International Conference on Global Trends in Engineering, Technology and Management (ICGTETM-2016)
Lean Supply Chain Strategies to Improve Business
Performance
Navneet Keshav Patil1, Dr. N. V. Halegowda2, Dr. V. S. Patil3
1
Research Scholar, Department of Mechanical Engineering, North Maharashtra University, Jalgaon, India
2
Principal, Adsul's Technical Campus, Chas, Dist. Ahmednagar, India
3
Professor, University Institute of Technology, North Maharashtra University, Jalgaon, India
Abstract — Today lean supply chain became a vital
tool used for enhancement of organizational
performance. The manufacturing sector has moved
from vertically organizational structure to horizontal
organization; that is today’s companies located
anywhere in the world control only pieces of the
supply chain. This enable companies to focus on the
finest part but supply chain has become more complex.
Owing to supply chain as a target oriented network of
processes and stock points used to deliver goods or
services to customers, lean strategies are imbibed for
coordinating within and between firms with a focus on
eliminating waste, achieving efficiency, or overburden
and creating value in products. Lean Supply Chain
provides rapid response to customer needs. Most
significant part of lean supply chain strategies is that
substantial improvement is achieved using existing
equipments.
Keywords — Supply Chain, Lean, Stock points,
Inventories.
I. INTRODUCTION
In today’s global market supply chain became a vital
entity to the organizations performance measurements.
To support this, research team from Stanford
University and Accenture showed a statistical
correlation between companies with a supply chain
strategy and important financial success. Boyson
(1999) studied that number of companies seek to
enhance performance beyond their own boundaries
through supply chain management. However, only a
few companies use new organizational concepts and
technological solutions strategically in a supply chain.
The manufacturing sector has moved from vertically
organized structures to horizontal organizations; that
is today’s companies located anywhere in the world
control only pieces of the supply chain.[2] This enable
companies to focus on the finest part but the supply
chain has become more complex. According to
Wallace Hopp, a supply chain is a target oriented
network of processes and stock points used to deliver
goods and services to customers. Processes correspond
to the individual activities involved in producing and
distributing goods and services. They could be
manufacturing operations, engineering design
functions, service operations, or even legal
proceedings. Definition involves stock points, which
ISSN: 2231-5381
represent locations in the supply chain where
inventories are held. These inventories may be the
result of deliberate policy decisions (retail stocks) or
the consequence of problems in the system (defective
items awaiting repair). It is vital to include stock
points in the definition of a supply chain as managing
inventories is a key component of effective supply
chain management,
One efficient strategy for coordinating within and
between firms with a focus on eliminating waste,
achieving efficiency, or overburden and creating value
in products is the concept of lean management.
II. SUPPLY CHAIN MANAGEMENT
Supply chain management integrates and coordinates
topics from manufacturing operations, purchasing,
transportation, and physical distribution into a unified
program into a seamless process. Bernard J. (Bud)
LaLonde, professor emeritus of Supply Chain
Management at Ohio State University. LaLonde
defines supply-chain management as follows: "The
delivery of enhanced customer and economic value
through synchronized management of the flow of
physical goods and associated information from
sourcing to consumption".
Seventy-five percent or more of respondents included
the following activities as part of their company's
Supply Chain Management department functions like
Inventory management, Transportation service
procurement,
Materials
handling,
Inbound
transportation, Transportation operations management
and Warehousing management. Consistent application
of appropriate information technology throughout the
Supply Chain Management pipeline results in
shortened cycle times and lowered effort.
http://www.ijettjournal.org
Page 354
International Conference on Global Trends in Engineering, Technology and Management (ICGTETM-2016)
Fig.2. SCM implementation steps
Fig.1. Flow Networks
Supply Chain Management becomes a tool to carry
out corporate strategic objectives like reducing
working capital, accelerating cash-to-cash cycles,
taking assets off the balance sheet increasing
inventory turns, and so on. Supply chain design as
consisting of two parts; ensuring operational fit with
strategic objectives and achieving maximal efficiency
within the constraints established by strategy.
2.2 Challenges in SCM
Several issues exist in the global supply chain
processes. One of the most common problems in
supply chains is the so-called bullwhip effect. Sharing
of information is another challenge as the companies
in a supply chain may not be prepared to share their
production data, lead time, etc. The difficulties of
formulating and adopting a new process, the lack of
teamwork between vendors, and the difficulty of interorganizational coordination are also the major
challenges in SCM.
