"Supply Chains: Tightening the Links"
Manufacturing Engineering
September 2006, pp. 77-92
The author of this article argues that the Lean journey must include effective Supply Chain Management. Steady reduction of inventory is often considered the most objective way to quantify lean achievements in manufacturing plants and in supply chains. The article presents data that indicate that all regions except Japan have actually gotten worse in their inventory-turnover scores over the last five years. The notable exception is Japan, which remains the leader on inventory-turnover as well.
Manufacturing plants have been actively converting to lean production, and the main problem does not seem to be in work-in-process inventory. It seems to be in supply chain management.
The article points to Wal-Mart and the electronics industry as those who have made the most progress in lean supply chain management processes. After discussing the innovative practices by these companies, a useful summary of the key Best Practices is presented:
- Internal and external collaboration—"internal multi-functional teams face to face with counterpart supplier and customer teams"
- Joint inventory—"as a performance metric aimed especially at managers in purchasing (raw materials) and marketing (finished goods)"
- Vendor-managed inventory—"with your inventory records open to suppliers"
- Continuous replenishment—"fed by your daily usage data"
- Synchronization via advanced scanning and tracking systems
- Squeezing out the middleman—"unless the middleman is a 3PL" (3rd Party Logistics)
- Direct shipment—"bypassing others' or your distribution centers"
- Cross-docking at distribution centers
- Breaking free of ingrained vertical integration—"to source noncore items from lower-cost suppliers who are more expert than you"
- For any product line involving large numbers of component parts, establishing modular suppliers to assume subassembly responsibilities for logical groups of parts
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