What is Lean management?
Lean management is a business practice that is used to maximise process efficiency while minimising waste. It was first used in the manufacturing sector, primarily at Toyota, but has subsequently been adopted by a number of sectors, including the healthcare, building, and service sectors.
The main goal of Lean management is to find and stop any processes that do not improve the final good or service. This is accomplished by adopting standardised work practices, using data-driven decision-making, and continuously refining processes with the help of all employees.
What is a supply chain?
The sequence of operations and procedures used in the creation and delivery of a good or service, from the procurement of raw materials through the point of sale, is referred to as a supply chain. Coordination and administration of numerous tasks, including the procurement of raw materials, production, transportation, warehousing, distribution, and delivery, are involved in this process. Multiple parties, including suppliers, manufacturers, distributors, retailers, and customers, all play important roles in a typical supply chain.
A supply chain’s goal is to maximise the flow of products and services from the manufacturer to the consumer in the most effective and economical way feasible. To ensure that products are produced and delivered at the proper time, in the proper amounts, and at the proper location while reducing waste, costs, and hazards, effective supply chain management needs constant collaboration, coordination, and communication between all parties that are involved. In order to optimise the entire supply chain and guarantee optimum efficiency and effectiveness, supply chain management also entails the use of a variety of technology, tools, and processes.
How to apply lean management in the supply chain?
Waste reduction and ongoing process improvement are key components of the lean management philosophy.
Supply chain management is one of the many fields in which Lean management can be used. Lean management in supply chain management aims to cut costs while increasing effectiveness and customer satisfaction as well. The followings are the main key ways to apply Lean management in supply chain management.
01. Identifying and mapping the value stream
It is essential to identify and map the value stream in order to apply ideas of Lean management in supply chain management. A method for analysing and comprehending the movement of the goods and information that make up the supply chain is value stream mapping. It further entails identifying all the steps, people, and organisations involved in getting a good or service from the beginning to the final user.
Creating a cross-functional team with members from all the major supply chain segments, such as procurement, production, logistics, and customer service, is the first step in defining and mapping the value stream. From the moment of first demand through the point of final delivery of the product or service to the client, the team should collaborate to identify the many processes and activities involved in the value stream.
The value stream must then be mapped out after the processes and activities have been determined. In order to do this, the full process flow, including all the touchpoints and decision points, must be visually represented. Then that diagram ought to show how information, materials, and resources move along the supply chain and ought to draw attention to any inefficiencies, bottlenecks, or delays.
The team should examine the value stream map after it has been created to find areas for improvement. Moreover, they ought to look for methods to boost productivity, get rid of waste, and streamline the process flow. This could even entail redesigning specific procedures, switching vendors, or adjusting inventory levels.
Supply chain managers can better comprehend the general movement of goods and information in the supply chain by defining and mapping the value stream. They can thus find inefficiencies, cut waste, and boost overall effectiveness. Concentrating on satisfying the needs of the client and getting rid of any processes that do not add value also enables them to establish a more customer-centric approach to supply chain management, and because of that, it emphasises the application of Lean management in supply chain management.
Overall, value stream mapping is a crucial step in implementing principles of Lean management in supply chain management and can enhance the supply chain’s overall performance and competitiveness.
02. Identifying and eliminating waste
Another one of the key actions that can be made to apply principles and techniques of Lean management in supply chain management is to identify and eliminate waste. To increase efficiency, cut costs, and boost customer happiness or satisfaction, waste must be identified and eliminated. In Lean management, waste is any activity or procedure that does not bring value to the customer or the product. There are 8 types of waste introduced in Lean management, and here are those typical waste categories that might be discovered in the supply chain.
- Overproduction: Making more than is required or starting production before the need is clear, which results in too much inventory and related expenses.
- Waiting: Waiting for the delivery of supplies or equipment, for approval, or for the procedure to go on to the next stage.
- Inventory: Inventory that is in excess of what is required to meet demand. Holding an excessive amount of inventory results in higher storage costs, obsolescence, and probable loss from spoiling or damage.
- Transportation: Transporting goods or resources needlessly will eventually result in higher fuel costs, pollution, and transportation expenses.
- Excessive processing: Processing that is done in a needless or redundant manner, such as increasing manufacturing or service delivery’s time and cost by including extra processes or complexity.
- Defects: Producing faulty goods that don’t satisfy quality standards, which results in rework, scrap, and unhappy customers.
- Excessive motion: Asking employees to move around a lot, like when they need to acquire supplies or equipment. Then it raises costs and poses a risk to safety as well.
- Unused talent: Not making the most of the workforce’s competencies.
