Lean Management and Supply Chain
Lean refers to a management viewpoint that fosters customer value through eradication of waste and constant improvement in a system, by implementing lean principles, practices, and techniques. When the theory of lean is executed in the whole supply chain, it is known as lean supply chain. The objective of Lean in the supply chain as a supply chain management strategy is to apply the lean concepts to all functions of members in a supply chain, such as suppliers, focal organizations, distributers, and customers. Investigators and experts perceive lean in the supply chain as a process of change in the supply chain that leads to a transformed and competitive supply chain known as lean supply chain. The advantages of lean supply chain include enhanced quality, low costs, improved delivery, high flexibility, and minimized shortage. The change and advantages are related to the adoption of lean principles, practices, and techniques in the supply chain.
I would like to thank my supervisor—————— for his/her support and guidance, which assisted in the successful completion of this research project.
I also thank several researchers whose studies in the areas of lean management and supply chain assisted me in the course of this project.
I appreciate my family and friends for supporting and encouraging me all through this project and study period.
Table of Contents
1.0. Introduction. 4
Because of high competition in the global business, several companies are establishing strategies of gaining competitive advantage over their rivals. Competition has moved from organization orientation to supply chain orientation; therefore, supply chain improvement is essential for existence. Experts recommend that lean should be adopted in the supply chain to assist in achieving the anticipated competitive advantage (Agarwal, Shankar, and Tiwari 215). In addition, lean is considered the foundation of supply chain management, and adoption of lean in the supply chain has numerous advantages. Several organizations that have adopted lean in some areas of their supply chain have many concerns regarding the implementation of lean management strategy in the whole supply chain. In addition, irrespective of the existing notion concerning the implementation of lean management as a way of establishing a competitive supply chain, several organization are hesitant to acknowledge lean supply chain management because they do not have sufficient information about lean in the supply chain. Nevertheless, the following concerns have been raised concerning extending lean management in the entire supply chain: the consequence of extending lean in the whole supply chain and the likelihood of adopting lean in the supply chain and other industry sectors because it initially belonged to the shop floor of automobile industry sector. Another concern is the evident of transformation from customary supply chain management to lean supply chain management. This paper enhances the comprehension of lean management in the supply chain by discussing the features of lean supply chain, advantages of lean in the supply chain, and the procedure of adopting lean in the supply chain (Bruce, Daly, and Towers 155).
Lean is defined as a management philosophy that deals with recognition and eradication of waste within and beyond a company’s products value chain (Trent 4). It is a strategy for reducing cost and improving quality and efficiency easily. The anticipated improvement can be attained by proper adoption of lean tools and techniques, practices and principles. The concept of lean emerged from a Toyota Motor Company, Japan, and it was called Toyota Production System (TPS). TPS was intended for enhancing the operation of the Toyota Motor Company after the Post-World War Two economic depression. Additionally, its purpose was ensuring that there was total elimination of waste, which increases efficiency and minimizes cost. TPS is based on the idea of manufacturing only the required units of goods at the time of need and in the required amount to evade waste arising from high inventories and over production. Lean was initially adopted in the manufacturing shop floor only and was known as lean production or lean manufacturing. Currently, the lean concept is used in several industry sectors and beyond a single company’s shop floor (Christopher and Towill 209).
ean PrinciplesSeveral studies have articulated a detailed business logic on lean management that is known as lean thinking or lean principles. The five lean principles include the following:
Value specification from the end customers’ view entails trying to establish customers’ expectations in a good or service. Additionally, appropriate specification of value from a clients’ view is an important step in lean management. Moreover, lack of specification of value accordingly results in delivering wrong goods and services to customers. Therefore, value specification should involve customers fully. Furthermore, innovation from companies offering values should be done after value specification has been made from customers’ view. Companies that ignore customer value produce products that are good from their own perspective but they do not meet customers’ need, which results in a waste. Improper or lack of clear specification of values from the beginning before applying lean tools and techniques normally leads to wrong process, product, and services. The foundation of customer satisfaction is on the ability to comprehend and produce what the customer view as value. The comprehension of customer value has become complex because what is regarded value differs in terms of customers’ several orientations, needs, and form of products (Kerber and Dreckshage 6).
