Although lean thinking is typically applied to manufacturing, lean techniques are applicable where there are processes to improve, including the entire supply chain. A lean supply chain is one that produces just what and how much is needed, when it is needed, and where it is needed.

The underlying theme in lean thinking is to produce more or do more with fewer resources while giving the end customer exactly what he or she wants. This means focusing on each product and its value stream. To do this, organizations must be ready to ask and understand which activities truly create value and which ones are wasteful. The most important thing to remember is that lean is not simply about eliminating waste—it is about eliminating waste and enhancing value.

A strong supply chain enables the member companies to align themselves with each other and to coordinate their continuous improvement efforts. This synthesis enables even small firms to participate in the results of lean efforts. Competitive advantage and leadership in the global marketplace can only be gained by applying lean principles to the supply chain.

Lean concepts require an attitude of continuous improvement with a bias for action. The concepts of lean apply to all elements of the supply chain, including support departments such as product development, quality, human resources, marketing, finance, purchasing, and distribution. The challenge is to bring all of these areas out of their traditional silos and make them work together to reduce waste and create flow.

The components of the Lean Supply Chain are:

Lean Suppliers

Lean suppliers are able to respond to changes. Their prices are generally lower due to the efficiencies of lean processes, and their quality has improved to the point that incoming inspection at the next link is not needed. Lean suppliers deliver on time and their culture is one of continuous improvement.

To develop lean suppliers, organizations should include suppliers in their value stream. They should encourage suppliers to make the lean transformation and involve them in lean activities. This will help them fix problems and share savings. In turn, they can help their suppliers and set continually declining price targets and increasing quality goals.

Lean Procurement

Some lean procurement processes are e-procurement and automated procurement. E-procurement conducts transactions, strategic sourcing, bidding, and reverse auctions using Web-based applications. Automated procurement uses software that removes the human element from multiple procurement functions and integrates with financials.

The key to lean procurement is visibility. Suppliers must be able to "see" into their customers' operations and customers must be able to "see" into their suppliers' operations. Organizations should map the current value stream, and together create a future value stream in the procurement process. They should create a flow of information while establishing a pull of information and products.

Lean Manufacturing

Lean manufacturing systems produce what the customer wants, in the quantity the customer wants, when the customer wants it, and with minimum resources. Lean efforts typically start in manufacturing because they free up resources for continuous improvement in other areas, and create a pull on the rest of the organization. Applying lean concepts to manufacturing typically presents the greatest opportunity for cost reduction and quality improvement.

Lean Warehousing

Lean warehousing means eliminating non-value added steps and waste in product storage processes. Warehousing waste can be found throughout the storage process including:  

• Defective products which create returns
• Overproduction or over shipment of products
• Excess inventories which require additional space and reduce warehousing efficiency
• Excess motion and handling
• Transportation steps and distances
• Waiting for parts, materials and information

Each step in the warehousing process should be examined critically to see where unnecessary, repetitive, and non-value-added activities might be, so that they may be eliminated.

Lean Transportation Lean concepts in transportation include:

• Core carrier programs
• Improved transportation administrative processes
• Optimized mode selection and pooling orders
• Combined multi-stop truckloads
• Cross-docking
• Right sizing equipment
 

The keys to accomplishing the concepts above include mapping the value stream, creating flow, reducing waste in processes, eliminating non-value-added activities and using pull processes.

The Benefits of Lean Supply Chain Systems are:

Responsiveness to Customers

Lean systems allow a supply chain not only to be more efficient, but also faster. As the culture of lean takes over the entire supply chain, all links increase their velocity. A culture of rapid response and faster decisions becomes the expectation and the norm.

Reduced Inventories

In the lean paradigm, inventory is considered waste. Manufacturing should take place efficiently with little or no raw material, work in process (WIP), or finished goods inventory. Many companies today produce directly into trailers and maintain no other finished goods inventory. All quality inspections and checks are performed within the process, rather than after production are complete. In this true make-to-order scenario, all goods are shipped directly to the next link. No space is designated to store finished goods.

Improved Customer Satisfaction

Lean promotes minimizing new product development time and expense. This delivers the product to market faster, making it easier to incorporate current requirements into the product. Lean also promotes the use of less capital-intensive machines, tools, and fixtures, which results in more flexibility and less initial cost to recover. As a result, product life cycles may be shorter and product developments incorporated in newer versions of the product more frequently. Profitability does not suffer and brand loyalty is increased, as customers prefer to buy products and services from a perceived innovator.