Lean supply chain management is one of the new concepts in business that has not been fully utilized by many companies. It is important to note this concept is not only meant for companies, which manufacture products. The concept is meant for all businesses that are after streamlining their processes through elimination of non-value adding and wasteful activities. It is possible to identify the areas or operations in a business where there is waste. Waste can be form of costs, inventory or time. Therefore, in order to create a lean supply chain, companies ought to examine all areas of the supply chain.
The Expert’s Guide to Lean Supply Chain Management
Most businesses have very complex purchasing operations. This is mainly because of their beliefs that purchasing needs must be complex. However, this should not be the case always. Large organizations have their corporate purchasing groups and local purchasing. This means that at their headquarters, they have purchasing departments, which dictate policies to local purchasing groups.
Generally, purchasing function at headquarters is duplicated at lower levels and these results to wastage of resources. With two or multiple purchasing departments, vendors are likely to acquire different information. They may be offered multiple contracts that lead to variations in the prices depending on the location. The varying information causes multiple records, which are stored in the computer systems. In lean supply management, it becomes easy to reduce procurement functions to ensure each vendor has only one point of contact and provides one price for the different locations.
This concept has gained popularity in manufacturing sector. This is because; it is an area where considerable improvement is possible. It is easy to improve manufacturing processes to reduce waste and make good use of resources. In addition, it can lead to high performance. You should note that quality is one of the important parts when it comes to lean manufacturing. When you have zero defects in manufacturing process, you are able to increase efficiency and reduce waste within an organization. When high quality is achieved, there will be less returns of goods and minimal quality issues. By implementing lean practices, as a manager you will be able to examine the company routings, equipments and bill of materials to determine where you need improvements.
There is a need to examine warehouse processes in order to find the areas of eliminating the waste and non-value added activities. For instance, one of the major areas companies should be looking into is reduction of non-value adding inventory. By decreasing the amount of unnecessary inventory, a business is able to minimize warehousing handling and storage costs. At the end this will result in reduced overall costs.
This is one of the areas that you must look into when implementing lean processes and practices. There is a need to streamline transportation procedures. In most cases, as a result of trying to improve on customer satisfaction, companies fail by making poor shipping decisions. A number of orders are made without combining extra orders in order to reduce shipping costs. In some cases, a company ends up using several shippers unnecessarily. When using its on vehicles, it is possible to cut on fuel consumption.
What are the Advantages of Lean Supply Chain?
Lean supply is only meant to produce what you only need, where it is needed, and when it is needed. By using this approach, you will realize it is advantageous over the traditional supply chain. It is important to recall that supply is greatly linked with demand. It is necessary to reduce inventory risk, add value on processes that have impact on employees and customers. the following are four advantages you should know:
Linking Customer Demand to Production
Lean supply is able to create a tight connection between the customer demand and the production rates. For instance, in lean environments, customer demand is known to “pull” the inventory through supply chain. This is made possible by restricting the quantities, which are produced and bought to match quantities ordered by the customers. By creating the linkage, you are able to eliminate overproduction and inventory by the suppliers, which can lead to increased costs.
Push model created is able to add to supplier’s risk levels. Therefore, it is not advisable to create an inventory before an increase in customer demand. This is because; this will lead to increased warehousing costs. In addition, it is possible for the inventory to become obsolete with time. The lean concept uses a kanban system in inventory level management. It is a system that is designed to keep the inventory levels low. Moreover, the purchases are made when the bin has been emptied. This is a great approach that reduces inventory as compared to the traditional methods. In addition, it is able to reduce obsolescence risk.
Waste is anything, which a customer is not willing to pay for. For instance, most products have labels that do not add value to the customer. Lean processes and practices work to eliminate the wasteful activities, functions and processes, which customers are not willing to pay for.
This is one of the main aspects of lean practices in supply chain. It focuses on making activities as error-proof as possible. Some of the error proofing processes includes setting email accounts to scan and detect automatically grammar and spelling errors.
Lean practices require companies to examine all processes in their supply chain. They should be able to identify those areas that are wasting resources. It is possible to measure such areas in real monetary value, raw materials or time. In this way, it is easy to improve a company’s competitiveness and thereby improving overall profitability.
Nearly all businesses across different sectors are looking for innovative ways of improving procurement processes. Companies want to make use of their limited resources to make more. Generally, lean supply chain is made up members that operate in and efficient and effective manner. In addition, they are conscious of needs of every person. On time production linked with delivery of supplies plays an important role in lean supply chain management.