What is a Lean Supply Chain?

Real-Life Examples 

Several companies across many industries have benefitted from switching to lean supply chains. Successful implementation has led companies to boost overall performance and customer satisfaction. The following companies represent the success that can follow the lean supply chain principle application. 

Amazon: Amazon focuses on customer demand and order fulfillment by using lean supply chain principles. The company makes data-driven decisions, optimizes warehouse operations, and uses advanced technology for warehouse operations—the company’s success results from a highly efficient and responsive supply chain.

Honeywell: Honeywell has utilized tools such as VSM (value-stream mapping), Kanban, and other continuous improvement initiatives that reduce waste and increase competition. 

Caterpillar Inc: Lean manufacturing practices have enabled Caterpillar to improve production. Its lean initiatives have helped reduce lead time costs and increase its competitiveness. 

Tools & Techniques

Lean supply chain strategies require the use of a variety of tools and techniques. Each tool is used to reduce waste and maximize efficiency. Below is a list of the most commonly used tools and techniques, along with in-depth descriptions of terms that have yet to be covered. 

• VSM (Value Stream Mapping)
• JIT
• Kanban System
• Kaizen
• Pull System 
• 5S System
• Poka-Yoke (Mistake-Proofing)
• Supplier Relationship Management (SRM)
• Cross-Functional Teams
• Heijunka (Production Leveling)
• Andon System
• Total Productive Maintenance (TPM)

Pull System: The pull system is a fundamental concept within a lean supply chain. This system is centered around production in response to customer demand. The chief principle is only replenishing inventory once it’s consumed. Production is more flexible than other systems, such as the “push system,” because it can be adjusted based on real-time fluctuations in demand. This system is much more responsive to consumer demand than other models, which increases customer satisfaction because the company can adapt accordingly. 

On the opposite end of the spectrum, a push-based system centers production around forecasts and predetermined schedules. The benefits of implementing a pull-based system are numerous and ultimately drive the lean-supply approach. First, a pull system reduces inventory levels by only producing what is needed at any given time, which goes hand in hand with minimizing overproduction and reducing waste, as well as carrying costs associated with storing excess inventory. 

One of the most significant benefits of the pull-system approach is the increase in quality control. With a pull system, production is completed in smaller batches, making detecting defects and monitoring product quality much more manageable. These quality issues become easier to find and correct in smaller batches, resulting in happier customers. A pull system lies within the principles of a lean supply chain, promoting a more adaptable and successful supply chain. 

5S System: The 5S method provides a foundation for an efficient and productive workplace environment. 5S stands for the 5 steps: sort, straighten, shine, standardize, and sustain. This cyclical methodology helps companies achieve continuous improvement standards in their lean supply chain. 

Poka-Yoke (Mistake-Proofing): Poka-Yoke is a methodology that aims to prevent defects and eliminate errors at the beginning of the process. To implement Poka-Yoke, create a flowchart and identify where potential human errors will occur, then work backward to identify the source of each error. Next, think of ways to make mistakes impossible.

This can be done by eliminating error-causing steps, replacing steps with error-proof ones, or making it easier to do the step correctly over making a mistake. If your company cannot completely eradicate the potential for the error, determine how to detect it and minimize the effects. Once you have decided which methods will work best for each error, test and implement them.

Supplier Relationship Management: SRM is critical to the success of a lean supply chain because it creates collaboration, optimizes processes and ensures efficiency. By sharing information and collaborating to improve processes, lead times can be reduced and efficiency increased. 

Cross-Functional Teams: This technique requires bringing together individuals across departments within an organization to identify challenges, improve processes, and boost performance throughout the company. 

Heijunka (Production Leveling): Heijunka is a crucial concept within the lean supply chain. This technique calls for the even distribution of product volume and product mix over a specific period. This process aims to reduce variability, improve flow, and enhance efficiency. This technique also follows the core principles of customer-demand-based production, sequencing, and scheduling production. Heijunka helps prevent overproduction, improves flow/responsiveness, optimizes resources, enhances flexibility, lowers costs, enhances quality, and simplifies planning and scheduling. 

