Lean Supply Chain & Logistics Management

It seems that there has always been a focus on cost cutting in the Supply Chain & Logistics function. This focus is due to the very real “leverage” effect that reducing operating costs can have on the bottom line. This strategy has been somewhat successful, but has left a lot on the table in terms of not only cost reduction opportunities but productivity and quality as well.

In the past five years or so, the philosophy of “Lean Manufacturing” has been grown to include the Supply Chain & Logistics function and can enable management to attain the improvements mentioned above.

So what is Lean all about and how can it help you?  In a nutshell, Lean is a team-based form of Continuous Improvement which focuses on identifying and eliminating waste from the customer’s viewpoint. Waste is defined as activities that do not add value to the customer. After all, the customer is ultimately paying for the end product (or service), which to them is the value added effort of transforming raw materials into finished goods. Activities that don’t add value to the customer such as production being stored, inspected, or delayed, products waiting in queues, and defective products do not add value; and as a result, they are 100% waste.

In fact, in most Supply Chains (more like Supply “Web” when you think about it), the full “cycle time” or the time material or information enters it until it exits it to the customer, is primarily non-value added or waste. Very little of this time is actually value added from the customer’s viewpoint (referred to as “processing time”). This cycle time is referred to by many in Lean manufacturing as “dock to dock” time. The shorter the “dock to dock” time, the more Lean your manufacturing process is. The same can be said in terms of your Supply (and Demand) Chain.

In Lean terms, Supply Chain & Logistics areas are frequently viewed as a “box” (i.e. one activity such as warehousing) or a “line” (i.e. transportation) on a Value Stream Map, which is a form of process flow mapping unique to Lean which separates value added and non-value added activities starting at the customer and working its way through your system back to the supplier. It is only recently that Supply Chain & Logistics practitioners have started to adopt Lean principles and tools to analyze and improve this critical area.

There are many concepts and tools that are in the Lean practitioner’s toolkit that can be applied to your Supply Chain & Logistics function. Many are relatively simple and easily understood such as 5S-Workplace Organization, Visual Workplace and Layout.  Others have greater complexity such as Batch Size Reduction, Quick Changeover, and Total Productive Maintenance (equipment related waste) for example. All require ongoing training, support and commitment from both management and the rank and file.

To get started, at the very least, requires a fundamental understanding of what is non-value added or “waste” from the eyes of the customer (both the ultimate customer and the people downstream from you who you are giving material or information to) in order to start down the path ofeliminating or at least reducing the identified waste.

The “Seven Wastes” as described by Taiichi Ohno of Toyota includeTransportation, Inventory, Motion, Waiting, Overproduction, Overprocessing and Defects. A good way to remember these wastes is the acronym “T.I.M.  W.O.O.D.”. Many people, including myself include an Eighth waste of Underutilized Employees or Behavioral waste.

It’s not really “rocket science” and in fact, once you and your team start thinking in this way, you’ll wish you started on the Lean journey sooner!

In the upcoming months, I’d like to delve into each of the Eight Wastes in this column and relate them to the Supply Chain & Logistics function to help practitioners start to “wrap their head around” this valuable tool as it’s not a “fad” and is truly here for the long term.  It’s important to realize that, when successfully implemented, Lean can be a competitive weapon which can be a great advantage in these tough economic times.

In the next blog we’ll start with perhaps the largest waste, and one that covers much variability and drivers of waste…Inventory.

Note: Certain passages in this column are adapted from “Lean Supply Chain & Logistics Management” (McGraw-Hill; 2012) by Paul Myerson with permission from McGraw-Hill