Category Archives: Lean

Your Manufacturing Is Lean, But Are Your Communications?

A recent article over on Industry Week on how Lean Communication Strategy Can Bolster Marketplace Position asked a great question:

      How does a manufacturer implement external communication initiatives without compromising performance or proprietary information?

Because, as the article points out, those companies that can elevate their brands and voices can also leverage incremental revenue streams.

So how does a company implement these external communication initiatives? According to the article, the answer lies in a lean model that unites functions; mirrors the manufacturer’s approach to efficiency and effectiveness; and utilizes QC initiatives that ensure accurate information is dispensed while trade secrets are not. In other words, through a lean communication strategy.

So how does one implement a lean communication strategy? According to the author, it’s effectiveness, prioritization, and ongoing analysis to ensure that the answers to the following questions are always available so that the correct message is always conveyed.

  • What is the value of the story?
    Will it support new business initiatives, influence public policy, establish the brand, burst with innovation, or echo CSR?
  • Who needs to hear the story?
    A niche market, the entire industry, or the public at large?
  • What is the best way to tell the story to the intended audience?
    General press release? Senior officer? One-on-one interview with the innovator?
  • What is the best channel for the story?
    Traditional news sources like radio, TV, or newspapers? Industry specific magazines? Social Media? Sales collateral through targeted channels?
  • Is there a strategic time to tell the story?
    That would enhance a new product launch or business expansion?
  • Who forms the review, vetting, and approval team?

The answers to these questions allow for the development, and deployment, of focussed communications that gather attention without wasting time and resources (to flood the market with messaging that is indistinguishable from the rest of the background noise).

It’s a logical application of lean. And hopefully Supply Management is involved to direct Marketing to the right innovations to focus on.

Is Your Supply Management Organization Being Held Back?

A recent article over on the CPO Agenda on Fresh Thinking, which noted that Procurement must be bolder in bringing about wholesale change that delivers effective results for the business, highlighted a number of areas that could be ripe for change. These areas need to be looked at carefully because their current state could actually be holding the Supply Management organization back. In order to advance, Supply Management cannot accept the status quo when the status quo is an outdated, ineffective, and or costly way of running the business.

The following five areas are ripe starting grounds for a Supply Management organization that wants to take its operations to the next level.

  • Organizational Rules
    Are organizational rules limiting opportunities for efficiency and effectiveness? There are a number of ways organizational rules could be impacting the Supply Management organization, including, but not limited to:

    • Diversity/Buy American Mandates
      While it’s often a good idea to diversify spend and buy at least some products or services at home (to address offshoring risks), excessive diversity or buy american mandates can severely limit options and have a dramatic impact on efficiency and effectiveness.
    • Payment Terms
      If finance is imposing egregious payment times on suppliers (of 90 days or more), this will limit the supply base that is available to the organization as some suppliers won’t stand for such BS.
    • Approval Chains
      If Procurement has to get a sign-off from each affected organization before every buy, and executives for buys over a certain dollar limit, they will be spending more time trying to get signatures than doing their job. Sign-offs should only be required for critical buys or very high dollar buys, not for office supplies or temp services.
  • Specifications
    The specifications could be outdated, non-standardized, or overly specific and all of these can add cost and drain efficiency.

    • Overly Specific
      If the specifications call for specific components from specific suppliers that are essentially commodities, they are overly specific and limiting competitiveness.
    • Non-Standardized
      If each department has their own specification for a workstation with a different configuration, this can limit leverage — especially since it’s very easy to standardize on an office workstation configuration for business people and one for technical people.
    • Outdated
      If the specs are calling for components that are now only being manufactured by a 10th of the total supply base or using materials that are no longer in common use, then the specs are outdated and should be refreshed.
  • Marketplace
    The marketplace could be holding Procurement back by holding on to outdated products or insisting on a wide-diversity of products when only a few should be required. For example, customers may love the old, regular un-concentrated laundry detergent which costs more to package and transport and is less environmentally friendly than the new concentrated formula or may be split between six scented varieties of your dish detergent. In the first scenario, Procurement will need to work with Marketing to push the new, environmentally-friendly, product while phasing out the old product and in the second, Procurement may have to work with engineering to find a way to mass produce the base detergent and mix the scent in later to avoid six low-volume, high-cost production runs.
  • Perception
    If the rest of the organization thinks of Procurement as the back-room, paper-pushing organization where careers go just before they are put out to pasture, it is going to be challenging for Procurement to gain respect, exert influence, and get a majority of spend under management. Procurement will have to work on its image first, get some quick successes, and leave major organizational change to later.
  • The Ideal Solution
    If the concept for the “ideal solution” is outdated, then Procurement’s efforts will be outdated. Before effecting significant change, Procurement has to know what the optimal state is and why.

