Lean Supply
Chain Management
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History
Methodology
Elements
Application
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Agenda
Advantages and
Disadvantages
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Implementation
Strategy
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Industrial Exposure
08
Global importance
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History
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Introduction
Lean supply chain management is all about streamlining your company’s supply chain in
order to eliminate waste and improve efficiency.
Eliminate Waste
Improve Efficiency
By reducing or eliminating non-value-added activities throughout the supply chain, lean supply
chain management can help your company save time and money while also improving customer
satisfaction.
Lean supply chain management examples would be companies like Toyota, IKEA, and Walmart
who have achieved mastery in eliminating waste from every aspect of the supply chain
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1913 - Origins of the Lean history: Henry Ford
The history of Lean begins with Henry Ford who set up a very productive organization around
the "Flow" that started with raw materials and ended when the customer left with his car.
Ford was the first to implement some of the following Lean concepts (before the word Lean
was invented):
Standardization: standardization of product models, associated parts and also production
tasks
Reduction of wastes: in particular operator movements by minimizing the number of tasks
to be performed
Just in time: Ford worked on its Supply Chain to get the right amount of materials and parts
according to demand
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Historical Background
1924 - Origins of the Lean history: Toyoda
Sakichi Toyoda founded Toyoda Loom Works, manufacturer of weaving machines.
He developed a loom that automatically stops when a yarn breaks. He had just
invented the concept of "autonomation", which allows the operator to no longer be
directly linked to a machine and can supervise several machines. It introduces the
notion of the human being into the production process. This is a key stone in Lean
history since this is a major of fundamental of Lean.
1937 - Kiichiro, son of Sakichi, created the automotive division of Toyota Loom Works
In the 1930s, and especially after World War II, people like Kiichiro Toyoda and Taiichi Ohno
at Toyota noticed something important. They thought that making small but clever changes
could keep the production process running smoothly while also making many different types
of products. They took inspiration from Ford's ideas and devised what we now know as the
Toyota Production System.
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Toyota Production System
Toyota Production System, driven by concepts like Just-in-Time production, continuous
improvement (Kaizen), and respect for employees, redefined how industries optimized efficiency
and productivity."
JIT: Just-in-Time Manufacturing
Just-in-Time (JIT) manufacturing, a key element of the Toyota Production System (TPS),
focused on efficiently using resources by producing goods only as needed. This approach aimed
to decrease waste linked with surplus inventory and waiting times.
Kaizen: Continuous Improvement Philosophy
Kaizen refers to the philosophy of continuous improvement. It empowered employees to suggest
and implement small, ongoing enhancements in processes, fostering a culture of consistent and
gradual improvements within the organization.
Respect for People: Employee Valuation Principle
The principle of Respect for People emphasized valuing employees, involving them in decisionmaking processes, and fostering a culture of innovation and engagement within the organization.
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02
Methodology
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Lean Supply ChainOverview
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Lean Methodology
Kaizen Methodology
The 5 Whys
Fishbone Diagram
Spaghetti Diagram
5S Scorecard
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Definition of Lean
“A
systematic approach to identifying and eliminating waste (nonvalue-added activities) in a company’s operations.
Lean emphasizes flowing the product at the pull of the customer.”
Lean is implemented through both rapid and continuous
improvement.
Kaizen- “Kai’ means “little” or “ongoing”. “Zen” means “for the
better” or “good.” Small continuous improvements on everyone’s
part lead to world-class manufacturing.
Example: An automobile manufacturer has implemented a JIT
inventory system to improve efficiency and reduce waste.
