LEAN SUPPLY CHAIN | LEAN OFFICES

ANVITY SINGH, RICHA VERMA, SHIVAM PANDEY, SUMEDHA BALIYAN, UTTAM VERMA, VARUN TRIPATHI
 CONTENTS
 What is Lean Supply Chain
 Characteristics of Lean Supply Chain
 Lean vs Agile Supply Chain
 Advantages of Lean Supply Chain
 Case Study
 Where and how to begin implementing lean supply chain management.
 How to begin
 Lean Tools
 Conclusion
WHAT IS LEAN SUPPLY CHAIN?

 Lean supply chain emphasizes overall quality.

This means a reduction of defective goods to
zero, lowering waste, and increasing
 By reducing quality control issues and having
efficiency as a result.
to handle customers with their returns, lean
supply chain management reduces overall
expenses.
 The idea behind is to emphasize a lower
number of returns by customers so that every
product that is sold is kept.

https://blog.procurify.com/2014/04/22/agile-lean-supply-chain-management/
http://www.aims.education/supply-chain-blog/lean-supply-chain-management/
WHAT IS LEAN SUPPLY CHAIN?

The following are the common factors between Lean and supply chain management:
 recognize customer,
 Are based on pull system,
 assess waste of inventory, and
 create value with growth, not just reduce costs.

Companies with a lean supply chain, inbound from suppliers and the outbound to stores or customers, have
identified the value of the supply chain and waste that exists and are removing the waste.

http://www.ltdmgmt.com/lean_supply_chain.php
PURPOSE OF A LEAN SUPPLY CHAIN

The purpose of a lean supply chain

 Efficiency, Flexibility, Productivity, Diversity, Development.
is to meet the 5R's of logistics,
By being lean, companies are efficient at lower volumes / lower size
namely, inventory that is:
lots, have greater flexibility; gain higher productivity, increase
product mix diversity, improve rapidity of product development  the RIGHT product
cycle, and have higher quality of performance.  in the RIGHT quantity
 Activities that support the 5Rs add value.  in the RIGHT condition
This applies both to the movement of product and to the
movement of information. Conversely, any activities that do not  at the RIGHT place
add value, do not further these 5R's, are waste.  at the RIGHT time

http://www.ltdmgmt.com/lean_supply_chain.php
 Over supply Transportation Inventory Waiting

Defective Service
Movement Over processing
or Product

These waste activities occur in different ways for both Make To Order and Make to Stock companies.
Compressing cycle time and increasing inventory velocity are the preferred results for lean supply chain management.

7 TYPES OF WASTE IN SUPPLY CHAIN MANAGEMENT

http://www.ltdmgmt.com/lean_supply_chain.php
CHARACTERISTICS OF LEAN SUPPLY CHAIN
The characteristics of lean supply chain
management start with the products
themselves.
1. Examination of why defects occur, and
2. Improving overall standards so that all
goods are free of defects.
3. While defects will occur even in
environments that emphasize high quality
control standards, their numbers can be
significantly reduced which in turn
benefits the rest of the company.
 The lean supply chain examples mostly come
from defective products that has slipped
through, such as recalled vehicles.
 When a vehicle is recalled by an auto
manufacturing firm, the costs associated with
repairing the issue can be considerable. This
means creating new parts and paying for
labour associated with the repair, not to
mention the inconvenience caused to
customer.
 “ The difference is in emphasis.”
Agile supply chain management focuses on the changing environment of business.
Lean supply chain is focused on quality control.

LEAN VS AGILE SUPPLY CHAIN

http://www.aims.education/supply-chain-blog/lean-supply-chain-management/
ADVANTAGES OF LEAN SUPPLY CHAIN MANAGEMENT

1. Better Manufacturing Techniques 2. Lower Administrative Costs

The emphasis on quality control not only means
creating better products, but better means of
creating products.
This means that innovation focuses on improving
the manufacturing process to eliminate
mistakes.
The costs associated in dealing with returns can be
considerable even when the number of items is relatively low.
By reducing the number of defective goods, you reduce
the associated administrative cost of working with
customers, replacing the item, and sending a new one back to
them.

3. Improved Brand
By manufacturing goods that are tough, durable, and are less prone to defects,
you increase the status of your company.
This can be a powerful advertising tool that promote the company brand by word
of mouth which is the most powerful form of advertising.

http://www.aims.education/supply-chain-blog/lean-supply-chain-management/
LEAN SUPPLY CHAIN : AMAZON

 Amazon as a company always knew that customers

would not pay for waste and that focus on waste
prevention is a fundamental concept of lean.
 The company’s information technology was always very good at understanding what the customer wanted and passing the
right signal down. For example, the selection of the transportation method for a given package is driven, first, by the promised
delivery date to the customer.

They have more people working in the fulfillment centers and customer-service centers than it does computer-science
engineers.

