Make my cut Lean, please.

Lean Sourcing is important, and I am quite pleased to see that the blogs are not the only medium extolling its virtues. Recently, the IACCM, Supply & Demand Chain Executive, and Industry Week have tackled lean and its impacts on the supply chain.

According to Supply and Demand Chain Executive, lean within your four walls isn’t enough – you need to take lean outside your company and I have to agree. After all, it doesn’t matter how lean your operations are if your suppliers are unable to keep up with you or your customers are not able to accept deliveries when you have completed their order, forcing you to either suspend production or hold extra inventory. Make sure to work with your suppliers and customers in your lean initiatives and help them be as lean as you are.

IndustryWeek states that lean begins with asking the tough questions. Organizations need a unified and quantified understanding of the issues with a coordinated vision and efforts to address them. When undertaking a lean initiative, be sure to ask the following questions:

  • How do we find opportunities for improvement while managing the business?
  • Should we be satisfied with maintaining last year’s performance?
  • What are the main barriers to success we face today?

The goal is to “transform value stream mapping from a one-time, static activity to an ongoing and dynamic process modeling of production and the extended supply chain is one very effective way to advance from merely doing Lean to truly running Lean — day in, day out.” In other words, like the last article it points out that you need to look outside your four walls in the implementation of a successful lean initiative. As the article says, the most successful Lean initiatives are not really about achieving a single business goal, such as inventory cost reduction, but are about driving sustainable process improvement and agility all across the value stream enabling manufacturers to balance multiple concerns effectively — delighting customers, steering the business flexibly through change, with Lean cost and inventory management, while doing the job right for each of the stakeholders.

Finally, the IACCM examines lean in the context of contracting, and points out that by the time services oriented contracts are signed, often many of the terms and requirements on which the contract was based are out of date and that today’s contracts require continuing and active governance as well as rigourous discipline. The key to survival in the 21st century is the development of organizational competence through superior use of information and knowledge. In addition, relationships across the supply chain must be kept aligned through terms that create flexibility to adapt.

In short, lean is a global supply chain process, not a local one.  Now, I know this still does not answer some of your questions on lean sourcing, and how it differs from strategic sourcing, so here’ s one way to look at it.  Lean Sourcing is a type of strategic sourcing focussed on making the most efficient decision overall.  By Wikipedia definition, strategic sourcing “is a systematic corporate/institutional procurement process that continuously improves and re-evaluates the purchasing activities of a company”.  However, this “improvement” does not have to be lean.  If you took a purely risk-mitigation focus, then any decision that reduced your risk would be an “improvement” and if you took a purely cost-centric focus, than any decision that reduced your overall Total Cost of Ownership on your purchases would be an “improvement”.  However, both of these decisions could have negative impacts such as increasing cost in the first case, increasing risk in the second case, and increasing delivery times (and inventory requirements) in both cases.  Lean is a holistic view of sourcing that takes a broader supply chain and operational view and makes the best overall decision for each purchase with respect to the supply chain and not just the commodity or service being purchased at the time.  In this way, Lean Sourcing can be viewed as strategic sourcing, but since strategic sourcing is not necessarily Lean Sourcing, they are not necessarily one in the same.    (The set of Lean Sourcing activities must contain strategic sourcing but strategic sourcing does not have to be based on lean principles or take a holistic supply chain view since you can always define strategy from operational, marketing, or financial foci.)

And if you’re still confused, since one could argue that good strategic sourcing is Lean Sourcing, I invite you to stay tuned for next month’s guest post on the subject from Lisa Reisman, Managing Director of Aptium Global.