The Time For Lean Is Now

But that does not mean you should rush an implementation. While lean can save time and money while increasing efficiency, a poorly thought out lean strategy will do nothing but disrupt operations, which will only waste time, increase cost, and decrease efficiency. And when you rush the implementation of any transformational program, chances are that you will make one or more mistakes that will lead you down the wrong road.

So, not only should you take the time to plan it out and get it right, you should learn the lessons from those who have went, and messed up before. The Supply Chain Digest recently ran a short piece documenting some common mistakes when implementing lean principles that is worth a read.

Don’t Implement Lean with a Weak Strategy or Insufficient Resources
If the strategy is weak, the workforce will see that it is half-assed and quickly lose faith. If the resources aren’t there, the overworked workforce will quickly lose interest in the initiative and fail to support it. As the article points out training, target setting, and communication tools all need to be carefully planned for proper implementation of Lean.

Don’t Take Lean Concepts Beyond the Lean Maturity Level of the Organization
Just because the lean designer has advanced theoretical knowledge and years of practical experience, that doesn’t mean the rest of the organization does or that they’re ready to be an advanced organization. The key to success is to take it one step at a time, one change at a time, and work your way up to a more advanced level.

Don’t Try a Cookier Cutter Solution
True Lean optimizes your business, not someone else’s. It’s impossible to take a cookie cutter plan and apply it out of the box. It will need to be appropriately tailored to your business by an expert, who will map out stages that the organization will have to pass through to obtain true lean success. As the article points out, each Lean solution must match with the company size, industry, ethnic cultures, product price structure, location, environment and a number of other related variables.

Follow these nuggets of advice, and you can start your journey down the road to lean success.

Tompkins Associates and the Next Generation Supply Chain, Part III.1

In Monday’s post, we brought your attention to Tompkins Associates‘ recent white paper on Leveraging the Supply Chain for Increased Shareholder Value which nicely complements CAPS Research and A.T. Kearney’s study on Value Focussed Supply: Linking Supply to Competitive Business Strategies and echos our cry for Next Generation Sourcing methodologies. A cry which has been taken up not only by The MPower Group (and spearheaded by Dalip Raheja who has declared that Strategic Sourcing is Dead and invited you to the The Wake for Strategic Sourcing) but by BravoSolution (who are rallying the battle cry for High Definition Sourcing and who have given us A Futuristic Look at High Definition Sourcing). We told you how they declared the need for a new Supply Chain Value Creation Framework and a renewed focus on business value in the supply chain, outlined three supply chain objectives — Profitable Growth, Margin Improvement, and Capital Efficiency, and described six primary types of value enabling actions to achieve the objectives before telling you that we would spend the next four posts discussing some of these actions and why Tompkins Associates‘ white paper on Leveraging the Supply Chain for Increased Shareholder Value should definitely be on your reading list as you outline your Next Generation Sourcing strategy.

So, today, we are going to discuss the objective of Margin Improvement.

There are three fundamental ways that a company can improve margins:

  1. Reduce COGS (Cost of Goods Sold)
  2. Improve Speed and Productivity
  3. Practice Tax Effective Supply Chain Management

Reducing COGS involves taking cost out of the supply chain mega process of Plan – Buy – Make – Move – Store – Sell – Return. Thus, the supply chain has lots of opportunities to reduce cost as each stage has multiple costly inputs.


