It may seem like wishful thinking to successfully implement and sustain a supply chain that delivers the highest possible value to the customer at the lowest possible total cost. But attaining this goal is possible with the right tools and leadership. Here are some key things to consider when developing a future state vision for your end-to-end supply chain.
The Challenge of Applying Lean to the End-to-End Supply Chain
For a lean, optimized, end-to-end supply chain, we need to connect all supply chain activities to produce flow in order to reduce lead times, improve working capital (reduce inventory), and eliminate supply chain waste. The team should examine supply chain functions from the supplier to the customer in relation to end to end supply chain functions. Collaboration is key to analyze each node.
When getting started, it's also important to consider some overlying themes of the work:
- Build a visual and deep understanding of the purpose and current state of the end to end supply chain.
- Gain leadership alignment and consensus on supply chain guiding principles and the vision for future state improvement plans and work streams to advance supply chain performance.
- Identify and execute upon any “quick wins” for immediate waste reduction or opportunity leveraging.
- Develop people and process capability and integrate this capability within the management system in order to implement and sustain the Lean Supply Chain.
- Create working models for decision making based on Total Cost of Fulfillment and integrate these tools within the management system.
The Business Case for Applying Lean to the End-to-End Supply Chain
There are several factors in today's market that necessitate the need to focus on end to end supply chain:
- Customers are expecting continued pressure and improvements on cost, quality, speed, service and innovation.
- The business environment is changing due to high volume, low margin products
- Globalization is making the supply chain more complex and disconnected from a flow and process point of view.
- SKU complexity is increasing supply chain complexity resulting in increased waste.
- Lead time reduction is required to be more flexible to high variation in market demand patterns – seasonality and customer spikes.
- Maintaining profit margins will require a focus on reducing operating costs and improving working capital to generate sufficient cash to ensure self funded growth.
- The supply chain is the vehicle to connect and leverage all other lean efforts within the organization.
Many manufacturers and distributors in this country are familiar with the value of lean principles and operating a lean business. Besides reducing lead times, cutting costs and increasing quality, lean thinking also leads to stability or a reduction in the high variation in a company’s processes and outputs of those processes. Stability throughout any business is often a critical component of its longterm success. It typically boosts financial performance, builds a more stress-free workplace and creates a more organized work environment that positively impacts the flow of information throughout the business and, in particular, the supply chain.
In summary, the result of implementing lean in the end-to-end supply chain include:
Increased Revenues: Customer On-Time, In-Full (OTIF); Lead Time Reduction; Customer Satisfaction
Reduced Operating Costs: Supply Chain Waste Reduction; Reduced Total Cost of Fulfillment
Working Capital Improvement: Raw, WIP, Finished Goods Inventory Reduction; Receivable and Accounts Payable Improvement
Reduced Lead Time: Flow and Supply Chain Waste Reduction
Supply Chain Performance: Right Product, Right Place, Right Time, Right Quantity, Right Service, Right Cost, Right Price
Supply Chain Stability: Through Standardization, Quality at the Source, Reduced Complexity and Implementation of Flow
Posted by LeanCor Supply Chain Group
LeanCor Supply Chain Group is a trusted supply chain partner that specializes in lean principles to deliver operational improvement. LeanCor’s three integrated divisions – LeanCor Training and Education, LeanCor Consulting, and LeanCor Logistics – help organizations eliminate waste, drive down costs, and build a culture of continuous improvement.Facebook LinkedIn Twitter Google+