Top five ways to lean your supply chain

There are entire books, thorough training and certification processes all devoted to lean supply chain practices. But within any manufacturing environment, there are a few relatively simple steps that will help any enterprise lean their supply chain. Here are my five top tips:

There are entire books, thorough training and certification processes all devoted to lean supply chain practices.

But within any manufacturing environment, there are a few relatively simple steps that will help any enterprise lean their supply chain. Here are my five top tips:

Resolve conflict between manufacturing efficiency and customer service

For most manufacturing organisations, there is a conflict between the need to be efficient in production and the need to be responsive to customers.

If manufacturing commits production capacity to large runs that are not immediately tied to customer demand, it might be difficult to meet the needs of customers as those needs change and fluctuate during the year.

Moreover, these large production runs mean that large amounts of capital are tied up in finished product inventory long before any revenue can be realised. To solve this conflict, manufacturers should try and produce smaller batches more frequently.

To encourage this, other metrics and KPIs can be introduced that are more holistic and based on customer service levels and inventory turns, rather than just production output.

Extend systems to suppliers

Once the basic problem of aligning manufacturing schedules with demand is taken care of, the greatest bottleneck to improved supply chain efficiency is often the disconnect between internal scheduling processes and those of external suppliers.

Technology can play a vital role in eliminating this constraint. For example, a portal can help suppliers look at their customer’s production plan and prepare their own work schedule accordingly.

This eliminates a lot of the manual and administrative work involved with interfacing with a supply chain partner in real time, removing all manual intervention and administrative delays.

Supplier portals can also provide a longer view of anticipated production so that vendors can manage their own inventories and plan their own capacity according to anticipated demand.

Run parallel MRP processes

Many companies operate with one single manufacturing resources planning (MRP) process, which is in make-to-stock (MTS) mode.

This is fine if a manufacturer has a stable, predictable demand for all of its products. But in reality, few manufacturers have the luxury of flat demand.

Most manufacturers would benefit from a make-to-order (MTO) system. This will avoid the stockpiling of a large number of items, freeing up both capital and production capacity for other products, all without sacrificing responsiveness or customer service.

By continuously analysing demand patterns and inventory turns, the point of postponement can be changed over time to achieve the optimal balance between efficiency and responsiveness.

Master the demand forecasting process

Too many companies fail to give demand forecasting the attention it deserves and this is often the undoing of even the most aggressive lean supply chain projects.

If you think of a demand forecast, the more accurate it is, the better position you are to supply to the market what the market needs.

If you increase the demand forecast accuracy, you can decrease your inventory and increase your level of customer service at the same time. Unfortunately, most companies divide responsibility for the demand forecast among multiple departments.

It is imperative that a manufacturing enterprise assign demand forecasting to an independent party within the company that has more of a holistic point of view than would sales, manufacturing or any other specific department.

Use an enterprise application that supports and streamlines your lean efforts

There is no technology or enterprise application that will, all by itself, deliver lean supply chain benefits. However, you will be much more successful if your enterprise software supports and streamlines your lean efforts instead of preventing barriers to the adoption of lean supply chain practices.

It should almost go without saying that an application should be well integrated and provide the visibility necessary to facilitate lean processes. You cannot improve what you cannot measure.

You should also look for an integrated system that will support your effort to do things right the first time. Without a viable system for getting the appropriate quality out of manufacturing and supply chain processes, it is entirely possible that apparent efficiencies gained in one part of the process will be wiped out by the added effort involved in correcting errors at another part of the process. You need a system that will report and allow you to record quality results and analyse performance on every lot or batch you manufacture through statistical process control.

The better the demand forecasting tool in your enterprise application, the leaner your supply chain will be. Regardless of your manufacturing mode, make sure that your enterprise application supports multiple modes including MTO, engineer to order (ETO), configure to order (CTO) and others. Even straightforward MTS manufacturers need to account for the different levels of demand for various products and part numbers. This will allow you to be efficient on products that make sense to manufacture in large quantities and responsive on products that are best handled as special orders.

Your enterprise software should also support your business for operations at multiple sites and include master data management. It is hard to create enterprise wide visibility and integration through the supply chain when you have duplicate data and records for the same part. Multi-currency and multiple language support is important to have as any extension of the application to a customer or vendor overseas will result in duplicate data, quickly undoing your lean supply chain improvements.

Lastly, but most importantly, your enterprise application needs to be intuitive. IFS has recently launched its new web interface ‘IFS Enterprise Explorer’ in response to demand for user-friendly enterprise software.

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