BOK MATRIX

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Lean Supply Chain Management

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Table of contents

1. Introduction ............................................................................................................ 3

1.1 What is lean ……………………………………………………………………… 4

2. Why leans supply chain is needed?........................................................................ 5

3. Benefits of lean supply chain management .......................................................... 6

4. Implementation of Lean SCM: ................................................................................... 6

5. Challenges faced while implementing lean SCM: .................................................... 8

6 .Best practices that support Lean SCM process:.......................................................... 9

7. Concluding remarks................................................................................................ 11

8. References. .................................................................................................... 12

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Lean supply chain management

1-Introduction

Supply chain is an established network of processes that starts from procurement of raw material;

conversion of raw material into final product and then distribution of that finished product to

customers. Over last two decades, the concept of lean supply chain management has gained great

importance from both academics and practitioners. To gain competitive advantages and to

survive in this dynamic environment firm are in need of delivering quality product with

minimum wastage of resources. Therefore the concept of lean Supply chain management is more

practical now a day’s then before it. Lean production is an integrated activity in SCM that is

aimed at achieving high volume production with minimum wastage of raw materials. It focuses

on improving the efficiency of processes on continuous basis, minimizing wastage and

eliminating almost all activities that does add any value in overall supply chain. Lean production

is considered a innovative way of thinking and thus it includes the integration of firms vision,

culture and strategy in such a way that it can serve the customer by providing high quality

product with in low cost and on short delivery Alabama Technology Network, 1998; Inman,

1999; Davis and Heineke,( 2005) cited by Agus& Hajinoor(2012).

Lean production is such a socio-technical system that is aimed on removing wastage by

minimizing supplier, customers and internal variability among firms operations. Lean production

is not only element that helps in achieving goals of Lean Supply Chain, it also includes product

development phase and aspects of distribution channel. Firms that want to implement LSCM

must also manage variable supply of product, processing time, demand and also manage

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relationships with all parties in value chain. In lean production the major factors is to manage

external relationships rather than internals (Jurado, Fuentes, & Diaz. (2012)).

1.1 What is lean?

According to Ohno,1998;Monden,1983 Cited by Turner,Parry,&Mills(2010) Lean is derived

from Toyota motors who firstly introduced this concept by improving its processes not only

on shop but also in its design and development. Lean is a value system that is based on

company customers and chain partners. Womack and Jones in 1996 cited in

Turner,Parry,&Mills (2010) described the lean to eliminate wastage and increase efficiency.

They also identified its five principles that are:

 Specify value

That is defined by customers in term of their satisfaction in shape of product for price

they are giving.

 Identify value stream

Actions that are used to transform product and services through problem solving,

information technology etc.

 Make the value flow

Reducing cycle time and batch size to make production more visible

 Customer pull

Customers make demand about special product or service.

 Pursuit perfection

Improvements will be made to make product or service perfect for customer.

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2-Why leans supply chain is needed?

Lean supply chain improves the firm’s performance and also produce superior quality product to

customers. A comparison was conducted by Nightingale (2005) Cited in Zai, Manzouri, &

Rahm(2013) between conventional SCM practices and lean SCM practices. They also

highlighted numerous issues when companies shift from conventional to lean practices. Lean

SCM practices helps in achieving goal of superior quality with minimum resources. To survive

in this dynamic environment it is necessary for firms to adopt lean SCM practices to gain better

performance.

Characteristics Conventional practices Lean practices

1-Competition No competition among members Competition exists

Of supply chain

2-Role of supplier less involvement Greater involvement

3-Data interchange less interaction very frequent at

&interaction Operational level

4-Structure vertical clustered

5-Procurement personnel large limited

6- Outsourcing cost based strategic

7-Nature of interaction adversarial; zero sum cooperative: positive

8-Realtionship focus transaction focused mutually beneficial

9-Selection criteria low cost performance

10-Contract length short term long term

11- Price changes upward downward

12-Quality inspection-intensive designed in

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Above table is complete comparison between conventional practices and lean practices. Lean

SCM is required because to superior quality, customer focused approach and cost effectiveness.

according to Zai, Manzouri, & Rahman(2013) In lean SCM there is collaboration at all that

improves firm’s process and performance in turn .