Businesses and companies can use Lean methodologies like value stream mapping, process flow analysis, and root cause analysis to find and get rid of waste in the supply chain. With the use of these methods, waste in the supply chain may be located and strategies to eliminate or minimise it can be developed. Businesses might, for instance, utilise a pull system to create products in response to actual client demand rather than anticipating demand and creating products anyway, which can result in excess inventory and waste. To assist employees in continuously identifying and eliminating waste, they may also apply visual management technologies, which also signifies the practice of Lean management in Supply chain management.
To sum up: Supply chain managers are able to increase productivity, cut costs, and boost customer satisfaction by locating and removing waste. The empowerment of employees to continuously detect and reduce waste can also assist in fostering a culture of continuous improvement inside the supply chain. In general, implementing principles of Lean management in supply chain management requires finding and removing waste, which can have a significant positive impact on performance and competitiveness.
03. Establishing pull systems
In order to apply ideas of Lean management in supply chain management, establishing pull systems is a smart way. With pull systems, products are only produced when they are actually needed, based on actual consumer demand. This contrasts with conventional push methods, which entail manufacturing things based on projections of demand.
The first stage in creating a pull system in the supply chain is to thoroughly comprehend client demand. In order to do this, data on consumer orders must be gathered and analysed, as well as patterns and preferences among customers must be recognised. After this data has been examined, a manufacturing schedule that is in line with actual consumer demand can be created.
Establishing a mechanism for stock replenishment is the next stage. Low inventory levels are maintained in a pull system, and supplies are only ordered when they are required to complete client orders. This lessens waste, lowers expenses, and enhances consumer demand response. The use of a just-in-time (JIT) strategy, in which materials are delivered just in time for production to begin, is one technique to set up a pull system for inventory management.
Setting up a pull system for information flow is equally as crucial as setting one up for inventory management. In order to ensure that everyone has access to the data they need to make choices in real time, a system that enables information to flow swiftly and easily through the supply chain must be created.
Creating a more adaptable and responsive supply chain is one of the main advantages of implementing pull systems in the supply chain. With that, supply chain managers can react more swiftly to changes in consumer demand, the market, or the competitive landscape by simply producing goods as needed. That further increases customer satisfaction, efficiency, and waste reduction in the business.
To sum up: In terms of implementing methodologies and techniques of Lean management in supply chain management, setting up pull systems is a crucial step. With Lean management in the Supply chain, managers can build a more responsive, effective, and competitive supply chain by coordinating production with actual consumer demand and building mechanisms for inventory and information flow.
04. Implementing continuous improvement
When talking about applying the principles of Lean management in supply chain management, we cannot ignore one of the core concepts of Lean management, which is implementing continuous improvement. Continuous improvement refers to the process of continually looking for ways to enhance systems, processes, and products in order to increase effectiveness and efficiency.
Establishing a continuous improvement culture across the entire firm is the first step in implementing continuous improvement in the supply chain. This entails fostering an atmosphere in which staff members are empowered to spot chances for development and difficulties, as well as encouraged to try out novel concepts and strategies.
The next step is to develop a structured method for continuous improvement once this culture has been formed. The Plan-Do-Check-Act (PDCA) cycle is one such strategy, and it includes the following steps.
First and foremost, identify the issue, decide on a course of action, and create a plan for improvement.
Next, put the plan into action and gather data to track development.
Then examine the information gathered during the “Do” phase to see if the strategy was successful in obtaining the desired result.
Lastly, if the plan has worked, put the new procedure or system in place. If not, pinpoint the source of the issue and create a fresh improvement strategy.
The Kaizen philosophy is another method of continuous improvement that places emphasis on modest, incremental changes that can be done every day. This entails forming groups of workers that collaborate to find and remove waste and inefficiencies in the supply chain.
There are several tools and techniques that may be applied in addition to these strategies to assist ongoing supply chain improvement. For instance, value stream mapping can be used to find possibilities for supply chain process optimisation, while root cause analysis can be used to pinpoint the root causes of issues.
To sum up: Managers may foster an innovative and effective culture that fuels continuous improvement in the company by implementing continuous improvement across the supply chain. This could make the supply chain more successful and competitive by reducing waste, raising quality, and increasing customer satisfaction. Along with that, this also underlines the benefits of applying core concepts of Lean management in supply chain management.
05. Collaborating with suppliers
When adopting principles of Lean management in supply chain management, collaborating with suppliers is an unforgettable and crucial step. In order to enhance the flow of goods and information between the two businesses and to jointly identify and get rid of waste and inefficiencies in the supply chain, collaboration with suppliers entails working closely with suppliers.
● Build trust
The first stage in working with suppliers is to build trusting relationships with them. Building trust and respect between parties is the basis of that professional relationship. Along with that, being open and honest in communication and cooperating to find ways to enhance the supply chain process is all part of that.
● Identify improvement opportunities
After a solid rapport has been built, the next stage is to collaborate to find supply chain improvement opportunities. This could entail reviewing supplier performance data and looking for ways to optimise operations and also to get rid of waste.
