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The Top 4 Principles to Build a Lean Supply Chain Strategy

After talking with over 30 supply chain executives over the last month, a concept that has come up more and more frequently is “lean manufacturing.” After doing some research, I found that it has been around since the 90s. “Lean” has been a critical concept in the world of manufacturing; however, it extends into the supply chain as a whole. So, what does it mean for a supply chain to be lean?

To start defining the key concepts, we can borrow from some of the predefined points in lean manufacturing strategies. The four key pillars to focus on are:

1) Eliminate Waste

Lean principles aim to identify the waste found in nearly every business and minimize or eliminate it, if possible. Here are the six pillars where companies see the most amount of waste:

  • Defects can lead to rework/salvage and scrap. It is arguably the most costly type of waste, especially if a defective product makes it to the customer. Faulty goods can also point to other issues at a product development or vendor level.
  • Over- or under-production is when production batch sizes do not match customer demands. In both cases, company margins reduce and increase money and effort spent across the value chain. 
  • Waiting comes in several forms. From production shutdowns to merely waiting for updates from internal team members or external partners, delays waste time and money that can be better used on other projects.
  • Not using people’s talents is a waste of their abilities and ultimately could cost the company innovative talent. When businesses neglect all their stakeholders’ full potential, they risk those people finding a company that will value their complete skill set. 
  • Transportation happens at every phase in the supply chain. If companies are now building a strategically diversified network, they will increase their lead times and decrease margins with higher transportation costs.
  • Inventory has five major categories: finished goods, sub-assembly, raw component, office supplies and Maintenance, Repair and Operations (MRO). Obsolete or overlooked inventory can build up in all of these areas, taking up valuable space and cramping your cash flow.

 

2) Continuous Improvement

A genuinely lean supply chain is a moving target. As new trends arise and unavoidable disruptions occur, a business’s entire organization needs to improve continuously. Promoting a culture of never settling for complacency instills “lean thinking” throughout your organization, which leads to smarter decisions and a desire always to be better. 

3) Organize Using 5S

Through constant improvements, the organization level of a company dictates the efficiency of its processes. Companies can follow the 5S organization method to achieve maximum efficiency:

  • Sort
  • Set in Order
  • Shine
  • Standardize
  • Sustain

The 5S principles are a proven strategy in keeping any workspace running efficiently. Whether it’s tracking shipment and delivery of raw goods or where individual projects are in the product lifecycle, the 5S strategy is a visual and transparent way to keep everybody on the same page.

4) Track Metrics (my favorite!)

You can’t improve what you don’t measure. If you think there’s an inefficient process within your business and don’t have the data to understand what could be causing these delays, there is no way to make any improvements. The more process tracking you do, the better the odds to prevent problems that might otherwise cause financial or physical damage.

Now that we’ve applied lean manufacturing basics to creating a lean supply chain strategy, it’s time to find a platform to support these initiatives. The Suuchi GRID supports these strategies through our software’s core modules. 

Communication and Collaboration

Organize communication and collaboration across all of your internal and external supply chain participants to avoid delays due to missed emails and phone calls. This module also allows for increased accountability through the storage of all historical communication.

PIM and Vendor Management 

Manage all the phases and stages of your production from product conception through to distribution. The GRID allows you to rate factories on the most critical metrics enabling businesses to make smart factory assignments for improved product quality and speed to market while increasing margins.

Materials Library 

Create a repository for raw materials to manage inventory, reduce the likelihood of over- and underordering raw goods. It also allows you to make smarter sourcing decisions from the early stages of development.

Analytics

Now that all information flows through a single platform, it allows for decision-makers to make data-backed decisions. Improvements and forecasts are no longer based on disjointed data points and are instead driven by prescriptive and predictive analytics.

The solution to taking today’s complex supply chain to a well-oiled machine will not happen overnight. The first step to a lean supply chain is to move into the digital age for a data-driven strategy.

Read more from the New Voices in Supply Chain Forum

Written by Ben Zucker

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