According to this principle, value stream should be identified from activities at suppliers to the end customers and expose waste. Value stream refers to various activities needed to deliver certain products from conception to the final consumer. It is important to note that identification of the value stream for every product is an important step in the adoption of lean. Mapping the value stream in the adoption of lean assists companies to acquire better visibility of what takes place in creating and delivering specific products. Because it is difficult to describe and asses what is not visible, enhancing visibility through mapping the value streams for products promotes improvement in the adoption of lean. Mapping the value stream for products reveals three forms of activities that occur along the value chain: activities that add value to customers, those that are very significant in the production and delivery of products and services but do not add value to customers, and activities that are neither significant nor add value to customers. Identifying and eliminating activities that are not significant and do not add value to customers improve the value chain. In addition, activities that add value to customers can be improved once they are identified (Christopher 40).
Establishing flow needs the system to be organized to prevent delays and implement practices and policies that assist in eliminating hindrances like downtime and scraps in the system. Moreover, anti-flow practices, such as batch production should be avoided. The flow principle is based on aligning all recognized values, establishing steps for continuous flow and efficient performance, and needs total re-arrangement and divergence from customary and usual ways of executing activities. Activities meant for producing and delivering goods should be connected and each source of delay should be identified and eliminated. Therefore, a lot of work should be carried out on the staff and machines to enhance system flow. The techniques of flow include concentrating on major issues, disregarding boundaries in jobs and functions that hinder flow, and challenging and innovating the existing practices and tools. It is difficult to establish flow because of the need to overcome the opposition against abandoning the traditional way of working (Lambert 271).
The pull principle states that only the exact quantity of what is needed by the customer needs to be provided and only when required. Pull necessitates connectivity and information flow between procedures in a value creation. In addition, unlike the traditional method where work-in-process inventories are stocked for the next operations, pull necessitates that what is required in the next step signals actions in the operations that come after it. Implementing the pull principle implies that the upstream does not produce goods or services unless the customer downstream makes a demand. It also renders sales forecast unsuitable. Therefore, value creation activities should be very fast to wait for customers to place a demand before creation of value. In most cases, a forecast result is unreliable and can lead to excess production or shortage. Furthermore, adoption of the pull principle, which assists in evading the need for forecast, makes a system more reliable (Ugochukwu, Engström, and Langstrand 88).
The perfection principle supports continuous improvement in a system by pointing out problems continuously and addressing them. Enactment of the first four principles that interact with each other results in challenges that need solutions; thus, continuous determination to align the system towards perfection is necessary. In addition, conducting several activities in a system normally results in discovering issues that are not operating accordingly. Similarly, adopting pull and flow in a system in different situations reveals challenges that must be addressed for the system to function well. Therefore, companies require both radical and incremental improvement methods to enhance perfection. When the entire process of value creation is visible and clear to all players such as suppliers, they are able to propose better methods of executing operations in the value chain.
Lean principles are executed through certain practices, which are activities conducted to establish improvements in companies (Lamming 186). Lean practices are supported by a set of tools and techniques and include the following:
Lean emphasizes on the significance of concentrating on customers’ needs by tackling value adding and non-value adding duties. Customers’ needs differ according to various factors, their span through various market place characteristics, such as quality, price, and delivery, and product variety. Since customers’ needs in business are significant and complex, examinations to determine their need for particular products should be thorough. Knowledge and market inquiry aimed at deeper understanding of customers’ needs is important in establishing a lean value chain. Therefore, data on customers’ needs must not be deduced or assumed and customers should be contacted to obtain their views (Ugochukwu, Engström, and Langstrand 89).
