Lean Supply Chain

The idea of a lean supply chain is one that businesses have long understood could improve their bottom line. To understand exactly what it means, think of something that's thin and lean and something that's large and bloated. The lean thing, in this case a system of getting from raw materials to finished product, is whittled down to the basic elements with nothing unnecessary or unneeded in the way taking up space. A bloated supply chain, on the other hand, is too full. There are too many steps and too many processes to go through which makes it take longer and makes it more difficult to navigate.

The process of creating a lean supply chain is simply one of carving a supply chain down to make it as simple, fast and efficient as possible. It eliminates waste, unnecessary links in the chain and the slowdowns that can hurt businesses (it also has a solid quality assurance plan in place). Any business should naturally want this because it makes getting things faster and easier, so you might wonder why starting out with a lean supply chain isn't naturally easy. The problems come in, in part, because there can be so many links in the chain, and each of those links can introduce problems and bottlenecks.

If you bake a cake and sell it at a bake sale, it becomes the product that you have created, supplied and sold to the customer. If you bake the cake in an efficient way without waste, transport it to the bake sale on a direct route and sell it without having to go through another person, you've created a lean supply chain from your kitchen to the customer. But this isn't really the complete supply chain that helped create that finished product.

You had to buy the ingredients to make the cake. At some point, you bought the pan and the stove used to create it. The companies that supplied the ingredients to you bought their ingredients from other companies and used them to create the things you needed. If a grain company doesn't supply wheat to be ground into flour to the company that sells flour, you couldn't get the flour and the supply chain would be broken. If there's a delay, or the flour has to go through three distributors before it gets to you, the cost is marked up and the process is slowed. So you can see how complicated a supply chain really can be for something as simple as a food item you create in your kitchen. Companies that create several products have to deal with a similar situation, but in a more complicated way.

The supply chain for a product that a company sells to its customers can include things like distributors and transportation companies, suppliers, storage facilities, wholesalers and retailers. If any of these links in the supply chain break, it spells trouble for the company. If the supply chain is full of unneeded links, it costs more than it should and takes longer than it should. Creating a lean supply chain saves money and makes the business run more efficiently.

There are three basic parts to any supply chain: supply, manufacturing and distribution. All of these parts need to work in concert and pull their weight in order to have a lean and efficient supply chain.

Supply involves the raw materials that are used. Manufacturing is the process of turning those materials into a deliverable product. Distribution is the act of getting those products to customers. To create a lean supply chain, a company needs to make the chain a demand-based process. Following demand to determine what's needed, and when and where it's needed, will keep out the excess and avoid things like inventory overstocks, over-purchasing needed items and purchasing unneeded items.

The first step is to actually map out the supply chain from beginning to end with lists, diagrams and any other resources that seem helpful. Making the chain more efficient is impossible until a company knows exactly where it stands now. Once the chain is mapped out, then a careful analysis of each step in the chain such as each supplier, warehouse, distributor, etc. can help identify unneeded elements. Remember, while it might be easy to spot problems in certain areas such as warehousing, the focus needs to be on every link in the chain and not just one category for the best results. Also keep in mind that the contract management process flow is difficult with a lean supply chain because you are constantly juggling new contracts.

It's also important to avoid concentrating on symptoms and look for the underlying cause of a problem. Having too much of a product is not a problem, but more likely a symptom of a bigger problem like poor planning, ordering mistakes or other issues that can be eliminated. Another step that's important is determining and realizing that a lean supply chain comes with risks. If it's truly demand-based, then there could be times when supply can't keep up briefly. There could be a delay at one step and keep inventory from arriving by a certain date. These things need to be figured into the equation.

It's also important to realize that this process is an ongoing one and not something that can be done once and forgotten. The supply chain is a dynamic business process and one that can be reanalyzed regularly to make sure the chain is as efficient as possible. A lean supply chain can help get rid of wasted inventory, time and money within a business, so it's well worth the time it takes to do the analysis and takes step to improve it.