This week’s reading introduces us lean
principles, which originated from Toyota’s car manufacturing and now largely
practiced in different industries. The basic idea of lean principles is to
eliminate waste through the workflow. Originally, the workflow indicates the
processes happening inside the organization. However, the side effect is
starting to impact the outsider. Eliminating waste requires reducing inventory
to streamline the workflow. As we can see from Dell’s case, Dell is taking lean
principles to extreme and the upstream players in Dell’s supply chain is
influenced.
However, if we understand lean principles
and think from a different angle. Lean principles can not only be applied into
industries other than car manufacturing, but also the whole supply chain. Compared
to manufacturing, the main task of lean supply chain is to optimize the value
stream of the supply chain. It will put more efforts on optimizing the workflow
of procurement, transportation and storage. The same as lean manufacturing,
lean supply chain should activate the demand pull.
Robert McKee and Dr. David Ross from Lawson
released three papers in the “Lean is Fashionable” series[1]. They
defined lean SCM as “a supply chain operational and strategic management
philosophy that utilizes Internet-enabling technologies to effect the continuous
regeneration of supplier and service partner networks”.
The reason why Lawson[2]
(acquired by Infor in 2011), an ERP software and services providers are doing
this study is because in Lawson’s eyes, the lean supply chain is enabled by
Internet and IT technologies. Interestingly, Herman Miller, as one example of
innovating in product design to improve its supply chain is now using services
from Infor to improve the visibility of operations and increase productivity[3].
The paper defines six mechanisms that the
entire supply chain ecosystem must continuously adapt and adopt to succeed and
lead. The first one is e-information, which means information to be
accumulated, tracked, monitored and harnessed over the Internet. Dell’s
business model is a typical example of using e-information. They receive their
orders from customers online, collect and analyze date and build predicting
models. In this case, why Dell is benefiting from this modern business modern
but its suppliers are still suffering from the bullwhip effect? One reason is
Dell has transformed its business information to e-information as necessary
since it deals with customers directly. However, most of the suppliers in the
upstream still remain the traditional business model. Some of them are starting
using ERP, but simply for recording and accounting, but not predicting. It
takes time when e-information fuse into lean supply chain’s ecosystem.
The other reasons impeding the lean
principles to be applied into supply chain is the lack of synchronization and
collaboration. When one organization decides to use lean principles, it accept
the principles as one culture, all the employees realize this and contribute to
improve the work process. This is because in one organization, standard, information
and value are shared. While in the supply chain, benefits are the major
concern. When there are conflicts, business relationships count little. Dell is
considered as bully when it kicks off its partners. If business partners can
collaborate and let information flow through the supply chain, it will be
easier for suppliers to control their inventory and meet the demand. In a
business relationship, companies need to think about how much information they
are going to share and based on the depth of collaboration, or in another word,
trust. Nowadays, the Supply Chain Council’s Supply Chain Operations Reference
(SCOR)[4] is gaining popularity. The SCOR model includes a
cross-functional framework, standard terminology, common metrics and best practices
that can be applied to entire supply chains. It is provides a standard for originations
to follow, which will fasten the process of synchronization and collaboration.
As the authors defined in their paper, lean
SCM is the new stage of supply chain, and now it only starts. We will see more
and more companies going to use lean principles, not only for improving its
workflow, but also integrate it into their supply chains. The main question is,
how can lean principles overcome the conflicts between different chains? The
papers give us several theoretical solutions, but how many of them and how
effectively can they be practiced?
Sources:
[3]: Herman Miller Case
[4]: What is SCOR?
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