Value stream analysis (VSA) is a way of comprehending what takes place along the products’ value chain. VSA is the first significant step that assists in attaining the anticipated alignment in value chain activities. Additionally, VSA is vital in identifying opportunities to improve the value chain for good performance, profitability, and relationships. VSA also clears the ground for eradication of waste because through it, activities along the value chain are categorized into value adding (VA) and non-value adding (NVA). The procedures involved in VSA include knowledge on its significance, production of value chain structure and selection of focus value stream, creation of present state map for the value chain, recognition of issues and opportunities for improvement within the chain, creation of future state map for the value chain, and recommendation for improvements (Martin 181).
The main emphasis in lean is identifying and eliminating waste from the entire value chain. Many activities in the adoption of lean entail waste elimination. Additionally, waste can be eliminated through analyzing and optimizing the transportation method and machine process, adopting proper and improved technology, and arranging facilities within the system appropriately. The initial stage in the adoption of lean is by identifying wastes, which include waste of excess production, waste of movement, and waste from manufacturing faulty products (Mason and Evans 115).
Workplace organization entails appropriate management of machines, tools, and other equipment in the workplace to enhance easy and faster access, occupation of lean space, and prevention of obstructions to workflow or material flow. Moreover, a disorderly workplace or system leads to errors and delays whereas an organized workplace, which assists in ensuring production flow, is a vital activity towards process improvement. Additionally, workplace organization is a simple but powerful practice in the adoption of lean. It assists in preventing different forms of wastes in a system, such as waste resulting from waiting and unnecessary transportation and movements (Myerson 21). Re-arranging machines on the shop floor can assist in attaining work-in- process inventories and production flow. Normally, the search for missing or misplaced objects results in a lot of time wastage. The concern of a system organization entails more than shop floor and focal organizations. Moreover, it can be used in offices and external supply chain (Mason-Jones, Naylor, and Towill 1465).
Focus on firm and efficient relationships among players in the value creation activities is one of the main differentiating factors of lean approach. Many activities can be easily aligned and coordinated through a firm and efficient relationship in a system. In addition, delays, alterations and other harmful effects of arms’ length relationship can be evaded. This form of relationship needs players to be engaged in long-term contract and share information that connects them together (Mason-Jones, Naylor, and Towill 58)
This important lean practice differentiates the lean approach of management from the traditional form of management. The essential idea of lean approach necessitates that only the form of units required by customers must be produced at the time of need and in the right amount because this assists in avoiding unnecessary inventories. In addition, this idea contrasts the traditional form of producing as much as possible even when clients do not make demand. The traditional approach leads to production of obsolete goods, which no one would like to purchase and accumulation of large inventories (Monden and Minagawa 145).
Regular search for challenges and offering solutions are lean practices that can be conducted anywhere and anytime. The lean approach focuses on revealing hitches within a system, which is done several times. Additionally, the determinations to find out the main causes of difficulties and their solutions in lean approach entails gathering information on overall equipment effectiveness (OEE), working time and process of operations, cycle time, and first time through (FTT) from current state map. Normally, the lean approach conducts benchmarking against perfection. This is why the lean approach is conscious in searching for challenges even when everything is operating well (Naylor, Naim, and Berry 110).
Tools and techniques comprise a comprehensive approach on the way of implementing practices efficiently. Adopting lean concepts, tools, and techniques depend on one another; therefore, it is necessary to implement some before others. In adopting lean principles, tools, and techniques, the type of tools and techniques to come first is determined by the situation, suitability, and economic factors. The widely recognized lean tools and techniques include the following:
JIT is a method in a flow process where the required parts, components, or materials are delivered to needed point only at the time of need and the quantity required. This lean technique ensures that materials and components are not stocked on the shop floor or other storage areas when they are not needed. JIT supports zero inventories and is based on pull production, top management and employee involvement, uninterrupted flow, eradication of wastes, supplier relations, and total quality control. Fruitful implementation of JIT needs a fast process devoid of waste, particularly waste arising from poor quality (Plenert 287).
VSM is usually regarded as the foundation for the implementation of other lean techniques and assists in tracking activities for value creation, starting from conception until delivery to the end customer. VSM promotes visibility of activities that occur in the process of value creation for the end customer. It is the main lean method for value stream analysis (VSA).
