MRO Magazine

Power supply chains with lean thinking


June 1, 2005
By PEM Magazine

A lean supply chain produces only what and how much is needed, when it’s needed, and where it’s needed. Understanding the difference between value and waste and value-added and non-value-added processes is critical to ensuring lean success. Sometimes it isn’t easy to discern the difference, however, when looking at an entire supply chain. The best way is to apply lean thinking to each component and determine how to link the processes to reduce waste.

Lean procurement
Some lean processes are e-procurement and automated procurement based. E-procurement conducts transactions, strategic sourcing, bidding and reverse auctions using Web-based applications. Automated procurement uses software that removes the human element from multiple procurement functions and integrates with financials.

The key to lean procurement is visibility. Suppliers must be able to “see" into their customers’ operations, while customers have to be able to see into their suppliers’ operations. Organizations should map the current value stream and together develop a future value stream in the procurement process. They should create a flow of information, while establishing a pull of data and products.

Lean warehousing
Lean warehousing means eliminating non-value added steps and waste in product storage processes. Typical warehousing functions include:

  • Receiving;
  • Put-away/storing;
  • Replenishment;
  • Picking;
  • Packing; and
  • Shipping.

Warehousing waste can be found throughout the storage process, including:

  • Defective products, which create returns;
  • Over production or over shipment of products;
  • Excess inventories that require additional space and reduce warehousing efficiency;
  • Excess motion and handling;
  • Inefficiencies and unnecessary processing steps;
  • Transportation steps and distances;
  • Waiting for parts, materials and information; and
  • Information processes.

Reduced inventories
In the lean paradigm, inventory is considered waste. Many would argue this point, but manufacturing can take place efficiently with little or no raw material, work- in-process (WIP) or finished-goods inventory.

Many companies produce directly into trailers and maintain no other finished goods inventory. All quality inspections and checks are performed within the process, rather than after production is completed. In this true make-to-order scenario, all goods are shipped directly to the next link in the supply chain when the trailer is full, and over production isn’t possible and can’t be tolerated. No space is designated to store finished goods. The system isn’t designed to carry them.

Applying one-piece flow and pull systems can dramatically reduce WIP. A Kanban or visual signal for more goods to be moved forward to the next process can accomplish this procedure. Although the ultimate goal is to eliminate WIP, minimal WIP is normally the result. The elimination of bottlenecks is one goal of a lean supply chain, but a bottleneck will always exist to some degree. As a result, WIP must exist in front of a bottleneck or the bottleneck operation will be starved and will stop.

Raw-material inventory is a different matter. Although the leanest organizations have arranged just-in-time deliveries to support manufacturing, this approach requires the absolute highest degree of competency and coordination within the supply chain.

Each step in the warehousing process should be critically examined to see where unnecessary, repetitive and non-value-added activities might exist. They can then be eliminated.

Lean transportation
Lean concepts in transportation include:

  • Core carrier programs;
  • Improved transportation administrative processes and automated functions;
  • Optimized mode selection and pooling orders;
  • Combined multi-stop truckloads;
  • Cross-docking;
  • Right-sizing equipment;
  • Import/export transportation processes; and
  • Inbound transportation and backhauls.

The key to accomplishing all of these concepts includes mapping the value stream, creating flow, reducing waste in processes, eliminating non-value-added activities and using pull processes. Supply chain leaders shouldn’t delay—it’s urgent to act now to implement lean concepts.

Bruce Tompkins is a principal with Raleigh, NC-based Tompkins Associates, a provider of total supply chain solutions, including manufacturing and stores operations. For more information call (905) 456-3871 or visit