Lean supply chain dynamics are one hallmark of globalization. By many accounts, supply chains became leaner and leaner during the last two decades of the 20th century and first two decades of 21st century. But in the wake of the ongoing supply chain crisis, it appears that many lean supply chains were in fact brittle.
We understand the supply chain crisis at this point. The Covid-19 pandemic triggered an e-commerce boom. Since March of 2020 we’ve seen accelerated demands that the existing supply chain couldn’t handle. Infrastructure is over-burdened. And even if it wasn’t, trade between the East and West is imbalanced.
So, the question worth asking is this: is lean broken? If not, what still works about lean methodologies? And, ultimately, can we apply the lean principle of continuous improvement to develop better lean principles?
Depending on your branch of the supply chain, there are various methodologies. So, today we’re going to look at the lean method because it’s been very successful and popular as an organizing system.
How popular? Well, have you ever heard about supply chain terminology like the Toyota Production System (TPS), just in time (JIT), Six Sigma, or black belts? These all reference lean principles. Indeed, the lean approach, which developed from TPS, has three principles:
Beyond those three principles, I like this definition of lean on Study.com: “Lean supply chain management is about promoting efficiency by removing unwanted or wasted components from a process. This process is most often applied to manufacturing, where supplies can be ordered as they’re needed rather than holding a lot of inventory as backstock.”
What’s to like about that definition you ask? Well, it clearly states the major potential problem with lean in today’s supply chain. For example, in the past, lean organizations carried as little inventory as possible, right? They continually removed waste from every process possible. This, in turn, delivered value to the customer in the form of the lowest possible prices.
This post will investigate what happens to lean when the supply chain becomes inefficient. We’ll define lean methodologies and summarize a few of the classic models. We’ll look at how these lean methods have held up during the supply chain crisis, especially amid e-commerce and current consumer trends.
What happens if the supply chain bottlenecks are never solved? If there’s a spike in fuel prices, will it make things even worse? What about a war in Europe? How are we evolving? And what does technology bring to lean principles?
Ultimately, we’re trying to understand what the future holds for lean supply chain methods and the organizations that employ them.
What exactly is lean? Lean is an idea. Lean is a system. It’s a way for businesses to do things.
As noted, lean is essentially a mindset fixated on the elimination of waste. To clarify, that’s a holistic statement. Waste can mean a host of things. Wasted space, wasted time, wasted money. Even wasted talent. Thus, lean organizations continuously look for ways to prevent waste.
As you peel back the layers and get deeper into lean concepts, more principles and ideas emerge. Here are some examples of terminology, principles, and practices of lean:
As you can see, these concepts are fairly open ended. So, let’s flesh these ideas out a little.
We create value when we create and provide a product (or service) that achieves a customer’s objective. I’d add that value and customer satisfaction go hand in hand.
The value stream is the vital steps that make up the process of creating the product of service. The value stream identifies the unnecessary or non-value-add steps of any given workflow process. Put another way, think addition by subtraction.
Remove steps in the workflow that cause interruptions, delays, or bottlenecks. Efficient processes and steps are created instead. This principle comes into sharp focus when bottlenecks emerge throughout the supply chain.
It all might have sounded inward-looking until this step. Pull essentially means an organization should produce only when a customer pulls. In Business 101 terms, an organization will only supply as a result of demand. This concept evolved into JIT manufacturing. Pull is also the concept that fractured during the supply chain crisis.
This could be rephrased as the pursuit of perfection. This principle reflects the organization’s commitment to continuously remove layers of waste as they are identified. This process in turn maintains value or promises to create new value.
At an elemental level, lean methods define roughly eight areas of waste:
The promise of technology is and always has been efficiency. Technology has already changed the supply chain. Cloud-based transportation management systems (TMS), control towers powered by AI, IoT devices, and real-time GPS integrations are all products that meet lean principles.
Waste elimination? Continuous improvement? Customer satisfaction? Check, check, check.
It’s worth pointing out that one of the biggest wastes in business is paper. Any office that operates off paper documents is going to fail almost any lean checklist. That walk to the filing cabinet to search for a missing file? It’s a waste of time, money, trees, resources, and human potential.
This is just one example of why document digitization is the first step toward a modern supply chain business. When documents are digitized, they become data. The technological wonders like management software, AI, and IoT integrations all require digitized data.
Learn more about document digitization from an industry leader, Vector.
So, are lean supply chains still viable?
No. And Yes.
No because we’ve seen how a hyperfocus on one principle can neglect another. Continuous improvement efforts to eliminate waste and reduce cost created the far-flung supply chains of globalization. The supply chain crisis stressed by e-commerce trends subsequently buckled in a series of choke points. But this isn’t the first time lean principles have been criticized for solving only a narrow set of problems.
And on the other hand, to lean’s credit, it clearly identifies transportation as a source of waste. So, perhaps we can still use lean principles to find a new degree of balance and resilience in the supply chain.
Final takeaway. And yes this sounds corny. But whether you realize it or not, you’re employing lean principles right now. By reading this post and doing research, you’re continuously improving yourself and your organization. Ultimately, we’re all trying to figure things out. So, when I look at the supply chain through lean principles, I still see reason for optimism about the future global value stream.
This post was written by Brian Deines. Brian believes that every day is a referendum on a brand’s relevance, and he’s excited to bring that kind of thinking to the world of modern manufacturing and logistics. He deploys a full-stack of business development, sales, and marketing tools built through years of work in the logistics, packaging, and tier-1 part supply industries serving a customer base comprised of Fortune 1000 OEMs.
Digital workflows across the supply chain.
