Principles of a lean supply chain
The concept of lean supply chain is the main focus of Chapter 13. While the course material provides multiple tools and techniques, there are some key principles for implementing a lean supply chain
Womack and Jones, in their seminal work Lean Thinking, provide the following guidelines for implementing a lean supply chain
* It is important to define a product’s value along with a target cost based on the customer’s perception of value.
* All firms along the value stream must make an adequate return on their investments related to the value stream.
* The firms must work together to identify and eliminate muda (waste) to the point where the overall target cost and return-on-investment targets of each firm are met.
* When cost targets are met, the firms along the stream will immediately conduct new analyses to identify remaining muda and set new targets.
* Every participating firm has the right to examine every activity in every firm relevant to the value stream as part of the joint search for waste
These principles can be explained using Apple as an example. Apple has multiple vendors supplying parts and accessories to manufacture iPhones and iPads. Each vendor must work towards making the most profit from the supply of parts to Apple. Similarly carriers moving goods from its manufacturing plants to warehouses and retail stores should identify key areas where they could save on transportation costs. Apple, on its own, can see if existing manufacturing locations make sense keeping in view transportation costs, labor costs etc. Each firm in the supply chain process should work together to make the supply chain most efficient and cost effective.
J. P. Womack and D. T. Jones, Lean Thinking (New York: Simon & Schuster, 1996), p. 277