getting parts and products to the dock on time so that ocean freight is a realistic option. It also is true that some companies are revisiting their decision to move their supply base offshore and are instead "near-shoring" some portion of their operations back to nearby countries or domestic locations to meet the most volatile demand.

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