Developing lean supply chains
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All businesses want a supply chain that is efficient with streamlined processes that consistently deliver against requirements. Processes that methodically abolish waste and non-value added activities can be a key strategic advantage supporting competiveness and increasing the contribution to the customer.
Every step of the supply chain can contain some type of waste (contributing either excess lead time or material). Activities that fail to contribute to the delivery of services and/or goods for the customer are seen as wasteful and fail to add value to products and cost companies money. Despite this however many companies fail to address this issue incorrectly associating lean principles (or ones that focus on value) as being not for them or too closely associated with manufacturing to deliver benefits outside of that particular sphere.
Whilst lean tools and methods are more common in manufacturing it is incorrect to think that they can can’t be applied to more traditional processes which includes the entire supply chain including the retail, wholesale, and distribution elements.
But what are the steps to implementing lean?
Supply chains driven by stable and consistent demand excel. Demand driven means requirement and consequentially how much inventory the system contains, how frequently it is replenished and what it consists of is in essence defined by the customer. The alternative is processes and buying practices that are often driven more by the supplier network than the buying organization (Inflexible MoQ’s, EoQ’s coupled with lengthy lead-times).
Detailed knowledge of the demand profile can help provide leverage with suppliers (consolidation) and can facilitate a leaner supply chain that is pro-active and not reactionary delivering key value with optimized inventory levels (to meet demand) a structured supplier network (you know what you want when you want it) with sufficient leadtimes (batch sizes are played off against leadtimes to meet the stable demand signal.)
However in reality this can be troublesome to deliver given the other aspects at play. Lean supply chains also require management and customer commitment to stability, clarity of information and risk. However given these issues supply chain professionals can still endeavor to reduce wasteful processes and policies from their organization.
What Contributes to a lean supply chain?
• Awareness of the ‘total’ supply chain. Assess and plan the whole process from customer demand signal to fulfillment. Understand the complexities and inter-dependencies throughout your numerous suppliers, distribution centers and the end customers. Know the waste within your value stream and develop plans to tackle it.
• Utilizing data to drive improvements – don’t just have metrics for the sake of metrics – use your KPI’s to help uncover issues that need addressing. Realize that poor management information can lead to waste.
• Understand your risks. Every supply chain has risks that if realized can have a negative impact on performance however, many of these can be averted.
• Management buy in – clear and robust backing from your management to support the delivery of efficiency and improvement projects
• Organization – People are a critical success factor and they can make or break proposed changes. Employees need to be involved in the lean program requirements as well as suppliers, service providers in designing improvements and management.
• Supplier relationship management. You can always cut costs through fire and forget sourcing. By collaborating with suppliers for ongoing improvement can deliver savings in raw materials, logistics and fabrication. Benefits can also be delivered enhanced focus on performance and relationship management.
Companies will continue to place pressure on their supply chain to deliver greater levels of value and performance. Finding the correct balance between efficiency and flexibility can be challenging but simply signing up to business models that are inefficient, error prone and high cost is not the answer.
Using the 10 c’s of supplier selection
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As all supply chain professionals know, selecting the right supplier includes much more than a focus purely on cost. If your actively involved in supplier selection you’ll know it can be an exhaustive process. There can be a wide range of variables to consider that can make the process complex and time-consuming.
One element to consider is a standard selection framework for selecting suppliers. Standard criteria can help level the playing field whilst also giving you a standardized procedure removing some of the guesswork from the process. But how should you evaluate your potential suppliers.
Carter’s10 C’s are an all inclusive means of making sure that a thorough method is adopted in regards to the supplier evaluation and that it is fair for all potential entrants. Carter’s 10 C’s method of evaluating suppliers has undergone various enhancements (from its original incarnation of the 7 c’s) and represents an ideal star point for those involved in recruiting or evaluating suppliers. While your criteria may be subtly different – developing a standardized set of requirements will help simplify the process and remove subjectivity.
So what to consider? Carters 10 Cs can be summarized as:
1. Competency – Does your supplier have the skills to deliver the materials you require?
2. Capacity –Does the supplier have an adequate “engine room” to produce your goods. Capacity can include equipment, human resources and materials. Can your supplier flex their capacity in line with your requirements?
3. Commitment –Quality is a key requirement for any business – does your supplier have the commitment to maintain suitable quality performance?
4. Control – Is your supplier in control of their policies and procedures? Can it ensure that its performance can be consistent.
5. Cash –Does your supplier have adequate financial standing?
6. Cost – What is the cost of products from the supplier.
7. Consistency –Does the supplier guarantee a consistent product time and time again?
8. Culture – Does the supplier share the same cultural values as your organization. Does it make sense that your supplier shares similar values and attitudes to avoid strains in the future relationship?.
9. Clean – Does your supplier have an appropriate sustainability policy?
10. Communication – What tools will you utilize to communicate with your supplier. Another key point is who will communicate with who? For example consider how you will manage problem resolution and issue escalation.
So that’s Carters 10c’s – how do you evaluate and select your suppliers?