The world of Lean and its principles is familiar to anyone working in operations, and organizations apply it through different methods and at different depths. In most cases it takes the form of a focused project to cut costs and improve efficiency.
Often, once the efficiency improvement has been achieved, a few months later comes a bounce back of some 50%-80% of the gain. So how do you produce improvement that is durable and continuous? Is it even possible?
Treating Lean as a cultural change in the organization is what ensures the process does not end with a one-time improvement. Under this approach, every single employee in the supply chain is a partner to the work, in the short term and the long term. Employees then learn to think on two levels:
- What do I need to do today in order to meet my standard output
- What do I need to do in order to improve things in the business
When employees are partners to the work at the daily level, the improvement is significantly larger. For a Lean rollout to succeed over time, it has to be rolled out across the whole organization. Organizations often run projects focused on one area: production lines, service units and so on.
Extending the rollout to the entire organization is the key to moving from an efficiency project to a culture of continuous improvement. 7I’s specializes in creating a Lean culture across the entire supply chain, in production, in warehouses, in distribution, at headquarters, and in the sales and service operations.
Beyond shortening Lead Time, lowering costs and improving quality, thinking in Lean terms will also bring stability and reduce variance in the company’s work processes and output. Five principles lead the way to implementing a Lean culture across the supply chain:
1. Stay close to the customer and reflect their needs
Genuinely understand the character of your customers’ consumption: in what quantity, at what frequency and at what prices. That lets you produce, market and distribute the product according to actual customer demand, to the customer’s “heartbeat”. In doing so you reduce overproduction, and with it the surplus stock the company has to pay for, move, store and count, all of which creates waste in the company’s supply chain.
2. Create Velocity
Shorten Lead Time and increase speed along the supply chain. Focus on flow and on how to create movement through the process. This is achieved by moving lower volumes at higher frequency. For example, focusing on freight costs alone can create long delays. Balancing the measurement of freight costs against the measurement of shipping frequency, by contrast, can reduce or even eliminate waiting time while cutting freight costs substantially.
3. Stabilize the flow of information and materials within the supply chain
Companies manage this by working in Pull Systems, which make it possible to read actual customer consumption and derive the pace required further up the supply chain. That lets you stop relying on forecasting and guesswork and start using data on the customer’s real consumption to drive planning and the pace of production and distribution.
Lines that work on pull are balanced, flexible to change and free of work-in-process inventory. Uneven flow has other consequences too. It is often the cause of overtime, with employees finding themselves overloaded on some days and idle on others. That imbalance wreaks havoc along the entire supply chain.
4. Create a culture of collaboration and problem solving
Many companies fail to function because employees in one department do not cooperate with their colleagues at the next link in the chain. They operate in an outdated way, as closed units that do not talk to one another, which leads to communication breakdowns, bottlenecks in the process and lost business opportunities. Companies need to build a culture of vertical and horizontal collaboration with customers, suppliers and partners along the supply chain.
Employees at every level can come to work and identify Waste in their own working environment on any given day. Senior managers in the organization need to create a culture and an atmosphere in which employees are allowed to make mistakes, while being encouraged to identify those mistakes and fix them right where they occur, as close as possible to the root cause.
There is real importance and real power in every employee being able to stand up and say they have identified a mistake that needs fixing, and at the same time propose the solution and implement it themselves, with a sense of partnership and ownership.
5. Focus on the total cost of the supply chain process
This is different from calculating the cost of each unit in a separate part of the process. The right approach is to look at the total cost of decisions along the entire chain and to optimize the whole.
Take, for example, buying a large quantity of raw material for the economies of scale. The unit cost is very low, but the decision to buy in bulk may turn out to be expensive in the long run. The company has to purchase the material, use expensive storage space to hold it, monitor it, and months later recycle it, sell it or even destroy it if the material has aged. The total cost is lost entirely in the overall financial view.
If a company invests a little more time in thinking about the chain as a whole, the total cost and the value to the customer may be significantly lower. Rolling Lean out across a company’s supply chain does not have to be a dramatic decision for the company.
Managing the process in a controlled way, at a slow pace, step by step, will deliver better results in the long run. The supply chain is excellent ground for a Lean rollout, because it is a vast and almost unlimited field of opportunities to improve and drive efficiency at any given moment and over time, and results come fastest from there.
Rolling Lean out across a company’s supply chain does not have to be a fateful decision for the company. Start slowly. Choose the right steps. Make the right decisions.
