Supply Chain Capstone Project - CH#3 Lean Management PDF

Supply Chain Capstone Project Chapter#3: Lean Management 1 Contents A. What is lean? B. Lean Failure C. Implementing Lean D. Supply Chain and Logistics Management E. Why all the Interest in Lean Supply Chain Management? 2 A. What is Lean? The supply chain is at risk of disruption caused by political...

Supply Chain Capstone Project Chapter#3: Lean Management 1 Contents A. What is lean? B. Lean Failure C. Implementing Lean D. Supply Chain and Logistics Management E. Why all the Interest in Lean Supply Chain Management? 2 A. What is Lean? The supply chain is at risk of disruption caused by political, financial, environmental, and other unplanned events. Managing the supply chain with all of this change and disruption is challenging. However, there are tremendous opportunities as well. 3 A. What is Lean? Lean: is a team-based form of continuous improvement that focuses on identifying and eliminating waste. Waste: is non-value-added activity from the viewpoint of the customer. Instead of a crash diet, Lean should be thought of as a long-term health program for business. 4 Contents A. What is lean? B. Lean Failure C. Implementing Lean D. Supply Chain and Logistics Management E. Why all the Interest in Lean Supply Chain Management? 5 B. Lean Failure Over half of Lean initiatives have failed. The primary reason for this is the lack of the proper culture to support the major changes required. 6 B. Lean Failure In many cases, management is not willing to give up some control to workers, dedicate resource time, or spend money for training and improvements. In other cases, Lean is just looked at as a “fad” that will go away or a shortterm program. 7 Contents A. What is lean? B. Lean Failure C. Implementing Lean D. Supply Chain and Logistics Management E. Why all the Interest in Lean Supply Chain Management? 8 C. Implementing Lean Lean requires both a top-down management commitment to change and a bottom-up participation and ideas. The culture has to encourage and create a team-based continuous improvement mentality. 9 C. Implementing Lean An effective way to implement Lean is through a train-do method. In this way, the trainer or consultant is more like a facilitator who teaches the employees the basic concepts and tools. After the trainer or consultant is gone, workers can continue on the Lean journey. 10 C. Implementing Lean Historically, Lean was applied to the manufacturing industry first, hence the term Lean Manufacturing is used. Lean began to be applied to the office for administrative processes (Lean Office) and recently to the supply chain and logistics function. Today, many tend to refer to it as Lean Enterprise. 11 Contents A. What is lean? B. Lean Failure C. Implementing Lean D. Supply Chain and Logistics Management E. Why all the Interest in Lean Supply Chain Management? 12 D. Supply Chain and Logistics Management Definition According to the Council of Supply Chain Management Professionals (CSCMP): “Supply chain management encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management.” 13 D. Supply Chain and Logistics Management Definition The Supply Chain Operations Reference (SCOR) Model divides the supply chain into five management processes: 14 D. Supply Chain and Logistics Management 1. Plan. Balancing supply and demand. These plans are communicated throughout the supply chain. 2. Source. The procurement of goods to meet demand. This includes identifying, selecting, and measuring performance of sources of supply, as well as delivering and receiving materials. 15 D. Supply Chain and Logistics Management 3. Make. The transformation process, taking raw materials and converting them into finished products. 4. Deliver. Resources to move materials along the supply chain, from suppliers to manufacturing and then to customers. It includes order management, warehousing, and shipping. 16 D. Supply Chain and Logistics Management 5. Return. The reverse logistics process for product or material that is returned, including repair, maintenance, and overhaul. 17 Contents A. What is lean? B. Lean Failure C. Implementing Lean D. Supply Chain and Logistics Management E. Why all the Interest in Lean Supply Chain Management? 18 E. Why All the Interest in Lean Supply Chain Management? The first reason is financial. The supply chain is a major cost center ranging from 50 to 80 percent of the cost of sales It is typically easier to reduce costs by a relatively small percentage and get the equivalent contribution to profit of increasing sales by a much larger percentage. 19 E. Why All the Interest in Lean Supply Chain Management? For example, a company with a 10 percent profit margin and a supply chain cost of 60 percent of sales would need to increase sales by 4 dollars to have the same impact on the profit margin as a 1-dollar supply chain cost reduction. In addition, it is not easy to increase sales in the current economic environment. 20 E. Why All the Interest in Lean Supply Chain Management? The second reason is operational. Bullwhip effect describes the magnified effect that occurs when orders move up the supply chain. This can be caused by a variety of things such as forecast errors, large lot sizes, panic ordering, variance in lead times, etc. 21 E. Why All the Interest in Lean Supply Chain Management? 22 E. Why All the Interest in Lean Supply Chain Management? The increased use of outsourcing, global supply chains, e-commerce, and shorter product life cycles has been a double-edged sword for supply chain professionals. It has given added exposure and importance to the function. On the other hand, it has put added pressure on the supply chain to be efficient while it has become stretched and more complex at the same time. 23 E. Why All the Interest in Lean Supply Chain Management? Customers want shorter lead times, smaller order quantities, and lower prices. In order to do this, companies need to reduce their costs and make their supply chain operations more efficient. 24 THE END 25