What Is Lean Supply Chain?
July 22, 2022
Organizations employ lean supply chain management principles to improve profits and customer satisfaction. This article explores the benefits and drawbacks of lean supply chains.
Lean supply chain management involves reducing waste to improve productivity and consumer satisfaction. SCM leaders can apply lean principles at every step of the supply chain, including procurement manufacturing, inventory management, distribution, and customer service. The best lean supply chains increase trust and improve employee satisfaction; over-lean chains can worsen backlogs and increase delivery times.
This article answers the question what is a lean supply chain? It covers:
- What is a lean supply chain?
- Real-world examples of lean supply chain
- Benefits and challenges of lean supply chain practice
- Lean vs. agile supply chains
- Should I get a supply chain master's?
What is a lean supply chain?
Companies use lean techniques like value stream mapping to analyze every step of the supply chain process, from acquiring raw materials to shipping finished goods. Becoming leaner can reduce costs and improve agility to better meet customer needs. According to TXM Lean Solutions, a lean SCM consulting group, organizations employ lean principles in all areas of SCM, including integration, operations, purchasing and procurement, and distribution and logistics.
Common lean solutions include:
Storage space is expensive. Lean companies only keep what they need on hand. Reducing inventory does not necessarily mean eliminating it; most organizations maintain a set amount of product in reserve for an emergency.
Lean supply chain management principles work best when experienced professionals implement them. The best lean companies value creativity and a strong chain of command with excellent communication and employ talent that fits their vision.
Getting your numbers right
Lean SCM means knowing precisely what you need and not over (or under) producing. Organizations that optimize in this way can reduce time and energy, saving money. For instance, having less inventory can reduce shipping congestion.
Utilizing data and automation
Automating basic jobs allows workers to perform more useful functions. It also reduces basic errors, improving productivity. Organizations utilize data to glean insights from past performance and forecast future demand. The best lean supply chains rely on numbers to identify exact (or near-exact) needs and stay balanced.
Improving quality control
Companies can eliminate waste by setting high quality standards so customers are satisfied with their purchases and don't return products. Improved consumer satisfaction means a better company reputation and more sales. It also reduces the need for logistical gymnastics and saves company resources.
Real-world examples of lean supply chains
According to AIMS education, lean supply chain in manufacturing starts with quality control in production. Selling a better product means fewer returns and recalls, reducing the burden on shipping and production. That frees up capacity for other functions.
Many companies like to go lean during the manufacturing process, where long lead times (the time between order and finished product) often result in waste. The American Society of Mechanical Engineers (ASME) reports on one paper manufacturer that drastically improved its delivery speeds by implementing a cellular manufacturing system. Before investigating the source of the waste and developing a new plan, the company was throwing away over ten percent of its inventory. Reducing waste led to faster delivery speeds and higher profits.
Effective communication is imperative in lean SCM; it reduces waste and encourages creative solutions. The best companies emphasize internal communication. For example, Amazon employees interface with short, information-dense notes to grab short attention spans. Netflix uses a similar technique. Eliminating wasted communication improves the flow of information and boosts morale.
Benefits and challenges of lean supply chain practice
Lean supply chains are good for the environment. Streamlining the manufacturing process and eliminating all non-value operations as a supply chain strategy means less wasted resources. Advanced forecasting allows companies to meet customer demand without overproduction. Lean thinking does more than improve the bottom line. Satisfied customers buy more products; employees who feel productive want to continue working in their jobs. Eliminating inefficiencies ripples far beyond the supply chain.
The main challenge lean supply chains face is having enough inventory to weather a crisis. Overly lean supply chains are especially vulnerable to so-called black swan events (like a war during a pandemic) that completely disrupt production. Just-in-time warehousing (having only necessary products in inventory) only works when the supply chain is moving.
That said, black swan events hurt the entire economy. Plus, products like perishable foods cannot be held in reserve for shortages. Excess inventory is not always a solution for overly lean supply chains.
With the global supply chain reeling, supply chain management (SCM) professionals may turn to different initiatives for better results.
Lean vs. agile supply chains
Agile supply chains prioritize flexibility by creating supply to meet demand instead of trying to maintain inventory levels. Agile supply chains don't rely on forecasting as much as lean chains. Instead, they prioritize excellent sourcing partnerships and communication (internal and external) to maintain competitiveness. These chains can use real-time metrics to make corrections on the fly.
Which process is better? It depends on the product. Agile supply chains are best for unpredictable markets. Redwood Logistics notes the fashion industry often relies on agile supply chains because trends shift quickly. Lean SCM is best for products like food that don't go out of style but may go to waste. Companies strive for continuous improvement throughout the supply chain and frequently combine lean and agile processes.
Should I get a supply chain master's?
An SCM master's is not strictly necessary to advance in this field; experience is all you need. Many SCM professionals do not have a master's. That said, Association for Supply Chain Management (ASCM) data indicate that 31 percent of SCM professionals hold a graduate degree (54 percent have a bachelor's). Many (of all education levels) also hold specialization certificates. That means nearly one in three SCM professionals holds a graduate degree, a ratio that grows smaller as you seek desirable higher-paying management and leadership positions.
Those with a graduate education typically earn more than those without one ($108,000 median annual salary verses $84,000). The typical graduate student is in their 20s or 30s with a few years of relevant experience.
What are the best SCM master's degrees?
Those who decide to earn a master's in supply chain management can choose from several options, including a Master of Science in Supply Chain Management and a Master of Business Administration with a SCM focus. Both programs include SCM coursework like procurement and sourcing, logistics, customer value, operations, data and analysis, operations management, and management training. MBAs include additional business coursework like accounting and economics. University of Tennessee offers both an MS and Executive MBA (designed for more experienced applicants than traditional MBA programs).
Though both degree programs can lead to excellent SCM positions, MBA-holders typically pursue management roles while MS-holders usually move into high-level operations positions. Students can frequently specialize during SCM programs, including areas like operations and global supply chain management. Career changers can use a master's to break into the SCM field.
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