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Wednesday, October 26, 2005

[ALI] (BangkokPost Article): Lean Supply Chain (Part2)

Sambungan minggu kemarin:


Lean thinking and the supply chain


This week we continue looking at "Lean Thinking" and opportunities that exist within the supply chain.

Lean Thinking is defined as the dynamic, knowledge-driven and customer-focused process through which people in an enterprise continuously eliminate waste with the goal of creating value. It is now an established fundamental approach for the world-class manufacture, distribution, and service sectors.

Lean thinking started in the 1960s in Japan with the development of the Toyota Production System (TPS) and was quickly established as a highly effective method for the production of cars and related engineered components.

Its fundamentals relate to what is truly value-adding in a process. Any transformation process that the ultimate customer would be prepared to pay for is classed as "value" while the "value stream" is the end-to-end collection of processes that create value for the customer.

The key to lean thinking is the optimisation of the activities and processes within the value stream into the most efficient combinations to maximise value-added content while minimising waste. Essentially, the stagnation of work in between processes is eliminated and the actual customer demand is pulled through the process which effectively drives the supply chain. It is a system based on a cascading supply chain from downstream to upstream activities in which nothing is produced by the upstream supplier until the downstream customer signals a need. It is essentially a paradigm shift from a forecast-driven to a demand-driven model.

Perfection is also a fundamental of lean thinking and refers to any ongoing activity aimed at achieving better results.

There are five core goals associated with lean thinking, as follows:

1) Identifying and enhancing process value streams. The core objective of any company's strategy in providing a product or service must be to add value to raw materials or goods. To be value-added the customer must be willing to pay for the activity which must somehow change the product in a particular way.

2) Track down waste and reduce or eliminate it. Waste can be defined as any element of production that adds time, effort, and cost but no value. Waste within any process is costly, and directly affects profitability and resources. It means staff time is used inefficiently. This can have a negative effect on staff motivation if employees perceive such work as being ineffective.

3) Make all processes flow smoothly to meet customer demand. Lean thinking also strives to ensure a smooth continuous flow of information and materials across all departments.

Production schedules critically are based on a pull system where materials and resources are pulled through the system as needed by the customer order schedule, rather than a push system where materials are pushed through the system to suit operational needs or simply because capacity is available. This principle needs to be spread throughout the organisation. Boeing, for example, is now assembling aircraft while they are constantly moving slowly on a track through a plant at the rate of customer demand.

4) Strive for continuous improvement and perfection in all processes. Having identified areas for improvement, there is a need to capture this data and train staff in areas relevant to the lean model. Many multinationals are committed to the ideal of continuous improvement, and incorporate it as a part of their organisation structure. The focus of these activities is to organise the workplace to make it more productive. This helps drive personal discipline and organisation within the company across all functions.

5) Seek seamless integration with all parties in the supply chain. Truly world-class companies are competing in terms of supply chain by developing sophisticated and efficient linkages with their suppliers and sub-suppliers. Access to long-term forecasting, demand patterns, and future plans are disclosed in a collaborative proactive approach.

A lean supply chain is one that produces just what and how much is needed, when it is needed, and where it is needed. The most important thing to remember is that lean is not simply about eliminating waste - it is about eliminating waste and enhancing value.

Next week we will look at some of the tools that are utilised in the "leaning" of the supply chain process.

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