Lean Principles In Supply Chain Management

The manufacturing sector has in the last several years has moved from a vertical structure to a horizontal structure. It implies that a single company no longer controls the whole supply chain; different companies all over the world can control different pieces of supply chain. Although this helps a particular company to focus on the particular task they have at hand, it makes the supply chain longer and complex. In todays world it is hard to distinguish between manufacturing process and supply chain.

This has an advantage too; the principles used for effective manufacturing can also be used for an effective supply chain. One such concept is ‘lean’.

Adoption of lean principles in supply chain worldwide has enabled manufacturing to be customer-focused,

Lean is a systematic approach designed to identify and eliminate waste of time, materials and effort through continuous improvement to enhance value to the customer by directing the flow of the product at the customers pull.

How can it be applied to supply chain management?

Logistics encompasses all the activities between the point of origin and the point of consumption, involved in the forward and reverse flow and storage of goods, services
and related information. Supply chain management on the other hand has a much wider scope encompassing the planning and management of all activities involved in sourcing and procurement, conversion, and all Logistics Management activities. It also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. Thus supply and demand management is integrated within and across companies by supply chain management.

While logistics focuses ion activities carried out in a single firm, supply chain uses the same processes but views these processes for multiple forms. There are several points of overlap between lean production and supply chain as indicated

For this to happen everyone within the organization should look beyond boundaries and focus on the relationship with customers and suppliers. Implementing change in focus can be difficult in todays environment of international supply chain. Nevertheless, the rather simple principles of lean business can form the foundation of any business in no time giving a new direction to its supply chain.

The 5 principles of lean:

The starting point is to recognize who the customers (end users) are.

1. Value (Value Added Activity)

The value of the product should be looked at from the customer’s point of view and not the companies. This will help greatly reduce waste caused by making faulty product, not meeting the quality standards or delivering it too slowly. Value is expressed in terms of how a certain product meets the customer needs.

2. Value Stream

The activities involved in an organization can be value added or non-value added. Value added activities help the organization meet the customer demands. Non-value added activities on the other hand do not contribute towards the benefit of the organization. By clearly defining the difference between the two, non-value added activities can be