Is Lean Supply Chain Dead?

Is Lean Supply Chain Dead?

Was Tesla’s recent eclipse of Toyota’s market cap on July 20th, 2020 less about stock price and more a passing of the torch? Tesla’s approach as market disruptor enables entrepreneurial creativity to accelerate bleeding edge technologies and innovative business models; whereas Toyota, as a market leader, embodies disciplined execution to empower business outcome consistency and product quality excellence. Great methodologies are timeless, but their applications must evolve; Lean Supply Chain practices must adapt.

Lean wasn’t built to handle the complexity of today’s global supply chains. The rigid software tools that unpin the method, like ERP systems, only capture a single, linear “Plan A” that breaks as soon as variables change. And unfortunately for CEOs and supply chain leaders, most of the data that goes into forming our supply chain plans is stored in our team’s memory and spreadsheets; offline data that causes costly, increased workloads, analysis delays and in some cases supply disruption when change occurs.

As leaders, we need ensure our teams capture all this invaluable supply chain data and use it to make better daily supply chain decisions which consider multiple plans so we can thrive no matter what variables change in the world around us.

Embrace Lean Principles, Digitize for Productivity

Although there are many variations, most Lean systems are based on traditional Toyota Production System (TPS) core principles developed in the 1970s and proliferated globally in the 1990s. These principles have a bias toward manual paper and spreadsheet tools to maintain and continuously improve operations, as the technology of the day didn’t enable the type of streamlined collaboration required to reduce waste in real time. Lean principles should be embraced as timeless best practices, while manual data should be digitized to further enhance supply performance.

Recent technology advancements in cloud software for productivity, digitizing data for collaboration, application programming interfaces (APIs) for automation, and artificial intelligence (AI) for insights now reduce the workload required to maintain day-to-day Lean supply chains. Embracing these new technologies to form a “Lean Management System 4.0” is the next continuous improvement that is poised to unlock a new productivity boom.

As with other Lean systems there are many derivatives, all of which can be successful. The Agile Lean approach combines proven Lean principles with Agile Supply Chain methods and Industry 4.0 digitization tools to accelerate teams’ efforts to improve supply performance.

Realizing Lean Results More Quickly

The average age of on-premises ERP systems is 20 years. Sadly, the expense of procuring and deploying newer cloud ERP systems is a bust for supply chain leaders trying to trim expenses. And most of the data utilized to manage and execute daily supply chain operations is still offline. This is where the challenge lies: as this data grows exponentially, we must confront the grim reality that we need either more people or more productivity to manage our increasing workloads.

The cost and lengthy timelines to deploy ERP systems have many manufacturers turning to Supply Execution Systems (SES), sometimes referred to as Supply Chain Execution Systems (SCES) and/or Supply Performance Systems (SPS). These systems are like Manufacturing Execution Systems (MES), except focused on increasing team collaboration and daily productivity of supply chain execution. Newer, purpose-built SES cloud software can be deployed quickly and connected efficiently to legacy on-premises ERP or newer cloud ERP systems.

Typically, SES software functionality focuses on four core areas: 1) real-time dashboards, 2) automated Plan for Every Part, 3) Agile project and task management and 4) supplier data management. SES value streams are intended to be a system of record for traditional offline and daily supply chain execution data.

Further, SES software acts as a daily macro insight tool across the enterprise for supply chain leaders while also serving as a micro daily analysis tool for individual team member tasks. These lightweight SES tools can easily be extended to suppliers to realize a digital Lean Extended Enterprise that allows more Agile exchanges of data which is critical during times of rapid change.

Due to the focus of SES software on enhancing daily productivity and execution, the payback period tends to be as little as three months. A double-digit annual ROI should also be a baseline expectation, as teams can reduce the time to realize lean supply chain cost savings results.

The Supply Chain Digitization Journey, Simplified

The internet is overflowing with Industry 4.0 buzz words like “automation” and “AI”. View digitizing supply chain data through the lens of core Lean principles. Focus on empowering teams with technology to increase productivity. The below Agile Lean Framework is a practical “crawl-walk-run” approach to transition from the manual supply chain data that’s offline to collaborative, cloud-based productivity software.

Agile Lean Framework

The framework is composed of four levels, summarized below, to systematically accelerate your supply chain digitization journey and performance:

  • Level 1: Standardize for Productivity
    • Upload offline data into a digital software environment such as automated Plan For Every Part software to increase productivity.
  • Level 2: Digitize for Collaboration
    • Convert manual daily task tracking into real time Agile Project and Task Management software to increase collaboration.
  • Level 3: Connect for Speed
    • Link internal and/or external supplier systems such as ERP and SES to save data analysis time and further increase productivity.
  • Level 4 Automate for Insights
    • Convert repetitive calculations into tailored algorithms that enable deeper and more cost savings insights via real-time dashboards.

As the amount of our programs’ data increases, our supply chains become more complex. Throughout your Lean journey, partnering with a firm that can also provide value-adding services such as digitizing data, cleaning data and executing project tasks will further hasten your quest to reduce waste. Proven Lean methods combined with a digitization framework and cloud-based SES software stand to empower your team to drive supply performance both now and in the future.

-William