Lean & Supply Chain Management
Customers, either B2B or B2C, make decisions based on delivery time. One would like this to be as short as possible. They want the stock to be small, because this takes up space and can be very costly. These are the reasons companies become motivated to lessen the lead time. A corresponding discipline is called Supply Chain Management, which we will elaborate on in this blog.
The connection between Lean and Supply Chain Management?
Lead times are linked to stock and the end product. Lack of products can lead to certain delays, which is an unwanted incident to the customer. And he or she will not pay for such services. Supply Chain Management, however, gives a company a system that continuously provides them with stock, purchased at a suitable price and at the right moment.
How can Lean principles be used to support companies this way?
Supply Chain Management starts with the customer. What is their demand? Or in other words, which requirements must these products meet? When do they need to be delivered and what is the quantity? As a company, you should know the Voice-of-the-Customer. That should support the entire planning.
However, the main idea of Supply Chain Management regards the fact that every entity within the chain can be considered a customer themselves. This is why it is even more important to make clear agreements with other suppliers. Especially when thinking about these lead times that should be decreased, it is relevant to have a clear image of the competence of your suppliers. It might be possible they can take over part of the production at less costs than you would be able to. This would be time-efficient for you as well.
ICT-systems are a bit part of Supply Chain Management. This is sometimes called Enterprise Resource Planning (ERP). There are actually many possibilities regarding ICT. The main advantage is stock and suppliers are always orderened. The disadvantage, however, it might increase the amount of administrative work.
These ERP-systems are meant to produce more time than it costs. This becomes possible due to overlay between departments. For example, the sales department enters orders that have come in, production makes a planning based on these orders, finances sends out the corresponding invoices and customer support gets insight in the history of orders from specific customers. To conclude, it does still happen sometimes that companies keep up too much administrative work, which has become unnecessary.
Flow can be considered the most important Lean principle when talking about lead time. This actually creates a continuous stream of production. A waiting time might arise when some parts are not present when using Supply Chain Management. You could state that the something went wrong regarding the communication between departments. And this is not that bad! Make sure the entire company learns from these mistakes and keep improving continuously.
Another noticeable mistake in many companies is the fact that employees need to look for things they might need. An example might be chaotic closets. And frequently, these closets do not even strike employees as messy. This happens because there must have been some sort of system before, yet there is not now. Make sure you immediately make a change. This leads to loss of valuable time and possible frustrations, so it does not need to be said this must be solved.
Pull starts at production when a customer has placed an order, not just at any time. This has positive impact on the stock, which thus decreases. Supply Chain Management is an essential here, because it is used as a form of communication between the different departments.
This, however, does mean a company should have a short lead time, because customers will switch companies whenever they would feel like it takes too long to receive their orders. “If you can’t beat them, join them”, might be the best strategy. And let this be the reason why Amazon is as successful as they are. When this company was conducted, it put much more pressure on companies delivering products to customers in the Netherlands.
Already in possession of a process that works efficiently? Make sure you standardise this process and create clearance for your employees. These processes should always be transparent. If this is the case, there is always room for continuous improvement.
Supply Chain Management and Lean principles come together. They both avoid waiting time, failures, stock, bottlenecks and other frustrations. However, you should stay critical. Keep track of the value stream!