A lean, mean supply chain machine
In recent years, the gospel of lean has spread beyond the production line to broader applications.
When the subject of "lean" principles comes up, more often than not, Japanese auto makers—particularly, Toyota—come to mind. But it's not entirely accurate to characterize lean as a modern Japanese innovation: The foundation elements of lean actually date back to business principles implemented by Henry Ford in the first part of the last century, principles he outlined in his classic 1926 book on management, Today and Tomorrow.
Nor is lean just about auto manufacturing—or manufacturing in general, for that matter. In recent years, the gospel of lean has spread beyond the production line to broader applications. We are convinced, for example, that the principles of lean can—and should—be applied throughout the supply chain. Implemented with focus and purpose, they have the potential to elevate—to transform— performance in sustainable ways.
But be warned. It's not easy being lean; the journey requires discipline, leadership, and buy-in from management and workers alike. If implemented inconsistently, or without a sense of direction or objective, a lean supply chain initiative is almost certain to fail.
What a muda
At its essence, "lean" homes in on eliminating waste, which in Japanese is called muda. Lean manufacturing programs, for example, target eight specific types of waste: unused creativity, defective parts, waiting, overproduction, overprocessing, unnecessary movement of products, unnecessary movement of people, and ineffective inventory control.
Though the list was created with manufacturing in mind, it is easily adaptable to other areas. Some of the types of waste, in fact, can be problems almost anywhere. Take unused creativity, the failure to capitalize on the ingenuity of both workers and managers. That is a near-criminal waste in any function, from sourcing/procurement to physical distribution.
Others have clear counterparts in supply chain processes. Defective parts, for example, translates to supply chain errors of all kinds—from picking errors to incorrect order quantities. It also includes shipping by the wrong carrier or the wrong mode. Those errors consume resources—time, people, and materials—to no useful end. Worse yet, additional resources are usually needed to correct the original error.
Waiting, too, has clear applications to supply chain operations. Think of trucks sitting idle awaiting their turn at the dock, or DC workers or machines standing by waiting for tools, products, or materials to arrive or to be taken away. Waiting constitutes an abuse of people, time, and physical assets.
Overproduction has counterparts in over-ordering at both the macro and micro levels of supply chain operations. Either way, an oversupply of product, often simultaneously at different points in the supply chain, represents a horrible waste. Think about the consequences when retailers, wholesalers, distributors, and manufacturers generate "just in case" inventories as a hedge against unexpected demand. Money, physical assets, time, people, and material have all been consumed for something that is not needed.
Overprocessing is a risk in any activity. Quality inspections, redundant approvals, and order reviews at the conclusion of pick/pack are some examples. It negates the value contribution of the original activity by adding unnecessary time and effort to the process.
Another example of overprocessing is the failure to rationalize the supply base and concentrate on a few top-tier suppliers. Yet another is the failure to rationalize the carrier base. Both result in inefficient duplication of resources, decisions, and communications.
Like overproduction, the unnecessary movement of products can occur at both the macro and micro levels—within a warehouse, within a factory, or with too many steps and too many stops through a distribution network. Unnecessary movement from suppliers—say, through master DCs to regional DCs for further deployment to customers (or into customers' distribution networks)—can be deadly from the standpoints of cost and time as well as the consumption of critical resources like labor and space.
It's easy enough to see how the unnecessary movement of people can create waste in the supply chain. In warehousing, an enormous percentage of people's time is devoted to movement, such as picking, putaway, and replenishment. If a facility is not well laid out with easy access to "A" items, the unnecessary movement and associated time can reach staggering levels. If goods are not where they're supposed to be, the movement to get them has been wasted, and even more time and effort will be spent in finding them.
Ineffective inventory control creates waste at several levels. Excess inventory based on bad inventory data diverts precious capital into the creation and maintenance of waste. And an overabundance of material results in the assignment of valuable space to hold unnecessary stock. A scarcity of items, on the other hand, results in stockouts or lost orders. Having too little also means time spent in trying to find the items and frequently results in expedited purchasing and transportation—more waste.
Manifestations of waste can be found throughout the supply chain. Examples include a fragmented supply base, inefficient ordering processes, tolerance for less-than-optimum incoming products and materials, empty backhauls, inefficient load creation, inaccurate forecasting, and ineffective information systems— and the list goes on and on.
The role of the Five Ss
The key to addressing the problem of waste lies in what have been called the Five Ss. They are:
- Sortation—separating needed tools and materials from the unneeded, and removing the unneeded
- Straightening—arranging items in easiest-to-use order
- Shining—cleanup; good housekeeping
- Standardization—systems and procedures to accomplish and monitor the first three Ss
- Sustaining—maintaining and continuously improving the operation.
It is admittedly easier to think about sortation and straightening in the context of manufacturing and warehousing than in the supply chain, but when you extend their definitions to include the development of good processes and procedures, their relevance becomes clear. Likewise, the need for shining, or good housekeeping, is evident across the board—in facilities, in rolling stock, in offices. It also applies to systems, files, and databases—every aspect of physical and information infrastructure.
Standardization, then, refers to the institutionalization of the processes and policies developed for lean operations. Sustaining means that the lean workplace never stops getting leaner. If it's to last, "lean" must become a way of life.
The end game
What's the ultimate objective? It's perfection: No waste. No errors. Absolutely accurate records. Perfect orders. You get the idea.
Is perfection achievable? Not exactly. But a lean initiative can bring an organization significantly closer to it. And with continuous improvement, it will come even closer to that goal with each passing year. One day—a day perhaps not too far off—a lean organization might awaken to discover that its performance looks like perfection indeed to those who have yet to start down the lean path.
About the Authors
Art van Bodegraven is, among other roles, chief design officer for the DES Leadership Academy; he can be reached at (614) 893-9414 or firstname.lastname@example.org. His website is www.artvanbodegraven.com.
More articles by Art van Bodegraven
Kenneth B. Ackerman, president of The Ackerman Company, can be reached at (614) 488-3165.
More articles by Kenneth B. Ackerman
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