What is a lean supply chain? According to Hopp and Spearman ‘a manufacturing supply chain is lean if it accomplishes its fundamental objectives with minimal buffering cost’. Martin Christopher says the goal is ‘To manage upstream and downstream relationships with suppliers and customers in order to create enhanced value in the final market place at less cost to the supply chain as a whole.’ Great. Let’s consider:
- We have learned that it is cost not price that should play a strong role in supplier selection. Costs include inadequate management skills, training costs, translation costs, quality issues, improvement potential, legal costs, bureaucracy, communication, differing priorities, safety concerns. Delays result. More buffering required? But where do you draw the system boundary?
- Then outsourcing became fashionable. Call centres moved to India for cost reasons. Often, failure demand arose, negating any cost savings and sending some scurrying back home. How much of your demand is failure demand?
- Intellectual property issues and patent infringement issues followed – including look-alikes. An erosion not only of profit but of value. Short term savings set against long term wipe out.
- We learned that improving end-to-end supply has both winners and losers. Bullwhip, buffer, and capacity issues – to say nothing of ‘gaming’ to meet targets. Not so easy to persuade the losers to sacrifice for the good of the ‘chain as a whole’.
- Then along came different wage inflation, changes in the exchange rate, tax and incentive changes. The discovery that some companies have very little loyalty to the workforce or to the local community. What is ‘value in the final marketplace’ then?
- With all the above, it becomes apparent that supply chain decisions should include a look at manager’s bonuses…
- Then along came natural and man-made disaster. Tsunami and nuclear power plant failure. Even Toyota gets caught. Much re-thinking here: should you put all your eggs in one regional basket? What about strategic supplies?
- Risk rather than cost became the concern. Again, where is the appropriate system boundary?
- And power has shifted to those that hold the information. So what is the cost of power lost or gained?
- Reverse supply chains are growing. With this comes design-for-recovery and design-for-disassembly. Does one do the minimum required by law, or try to develop green credentials? Who is the final customer? Should you employ an international supply chain to deliver something that will end up in a garbage dump within days? Is this lean or is this ethics?
- Ultimately, a green supply chain would make at the point of use. This is starting. ‘Fab-Labs’ are becoming reality. The ultimate ‘disruptive technology’?
- Could it be that the real lean supply chain evolution is yet to come – as managers, engineers, designers, schedulers, HR people, lawyers, marketeers, and yes, even consultants, professors and journalists increasingly work remotely in networks?
It is all Malcolm McLean’s fault! Shame on you if you don’t know who the greatest cost-cutter in history was. A hint: at the time of his funeral, every container ship in the world sounded its fog horn.