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Kaizen Methodology
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Select project/opportunity
Study design principles/best practices from previous projects
Prepare an analysis of the current state
Generate proposed solutions (future state)
Develop proposed solution
Get feedback on the proposed solution
Revise and implement solution
Measure impact
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5 Whys
Question asking method used to discover the root cause of
a problem
● Highlights cause-effect relationship
● Identify problems – not just symptoms
● Have to ask the right why questions
● Could be any number of whys
Example:
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My car will not start. (the problem)
Why? - The battery is dead. (first why)
Why? - The alternator is not functioning. (second why)
Why? - The alternator belt has broken. (third why)
Why? - The alternator belt was well beyond its useful service life and
has never been replaced. (fourth why)
Why? - I have not been maintaining my car according to the
recommended service schedule. (fifth why, root cause)
5 WHYS
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Fishbone (Ishikawa) Diagram
Example:
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http://www.techrepublic.com/article/use-a-fishbone-diagram-to-help-attack-complex-problems/
DMAIC
Define
Measure
Analyze
Improve
Control
Case Study-Example
Ismail Industries Bearing Example
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SpaghettiTheDiagram
chart that shows the flow of product – highlights
inefficiencies in layout
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5S
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03
Elements
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Elements of Lean Supply Chain Management
To successfully implement lean supply chain management, there are several
key elements that need to be in place. These elements include:
Customer
Requirements
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Data and Analytics
Collaboration
Technology
Continuous
Improvement
Customer Requirements
Companies need to understand their customers' needs and expectations in order to provide high-quality products and
services. The customer's needs should be the driving force behind the supply chain process, and companies should use
data and analytics to better understand customer requirements.
Data and Analytics
These are essential for understanding customer requirements and improving the supply chain process. Companies should
use data and analytics to identify areas where waste can be eliminated, processes can be improved, and customer service
can be increased.
Collaboration
Companies need to collaborate with their suppliers, manufacturers, and customers to ensure that everyone is working
together to achieve the same goal. This collaboration can help companies identify areas where improvements can be
made and ensure that everyone is working toward the same objectives.
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Technology
Companies should use technology to increase transparency and improve communication and collaboration between
suppliers, manufacturers, and customers. Technology can also be used to track and monitor the supply chain process ,
helping companies identify areas where improvements can be made.
Continuous Improvement
By continually looking for opportunities to improve, companies can ensure that their supply chain remains efficient and
effective
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04
Application
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Supplier Management: Implementing lean practices with suppliers involves
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Building strong relationships
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Optimizing communication
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Establishing standardized processes
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Minimizing inventory holding costs.
Inventory Management: Lean principles such as Just-In-Time (JIT)
inventory help
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Minimize excess stock by aligning inventory levels with demand.
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Reduces storage costs
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Minimizes waste from overproduction
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Efficient flow of goods.
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Production and Manufacturing: Lean methodologies, like
the Toyota Production System (TPS), focus on
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Reducing waste (such as waiting times, over-processing etc.)
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Improving efficiency by implementing value stream mapping,
Kanban systems, and continuous improvement (Kaizen).
Logistics and Transportation Lean practices can
optimize transportation and logistics by
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Streamlining routes
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Reducing unnecessary handling
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Optimizing vehicle loads to minimize fuel consumption and
transportation costs.
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Warehousing and Distribution: Applying lean principles
in warehousing involves
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Organizing layouts for efficient material flow
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Employing visual management systems
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Reducing waste in handling and storage
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Improve overall warehouse productivity
Customer Service and Demand Planning: Lean
principles can be used to
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Enhance customer service
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Improving demand forecasting accuracy, ensuring products are
available when needed.
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Minimizing lead times in responding to customer orders.
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Information Flow and Technology: Lean supply chains benefit
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Efficient information flow facilitated by technology
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Real-time data sharing
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Inventory visibility
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Process automation
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Reducing errors and delays.
Continuous Improvement Culture: Lean supply chain management
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Promotes a culture of continuous improvement
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Encouraging teams to seek out inefficiencies
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Experiment with new methods
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Consistently refine processes for better results.
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05
Advantages and Disadvantages
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ADVANTAGES
Boost efficiency and profits
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Focus on minimizing waste and reducing inventory levels.
By trimming the fat from your supply chain, you remove the associated costs and
fewer expenses mean that the profit margin
Increase flexibility:
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While maintaining efficiency, leans adapt to changes in demands because of minimal
inventory stock approach
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ADVANTAGES
Reducing Waste:
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Waste appears in the form of as excess inventory, long lead times, lost productivity.
Lean helps in eliminating unnecessary processes and material.
The basic idea behind the Toyota Production System is to eliminate waste in all
forms like excess inventory, motion, defects, and over-processing.
Streamlining the processes:
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Lean enhance efficiency and adaptability by simplifying logistics and removing
unnecessary procedures.
Value stream mapping is the tool Lean use to find all the hidden waste.
This enables streamlining of processes across the whole supply chain from the
supplier through manufacturing and distribution to the end user.