Thorough cost/benefit analysis lays the essential
foundation for prioritizing and sequencing initiatives,
establishing capital and people requirements, and
getting a complete financial picture of the company’s
supply
chain—before,
during,
and
after
implementation.
2.1 Implementation of Supply Chain Management
in an organisation
The important characteristic of firms that could apply
SMC is the will to accept innovations and new
methods of working. The following steps are required
to achieve superior performance for implementation of
supply chain management.
Various requirement to align the supply chain
with the business strategy
Various level of customer services to be
provided to each customer segment
Various channels of distribution that best
meet our goals and our customers' needs
Structured physical network of plants and
distribution
Rationalisation of current network
Use of contract manufacturing or third-party
logistics capabilities
Best transportation services that link together
the network of facilities
List of activities that can be outsourced
Identification of core supply chain processes
driving the business
Adoption of best-in-class approaches to
current core processes
Design effective linkages with suppliers and
customers
Level of cross-functional integration required
to manage core processes effectively
Leverage cross-company skills and abilities
Effective performance-measurement and
reporting structure
Use of IT platform and core applications
software
ISSN: 2231-5381
A critical step in the process is setting explicit
outcome targets for revenue growth, asset utilization,
and cost reduction.
3. LEAN SUPPLY CHAIN (LSC)
Nowadays supply chain had got entangled between
entire flow of product and production process. To
make supply chain management efficient concept of
lean is to be introduced. This will automatically
provide a boundary line between manufacturing and
supply chain logistics. Application of lean to supply
chain converts the process of pushing of product by
http://www.ijettjournal.org
Page 355
International Conference on Global Trends in Engineering, Technology and Management (ICGTETM-2016)
the company to pulling of product by the customer.
LSC enables to define the product value form the
customer’s point of view instead of companies. It is a
continuous process which never ends to eliminate
waste in materials, manpower and processes.
Process standardization, product standardization,
demand management, collaboration and cultural
change are necessary attributes of lean supply chain.
Enterprise resource planning technology tuned with
process plays a key part of developing lean supply
chain management process. Proactive approach is
required to develop sound communications within and
among customer and supplier firms. Organization
must study the causes and drivers of waste and nonvalue added activities and processes. The eight wastes
in lean are: Defects, Over-production, Waiting, Nonutilized talent, Transportation, Inventory, Motion and
Extra-processing, acronym as DOWNTIME.
iii)
iv)
v)
vi)
Information Technology: Organizations
need to recognize that information
technology is more than just computers.
Communication
technologies,
data
recognition
equipments,
factory
automation and other hardware and
software’s comes under information
technology.
Execution: Core team is restructured by
empowerment of people, use of
technology, promotion of creative
thinking, flexibility, higher satisfaction
level, building corporate culture of
openness and continuous performance
improvement.
Monitoring: Continuous tracking and
tuning of processes is established.
Control: Short term and long term
changes in demand patterns, quicker
response to unexpected events and
improvement in customer satisfaction is
controlled.
5. CONCLUSION
Fig. Eight Wastes in Lean
LSC represents a hybrid approach in supplier
partnerships and strategic alliances. In horizontal
integration organization buys all inputs from outside
specialized suppliers. In such case there is lower
production costs and higher coordination cost. In
vertical integration organization produces all required
inputs in house only.[3] This process involves high
production costs and lower coordination costs. Lean
approach optimizes both customized and standardized
inputs. Such model confers lowest production costs
and coordination costs.
4. LEAN SUPPLY CHAIN PERFORMANCE
Lean Supply Chain is a combination of two separate
but
complementary
process
improvement
methodologies. Applying lean to supply chain
involves following procedures.
i)
Analyzing: Study the existing processes
and proper documentation is done.
ii)
Modeling:
Simulating
different
alternative scenarios for improving
performance
ISSN: 2231-5381
Lean supply chain provides rapid response to
customer needs. It also shortens process cycle time,
reduces ―bull whip‖ effect, reduces inventory costs,
improves customer services, reduces communication
gap among different levels. Enhancement in interorganizational information systems is achieved in lean
supply chain integration. Most significant part of lean
supply chain strategies is substantial improvement is
achieved using existing equipments. Decisions for
implementing LSC is easy during management review
it as a strategy for increasing competitiveness,
revenues, profit margin, market share, reducing labour
and inventory costs. Study shows that consistency of
reliability and validity in performance improvement
depends on types of industries and competitiveness in
market. Furthermore, scope of research exists in
clustering of related industrial areas.
REFERENCES
[1] Barrat, M. ―Understanding the Meaning of Collaboration in the
Supply Chain,‖ Supply Chain Management: An International
Journal, 9:1, 2004, pp. 30-42.