3-Benefits of lean supply chain management

Lean production is philosophy that is based on many practices like TQM, JIT to remove wastage

and improve performance. The use of Lean production practices results in following outcomes (

Hofer et al, 2012).

 Improved operational performance

 Higher quality

 Lower inventories

 Less lead

 Improve financial performance

 Increase collaboration between all parties

 Less usage of raw material

 Less cost of finished goods

4-Implementation of Lean SCM:

The term lean production is mainly associated with Toyota production system where it was

firstly implemented with JIT to improve quality and delivery time.

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Health care sector:

An example from real life is implementation of lean processes in health care organizations.

Supply chain in hospitals is interconnected within its all departments. As due to less budget

available hospitals has to cut its budget by implementing lean manufacturing techniques. The

tendency to reduce supplies especially in hospitals is difficult task. Hospitals are notorious in

wastes and misuses of supplies that is less attention towards these issues and limited qualification

of professional in field of management. To implement lean practices is difficult task because

processes are more complex in hospitals and required a different combination of product and

services for each patient (Machado, &Vaccaro (2014) ).

The main changes that were made in health care organizations especially hospital are the

modification in work structure by building multidisciplinary teams and tasks are divided that

who is responsible for what. In this way administrative work is made more easily so time is left

for other tasks. Following steps were made

 Modifying work structure by making teams

 Involving staff at initial stage

 Head of hospital cut down staff i.e.potenial use of staff to full extent.

 Standardizing work-it means documenting in same way and making same forms for

visitors(Hansan,2012)

By implementing the lean production system in hospital, organization culture is changed and

team (doctors, nurses worked is promoted to satisfy end customers i.e. patients. Satisfaction is

only possible if entire supply chain in integrated into coherent way.

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Pork sector:

Another example of practical implementation of lean production is pork sector ,that has adopted

demand management techniques. This implementation is example of greater collaboration of

supply chain collaboration to gain competitiveness in market. Members of this sector directed

their future strategies on innovation and collaboration to gain desired outcomes. Pork system has

cultural capability to apply lean system Castro, Gimenez ,& Simon(2010).

5-Challenges faced while implementing lean SCM:

A study conducted by Womack et al. (1990) Cited by by Agus& Hajinoor(2012) Despite the

benefits of lean production system there are many implementation challenges faced by

organizations. These are

 Lean production changes the way people works but it does changes their minds to adapt

this new processes. So workers especially Blue collars find their jobs more challenging

for them as lean processes are implemented. Workers may find their job more stressful at

that time than even before.

 A study conducted by Alabama Technology Network( 1998) cited by Agus&

Hajinoor(2012) said that It is takes time to distinguish value added activities from non

value added activities i.e. elimination of wastge.Wastage include overproduction, defects

in product, waiting for transportation, underutilized people etc.

 Cultural difference

 Lack of skilled work force

 Lack of interest in implementing Lean SCM by supplier

 Lack of commitment from top management

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A company can cope up with these challenges by arranging the training session for workers,

making their minds that new processes are beneficial for all stakeholders. By streamlining all

processes from manufacturing to distribution non value added activities can be avoided. So lean

SCM is customer oriented.

6-Best practices that supports Lean SCM process:

According to Shah and Ward, 2003, 2007; Bhasin and Burcher, 2006; Pettersen, 2009; Agus and

Hajinoor, 2012 as cited by(Jabbour,Junior,& Jabbour, 2014) main practices that support Lean

SCM especially lean manufacturing are

 Continuous flow

For reducing in production size it is important to make better control over production by

continuous flow of processes that reduces wastage.

 JIT

By using kanban cards, it is easier to plan and control production flow to the extent that

production is done only when needed. It is produced only in required quantity

 Reduction in setup time

By using SMED techniques machine setup time is reduced and a combination between

production quantity and variety is made.

 Total production maintenance

By doing minor daily repairs or keeping machinery up to date can help avoiding

unnecessary stops during production. This reduces wastage and saves time.

