Lean manufacturing and supply chain management are terms go hand in hand. Although lean is built on a wider base I feel the backbone of lean, JIT (Just In Time) is about building a better supply chain within the organization. Tools like Kanban are parts of this exercise. Value will flow from one work station to the other within the supply chain. This is sometimes called the value chain (at least that is how I call it). If this flow of value is hindered, it is called a waste.
Nowadays lean is not just about manufacturing. Even within a manufacturing organization lean concepts are applied in offices, service departments and so on. With the emergence of concepts like lean enterprise these concepts have extended beyond the boundaries of the organization and reached the suppliers and customers, in short the entire supply chain. This makes much sense since most of the waste is generated within the supply chain than within your premises. Sony in 2006/2007 lost 2% of its share value due to delays in releasing play station III (PS 3) due to a problem in getting the blue laser used in manufacturing PS3 and recall of problematic batteries which can catch fire on some notebook computers. Both the problems did not take place entirely within Sony, but due to the problems they faced in their supply chain. In another example CISCO is said to had a $2.2 billion write-off mainly due to the problems in their order fulfill system. In simple this suggests even you do your job 100% within your organization, your supply chain can kill your organization.
To be truly lean you need to have a tightly integrated supply chain or a lean supply chain. This would mean having less number of suppliers with long term relationship. This also means having a tight integration with the customers. So you would know what your customer needs quickly. And you would also have means of conveying your requirements to your suppliers quicker and accurately. Although it seems simple enough to read practice is a completely a different game altogether. Tight integration can mean you depend on each other so much even a failure outside your control can bring your organization down. For an example failure of your supplier to deliver goods on time will mean you cannot meet your customer’s requirements.
In the ideal world, your supply chain should not have any wastes involved so your supply chain and value chain would fall in the same line. So value will be identified in every point of supply chain. In this ideal situation you will enjoy the fullest benefits of lean. Your customer will pay only for the true value of the product or the service not for the waste involved in the process.
US auto industry is going thru very tough times, especially with the rejection of $14 billion bailout package. Ford, GM and Chrysler, US auto manufacturing giants are among tremendous pressure. But the hit on Toyota is comparatively smaller, probably due to their lean manufacturing practices.
As usual tough times bring the best out of anything. There were some interesting topics coming up in the bailout negotiations. Lawmakers want the assurance this will not take place again in future and they want big three to consider building vehicles with higher fuel economy and environmentally friendly. This is ultimately good news for consumers and entire world. I think we are little too late even today.
If these giants fail and stop production, ripple effect will be massive. Job losses are among the most important effects. But how will Toyota respond to this? They have cleaner cars, less manufacturing wastes and they produce cars with higher fuel economy. Ideally they should be able to increase their market share further and become more and more profitable. Isn’t that simple economics. But some have other ideas.
Remember Toyota is mainly an automobile assembler. That is their main business. Parts for their vehicles are manufactured by various vendors all over the globe. Some of these vendors are suppliers for the big three US auto manufacturers as well. So if the big three fail, these vendors will have less orders and they will have to either downsize or probably closedown their operations. Meaning, Toyota will loose their reliable vendors (or partners in lean environment). Toyota need these vendors to operate in their just in time model. Supply chain is the main strength when it comes to operate in a JIT model. Any new comer will have to be adapted in to the lean culture over the time. This might directly impact their production.
It is interesting to see how Toyota, the legendary manufacturer is going to respond to this scenario. Their philosophy of working with few, reliable vendors are under a threat now. Will they change their concepts or will they look at this as learning and prepare for the future. Toyota and their lean manufacturing system (Toyota Production System) love challenges. We have to wait and see.
Lean manufacturing is directly dependent on a very tightly coupled supply chain both integral and external. Coordinating supply chain and elimination of problems in it is very important for the smooth lean operation. There are number of techniques making this possible. Barcode is one of the very old such systems. RFID (Radio Frequency Identification) is among the emerging technologies in this era.
Basically RFID functions as a barcode. It has a unique identifier embedded into that. This is read through radio frequencies in different stages of the supply chain to get the exact stage of the product in its supply chain. Since it is using radio frequency to read the information there is no requirement to have a clear visibility of the tag to read. It makes it easier to read the tags. So makes the technology very versatile.
I found below video interesting on this topic.
In the age of computer technology this can be used in Kanban, to monitor the WIP and to identify the areas of bottlenecks. But always obey the basics of lean manufacturing. Technology is the supporter not the driver of lean.
Lean manufacturing is a very popular concept. But words like lean enterprise and lean supply chain are capturing the industry by storm. What is the reason for this shift from manufacturing focus to a wider focus?
As a lean manufacturer you are good as the weakest of your suppliers in becoming truly lean. For an example if you have hundred items going in assembling one finished product, you are only good as the weakest supplier who is not supplying you on time as per the required quality standards. Most of the wastes are generated in the interfaces between supplier to manufacturer and manufacturer to the customer and so on.
Suppliers, manufacturers and customers and even other influential bodies like government agencies are links of a single supply chain. The total strength of the chain will be as good as its weakest links strength. Best performance can be achieved only if we optimize the strength of this chain.
While it is important to understand the ideal lean supply chain scenario and the advantages it can bring, it may be impossible to make all the suppliers and customers and others involved in the process lean over night. So do not fall in to the trap of waiting till all the others become lean to start your lean journey. You should not plan the ideal JIT system based on assumption. The system must be optimized to get the best outcome from the lean implementation with the resources available. Unless you start using lean to its fullest effect, trying to convincing your suppliers and customers to follow lean will off tack your efforts. Once your system is matured, you can extend your lean efforts through the supply chain.
Continuous change is a basic lean concept. A lean supply chain can be achieved with small, step by step approach over a period of time. Simply although it is very important to extend your lean efforts throughout the supply chain, it is a step by step process which starts from you with lean manufacturing.