Understanding Lean Supply Chain & Logistics

Many clients, and organizations that CGN Global works with, are in a constant cycle that pushes them to improve their business to gain a competitive advantage.  Organizations consistently feel stress to reduce costs, time, and staggering inventory levels.  One way proven to improve an organization substantially is a supply chain process known as Lean Supply Chain & Logistics.

What is the importance of Lean Supply Chain & Logistics.

Lean Supply Chain & Logistics can be described as an efficient and effective way to recognize and eliminate wasteful (non-value added) activities from a supply chain to increase product flow and speed. To achieve leaner logistics, organizations need to implement leaner thinking.  Organizations that incorporate lean thinking into their supply chain can benefit from improved customer service, by reducing waste and overall corporate citizenship. 

What is Lean Thinking?

Lean Thinking originated over fifty years ago, from manufacturing methods (developed by an American W. Edward Deming) used by Japanese automotive manufacturers. Due to minimal resources and shortages, Japanese manufacturers employed a production process that worked with identifying and minimizing waste (or “MUDA”). Lean Thinking soon spread to all manufacturing areas, new product development and supply chain management.

Lean Thinking involves a dynamic cycle of identification, isolation, and elimination of waste and maximizing product value. This process means that end-customers don’t pay for an organization’s inefficiency and waste.  Five principles are involved in achieving minimal waste:

1. Value Specification: Customer value is identified and added along the supply chain network.
2. Map Out Value Stream: Identifying all processes along the supply chain network, in order to eliminate the processes that do not create value to the overall product.  Value Stream Mapping helps one understand how value is created within the product, from the customer’s perspective. 
3. Identify Waste & Create Product Flow: Apply the outlined factors to make valuable processes, occurring in a smooth system; minimizing interruptions, inventories and downtime.
4. Manage and Reduce Waste to Establish Customer Pull: Production is like a rope; you pull (ropes are “pulled”, not “pushed”). Finished Goods Inventory(FGI): designed as a control point.  Demand Driven Replenishment:  Product that is manufactured only in response to the customer where needed; implying that demand information is made available across the supply chain.
5. New opportunities: Drive a culture of “improve the improvement”

Each of these five processes seeks perfection to progressively improve every process; minimizing waste and maximizing value. 

Takeaways

• Lean Supply Chain Management represents a modern way of thinking about supplier networks.
• Successful firms need to develop “lean supply chain relations” with key and strategic customers, and create an environment of “mutual dependencies”
• Right quantities, at the right time, delivered to the right location.
• Lean principles require collaborative supplier relationships, while balancing cooperation and competition. The goal is to minimize waste, reduce costs, improve quality, and strive for service.
• Cooperation involves a spectrum of collaborative relationships & coordination mechanisms
• Supplier partnerships & strategic alliances represent a key feature of Lean Supply Chain Management

Future of Lean in the Digital Age

How organizations embrace the digital economy, in conjunction with lean, will emerge as a key business driver, as consumer “pull” replaces industry “push".

Lean can be a prerequisite, a booster, and a catalyst to the digital economy and not mutually exclusive. Organizations that are already engaged in lean transformation should not stop their efforts and skip to digital transformation. Bottom-line is, one can find increased value in using lean methodologies, by synchronizing them to new digital platforms.

CGN is a leader in transforming businesses through the described lean methodologies.  We see ourselves as collaborative innovators, at the forefront of the digital age, developing new digital solutions, designed with lean supply chain methodologies in mind, to drive maximum ROI faster, helping our clients win in the long run.