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Technology Enablers for the Lean Supply Chain

Written By: Michael Bittner
Published On: September 14 2005

Introduction

As described in Moving Beyond Lean Manufacturing to a Lean Supply Chain, lean manufacturing can be extended beyond the shop floor and into other supply chain processes. To do this, companies must assess their production environment and supply chain activities. By keeping in mind some guidelines, a company can effectively transform the supply chain into a lean process.

Integrating and Supplementing with Lean

Lean functionality must be integrated within, and supplement existing enterprise resource planning (ERP) and supply chain management (SCM) infrastructure.

The prevailing attitude in a company that is adopting lean must be, "we're all in this together". The adoption of lean manufacturing tools and concepts requires much more that just "bolting on" a new technology application. Synergy with existing business applications is mandatory to achieve success. Traditional push-type scheduling with phased pull-type replenishment must coexist during the transition to a lean environment. With this said, coexistence will bring both complexities and opportunities to light, such as

  • Hybrid scheduling techniques such as manufacturing resource planning (MRP), just in time (JIT) , synchronous, and flow, can be deployed in complementary fashion, but dynamics like level loading, kanban sizing, and buffer sizing, must co-exist with planning, procurement, and scheduling systems

  • Supply chain strengths and weaknesses can be highlighted with lean concept adoption. Adaptability of lean concepts will be required throughout the supply chain

  • Lean manufacturing also impacts the planning, procurement, and scheduling systems of supply chain network partners

  • An interdependent supply network requires a unified approach, involving external participants, such as suppliers and partners

  • Supply chain networked process efficiencies can be the end result

Part Two of the Moving Beyond Lean Manufacturing to a Lean Supply Chain series.

Measure to Improve

Supply chain visibility (SCV) and supply chain event management (SCEM) are vehicles for alerting change through the supply chain, and a step toward a lean supply chain.

Bluntly stated: if you can't see it, you can't measure it; if you can't measure it, you can't improve it. There must be visibility into production and supply chain activity that takes place both inside and outside of the enterprise. It is also a prerequisite step toward establishing critical collaborative partnerships. In order to effectively manage these critical interactions, enterprises must be able to gather customer demand, production, and supply chain activity data and respond to it in a timely fashion, even in real-time if necessary. This means that data must be gathered from critical inflection points from the primary customer contact point, through the supply chain process flow, to the shop floor, and back again.

Event management and intelligent response take on more significance, as enterprises extend their focus from solely cost control to opportunistic revenue generation. For this to happen, enterprises must anticipate and respond to pull demand generation signals, which requires alignment with trading partners further up and down the demand chain.

Adaptive supply chain networks must coordinate supply and demand chains. The business issue is that current supply and demand chains break under the pressure of unexpected events. Adaptive supply networks must capitalize on "smart" agent software, acknowledge real world events, and become event-driven and self-regulating. Companies can then link supply networks to new, continuous demand management applications and practices that predict, mange, and reduce variability on the demand side. The impact on business is that by linking supply and demand, the right products get to the right places at the right times. As the flow of goods more closely matches demand conditions, companies are able to trim inventories, avoid surprises, and improve customer satisfaction. Deploying this technology is the adoption of technology enablers toward a lean supply chain.

Vendors offering various forms of supply chain visibility (SCV) and supply chain event management (SCEM) software come from an array of areas. Mega-ERP and platform vendors like SAP, Oracle, and Microsoft have built SCV and SCEM capabilities within their platforms. Traditional supply chain execution vendors like Manhattan Associates, RedPrairie, Provia, Irista, and HighJump Software have built integrated bolt-ons for SCV and SCEM. Other vendors specializing in "edge" data and event solutions are Savi Technologies and GlobeRanger. Finally, SeeCommerce has products focused on SCV, SCEM, and KPIs.

Vertically-oriented IT Infrastructures and Lean

A vertically-oriented IT infrastructure must exist to exploit lean through the enterprise network of suppliers, customers, and partners.

The extended enterprise that behaves like a holistic entity and uses IT to leverage integrated processes will gain significant advantages. Enterprises within the vertical should spend more time accessing benefits and fewer resources counting costs. When lean principles are achieved, each section of the vertical can claim benefits.

But there are challenges.

