The world of Lean and its principles is familiar to professionals working in operations and is implemented across organizations using different methods and at varying levels of depth. In most cases, Lean takes the form of a focused project aimed at reducing costs and improving efficiency.
Often, however, after efficiency gains have been achieved, organizations experience a bounce-back effect within a few months, losing approximately 50%–80% of the improvement they achieved. So how can organizations create sustainable, continuous improvement? Is it even possible?
Approaching Lean as a cultural change within the organization helps ensure that the process does not end with a one-time improvement. Under this approach, every employee throughout the supply chain plays an active role in both short-term and long-term improvement. In this way, employees learn to think on two levels:
- What do I need to do today to meet my standard output targets?
- What do I need to do to improve the business?
When employees are actively involved in improvement on a daily basis, the potential gains are significantly greater. For Lean implementation to succeed over time, it must extend across the entire organization. Organizations often carry out focused projects in a specific area, such as production lines, service units, and similar functions.
The challenge of expanding Lean implementation across the entire organization is the key to moving from a one-time efficiency project to a culture of continuous improvement. 7I’s specializes in creating a Lean culture across the entire supply chain – in production, warehouses, distribution, headquarters, and sales and service operations.
Beyond reducing Lead Time, lowering costs, and improving quality, Lean thinking also creates greater stability and reduces variability in the company’s processes and output. Five key principles guide the implementation of a Lean culture across the supply chain:
1. Stay Close to the Customer and Align with Their Needs
Develop a genuine understanding of your customers’ consumption patterns: how much they consume, how frequently, and at what prices. This allows you to produce, market, and distribute products according to actual customer demand -in line with the customer’s “heartbeat.” By doing so, you reduce overproduction and the excess inventory that comes with it – inventory that the company must pay for, transport, store, and count, all of which creates waste throughout the supply chain.
2. Create Velocity
Reduce Lead Time and increase speed throughout the supply chain. Focus on flow and on how to keep products and materials moving through the process. This can be achieved by moving smaller volumes more frequently.
For example, focusing solely on transportation costs can create significant delays. By contrast, balancing transportation cost metrics with transportation frequency can reduce or even eliminate waiting times while also significantly reducing transportation costs.
3.Stabilize the Flow of Information and Materials Within the Supply Chain
Companies can achieve this by implementing Pull Systems, which use actual customer consumption to determine the required pace further upstream in the supply chain. This allows organizations to reduce their reliance on forecasts and guesswork and instead use actual customer consumption data to plan and determine the pace of production and distribution.
Production lines operating with a pull system are balanced, flexible in responding to change, and free of work-in-process inventory. Uneven flow also creates other consequences. It is often a major cause of employee overtime, with employees finding themselves overloaded on certain days and with insufficient work on others. This imbalance creates disruption throughout the entire supply chain.
4. Create a Culture of Collaboration and Problem-Solving
Many companies struggle because employees in one department do not collaborate with their colleagues at the next link in the chain. They continue to operate according to an outdated model of isolated units that do not communicate with one another, leading to communication breakdowns, process bottlenecks, and lost business opportunities.
Companies need to create a culture of both vertical and horizontal collaboration with customers, suppliers, and partners throughout the supply chain. Employees at every level can come to work each day and identify Waste within their own working environment.
Senior managers need to create a culture and an environment in which employees are allowed to make mistakes, while also encouraging them to identify those mistakes and correct them where they occur, as close as possible to the root cause. There is significant value in empowering every employee to stand up and say that they have identified a mistake that needs to be corrected, while at the same time proposing a solution and implementing it themselves, with a genuine sense of involvement and ownership.
5. Focus on the Total Cost of the Supply Chain Process
This is different from calculating the cost of each unit within an isolated part of the process. The right approach is to consider the total cost of decisions across the entire supply chain and optimize the system as a whole.
Take, for example, purchasing a large quantity of raw materials to benefit from economies of scale. While the unit cost may be very low, the decision to purchase in bulk may prove expensive in the long run. The company must purchase the material, use valuable storage space to store it, monitor it, and, months later, recycle, sell, or even dispose of it if it has become obsolete. The true total cost can easily be lost when looking at the decision from a narrow financial perspective.
However, if a company invests a little more time in thinking about the supply chain as a whole, the total cost can be significantly lower while the value delivered to the customer can be substantially higher.
Implementing Lean across a company’s supply chain does not have to be a dramatic undertaking. Managing the process in a controlled way, at a measured pace and step by step, will produce better results in the long run.
The supply chain provides excellent ground for Lean implementation because it offers a vast and almost unlimited range of opportunities for continuous improvement and greater efficiency, both at any given moment and over time. It is also an area in which results can be achieved relatively quickly.
Implementing Lean across a company’s supply chain does not have to be a make-or-break decision for the organization. Start slowly. Choose the right steps. Make the right decisions.
