Supply Chain Management Lean Operations

Posted by Gerry Poe

supply chain management lean operationsSupply Chain Management (SCM) and lean operations detail how companies strive for success using the best practices and principled values.

Today, strings of lean suppliers make efficient routes to delivery. Part of the reason for the remarkable efficiency of these chains is due to the rise of enterprise resource planning software (ERP). With ERP systems in place up and down the supply chain, automated processes are able to keep up with the speed and volume of production with reduced lead times, while reducing bottlenecks which impede on-time throughput. These automated processes depend upon the gathering of data from all aspects of the manufacturing operation and include tasks such as procurement, inventory management, cost accounting, shipping, quality, payroll (time and attendance), and just about any other area involved in manufacturing. Automating processes means automating to achieve greater efficiencies into the "system", and when the supply chain members (partners) are automated up and down the line, the line itself becomes more efficient.

Interestingly, a lean supply chain is enhanced by customers who are themselves lean-minded. A lean customer is one who not only expects and depends upon value in the products they purchase, but one who realizes the clarity and speed of their own demands to suppliers results in the delivery of what they are really looking for. They understand that continuous improvement in the supply chain will have beneficial effects upon supply quality, availability, and delivery performance. And, continuous improvement in the supply chain relies upon customers working alongside suppliers through proactive feedback.

In other words, lean supply chains are made up of members who operate in efficient and continuous improvement modes and are conscious of the needs of each other. The on-time delivery of production supplies and components at the bottom means the on-time delivery and distribution of finished goods at the top.

Many manufacturers have implemented electronic Kanban systems aka an "e-Kanban system." These help to eliminate common problems such as manual entry errors and lost cards. E-Kanban systems can be integrated into enterprise resource planning (ERP) systems, enabling real-time demand signaling across the supply chain and improved visibility. Data pulled from e-Kanban systems can be used to optimize inventory levels by better tracking supplier lead and replenishment times.

One of the effects of Lean is in the area of key performance indicators (KPI). The KPIs by which a plant/facility is judged will often be driving behavior, because the KPIs themselves assume a particular approach to the work being done. This can be an issue where, for example a truly Lean, Fixed Repeating Schedule (FRS) and JIT approach is adopted, because these KPIs will no longer reflect performance, as the assumptions on which they are based become invalid. It is a key leadership challenge to manage the impact of this KPI chaos within the organization.

But somehow, we have never made the transition to thinking about our time, energy, and other non-tangible resources as inventory. Well, it's time that we did so because we are suffering the consequences of promising to deliver something that is not available. If you promise that you can complete a project for a client and it is going to take you 8 hours of uninterrupted time to complete it and you only have 4 hours of uninterrupted time, then you are NOT going to deliver. Your client will be upset and your reputation will suffer.

Lean aims to make the work simple enough to understand, do and manage. To achieve these three goals at once there is a belief held by some that Toyota's mentoring process,(loosely called Senpai and Kohai, which is Japanese for senior and junior), is one of the best ways to foster Lean Thinking up and down the organizational structure. This is the process undertaken by Toyota as it helps its suppliers improve their own production. The closest equivalent to Toyota's mentoring process is the concept of "Lean Sensei," which encourages companies, organizations, and teams to seek outside, third-party experts, who can provide unbiased advice and coaching, (see Womack et al., Lean Thinking, 1998).

For many, Lean is the set of "tools" which assist in the identification and steady elimination of waste (muda). As waste is eliminated quality improves while production time and cost are reduced. A non-exhaustive list of such tools would include:

  • SMED
  • Value Stream Mapping (VSM)
  • Five S
  • Kanban (pull systems)
  • Poka-yoke (error-proofing)
  • Total Productive Maintenance
  • Elimination of time batching
  • Mixed model processing
  • Rank Order Clustering
  • Single point scheduling
  • Redesigning working cells
  • Multi-process handling and control charts (for checking mura)

The "flow" (or smoothness) based approach aims to achieve just-in-time (JIT), by removing the variation caused by work scheduling and thereby provide a driver, rationale or target and priorities for implementation, using a variety of techniques. The effort to achieve JIT exposes many quality problems that are hidden by buffer stocks; by forcing smooth flow of only value-adding steps, these problems become visible and must be dealt with explicitly.

This happens (to all of us) because we do not know how much time we have "available to promise." The idea of ATP (Available to Promise) is one that comes from supply chain management and logistics.

Essentially, lean is centered on preserving value with less work (and waste). Lean manufacturing is a management philosophy derived mostly from the Toyota Production System (TPS) (hence the term Toyotism is also prevalent) and identified as "Lean" only in the 1990s. TPS is renowned for its focus on reduction of the original Toyota seven wastes to improve overall customer value, but there are varying perspectives on how this is best achieved. The steady growth of Toyota, from a small company to the world's largest automaker, has focused attention on how it has achieved this success.

Similarly, commonly used ERP accounting systems developed to support mass production are no longer appropriate for companies pursuing Lean. Lean Accounting provides truly Lean approaches to business management and financial reporting.

The difference between these two approaches is not the goal itself, but rather the prime approach to achieving it. The implementation of smooth flow exposes quality problems that already existed, and thus waste reduction naturally happens as a consequence. The advantage claimed for this approach is that it naturally takes a system-wide perspective, whereas a waste focus sometimes wrongly assumes this perspective.

The concept of waste being built into jobs and then taken for granted was noticed by motion efficiency expert Frank Gilbreth, who saw that masons bent over to pick up bricks from the ground. The bricklayer was therefore lowering and raising his entire upper body to pick up a 2.3kg (5lb.) brick, and this inefficiency had been built into the job through long practice. Introduction of a non-stooping scaffold, which delivered the bricks at waist level, allowed masons to work about three times as quickly, and with less effort.

Ford's early success, however, was not sustainable. As James P. Womack and Daniel Jones pointed out in "Lean Thinking", what Ford accomplished represented the "special case" rather than a robust lean solution. The major challenge that Ford faced was that his methods were built for a steady-state environment, rather than for the dynamic conditions firms increasingly face today. Although his rigid, top-down controls made it possible to hold variation in work activities down to very low levels, his approach did not respond well to uncertain, dynamic business conditions; they responded particularly badly to the need for new product innovation. This was made clear by Ford's precipitous decline when the company was forced to finally introduce a follow-on to the Model T.


Supply Chain Management (SCM) is gaining strength as an integration of ERP, suppliers, customers, and global dynamics creating an envelope of processes, cost management collaborating to save time, money and product value. If all systems are interwoven, forming a single thread of demand and supply, consumerization and product lifecycles are serving customers better within the value/profit-phase of each product. Whether we are buying bread or wheat, water or eggs, SCM forms a mix of demands and supplies which we call manufacturing bread.

Does your Enterprise Supply Chain Management Software Include:
(procurement, logistics, demand planning, supply chain visibility, demand/inventory optimization)

  • Purchasing System
  • Requisition System
  • Technologies: EDI /XML/ E.Net
  • EDI - Trading Partner Management
  • Supplier Performance Analysis
  • Customer/Supplier Web Portal
  • Consignment Inventory
  • Supply Chain Transfer Processing and Documentation
  • Approved Supplier/Manufacturer Management
  • Supply Chain Planning
  • Inventory Forecasting and Optimization

These questions are but a few in the Complete Enterprise (ERP) Self Assessment which includes over 300 questions. You can download the complete ERP self assessment here:

Download eBook: How to Choose Your Enterprise Accounting Software System 

Tags: Best ERP Software, Supply Chain Management, Lean Operations, SCM

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