A while back, the Supply Chain Management Review ran an article entitled Lean: The Antidote to Cost and Variation that focussed on lean as a lever to do just that because it can reduce waste and improve customer service. The article identified eight enablers of lean distribution in global supply chains that tie into customer demand and reduce variability and costs. These are:
- Formal Service Policies
Establish formal policies that articulate customer needs and how service is enabled with internal capabilities throughout the entire supply chain. This will keep the organization on track.
- Support for Pull
This will reduce variation caused by hedging, planning, policies, and other factors.
- Isolate Variability
Strategically place and manage inventory and capacity buffers. This will reduce the amount of safety stock required.
- Cost trade-offs
Assess and decide cost trade-offs on a structural level as this will enable systematic cost elimination based on capabilities.
- Linkage for Pull
Pull is a the philosophy of replenishment, not forecasting. It prevents over-ordering and under-ordering.
- Reduced lead times
Reducing lead times will improve flexibility and increase responsiveness.
- Reduced variability
Quantify the current variation to enable the operation of distribution processes based on capability limits.
- Reduced lot sizes
Larger lot sizes may lower sourcing or production costs, but can increase distribution costs, decrease profits due to overstock clearance, and reduce services.
These enablers are important because a well designed supply chain should deliver product quickly to the end customer with minimum waste, as per The Goal of the Lean Supply Chain, an article that ran in Industry Week not that long ago.
The article over-viewed the seven steps to lean supply chains, and the number two step was understand customer value, second only to the development of a systems perspective, since everyone suffers in the long run if each element in the supply chain tries to optimize its own operations in isolation. The article points out that a successful organization will make an attempt to understand any volatility that exists in customer demand, rectify it, and, in effect, take lean to the customer.