Establishing shared improvement initiatives is also an essential component of working with suppliers. This entails collaborating to find and put into place improvements that are advantageous to both firms. For example, the customer organisation may be able to improve its ordering process by adopting a new ordering system, while the supplier may be able to improve its delivery performance by implementing a new delivery scheduling method.
Creating a program for supplier development is another technique for working with suppliers. This entails collaborating with suppliers to generate new products or services that cater to the demands of the client company while also assisting them in enhancing their operations and capabilities. The client organisation can build a supply chain that is more competitive and effective by making investments in the growth of its suppliers.
● Acting out
Collaboration with suppliers is crucial when using Lean management in supply chain management since it makes the supply chain more responsive and integrated. Both the client organisation and the supplier organisation can gain from lower costs, higher quality, and more customer satisfaction by collaborating to discover and eliminate waste and inefficiencies.
To sum up: In general, working with suppliers is a crucial step in practising principles of Lean management in supply chain management. Using those methodologies, organisations may build a more competitive, effective, and successful supply chain by collaborating to find and remove waste and inefficiencies in the network.
06. Monitoring and measuring performance
In order to apply methodologies and techniques of Lean management in supply chain management, monitoring and measuring performance is an important step. In this step, data on various components of the supply chain process are gathered, then examined, and finally used to pinpoint areas in need of improvement and monitor development over time.
● Establish performance indicators
Establishing precise performance indicators is the first step in tracking and measuring supply chain performance. These metrics must be measurable and simple to follow over time, and they ought to be in line with the organisation’s objectives. There are many performance indicators or measures that can be established to measure the performance of the supply chain. On-time delivery rates, inventory turnover, lead times, and customer satisfaction scores are a few examples of those performance measures in the supply chain.
● Collect data
Once performance measures have been developed, the following step is to continuously gather data on these metrics. Implementing a data gathering system, such as an ERP system or a supplier scorecard, may be necessary to do this. In order to ensure that the metrics are meaningful and dependable, it is crucial to ensure that data is collected regularly and, most importantly, in a precise manner.
● Analyse the data
Data analysis and the identification of improvement areas come after data collection. This could entail using statistical analysis tools like Pareto charts or control charts to find trends and patterns in the data or performing root cause analysis to pinpoint the main causes of the issues that arose.
● Implement improvements
The firm can then create and implement improvement initiatives to target areas for improvement based on the insights discovered through data analysis. In order to streamline supply chain operations; this may entail working with suppliers to adopt process improvements.
● Monitor and measure
Finally, in order to evaluate progress and make sure that improvement activities have the desired effect, it is crucial to continuously monitor and measure performance throughout time. This can entail holding routine supplier performance reviews or putting in place a continuous improvement procedure like the Plan-Do-Check-Act (PDCA) cycle.
To sum up: Overall, Monitoring and measuring performance is an essential component of utilising the principles, concepts and techniques of Lean management in supply chain management. Organisations can identify areas for improvement and undertake focused improvement projects to produce a more effective and efficient supply chain by gathering and evaluating data on supply chain performance.
In conclusion, adopting continuous improvement, developing pull mechanisms, identifying and reducing waste, working with suppliers, and monitoring and measuring performance are all part of applying principles and concepts of lean management in supply chain management. Supply chain managers may be able to lower costs, increase efficiency, and boost customer satisfaction by applying following these measures.
- Identify and map the value stream: Finding and mapping the value stream is the first stage in implementing lean management in supply chain management. This entails figuring out the processes that the good or service goes through, from the stage of the raw materials to the stage of the finished good. Map out the whole process flow, including all the touchpoints and decision points, after this is finished.
- Identify and eliminate waste: After the value stream has been diagrammed, waste needs to be located and removed. Excess inventory, superfluous processing processes, overproduction, and faults are just a few examples of waste. Supply chain managers can save costs and boost efficiency by locating and removing waste.
- Establish pull systems: In a pull system, production is driven by client demand. In other words, the production process doesn’t start until there is a market need for the good or service. Pull systems can be established in the supply chain to assist in decreasing surplus inventory and enhancing customer demand responsiveness.
- Implement continuous improvement: A crucial component of lean management is continual improvement. It entails continually looking for methods to streamline operations and get rid of waste. Managers can utilise tools like kaizen events, which are quick, concentrated improvement projects that involve all stakeholders, to achieve continuous improvement in the supply chain.
- Collaborate with suppliers: Collaboration with suppliers is essential for the implementation of lean management in the supply chain. Supply chain managers can find possibilities for improvement and create shared solutions by collaborating closely with suppliers. This could enhance supplier performance, lower expenses, and boost overall effectiveness.
Monitor and measure performance: In order to make sure that the lean management initiatives are producing the expected results, it is crucial to monitor and measure performance. Indicators of key performance (KPIs) can be used to monitor development and pinpoint opportunities for development.