Buyer-supplier relationship was initially characterized by distrust and rivalry with one another. Everyone wanted to be the best and attain maximum profits. However, lean approach to management is different from the old notion and promotes close cooperation between buyers and sellers (Taylor, Taylor, and Brunt 17).
Standardization of process or work entails ensuring that the work or process is consistent and repetitive by offering fixed and acceptable approach, which everyone and everything should adhere to in executing activities. Standardization of work focuses on the best ideas from teamwork. Therefore, for standardization to succeed, stability that can be implemented as standard is required in the procedure. Standardization also assists in checking against variation in quality and output.
This technique supports the definition of value in conjunction with customers. The old method and tradition where customers were expected to purchase whatsoever was produced in bulk and sent into the market has shifted to a case where customers anticipate to be treated as special people. Therefore, customers should be involved from the early stage in production of goods and services to incorporate their desires (Banavara, Agarwa, and Sharma).
This lean technique differentiates it from other management approaches. Implementation of employee involvement implies that employees have important functions in decision making. In addition, employee involvement spans through several areas in a lean factory that include setup time reduction, quality inspection, work scheduling and control, and standardization of operations (Wincel 207).
A supply chain refers to a network of facilities that execute duties of developing products, procuring materials between facilities, manufacturing products, and distributing goods to customers. Individuals in the network have different functions that assist in attaining the objective of establishing the network. Materials normally flow from the suppler to the end user within the supply chain. In the supply chain network, information and materials flow follows two ways: upstream to downstream and downstream to upstream. In the case of closed loop supply chain and rejections, clients return products, which are no longer serving their purpose because of faults or depleted life cycle to the manufacturer for re-use or refurbishing. The members of a supply chain include suppliers, manufacturers, or focal organizations, distributors and end customers. The roles that are played within the supply chain to attain the objective of the network include marketing, product development supplier management, production management, inventory management, demand management, and flow management. Additionally, the supply chain, performance methods comprise client contentment, flexibility, information, and material flow integration and supplier performance (Trent 14).
The recognized benefits of lean in the supply chain include low inventories, customer contentment, increased efficiency, high quality, minimized cost, and enhanced delivery regarding time, quantity and quality specifications, and increased flexibility (Wincel 215). These benefits are associated with lean management practices like value chain analysis, eradication of waste, system organization, end customer focus, problem solving, and strong and effective relationships. Enhancement of delivery, which entails delivering precise customer specifications in terms of quantity and quality at the needed time, is possible through the adoption of lean practices. By adopting just-in-time and pull production, inventories in the system is evaded and the cost of holding inventories is minimized. In addition to reduction of lead-time by preventing unnecessary procedures, waste eradication has assisted in minimizing cost by preventing excessive production, unnecessary transportation, inventory and processing. By concentrating on the end customers and utilization of value chain analysis in the whole value chain, wastes and value adding activities are identified. Furthermore, identification of value adding activities and waste eradications assists in the attainment of customer contentment (Myerson 6).
The lean principles, tools, and techniques are vital in implementing lean in the supply chain. The objective on lean in the supply chain is to apply lean concepts in the performance of the roles by members within the whole supply chain. Additionally, lean in the supply chain is a procedure of changing a supply chain into a lean supply chain by applying lean principles, practices, and techniques. It also functions as a procedure and a supply chain management strategy that is imparted into the regular undertakings of the engaged firms. Moreover, lean in the supply chain is clearly comprehended when it is perceived from the impacts and features of its main outcome−the lean supply chain. The results of lean supply chain are minimized cost, reduced inventories, enhanced quality and flexibility, customer contentment, low shortage, enhanced delivery, dependable system, and enhanced flow. It also has attributes that differentiates it from traditional supply chain: Incorporated supply chain members, effective communication, and information sharing, end customer emphasis, constant improvement, lasting relationship, JIT delivery, predictability, and organizational broad engagement.
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