Streamlining processes and discarding non-value-added activities.
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ADVANTAGES
Manufacturing:
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Lean manufacturing is a transformative approach within the supply chain.
It seeks to optimize the manufacturing process, reduce waste, and respond faster to
customer demand.
Optimized inventory
Management:
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Lean helps in managing inventory levels efficiently, reducing carrying cost and risk of
overstock and stockouts.
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ADVANTAGES
Cultural embrace of continuous
improvement:
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Lean fosters a cultural of continuous improvement by innovation and adaptability.
This system is from the principle of continuous improvement, which means that
Toyota constantly looks for ways to improve its processes and products.
Customer satisfaction:
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Lean supply chain is increasing customer satisfaction by delivering products more
efficiently and reliably by reducing lead time.
Toyota achieves this is by using a just-in-time production system, which helps them
avoid overproduction and waste. This system also enables them to respond quickly
to changes in customer demand
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DISADVANTAGES
Disruption sensitivity:
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Lean with their minimal inventory approach are more sensitive to disruptions which
can impact overall operations.
Limited flexibility:
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The emphasis on efficiency and minimal inventory may hinder to quickly adapt to
changes in customer demand and unexpected market shift.
Supplier dependence:
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Lean system heavily rely on reliable and efficient suppliers.
Issues with suppliers can impact entire SC.
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DISADVANTAGES
Continuous improvement costs:
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Sustaining a lean SC involves ongoing investments in continuous improvement
initiatives, which can be resource intensive.
Technological dependency:
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Lean rely on technology, any failure in technology can disrupt the entire SC.
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DISADVANTAGES
Leadership:
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SC are cross functional, make achieving change difficult if one functional link in the
chain is not aligned with the change.
Lean supply chain efforts have been unsuccessful because the procurement team
have focused on reducing unit cost as a goal above all others.
This often leads to frequent changes of suppliers, short term relationships and the
selection of suppliers who lack the skills and capabilities to collaborate in a Lean
supply chain (but have low unit price).
Much of the “low-cost sourcing” wave of the past 20 years has been driven by this
kind of logic but has not necessarily left businesses better off overall.
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DISADVANTAGES
Lack Knowhow:
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Lots of people claim to know Lean.
Many ERP provider argue that their forecast driven “push” planning tool is “Lean”
Because it offers “min-max” replenishment capability.
However, Lean is not a single tool or software module, it is a complete management
system.
To understand Lean, you need to find people who genuinely understand Lean supply
chain principles.
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06
Implementation Strategy
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1. Eliminate All Waste in the
Supply Chain So That Only Value
Remains
Creating a smooth flow of products downstream in a lean supply chain requires all departments and
functions in the organization to work in collaboration. In the supply chain, the seven wastes translate to:
 System complexity—additional, unnecessary, steps and confusing processes
 Lead time—excessive wait times
 Transport—unnecessary movement of product
 Space—holding places for unnecessary inventory
 Inventory—inactive raw, work-in-process, or finished goods
 Human effort—activity that does not add value
 Packaging—containers that transport air or allow damage
 Energy-(Sometimes called the eighth waste): eliminate wasteful energy in the supply chain: minimize
electricity, gas, utilities, etc.
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2. Consider Advancements in
Technology To Improve The Supply
Chain
The following are a great list of technology investments that should be at the top of the list in the quest for the
lean supply chain:
•Workforce Management throughout the Supply Chain,
•Omni-channel fulfillment, RFID,
•Supply Chain Management (SCM) systems, Electronic Data Interface (EDI),
•Trading Partners Interface (TPI-Retail Value Chain Federation),
•Customer Order Management,
•Customer Relationship Management (CRM)/Cloud Solutions,
•Transportation’s Yard Management Systems (YMS) to manage and track freight in the 3PL’s yard outside the
warehouse dock doors,
•GPS for tracking freight,
•a Transportation Management System (TMS),
•and any other technology that streamlines the supply chain and improves communication and value to the
customer.
To drive further value, look for technology providers in the logistics and supply chain space who can integrate
these systems together.
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3. Make Customer Usage Visible
To All Members of The Supply
Chain
Flow in the lean supply chain begins with customer usage. Visibility to customer usage for all supply chain partners is
critical. This sets the supply chain pace.