 Employee involvement

The main pillar of lean manufacturing and SCM is autonomation. This concept involves

employees in proposing suggestion for better performance and in this way in tough or

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hard time employees provides support in achieving objective of minimizing wastage and

delivering high quality.

 Continuous improvement

According to Naslund, 2008; Arnheiter and Maleyeff, 2005 cited by ( Jabbour,Junior,&

Jabbour, 2014) by using quality management techniques like total quality management

and PDCA (plan do check act) it is possible to find causes that are barrier in cyclic flow

and it is also possible to find their solutions. Companies are using an integrated

approached between lean manufacturing and six sigma to gain required performance. Six

sigma is tool for process improvement by defining, measuring, analyzing and controlling

the production process.

 Supplier development

According to Liker (2005) as cited by (Jabbour,Junior,& Jabbour, 2014) supplier

development is a main principle of lean manufacturing that is supporting and challenging

the partner i.e. supplier in a way that it improves its own processes. It can be achieved by

collaborative efforts from supplier and manufacturer.

Logistic management

Logistic management is main component of Lean SCM practices; timely delivery of

product is an important for firm. For this purpose logistic network should be designed in

best way and should be greater collaboration with logistic services provider. Logistic

network should have flexibility of providing services according to demand. Smooth flow

transportation eliminates the need of buffer stock at all (Kodali &Jasti, 2015).

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 Information technology management

EDI are used to communicate between different departments. There is centralized

database for documenting .ERPS are employed at customer based for effective

communication. Effective and transparent flow of information is base for lean

SCM.Computer based decision aiding systems are used by firms (Kodali &Jasti, 2015).

While in lean SCM there should be good collaborative network among all parties i.e. supplier,

distributors and customer so that desired goals can be achieved (Jabbour,Junior,&

Jabbour,2014).Toyota motors was first to implement the concept of lean manufacturing and

followed all above practices.

7-Concluding remarks

Implementing lean SCM practices leads towards minimization of wastage, improved

performance, greater productivity, lower cost and best quality. To gain desired results in lean

production is well structured, well developed and collaborative relationship between customer

and supplier’s .the success of lean production depends upon long lasting relationship with

partners in supply chain. Lean production implementation in health care is discussed in this

report.

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References

 Agus,A.& Hajinoor,M.S.(2012). Lean production supply chain management as driver

towards enhancing product quality and business performance Case study of

manufacturing companies in Malaysia. International Journal of Quality & Reliability

Management, 29 (1), 92-121.

 Castro,C.P., Gimenez ,G.& Simons .D.(2010). Development of lean supply chains:a case

study of the Catalan pork sector. Supply Chain Management: An International Journal

15(1), 55-58.

 Hansen, E. (2012). Implementing Lean healthcare Linköpings university.

 Hofer, A,R,Hofer,C.& E.C.(2012). The effect of lean production on financial

performance: The mediating role of inventory leanness. Int J. Production

Economics(138), 242-253

Jabbour, A.Junior, J. & Jabbour,C.(2014). Extending lean manufacturing in supply

chains: a successful case in Brazil. An International Journal, 21(6), 1070-1083.

 Jurado,P. Fuentes,J.M.& Diaz,M.S.(2012).Cooperation in the supply chain and lean

production adoption:Evidence from the Spanish automotive industry. International

Journal of Operations & Production Management 32(9), 1075-1096.

 Kodali,R, Jasti,N.K.V. (2015). A critical review of lean supply chain management

frameworks: proposed framework. production planning & control: The Management of

operations.

 Turner.C, Parry,G. Mills.J. (2010). Lean competence: integration of theories in operations

management practice. Supply Chain Management: An International Journal15 (3), 216-

226.

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 Machado,C.L.M, &Vaccaro,G.(2014) LEAN HEALTHCARE SUPPLY CHAIN

MANAGEMENT: MINIMIZING WASTE AND COSTS. INDEPENDENT JOURNAL

OF MANAGEMENT & PRODUCTION (IJM&P), 5(4), 1071-1088

 Zai,C. Manzouri, M.& Rahman,M.(2013). Lean supply chain practices in the Halal food.

International Journal of Lean Six Sigma,4(4),389-408.