Supply Chain Management (SCM) is managing the flow of goods and services throughout the supply chain (Russell & Taylor, 2003). Lean techniques should not be confined to one part of the supply chain. Companies should also have lean implemented in their entire organization. This involves using lean techniques in product development, accounting, and manufacturing of a company. Dr. Thomas Greenwood (2006) of Leanworks™ describes this concept of extending lean throughout one company’s entire organization as having a lean enterprise. Each lean enterprise is then linked to their supplier and customer in order to convey information more smoothly and in a more timely manner. Langenwalter coined a
new term, Total Enterprise Integration (TEI), which is “integrating all information and actions required to fully support a manufacturing company and its supply chain” (2000). TEI is necessary for a fully functional lean supply chain. In order for the enterprise to fully transition to lean, the correct information technology should be implemented that allows optimal communication between supply chain partners. In an integrated supply chain, each partner is linked, through information technology or other methods, to the same customer demand signal. The manufacturing plant may allow its supplier to have access to the production schedules. When this type of linking occurs, each partner in the supply chain is aware of the specific needs of the customer and can then build to demand (Aberdeen Group, 2006a; Ake, Clemons, & Cubine, 2004; Michel, 2002).
Having a lean supply chain will provide many benefits to all companies involved, including reduced paperwork, reduced waste and reduced costs between business partners (Langenwalter, 2000). However, members in the textile and other industries are not implementing lean concepts throughout the enterprise or supply chain (Aberdeen Group, 2006b). The Aberdeen Group’s Roadmap to Lean Success survey of 125 companies’ lean involvement conducted in June of 2006 shows in Figure 2.5 that only about one third of the survey participants have lean manufacturing programs and less than 20% of companies surveyed have yet to implement lean in their enterprise or supply chain (2006).
Relative Lean Maturity of Respondents 12% 31% 57% 18% 23% 59% 32% 39% 28% 0% 20% 40% 60% 80% 100%
Lean Supply Chain Lean Enterprise
Lean Manufacturing
Mature >5 yrs Some Lean Just Beginning
Figure 2.5 Relative Lean Maturity of Respondents Source: (Aberdeen Group, 2006d)
The Aberdeen Group’s Lean Supply Chain analysis of multiple industries says that many manufacturers are beginning to separate the lean philosophy from the tools and techniques used in manufacturing to apply the same philosophy with other tools and techniques in different parts of the supply chain (Aberdeen Group, 2006b). Still, there are limitations. In Figure 2.6, The Aberdeen Group’s September 2006 Lean Supply Chain Report shows the top barriers to fully adopting lean principles throughout the supply chain (Aberdeen Group, 2006b). Many of these barriers are similar to those barriers seen when trying to implement lean on the shop floor.
Top Barriers to Adoption/Expansion of Lean Strategy 22% 30% 35% 35% 39% 57% 0% 10% 20% 30% 40% 50% 60%
Enterprise level re-organizations or consolidations that affect supply chain value streams Operating practices and data standards differ significantly across trading partner community Lack of participation by suppliers and other
partners
Top management commitment No straight-forward way to quantify the business
value of Lean beyond the plant floor Significant culture change required outside the
plant
All Participants
Figure 2.6 Top Barriers to Adoption/Expansion of Lean Strategies Source: (Aberdeen Group, 2006b)
Lack of participation by suppliers is tied for the third most prevalent barrier. A company who has a lean manufacturing facility should not carry much inventory. Their supplier, however, if not lean, may have to carry extra inventory in order to provide what their customer requires. Suppliers may miss out on optimal business opportunities if they cannot promise their customers the products in an on-time manner, a task often made much easier with the implementation of lean manufacturing techniques. Companies involved in lean manufacturing have now begun to encourage their suppliers to also become lean and have begun helping them transform, while other companies are simply requiring their suppliers to be lean (Fabric manufacturing gets a new twist, 2003; Bacheldor, 2004a).
In addition to the planning and scheduling inside a plant, lean manufacturing also works best if the entire supply chain uses the same type of planning and scheduling system
or one that is compatible with the other members of the supply chain’s planning and scheduling systems. With similar and compatible systems in place, the fiber producer would be able to see what his customer’s customer is ordering and prepare accordingly. Supply chain scheduling is used to integrate all of the various links of the supply chain together. An example of a textile supply chain is shown in Figure 2.7.
Figure 2.7 Textile Supply Chain
In each of these stages, information must be conveyed to ensure correct timing of orders. If a real-time relay of information is available to the suppliers regarding what their customer needs, there would not be a need for increased inventory waiting for a high demand period that may or may not come. For example, in order for the fabric manufacturer to be a lean organization, it may be necessary for the yarn manufacturer to hold extra inventory. This is useful to the fabric manufacturer, however costly for the yarn manufacturer. With the correct planning and scheduling systems in place, the need for holding excess inventory at one stage of the supply chain may be eliminated.
The following examples are of two integrated lean supply chains from the automotive industry. Guide, a manufacturer of automotive lighting systems, uses Factory Logic, a lean manufacturing software package that allows them to send their materials requirements directly to their suppliers (Bartholomew, 2003). With this system, Guide’s supplier knows, in real time, exactly what the demand is, and can manufacture accordingly. Delphi Corporation is an automotive supplier who used lean manufacturing to decrease
Fiber Producer Yarn Manufacture Fabric Manufacture Retailer
cycle times, improve on-time delivery, productivity and quality. Nelson, VP at Delphi Corporation, implemented a program which entitles their suppliers to their manufacturing secrets. Delphi helps their suppliers identify waste, map their manufacturing processes, and even helps with financial data and cost analyses. This sharing of information saved the company money and time involved in production stops from poor supplier quality, which improved by 34% (Bacheldor, 2004b). By ensuring Delphi Corporation’s supplier was included in their lean program, as well as the information flow, the company’s lean transformation was a success.