Top management knows that lean can add value, but many still haven’t moved past the initial education stage into full-scale lean supply chain implementation. One reason may be that they haven’t made the paradigm shift as to how to implement lean. The Lean Supply Chain is a system of interconnected and interdependent partners that operate in unison to accomplish supply chain objectives. There should be metrics involved to monitor these objectives to ensure success across the supply chain. These metrics should be reviewed frequently to ensure supply chain success. These objectives are accomplished as follows:

1. Eliminate All Waste in the Supply Chain So That Only Value Remains

Creating a smooth flow of products downstream in a lean supply chain requires all departments and functions in the organization to work in collaboration. In the supply chain, the seven wastes translate to: o    System complexity—additional, unnecessary, steps and confusing processes o    Lead time—excessive wait times o    Transport—unnecessary movement of product o    Space—holding places for unnecessary inventory o    Inventory—inactive raw, work-in-process, or finished goods o    Human effort—activity that does not add value o    Packaging—containers that transport air or allow damage o    Energy-(Sometimes called the eighth waste): eliminate wasteful energy in the supply chain: minimize electricity, gas, utilities, etc.

2. Consider Advancements in Technology To Improve The Supply Chain

The following are a great list of technology investments that should be at the top of the list in the quest for the lean supply chain:

To drive further value, look for technology providers in the logistics and supply chain space who can integrate these systems together.

3. Make Customer Usage Visible To All Members of The Supply Chain

Flow in the lean supply chain begins with customer usage. Visibility to customer usage for all supply chain partners is critical. This sets the supply chain pace.

4. Reduce Lead Time

Reducing inbound and outbound transportation logistics gets us closer to customer demand which results in reduced reliance on forecasting, increased flexibility, and reduced waste of”overproduction”.  When you create your Sales, Inventory, Operations and Production Plan (SIOP) monthly, or more frequently, invite your top Suppliers and Customers to the SIOP meeting. Work in Collaboration to reduce lead times and brainstorm how you can create a Lean Supply Chain that brings value beyond your customers’ expectations.

5. Create a Level Flow/Level Load

Leveling the flow of material and information results in a lean supply chain with much less waste at all critical points in the system.

6. Use Pull Systems, Like Kanban

Kanban Pull systems reduce wasteful complexity in planning and overproduction that can occur with computer-based software programs such as Enterprise Resource Planning (ERP) which creates a Push system with too much wasteful inventory going into the warehouse. Pull systems permit visual control of material flow in the supply chain.You can also use Ship-to-Use (STU) systems.  Quality Assurance goes to your suppliers, qualifies them for their quality systems and enables them to ship to a point of use on the production floor to avoid sitting in a warehouse as wasteful inventory.

7. Increase Velocity, Throughput and Reduce Variation

Fulfilling customer demand through delivery of smaller shipments, more frequently increases velocity and throughput to your customers… This, in turn, helps to reduce inventories and lead times and allows you to more easily adjust delivery to meet actual customer need consumption.

8. Collaborate and Use Process Discipline

When all members of the lean supply chain can see if they are operating in concert with customer need consumption, they can more easily collaborate to identify problems, determine root causes, and develop appropriate solutions to solve any root cause problems. Lean’s Value Stream Mapping (VSM) helps break down processes and gives you the ability to rebuild your process more effectively. Utilize Six Sigma’s DMAIC: Define, Measure, Analyze, Improve and Control to solve any problems or roadblocks. Lean’s PDCA can also be used: Plan, Do, Check and Act.  Any and all members of the lean supply chain should use these tools to solve problems and reduce costs to increase value to the customer.

9. Focus on Total Cost of Fulfillment

Make decisions that will meet customer expectations at the lowest possible total cost, no matter where they occur along the supply chain. This means eliminating decisions that benefit only one part of the stream at the expense of others. This can be achieved when all partners of the  lean supply chain share in operational and financial benefits when waste is eliminated.

