Applying Lean Thinking To Your Company And Your Supply Chain

Author(s):

Sherry R. Gordon
Sherry R. Gordon, President, NESI, Inc., Medford, MA. 02155, 781-395-6657, srg@nesi-supplychain.com

85th Annual International Conference Proceedings - 2000 

Abstract: Lean thinking can be applied to your company and your supply chain in order to improve overall performance. There are numerous practices being deployed by successful companies that can be viewed in the context of the five lean principles of value, value stream, flow, pull and perfection. While lean practices are typically associated with the manufacturing shop floor, these practices are highly relevant to supply chain management in both manufacturing and service organizations. This presentation focuses on some best practices, practical applications of these practices, and typical results from implementing them.

Objectives:

  • To understand the five basic principles of lean thinking
  • To apply lean thinking to supply chain management
  • Illustrate several best practices for applying lean thinking, improving supply chain performance and enhancing customer satisfaction.

What Is Lean Thinking. Lean thinking is a way of improving processes in order to maximize value and eliminate waste. While lean thinking has been typically applied to improving value streams in manufacturing, it is a useful tool that can and should be applied to all aspects of the enterprise and the extended enterprise that includes suppliers. The results of applying lean thinking both to one's company and to one's supply chain are shorter cycle times, lower costs, and better quality.

Lean thinking includes five basic principles:

  • Value
  • Value chain
  • Pull
  • Flow
  • Perfection

Value is defined as the ultimate customer's subjective evaluation, adjusted for cost, of how well a good or service meets or exceeds expectations. The important point is that the end customer determines value, not the supplier. This view of value helps focus all activities. If you look at a task and ask, "Would the customer pay for " and the answer is no, then value is missing by this definition. Value stream is the flow of all the specific activities required to design, order and provide a specific product or service from concept to launch, order to delivery, and raw materials to finished product into the hands of the customer. The opposite of value is waste. The third principle, flow, is defined as the progressive achievement of tasks along the value stream with no stoppages, scrap or backflows. Fourth is pull, which is a system in which the supplier produces nothing until the customer signals a need. And fifth is perfection, which is the continuous striving to apply the principles of lean thinking to eliminating waste.

Applying Lean Thinking to Supply Chain Management: As customers and suppliers work together as an extended enterprise, they must function together efficiently and seamlessly. In order to maximize each other's business contribution to the end customer and to deliver on time and with the best cost and quality, waste must be driven from the value stream. And, as supplier content becomes a significant percentage of cost of goods sold or of service delivery, the need integrate suppliers in order to meet customer expectations and achieve strategic goals becomes critical to competitiveness. Applying lean thinking to eliminating waste from the customer-supplier value chain is another way of thinking about and addressing the issues.

Lean Principle  Supply Chain Practice

Value    Collaborative Product Development

Value Stream  Supplier Partnering

    Value Stream Analysis

Pull    Visual Systems

Flow    Advanced Planning Systems

Perfection   Kaizen Blitz

    Lean Masters

    Continuous Improvement

Value - Collaborative Product Development. This is a well defined, cross-functional process applied consistently to accomplish the design of products. The process encompasses a team of internal resources and those in the supply chain. Process activities include product planning and definition, engineering for design, manufacturing, quality, test and field service.

Value Stream - Supplier Partnering. Choosing those suppliers with whom you wish to partner is key for ensuring that you can minimize waste in the value stream. You need to determine whether a supplier can be categorized as non-core, a bottleneck, critical or a potential partner before proceeding. Then tools for solidifying and improving the relationship can be applied.

Value Stream - Value Stream Analysis. To look at the value stream of the extended enterprise, both of the customer and suppliers, a company needs to determine who its key suppliers are and the role that they play. Then several tools such as process activity mapping and quality filter mapping can be applied to identify and eliminate waste within each organization and between customer and supplier.

Pull - Visual Systems. This practice enhances pull by creating a work environment that is self-explaining, self-ordering, self-regulating, and self-improving - where what is supposed to happen does - on time, day or night. Products and/or processes can progress along the value stream unhampered by stoppages and bottlenecks because the processes are visible, clear and self-evident. Non-value added tasks such as search, asking, selecting, rummaging and moving things around can be reduced.

Flow - Advanced Planning Systems. These systems, also known as APS, are a recent development and are typically interfaced to ERP (Enterprise Requirements Planning) or other decision support systems. They use advanced algorithms to model supply chain constraints and enable intelligent supply chain and inventory planning and decision-making. These systems can be used to plan and schedule production and to plan demand on the supply chain and plan transportation.

Perfection - Kaizen Blitz or Accelerated Improvement Workshops. This technique of accelerating improvements in the workplace over the course of several days to a week through a series of such events has become an increasingly popular tool both in manufacturing and in service industries.

Perfection - Lean Masters. Lean Masters are individual contributors from various disciplines who are process focused, results driven, and implementation oriented. Their role is to develop and lead improvement initiatives within either their own company or in those of their suppliers.

Perfection - Continuous Improvement with Suppliers. Some key practices that can be used to work collaboratively with suppliers to try to achieve perfection in the extended enterprise are collaborative value engineering, supplier councils, supplier associations, and value stream mapping between customers and suppliers.

Some of the key success factors in applying lean thinking to your company include committed leadership and support from senior management, a strong change agent, educating employees within the company as well as suppliers. Often a crisis is required to move companies to deploy lean thinking. However, typical results include radical reductions of cycle times (>90%), inventories (>90%), new product time to market (50-70%), total costs (50%), and defects (>90%).

BIBLIOGRAPHY:

Fleischer, Mitchell and Jeffrey K. Liker. Concurrent Engineering Effectiveness: Integrating Product Development Across Organizations. Cincinnati: Hanser Gardner Publications, 1997.

Galsworth, Gwendolyn D. Visual Systems: Harnessing the Power of the Visual Workplace. New York: AMACOM, 1997.

Hines, Peter. Creating World Class Suppliers: Unlocking Mutual Competitive Advantage. London: Pitman Publishing, 1994.

Kilpatrick, Jim, "Advanced Planning Systems: Spark the Supply Chain." APICS -the Performance Advantage, August 1999, 25-28.

Womack, James P. and Daniel T. Jones. Lean Thinking. New York: Simon and Schuster, 1996.


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