Lean Supply Chains Require Investment in Suppliers
Lean manufacturing is a revolutionary philosophy that has the potential to transform every aspect of your business. If you know about lean, you’ve probably heard about reducing waste on the factory floor and improving manufacturing processes. What you may not know is that lean philosophy can be applied to other parts of your operations as well. Even for firms with a “leaned out” factory floor, the supply chain is ripe with opportunities to get rid of waste, such as collaboration between suppliers and buyers.
The best way to reduce waste is to create a more equal relationship between suppliers and buyers, a partnership between companies with the same long-term interests. One of the only businesses in the world to fully implement a lean supply chain is Toyota, where lean manufacturing was pioneered. Toyota has achieved its success in part because it has applied lean principles to its entire supply chain. Toyota acknowledges that small to medium-size suppliers are crucial parts of the supply chain and integral to any assembly firm. It is in the interest of buyers to treat suppliers as long-term partners in the enterprise by helping them become lean, to reduce waste by sharing information and resources, and encouraging them to improve designs and processes.
In a lean supply chain, the buyer invests monetary and intellectual resources in the supplier. For example, a car company will usually give its pool of suppliers blueprints for a part, and the supplier that can manufacture that part the cheapest at a given level of quality is selected. Suppliers, experts in their field, have little opportunity to suggest improvement because they have no information about the rest of the vehicle. Due to the fickle nature of their relationship with the buyer, vendors must maintain a large inventory to ensure there will be no delays that might cause the buyer to cancel the contract. There is little or no collaboration and no mutual assistance and no improvement happening in this system.
In a lean system, the buyer will give the supplier a set of specifications and the supplier will design the part. The buyer will share information about the larger product with the vendor and encourage vendors to work with each other to produce a better product more efficiently. The key, however, is that the buyer invests resources and, more importantly, knowledge in the suppliers to help them become lean. In this way, both firms can collaborate and reduce inventory and other types of waste in the supply chain.
This is not to say that simply reducing inventory will transform your supply chain; in fact, that approach would reflect a too narrow view of what lean manufacturing means. The idea is that inefficiencies and waste in the supply chain and in the manufacturing process must be eliminated to allow the supply chain to be more responsive to customer demand, and this in turn will allow for reductions in inventory.
