Supply Chain Management: Aldi and lean manufacturing

Monday, November 3, 2014

Aldi and lean manufacturing

Lean manufacturing the buzz word in the industry that all organizations are trying to implement in order to better their process and provide a better customer experience to the end users. According to the time management expert Daniel Markovitz the core principles of lean management is to produce more using lesser resources and this can be applied at an individual level as well. [1] In any workplace lean management can be achieved in 3 most important ways.

1. Implementing 5s – According to the 5S which stands for sort, set in order, shine, standardize and sustain.[2] Every organization must inculcate this as a part of the routine of each worker. If the information needed is available easily and one doesn't have to spend time looking for the right information.

An example of this is in a lab technician ‘s office where a whiteboard has all the information and status on the tests performed that day, so that when a physician calls in information is readily available and one does not have to look through papers or documents on the computer. A lot of valuable time is saved in this process.

2. Standardized work – While trying to develop innovative features and enhances versions of the product one must keep in mind the bearing it has on the other existing conditions of the project. Hence developing standardized procedures and ensuring adherence is an important step in the process.

3. Ensuring the flow of the project – It is very costly to interrupt the flow of the production in manufacturing and flow of work in the service industry. So as a part of lean management it is paramount to ensure the process is streamlined to facilitate uninterrupted flow of products or service.

In terms of trying to deal with inefficiencies at the lowest cost, we need to analyze the problem the hand. For this a fishbone structure is one of the recommended practices.[3] The fishbone diagram of analyzing the causes of inefficiency and proceeding towards lean management plan .

An example of an industry where lean management help achieve Aldi achieve its goal of providing customers with more value while providing a pricing that is 30% cheaper than that of its rivals. [4] Aldi achieved this through implementing lean production by reducing waste and the quantity of the resources used. It sourced most perishables from local markets hence the distance travelled was lesser which in turn reduced the costs and wastage. The various practices it used to achieve this is as follows:

· Continuous improvement - it ensured buy in from all workers

· Just-in-time – stock arrives on a need basis, hence cost savings due less storage space required.

· Total quality management (TQM) - all workers have a responsibility for getting it ‘right first time’.[5]

In my personal experience I think lean management is an excellent process to deliver additional value to consumer at reduced costs. However, in the service industry this can become very tricky because customer service levels are achieved through better training of staff and it would lead to increased costs. Hence question then would be to how to strike a balance in such scenarios?