Andon System: The Andon system is a visual and audible signaling technique used to communicate the status of processes, quality issues, or a need for assistance. Operators push a button, pull a chord, or use another similar activation system to activate the Andon system. Color codes, alarms, sounds, etc., will go off in response, alerting the team of the issue.

This quick feedback loop allows team members to resolve any issues as they arise. This method will enable workers to stop production or ask for assistance. Once a resolution is reached, team members investigate the cause and how to prevent similar issues. This system encourages continuous improvement, allowing processes to be improved over time. 

Total Productive Maintenance: Total productive maintenance maximizes equipment effectiveness and productivity while minimizing breakdowns. Proactive and preventative maintenance is a priority in keeping equipment in excellent condition. Having reliable machinery is essential for a successful supply chain. The TPM technique addresses the “Six Big Losses” that reduce equipment effectiveness.

These losses include downtime, speed losses, rework, changeover and setup time, reduced yield, and small stops. Addressing these losses helps to get rid of waste and improve the process. The strategy includes many other tools and techniques, such as autonomous maintenance, training and skill development, overall equipment efficiency, zero breakdown goals, equipment standardization, root cause analysis, and visual management. 

VSM Mapping

VSM Mapping is a visual tool used to improve the flow of information and materials within a process. This strategy involves drawing a detailed map of the steps to make a product or service. This tool allows companies to visualize, analyze, and optimize end-to-end processes by creating a detailed roadmap. To implement this method, you must first identify the process and map the current state. Next, use symbols to represent process steps, inventory, flow, information, etc. It is essential to include data such as time spent at each step, the amount of inventory, and any other relevant metrics.

Equally as important, identify the value-adding and non-value-adding or wasteful steps in your process. This mindset is a crucial concept of lean thinking. Once the mapping step of the original process is complete, it is time to create a new flowchart for an ideal future state. The final step of the process involves implementing the changes the company needs to make. Often, this will include streamlining processes, improving communication, and reducing unnecessary inventory. 

VSM is a method that will need to be implemented and updated regularly as part of the continuous improvement cycle.VSM mapping helps to identify bottlenecks through visual representation, which shows where the flow is impeded. Cycle time analysis and inventory level management through VSM are additional ways in which VSM helps reduce bottlenecks and optimize supply chain processes. Mapping out the process allows you to “assign” cycle times, which will clearly show which steps take longer than others while also allowing you to visualize inventory levels, which have the potential to signal bottlenecks upstream or downstream in the supply chain. 

Kanban Method

Kanban cards represent physical tasks, work items, or products in the supply chain and move through various workflow stages. The cards’ movement is tracked on visual boards that represent real-time workflow. From it, stakeholders and team members can better grasp the situation. Another key concept of Kaban is WIP (work-in-progress) limits. These limits prevent overloading team members and ensure each process only takes on a manageable amount of tasks simultaneously. Much like other bottleneck-preventing methods, the Kanban method   

is also visual, allowing the team to identify workflow delays quickly, address the issue quickly, and reduce lead times. The Kanban method also makes handovers much more efficient by reducing wait times.

As a result of the natural transparency, Kanban enhances communication between teams, departments, and stakeholders and collaboration efforts within the company. Increased flexibility and adaptation to variability are also effects of employing this methodology.   

Six Sigma

Six Sigma is another method to improve processes, reduce and eliminate defects, and increase efficiency. It has been used across a variety of industries. The goal is to deliver high-quality products, with a statistical measure of only 3.4 defects per million opportunities. The Six Sigma method accomplishes these goals through data-driven decision-making, process standardization, continuous improvement, error prevention, customer focus, variation and cost reduction, employee involvement, and lean Six Sigma integration.

Patterns, trends, and variations are identified through statistical data analysis, while standardized processes create a predictable and reliable work environment and manufacturing processes. Many companies combine Six Sigma with lean principles to accomplish their company goals.