Supply Chain Management: Lean Management Approach

Production practices have had an important role in satisfying the dynamic market. Many approaches have being developed in order to respond effectively to specific business requirements. In fact, some areas of management have focused its study on the overseeing, designing, and controlling the process of production in an effort to find the best methodology that ensures the business success and performance. However, complexities arise in this field because many variables such as costs, inventory, scheduling, suppliers, etc have to be considered in any business. Lean approach and the traditional approach are two points of view that aim to address this complexities, and those will be examined in this essay.

Lean method produces the little goods that are definitely will sell off and these constraints production of more goods than necessary. LM working on the core principle ‘work smarter, not harder’. Lean production is aimed toward the elimination of waste in each space of production together with client relations, product style, provider networks and manufacturing plant management. Its goal is to include less human effort, less inventory, less time to develop

“Lean is a systematic approach to identifying and eliminating waste (non-value-added activities) through continuous improvement by flowing the **product at the pull of the customer in pursuit of perfection.” Lockwood [24].

The lean supply chain helps to imrprove efforts focusing waste, improve manufacturing schedule and economically produce small quantities. It is also flexible to react to changes in the market. Hence, BMW has this facility of allowing a customer to change its order within a week of placing and still maintain the original delivery time and high quality. Similarly, agile supply chain helps in carrying a generic inventory. The best part is that it helps in reducing risk of keeping too much stock as well as being out of stock. Mass-customization can be easily pursued through an agile supply chain which offers variety at a lower total

“Lean means creating more value for customers with less” (Krejewski, L., Ritzman, L.P., & Malhotra, M.K., 2013). Implementing this into a project can make the project very successful at a lower rate of cost and time. There are five steps in allowing the lean process to work successfully. This process is easy to remember but not always easy to achieve. Specifying the value from the customer’s point of view of the product that the customer is interested in purchasing is the first step. Identifying all the steps of value for the product the customer wants to purchase and eliminating the steps that are unnecessary is the second step. Creating a sequence of steps that flow in a consistent fashion and will flow smoothly toward the customer is the third step. Introducing the flow of the product that the customer is interested in purchasing and allowing the customer to pull value from the product is the fourth step. The fifth and final step in the lean technique process is “as value is specified, value streams are identified, wasted steps are removed, and flow and pull are introduced, begin the process again and continue it until a state of perfection is reached in which perfect value is created with no waste” (Lean Enterprises Institute, 2015).

The average company spends nearly half of every dollar it earns on production needs—goods and services it needs from external suppliers to keep producing. A supply chain consists of all parties involved, directly or indirectly, in the procurement of a product or raw material. Supply chain management (SCM) involves the management of information flows between and among stages in a supply chain to maximize total supply chain effectiveness and profitability.

In a finished product, out of most of the industries only one particular company, provide a very little amount of the total value. Hence to improve the process within the company lean techniques are used so that the total impact will not be high when it is applied to a broader supply chain.

The origins of lean thinking is actually created from the manufacturing industry. In the manufacturing or production industry, lean management design approach main objective is focusing on the elimination of waste and having a smooth workflow through a right process. Lean also enables the organization to improve performance.

Supply Chain Management (SCM) represents the end to end value chain of a business from production to after-sales service. According to Schulz, a well-managed supply chain should be market focused, stating that the supply chain should strongly represent the market needs and “what solutions consumers are looking for, not the product we are trying to sell them”. However is the philosophy of SCM merely just a new supply chain thinking approach to older existing SCM practice? For example, Quality Management which is deeply rooted in the concept of SCM although not in self-new, has evolved over time, and is based upon the concept of having total commitment to everyone is the supply chain to deliver quality service/products to both the internal and

A company realizes profits from two activities, increased sales units with reduction of costs. The stakeholders that allow a company to do this are the internal employees to the company, and the businesses the company partners within their product supply chain. Lean development methodologies are common in manufacturing due to the relentless focus on continuous improvement, and efficient manufacturing practices while

Lean supply chain management is all about the reduction of cost and waste as much as possible. The aim of this method is to focus on efficient, streamlined operations. In this approach, anything in the process that doesn’t add value for customers is eliminated. When implementing a lean supply chain, you’re constantly looking for ways to remove layers of waste and only take steps that add value to a product or service. One characteristic of a lean supply chain is that products are made on an as-needed basis so there’s no unnecessary inventory or overproduction. Additionally, companies with high volumes of low variability purchase orders, such as food items, benefit their efficiency greatly by utilizing the lean supply chain methodology.

Most companies leaving on lean manufacturing soon find that their accounting processes and management methods are inconsistent with the lean changes they are making. The reason for this is that traditional accounting and management method were intended to support traditional manufacturing; they are based upon mass production thinking. Lean manufacturing breaks the rules of mass production, and so the traditional accounting and management methods are unsatisfactory and more often than not effectively unfriendly to the lean changes the company

Lean management looks for different ways to eliminate factors that waste time, effort or money. This is achieved by analyzing a business process and then revising it or cropping out any steps that do not create value for consumers. Lean Management philosophy is based on the idea that organizations should set their strategies according to what the consumers really value, systematically eliminating waste both within the firm and along the process of supply chain. Many companies when implementing the Lean Management ideology complains that traditional Management Accounting Systems are unable to support their projects. At best, they are perceived as bureaucratic tasks, and at worst, they are considered a key constraint to both the acceptance and success of lean projects implemented in their organizations. The failure of these traditional Management Accounting tools and techniques has led to management consultancies in coming up with and developing a few range of Lean Accounting

This will in turn help the company honor its promises to customers which will create customer goodwill. Again a lean production ensures the company reduces wastage to the bare minimum. (Wolfe, 2011) This is very helpful in pursuing lower costs. Key areas addressed by the strategy include stock holding levels, lead time minimization and reduction of stock holding costs for the company. Lower costs will enhance our ability to offer better prices than competition giving us a cost leadership competitive edge. Efficiency and effectiveness of sourcing and the elimination of waste in our goods inwards processes is also key in breaking the quality cost trade off which is central to securing a blue ocean space in the industry.

Lean is about doing more with less and is often used in connection with lean manufacturing to imply a ‘just-intime’ approach to the business. Many companies that have adopted lean manufacturing as a business practice are anything but agile in their supply chain. It is paradoxical that many Japanese companies have exceptionally long delivery lead-times to their customers and insist that those customers provide them with firm orders often several months ahead of manufacture. Yesterday’s world was one characterised by standard products, mass produced for generally predictable market demand. Today’s world is almost the opposite with customers demanding tailored solutions (high variety) in small quantities (low volume) with a higher degree of uncertainty.