The Lean methodology is unique in the sense that it is a concept, philosophy, practice and set of business tools all rolled into one neat package. Its focus is maximization of quality, reduction of unnecessary processing and optimization of value to customers by offering them what they need when they need it. This idea is encompassed in the twin pillars of lean thinking: Just-in-Time and Jidoka.
Every lean organization strives to provide its customers with the best quality it can within the shortest lead time possible by minimizing waste and unnecessary processes. At first, most people think of waste in terms of inventory, but lean also looks at proper utilization of time, effort and human resources. By using the practices below, lean can fit in nicely with supply chain planning, whose main objectives are to lower costs while improving customer satisfaction.
- Streamline Procurement Procedures
Many businesses build up complex purchasing operations due to the belief that they have complex purchasing needs, but this is not necessarily the case. For large firms, there are often corporate purchasing groups operating parallel to local purchasing, resulting in a purchasing department at the headquarters which dictates company policy to the local groups. In many cases, resources are wasted when the lower level duplicates the purchasing functions carried out at headquarters.
Because there are two purchasing departments, it is easy for vendors to receive conflicting information. They may receive multiple contracts – one central and various local – resulting in a variation of pricing. When this varying information is stored as multiple records within the company’s computer system, it can lead to confusion as employees will be unsure of which vendor to contact.
If a company practices Lean supply chain management, they reduce their procurement functions to a single point of contact for all vendors so that there is only one contract and a single price applicable to all its locations.
- Improve Manufacturing Processes
Lean supply chain management first gained popularity in the field of manufacturing, thanks to the quick and significant improvements it can achieve. Through this methodology, it is possible for manufacturing processes to be improved for purposes of reducing the resources needed and eliminating waste, while ensuring optimal operational performance.
Quality is an essential part of lean thinking. When there are no defects in the process, wate is reduced and the organization’s efficiency increases. Better quality also means that there will be fewer customers returning goods, thus reducing the resources required for quality control, repairs and returns.
Organizations which adopt Lean manufacturing practices improve their supply chain by examining their routings, equipment and bill of materials to find where they can make further improvements.
- Eliminate Waste In Warehousing And Transportation
Warehouse processes need to be carefully examined in order to identify areas where resource wastage and non-value adding processes can be eliminated. Among the areas companies should keep working on is the elimination of unnecessary inventory. Accumulation of inventory requires the company to spend money and other resources on storage and maintenance. Getting rid of unnecessary inventory helps to streamline the supply chain and minimize warehousing space.
Businesses looking to improve their Lean supply chain will often look at ways to streamline their transportation procedures. There are many instances where a company’s efforts to satisfy its customers results in making poor shipping decisions. For instance, instead of combining multiple orders for cheaper shipping, they are sent out individually, which is more expensive. A business could also find itself dealing with multiple shipping companies instead of reducing their transportation options to a few affordable choices.
When an organization takes advantage of the power of lean to make its supply chain operate in a more efficient way, then it will be easier for it to offer a consistent level of service to customers. Reliable service results in satisfied customers, increased pricing power and higher revenues.