Given the business evolution of Amazon from a bookstore to the store for everything, they had to reinvent automation,
following the lean principle of “autonomation”: keep the humans for high-value, complex work and use machines to support
those tasks.

Another major dimension of the deployment of lean at Amazon was the enforcement of “standard work”: combines the
elements of a job into the most effective sequence, without waste, to achieve the most efficient level of production.

Amazon also used kaizen at the workstation level to reach new productivity objectives for stowing products. The goal has
always been to stow products within a certain time period and with a certain number of frontline staff, because stowing
accounts for about 20 percent of the costs in the fulfillment centers.
LEAN SUPPLY CHAIN : ZARA

 The primary keys to Zara’s supply chain success are

agility, speed, the successful application of lean
thinking, and vertical integration.
JUST IN TIME PRODUCTION
• Zara’s success relies on keeping a significant amount of its production in-house and making sure that its own factories reserve
85% of their capacity for in-season adjustments. In-house production allows the organization to be flexible in the amount,
frequency, and variety of new products to be launched.

• Zara also commits six months in advance to only 15% to 25% of a season’s line. And it only locks in 50 to 60 percent of its line by the
start of the season, meaning that up to 50 percent of its clothes are designed and manufactured smack in the middle of the
season.

• Store managers communicate customer feedback on what shoppers like, what they dislike, and what they’re looking for. That demand
forecasting data is instantly funneled back to Zara’s designers, who begin sketching on the spot.

• Zara also has extra capacity on hand to respond to demand as it develops and changes. For example, it operates typically 4.5
days per week around the clock on full capacity, leaving some flexibility for extra shifts and temporary labor to be added when needed.

• This then translates to frequent shipments and higher numbers of customer visits to the stores, creating an environment of
shortage and opportunity.
LEAN INVENTORY MANAGEMENT

• Inventory Optimization Models are put in place to help the company to determine the quantity that should
be delivered to every single one of its retail stores via shipments that go out twice every week.

• The stock delivered is strictly limited, ensuring that each store only receives just want they need. This goes
towards the brand image of being exclusive while avoiding the build up of unpopular stock.

• This quick in-season turnaround, from production facilities located close to Zara’s distribution headquarters
in Spain, allows Zara to ship more often and in smaller batches.
HOW TO IMPLEMENT LEAN SUPPLY CHAIN MANAGEMENT

First, lean requires a strategy. It is not just a Second, lean goes beyond the four walls of the
manufacturing program. It is a paradigm that warehouse or factory. It goes beyond
requires a change throughout the organization if it is to organizational boundaries of the company and
be truly successful in removing waste and adding value. extends to suppliers and to customers. This breadth
Organizations must look at everything differently. of scope is why it requires strategy for success.

Third, there are lean principles that must be basis of the lean supply chain. Namely-
 Determine value from the view of the customer, not the view of the company.
 Make the product and information flow.
 Pull product; do not push it.
 Manage toward perfection with continuous improvement.
LEAN TOOLS

5S Rapid Setup Standardize

Kanban Workcell 6 Sigma

 Some challenges in implementing lean SCM are:
 lack of implementation know-how,
 resistance to change,
 lack of a crisis to create urgency,
 gaining resources and commitment, and
 back-sliding.

CHALLENGES
 Sometimes these challenges are not addressed or appreciated with lean SCM. These include-

International
Accounting
sourcing

Organization Number of
Silos firms

CHALLENGES
HOW TO BEGIN

 The initial step to implementing lean is to evaluate and to measure the present supply chain.
Value stream mapping (VSM) is a visual tool to define the current state of a company's supply chain, to identify
waste and to lay the foundation in determining the future state flow of the supply chain.
 Value stream mapping (VSM) identifies waste in supply chains, especially with regards to time and inventory.
Initial VSM efforts include defining the present value stream for product families, those that share common
operations or have large volume impact, either units or dollars, or other delineator as determined.
 With mapping the current supply chain state, you can then draw on the various lean tools to design the future
supply chain flow. This future state should include the infrastructure to support it-training, culture, quality
methods, accounting systems, and investment policies.
CONCLUSION

 Often, there are supporting processes with lean SCM that include Strategic Sourcing to
manage supplier performance for critical and important items; Strategic Customer to
gain needed viewpoint of key customers; and Sales and Operations Planning to blend
the strategic sourcing and customer with the tactical day-to-day supply chain management.
 There is no quick fix to being lean. Often the waste has become incorporated into the daily
operation company-wide and is accepted as part of doing business. In some instances, there
may be too much instability in a supply chain to begin lean. The first step is then to increase
stability before beginning lean.
 But the benefits can be significant from gaining market share, reducing capital tied up in
inventory, increasing profitability, improving customer service, increasing capacity and
taking time out of the entire company's way of doing things.