Wednesday, September 18, 2013

Can any SCM be optimized by using Lean Manufacturing, TQM or other process improvements?

A discussion on actual process improvement methodologies: applications, limitations, future.

The effective management of its supply chain is a crucial point into driving success into a corporate organization. Whether it is planning correctly your supply and demand to secure the right inventory, being able to produce at a lower cost, delivering your service in time for greater customer satisfaction, or improving the quality of your product, an effective and superior supply chain can make the difference.

Thus, many improvement methodologies are actually used in the market and while one could argue that they all have the same broader goal which is to create additional value for your organization by saving time, money, increasing productivity, etc., choosing the right tool is a key in achieving process improvement.
In his paper, ‘How To Compare Six Sigma, Lean and the Theory of Constraints [1], Dave Nave does a comparative study of the Lean Thinking, Six Sigma and another process improvement methodology , the theory of constraints which is based on the principle that upgrading weakest link in the process will result in an overall process enhancement. He explains how you can evaluate the organizational values and select the one adapted to your needs
However, selecting and using the right improvement methodology is more than aligning facts and figures, it is adapting the tool to the needs of your organization and being innovative and smart in the way you use it.

DELL is a pioneer in this area. In 2004, the company managed to have 72 hours of inventory by adopting a just-in-time philosophy that is close to the Lean thinking. However, they go beyond the static and standard implementation of a lean methodology by pushing their suppliers to adapt and by having their complete organization aligned to function with speed and flexibility [2].  
Another example is the Seattle Children’s Hospital. The hospital implemented a program called “continuous performance improvement” C.P.I based on the Toyota Production System, TPS or Lean Thinking. Among other notable improvements, the hospital cut their costs by 3.7% saving $23 million [3].

While those are examples of application of the TPS methodology, another management theory is the Total Quality Management also called TQM.  It is a variant of the lean manufacturing and it emphasized the fact that better quality of service, products and even work environment will lead to a greater rate of return [4].
An inspiring success story is how RIMS, a graduate business school in India, used TQM to improve their KPIs: assurance of learning, research productivity and graduate placement. The school management determined key performance indicators, identified the stakeholders and used TQM tools to significantly improve their measures [5].  

The broader range of applications of management theories show that every industry is concerned about cost effectiveness, productivity, quality of service and customer satisfaction. Process improvement methodologies such as TQM, Six Sigma, or Lean Thinking can move beyond manufacturing and be applied to health care, IT services and even higher education. While there have been some edifying and innovative ways to use it by the past, I wonder how the exponential development of new technologies will lead to original applications of these relatively old tools that have managed to be relevant no matter what. Another question would be whether there is a domain where you cannot apply those methods or where their limitations make them ineffective.
Nonetheless, though some problems are universal and corporations have always wanted to improve customer satisfaction and revenue at a lower cost, I think we may expect new theories on how to better manage our supply chain to emerge and maybe one day, Lean thinking and Six Sigma would join mass production as obsolete and ineffective management theories.

2 -; accessed on September 16, 2013
4 -; accessed on September 16, 2013

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