The challenge of integrating lean concepts into purchasing, manufacturing, and sales holds promise. Within the enterprise, IT tends to pulls systems independently to exploit the objectives of cost, efficiency, and flexibility. Purchasing systems buy quantities for lowest price; manufacturing looks for speed with the fewest resources; and sales wants a lot size of one with zero lead time. The enterprise is already in conflict and when it is extended, it exacerbates the problem.

Linking the IT infrastructures with collaboration can reduce cost and deliver results; however, most verticals have not been able to accomplish this because they cannot decide the all important question: "who is going to pay for it?" Remember that what one part of the vertical considers finished goods inventory, another part actually considers raw material. Simply moving it from one to another through better connected IT systems doesn't help. True reduction is accomplished by better understanding demand and reduction at all points. The quest for waste reduction is imperative throughout a supply chain.

The IT infrastructure that supports lean will vary by vertical. The shorter the supply chain, the simpler it is to gain agreement on the distribution of costs and benefits across the supply chain. For example, certain process industries with one-to-many bills of laden should be able to incorporate lean principles rapidly. However, a multitude of retail outlets can somewhat complicate the collection of demand and forecasting data.

Demand-driven supply network infrastructure requires a cohesive approach. IT organizations must open up and share information across the enterprise and distribute costs where benefits are gained. Dictating standards formats and protocols is simple. Applying demand data to the enterprise the way it is used on the plant floor among cells is beneficial.

Correctly Using Key Performance Indicators

Measurement and key performance indicators (KPI) resulting from lean will fuel the performance driven enterprise.

Measurements, metrics, and key performance indicators (KPI) are tools and concepts that are often associated with lean, but are seldom used correctly. Too often the result is that the lean project objectives never reach expectations which likely were not established properly in the first place. Here are a few of the concepts to remember when implementing lean manufacturing tools and concepts through your supply chain:

Metrics must be tied to strategies, goals, and objectives. Lean projects need to be funded and driven by a set of consistent strategies, goals, and objectives with pre-defined metrics that are tied to them. Typically departments, especially the plant floor, develop measurements that isolate productivity measures. Supervisors develop metrics to optimize flow through the individual cells and, in some cases, use these as pay incentives. If KPIs are isolated, they likely will not be helpful to the overall extended enterprise. At a recent World Economic Forum in Davos, Switzerland the textile industry made a case for removing all cell productivity measures that were not linked to the overall extended enterprise.

Objectives must be measurable. Supporting technology must include facilities for process data capture at key points through the supply chain. This requires a full complement of supply chain monitoring and event management capabilities, along with measurement. An example of this is the alignment of production and distribution units-of-measure across the extended enterprise often becomes a cumbersome task. Deciphering a unit from a pack from a carton in real time can lead to errors or invalid data. Often the largest member of the chain dictates the values which may or may not be the most effective. Cooperation should be established among members to select the values that are readily available and can be understood by those evaluating information or metrics.

Measure what you can affect. If you cannot change an outcome, meaning if you cannot take actions to positively influence a process cycle, then the measurement is of marginal value. Many enterprises spend thousands of dollars communicating to employees a multitude of KPIs that are misunderstood. When one part of the enterprise is inhibiting value creation, posting those results to another piece of the supply chain will develop negative opinions and hurt cooperation.

Employee buy-in to measurements is paramount. Employees need to understand the dynamics and value of measurements, and buy into the importance of reliable measurements. The classic example is the worker that has incentives for weight produced, while the scheduler is rewarded for quantity of throughput. Synchronization is difficult to achieve across the extended enterprise; however, without it, each area will sub-optimize.

Simple and few. You need to focus on only the measurements that that make a difference to the operations of internal processes and those external to the operation that result in supply chain efficiencies. Use benchmarking processes to bring up priority performance measurements to address known performance gaps.

Conclusion

Enterprise transformation to a lean supply chain requires discipline along with enabling technology, but developing a lean supply chain involves much more than just new technology. Following some specific guidelines about extending lean methodology will help you proceed through your supply chain transformation to lean:

  • Create designs of your supply chain processes in order to understand, in detail, how your supply chain functions and how it should be improved

  • Use highly disciplined program management, to avoid cost overruns and control project scope.

  • Provide a strong program of management change that includes education, training, and communications for all employees and partners.

  • Understand how your customers and partners will benefit from an improved, lean supply chain. The solution must work to the benefit of all those involved.
 
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