While the white-paper skips over this step, there are lots of opportunities to take cost out in the planning stage. Without going into much detail they are:

  • Understand true spend
    and identify where the organization is spending money and ask if it needs to be spending money there? Maybe it’s paying for twice as much warehouse space as it ever uses, maybe it’s buying office supplies off-contract at double the contract rate, and maybe it hasn’t even analyzed it’s energy spend.
  • Understand true demand
    as better forecasting takes cost out of spend across the board, as the organization won’t overbuy (and tie up working capital in inventory) and won’t underbuy (and lose marketshare to the competition)
  • Understand true 3rd party needs
    and know exactly what skills and equipment are needed by the third party component manufacturers, 3PLs, etc.


Not only can the organization reduce cost by designing the supply chain for the optimal goal — be it lowest TCO / highest TVM, best quality, greatest availability, or maximum agility — depending on the product or service being sourced, but it can should-cost model before the buy to understand precisely what it should be paying (and why) and then apply decision optimization to understand how all of the different cost drivers interact, which will enable it to negotiate the best overall deal.


There are a large number of opportunities to take cost out of the production stage, and go lean, including the following seven opportunities identified in the white paper:

  • eliminate overproduction
  • reduce waiting time (between steps)
  • reduce transport (of raw materials)
  • remove unnecessary processing steps
  • eliminate excess inventory
  • reduce unnecessary motion
  • reduce the defect rate


Similarly, there are a large number of opportunities to take cost out of the transportation stage, especially if you redesign your logistics network, and the following seven opportunities identified in the white paper are a great start:

  • develop core carrier programs
  • implement a TMS (Transportation Management System)
  • take control of inbound freight
  • outsource various (non-core) transportation management functions
  • identify shipment planning and execution opportunities
  • rationalize fleets
  • improve controls


Inventory represents a huge opportunity to reduce costs, especially since most organizations make a number of inventory management mistakes on a daily basis. In many operations inventory accounts for over 20% of the overall product stock. The white-paper identifies a number of opportunities every company has to improve inventory management and lower costs. The following ten opportunities identified in the white paper are great ways to obtain profitable growth through better storage management:

  • strategic positioning of inventory
  • product protection
  • seasonal buys
  • special deals
  • quality assurance
  • postponement
  • value-added services
  • returns management
  • freight spend reduction
  • growth management


Margin can be improved by improving the perfect order rate and by planning and implementing profitable, differentiated, service programs. A company can create a differentiatd service program by:

  • segmenting markets and product groups
  • identifying key value points by customer
  • identifying consolidation opportunities around the customer
  • identifying and creating common processes and systems


The supply chain can take cost out of the return stage by:

  • reducing the number of returns (which can be as high as 20% in electronics)
  • reducing the cost per RMA (Return Material Authorization)
  • improving the return velocity
  • capturing residual product value
  • deriving value from sustainability initiatives
  • standardizing the process
  • recovering costs from suppliers (who do not meet defect rate targets) and
  • multi-channel visibility

The white-paper provides five great approaches for reducing the number, and rate, of returns and four great suggestions for capturing the residual value of products that should not be missed.

For more information on designing the supply chain for the optimal goal (best price/TCO, best quality, best availability, and agile supply base); improving production, transportation, and storage; creating differentiated service programs, and improving the returns process, see Tompkins Associates‘ white paper on Leveraging the Supply Chain for Increased Shareholder Value. For more information on decision optimization or Should-Cost Modelling, see various posts here on Sourcing Innovation and the e-Sourcing Wiki.

In tomorrow’s post we’ll discuss the other two strategies for margin improvement: improving speed and productivity and tax-efficient supply chain management.

Is Continuous Improvement Top-Down or Bottom-Up?

It’s neither, because it’s both.

As per this recent article in Industry Week that asks top down or bottom up, Continuous Improvement (CI) requires top-down executive and management support, but the improvement itself must be initiated at the ground-level by the day-to-day workers in the plants, the back-office, and the warehouse floor.

The key to improvement is to identify inefficiencies and fixes for those efficiencies. The best people to identify these inefficiencies are the people who use the systems and processes every day. Likewise, the best people to identify solutions are the people who will have to use those systems and processes every day. Although you may need to bring in a CI facilitator to help your teams unlock their creativity and identify the solutions that will improve your operational efficiency, true solutions will come from within.

And even if these solutions cause the organization take a short term hit on the balance sheet or P&L, a true improvement will deliver lasting impacts where working capital, cash flow, quality, and productivity are concerned.