[2] Houshmand M., Jamshidnezhad B., 2006, ―An extended model
of design process of lean production systems by means of process
variables‖; Robotics and Computer Integrated Manufacturing Vol
22, No16, 1–16.
[3] Anon., 2006, ―Lean Certification Body of Knowledge‖, Version
2.0, Society of Manufacturing Engineers.
[4] Wong, Y.C., Wong, K.Y. and Ali, A., 2009. ―Key practice areas
of lean manufacturing‖, Proceedings of the International
Association of Computer Science and Information Technology,
Spring Conference (IACSIT-SC 2009), Singapore, pp. 267-271.
[5] Shah, R. and Ward, P.T., 2007. ―Defining and developing
measures of lean production‖, Journal of Operations Management
25, pp. 785-805.
http://www.ijettjournal.org
Page 356
International Conference on Global Trends in Engineering, Technology and Management (ICGTETM-2016)
[6] Taylor, D and Pettit, S., (2009), ―A consideration of the
relevance of lean supply chain concepts for humanitarian aid
provision‖, International Journal of Services Technology and
Management Issue: Volume 12, Number 4 / 2009 Pages: 430 – 444
[7] Wee, H.M.and Wu, S. (2009), "Lean supply chain and its effect
on product cost and quality: a case study on Ford Motor Company",
Supply Chain Management: An International Journal 14/5 pp 335–
341.
[8] McKee, R. and Ross, D. (2009), "From Lean Manufacturing to
Lean Supply Chain: A Foundation for Change", LAWSON White
Paper.
[9] Martin, J. (2007), "Deploying Lean Six Sigma Projects Using
Lean Tools", McGraw-Hill
[10] Abdulmalek, F.A. and Rajgopal, J., 2007. ―Analyzing the
benefits of lean manufacturing and value stream mapping via
simulation: a process sector case study‖, International Journal of
Production Economics 107, pp. 223-236.
[11] Sanchéz A.M., Pérez P.M., 2001, ―Lean indicators and
manufacturing strategies‖; International Journal of Operations &
Production Management, Vol. 21, No. 11, p1433-1451
[12] Bhasin, S. e Burcher, P., 2006, ―Lean viewed as a philosophy‖,
Journal of Manufacturing Technology Management; Vol. 17, Nº 1,
56-72.
[13] Mason-Jones, R., and D.R. Towill. ―Information Enrichment:
Designing the Supply Chain for Competitive Advantage,‖ Supply
Chain Management, 2:4, 1997, pp. 137-148.
[14] Vonderembse, M. A., M. Uppal, S.H. Huang, and J.P.
Dismukes. ―Designing Supply Chains: Towards Theory
Development,‖ International Journal of Production Economics,
2006, In Press.
[15] Mary J. Meixell and Vidyaranya B. Gargeya (2005), Global
Supply Chain Design: A literature Review and Critique, Elsevier
Ltd
[16] B.S. Sahay and Ramneesh Mohan (2003). Supply chain
management practices in Indian industry. International Journal of
Physical Distribution & Logistics Management, 33: 7, 582-606.
[17] J. D Wisner and K.C.Tan (2000), Supply Chain Management
and Its Impact on Purchasing, The Journal of Supply Chain
Management, Vol. 36, No. 4, pp. 33-42.
[18] Cigolini, R., Cozzi, M. and Perona, M. (2004) A New
Framework for Supply Chain Management. International Journal of
Operations & Production Management, 24, 7-41.
[19] Habib, M.M. (2011) Supply Chain Management (SCM):
Theory and Evolution. Supply Chain Management, Applications
and Simulations. InTech
Open Access, Croatia, September 2011.
[20] Lockamy, A., and K. McCormack. ―The Development of a
Supply Chain Management Process Maturity Model Using the
Concepts of Business Process Orientation,‖ Supply Chain
Management: An International Journal, 9:4, 2004, pp. 272-278
[21] Lewis, M.A., 2000. ―Lean production and sustainable
competitive advantage‖, International Journal of Operations &
Production Management 20, pp. 959-978.
[22] Wu, Y.C., 2003. ―Lean manufacturing: a perspective of lean
suppliers‖, International Journal of Operations & Production
Management 23, pp. 1349-1376.
[23] Trkman, P., M. Indihar Stemberger, and J. Jaklic. ‖Information
transfer in supply chain management,‖ Informing Science, 2, 2005,
pp. 559-573.
ISSN: 2231-5381
http://www.ijettjournal.org
Page 357