Bottom-to-Top Approach: How to Lean Your Supply Chain in the Right Direction

Companies are realising the positive effects of applying Lean principles in manufacturing to their operations.

Lean manufacturing is a management philosophy that seeks to preserve value for the customer with less work, and considers the expenditure of resources on anything that doesn’t create value as waste.

But where companies lose out is in simplifying this principle, by focusing on reducing spend alone, when it is a philosophy reliant on a number of factors and an understanding of how they work together.

Natwest’s Mark Eastwood, who is Head of Manufacturing for Business and Commercial Banking at the bank, said: “Lean manufacturing is about identifying and rectifying inefficiencies to reduce waste and streamline the manufacturing process.

“‘Waste’ can come in all shapes and sizes for businesses but often relates to overproduction, time and inventory. Apply the Lean principles to supply chain management and it’s about creating a seamless process from start to finish.”

“When applied correctly, it can help minimise costs at all levels, reduce lead times and overall waste, while ensuring a quality end product is still produced. Thus creating a win-win situation, which benefits business and  the customer.”

To fully understand these principles, a company should trace their origins.

Between 1948 and 1975 the founder of Toyota, Sakichi Toyoda,his son Kiichiro Toyoda,and the famous engineer Taiichi Ohno developed the Toyota Production System (TPS), also known as the Toyota Way, the precursor to the general Lean manufacturing.

These Japanese automotive philosophers focused on three principles, ‘muda’ (wastefulness), ‘mura’ (unevenness), and ‘muri’ (overburden), which resulted in their idea of the ‘Seven Wastes’.

The Seven Wastes

1.       Overproduction – Are you producing more than consumers demand?

2.       Waiting – How much lag time is there between production steps?

3.       Inventory (work in progress) – Are your supply levels and work in progress inventories too high?

4.       Transportation – Do you move materials efficiently?

5.       Over-processing – Do you work on the product too many times, or otherwise work inefficiently?

6.       Motion – Do people and equipment move between tasks efficiently?

7.       Defects – How much time do you spend finding and fixing production mistakes?

How to apply the Seven Wastes to your supply chain

There are a number of variations upon Toyota’s ideas, but they all come back to the same thing – waste as more than simply waste product or money and the relationship between the Seven Wastes.

In the supply chain – overproduction, over-processing and inventory work together. Are you as a company either producing or ordering more stock than is immediately required?

One of the things that inspired the Toyoda family was the American supermarket shelf stacking system. The customers empty a shelf of a product, and then a staff member replenishes that shelf. They believed that if you could only either also produce or order the amount of stock needed to ‘replenish your shelf’, as opposed to having large amounts of stock lying around, you would save money.

Having a large warehouse filled with stock ready to fly off the shelves without need for constant transportation, may seem the best way, but accumulation of inventory requires resources to store and handle it.

This may seem likely to increase transportation costs, but realising the relationship between the Seven Wastes comes in to play here. What makes low transportation costs and low warehousing costs possible is by looking at motion.

Overburden and motion

The Toyoda’s emphasised the need for management to have less of the top-down approach, and allow for more staff development and engagement and customer engagement. This leads to your staff knowing and understanding the Lean principles and how it makes their job easier and less stressful rather than adding to their workload; the principle of overburden. For example, Toyota often reduced waste without even thinking about it, due to staff being engaged with the practice. Initiatives where triggered by staff in the factories by the need to remove inconsistency or reduce overburden and these in turn removed waste, without the need for specific focus on its reduction.

This was because staff had been engaged with and understood the principle – at a cost to the company of course - and had begun to identify the instances where they had been applying too much effort in non-vital tasks, and not enough in vital ones, which brings us back to motion.

So investing in bringing your staff on board with the philosophy is vital, as it takes time and faith.

Mark Eastwood says: “It (Lean) has the pressure of needing ongoing time and investment in order to work and also requires full support and buy-in from all employees.

“Also, businesses need to be open to change and understand that sometimes, those made might not initially work. That’s why it’s important to ensure process improvements are planned in full, before execution.”

Your customers

And as for customers – enhancing your knowledge of what they really need helps you to only spend on that amount and the replenishment of it for next time.

But also – rather than changing your delivery options to suit individual customers, try to combine deliveries and stretch out order-delivery predictions, so that a truck is not making a delivery while half full. It may mean that one customer gets their order earlier than another but the other will still get it within the predicted time and costs saved can be pumped back into improving your product.

This is better than ‘dispatching’ a product dependent on the date it was ordered – and another example of motion.

Mark Eastwood says: “An important stage from the outset is to identify what your customers value. Once established, you can then work through your supply chain model, to identify processes which fail to add any further value and remove them.”

Businessmen, before the Toyodas, were losing out on waiting times, transportation and motion because they feared the expense of spending on improvements. But if you follow the Seven Wastes and acknowledge the relationship between the principles, you will create a seamless, complimentary operation.