Lean Supply Chain Implementation Results

lean supply chain six sigmaCustomers can gain the benefits of:

The New Role of the 3PL

The new role of the 3PL will not just be to transport and warehouse, but serve as a trusted partner in the lean supply chain journey by implementing lean in their operation (5S, Continuous Improvement, Pull Systems and Lean Six Sigma) identifying problems, implementing solutions, and adding value in complex supply chains. The relationship with the 3PL needs to move from transactional to one of long term partnership and commitment:

**However, cost reduction all depends on your relationship with your 3PL. Collaborate together. Brainstorm. Create a shipper-3PL cross-functional team to solve root cause problems and generate cost savings together. Pounding on the table asking for more cost reduction is not good. Adversarial relationships do not work. Be collaborative and work with your 3pl in the spirit of cooperation and trust.

What about a 4PL?

BONUS: 3PL vs. 4PL: What’s The Difference? The 4PL delivers the ability to provide a lean Supply Chain blanket solution, end to end, from the supplier to the manufacturing operation, to distribution, and to the end customer. The 4PL manages supplier evaluation, through the logistics supply chain cycle, to completion of invoice management, while giving full visibility and measurement of performance (metrics) at each and every stage of the supply chain. Most 3PL’s are focused on the single logistics element, transportation or warehousing. The 4PL is able to provide added value starting from the planning stages, covering production, and inventory planning which all occur prior to the 3PL’s involvement begins. With regards to the Supply Chain activity, the 4PL is best placed to provide added value, by its carrier-neutral stance (at Cerasis we are carrier-neutral, giving you choice within our TMS), therefore having no conflicts of interest with 3PL’s, so ensuring that the customer gets the best solution to Supply Chain Optimization,will increase the visibility of the full inventory cycle, and help to visualize and optimize cost elements, including inventory flow costs.

Consider Lean Accounting

The Vision for Lean Accounting as stated by Author Brian Maskell in his book “Lean Accounting: What is it all about?

  1. Provide accurate, timely, and understandable information to motivate the lean transformation throughout the organization, and for decision-making leading to increased customer value, growth, profitability, and cash flow.
  2. Use lean tools to eliminate waste from the accounting processes while maintaining thorough financial control.
  3. Fully comply with generally accepted accounting principles (GAAP), external reporting regulations, and internal reporting requirements.
  4. Support the lean culture by motivating investment in people, providing information that is relevant and actionable, and empowering continuous improvement at every level of the organization.

Why is Lean Accounting needed?

There are positive and negative reasons for using Lean Accounting in the lean supply chain. The positive reasons include the issues addressed in the “Vision for Lean Accounting” shown above. Lean Accounting provides accurate, timely and understandable information that can be used by managers, sales people, operations leaders, accountants, lean improvement teams and others. The information gives clear insight into the company’s performance; both operational and financial. The Lean Accounting reporting motivates people in the organization to move lean improvement forward. It is often stated that “what you measure is what will be improved.” Lean accounting measures the right things for a company that wants to drive forward with lean transformation. Lean Accounting is also itself lean. The information, reports, and measurements can be provided quickly and easily. It does not require the complex systems and wasteful transactions that are usually used by manufacturing companies. The simplicity of Lean Accounting frees up the time of the financial people and the operational people so that they can become more actively involved in moving the company forward towards its strategic goals. The role of the financial professional moves away from bookkeeper and reporter and towards strategic partnering with the company leaders. At a deeper level Lean Accounting matches the cultural goals of a lean organization. The simple and timely information empowers people at all levels of the organization. The financial and performance measurement information is organized around value streams and thereby honors the lean principle of value stream management. The emphasis on customer value is also derived from the principles of lean thinking. The way a company accounts and measures its business is deeply rooted in the culture of the organization. Lean Accounting has an important role to play in developing a lean culture within an organization. So how do you go about setting up a lean supply chain? Let us know in the comments section below!

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