4. Reduce Lead Time
Reducing inbound and outbound transportation logistics gets us closer to customer demand which
results in reduced reliance on forecasting, increased flexibility, and reduced waste of”
overproduction”. When you create your Sales, Inventory, Operations and Production Plan (SIOP) monthly,
or more frequently, invite your top Suppliers and Customers to the SIOP meeting. Work in Collaboration to
reduce lead times and brainstorm how you can create a Lean Supply Chain that brings value beyond your
customers’ expectations.
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5. Create a Level Flow/Level Load
Leveling the flow of material and information results in a lean supply chain with much less
waste at all critical points in the system.
6. Use Pull Systems, Like Kanban
Kanban Pull systems reduce wasteful complexity in planning and overproduction that can occur with
computer-based software programs such as Enterprise Resource Planning (ERP) which creates a
Push system with too much wasteful inventory going into the warehouse. Pull systems permit visual
control of material flow in the supply chain. You can also use Ship-to-Use (STU) systems. Quality
Assurance goes to your suppliers, qualifies them for their quality systems and enables them to ship to
a point of use on the production floor to avoid sitting in a warehouse as wasteful inventory.
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7. Increase Velocity, Throughput
and Reduce Variation
Fulfilling customer demand through the delivery of smaller shipments more frequently increases velocity
and throughput to your customers… This, in turn, helps to reduce inventories and lead times and allows you
to more easily adjust delivery to meet actual customer need consumption.
8. Collaborate and Use Process
Discipline
When all members of the lean supply chain can see if they are operating in concert with customer need consumption,
they can more easily collaborate to identify problems, determine root causes, and develop appropriate solutions to
solve any root cause problems. Lean’s Value Stream Mapping (VSM) helps break down processes and gives you the
ability to rebuild your process more effectively. Utilize Six Sigma’s DMAIC: Define, Measure, Analyze, Improve and
Control to solve any problems or roadblocks. Lean’s PDCA can also be used: Plan, Do, Check and Act. Any and all
members of the lean supply chain should use these tools to solve problems and reduce costs to increase value to the
customer.
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07
Industrial Exposure
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Production with Minimum Defects
Long term Inventory Increase Wastages
QA should be performed duly
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Production lead towards wastages
Holding cost of inventory
Pull methodology can help
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Department face loss in production hours
May face incomplete targets in results
Line balancing can help
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Loss if efficiency of Production & Quality
May increase rework
Effective utilization of manpower
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Logistics cost
Lead time
Selection of facility location
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Holding cost
More inventory will take more place
Minimum inventory level or JIT
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Ergonomics can reduce efficiency of worker
Can increase the production cycle time
Time motion study to overcome the issue
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Rework in production
Maintenance Breakdown
Right production should perform
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08
Global Importance
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Global Importance
Economic Efficiency
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LSCM enhances economic efficiency globally.
Minimizes waste and optimizes processes.
Contributes to cost-effective business operations.
Drives sustainable growth in a rapidly changing global economy.
Environmental
Sustainability
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LSCM stands out in terms of sustainability on a global scale.
Reduces resource consumption and waste.
Aligns with environmental goals and minimizes ecological footprints.
Balances economic success with environmental responsibility.
Global Importance
Resilience in Global Supply
Chains
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LSCM enhances resilience in the face of disruptions.
Promotes agility and adaptability in supply chain processes.
Ensures continuity of essential goods and services globally.
Addresses vulnerabilities highlighted by events like the COVID-19
pandemic
Improved Customer
Satisfaction
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LSCM addresses evolving customer expectations.
Streamlines processes and minimizes lead times.
Increases customer satisfaction globally.
Positive impact on repeat business and word-of-mouth promotion.
Global Importance
International Collaboration
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LSCM provides a common framework for international businesses.
Standardizes processes and promotes efficiency.
Facilitates smoother collaborations between global partners.
Fosters trust and cooperation, contributing to a stable global
economy.
9. Focus on Total Cost of
Fulfillment
Make decisions that will meet customer expectations at the lowest possible total cost, no matter where they
occur along the supply chain. This means eliminating decisions that benefit only one part of the stream at the
expense of others. This can be achieved when all partners of the lean supply chain share in operational and
financial benefits when waste is eliminated.
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THANKS
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