As written earlier people very often see Lean Management as is typically applied to manufacturing lean techniques. It is seldom that executives understand that Lean Management are applicable anywhere there are processes to improve, including the entire supply chain. A lean supply chain is one that produces just what and how much is needed, when it is needed, and where it is needed.
What is important to understand is that the underlying theme in lean management thinking is to produce more or do more with fewer resources while giving the end customer exactly what he or she wants. This means that the organization need to focus on each product and its value stream. This is what was done within National School Fruit Organizationng where the work process within administration, procurement and subscription was standardized. To do this, National School Fruit Organization in this case had to ask themselves and understand which activities truly create value and which ones are wasteful within the organization. The most important thing to remember is that lean is not simply about eliminating waste—it is about eliminating waste and enhancing value.
Value and Waste
Value, in the context of lean, is defined as something that the customer is willing to pay for. Value-adding activities transform materials and information into something a customer wants. Non-value-adding activities consume resources and do not directly contribute to the end result desired by the customer. Waste, therefore, is defined as anything that does not add value from the customer’s perspective. Examples of process wastes are defective products, overproduction, inventories, excess motion, processing steps, transportation, and waiting. Understanding the difference between value and waste and value-added and non-value-added processes is critical to understanding lean. Sometimes it is not easy to discern the difference when looking at an entire supply chain. The best way is to look at the components of the supply chain and apply lean thinking to each one and determine how to link the processes to reduce waste.
Creating Value
Lean principles focus on creating value by:
- Specifying value from the perspective of the end customer
- Determining a value system by:
- Identifying all of the steps required to create value
- Mapping the value stream
- Challenging every step by asking why five times
- Lining up value, creating steps so they occur in rapid sequence
- Creating flow with capable, available, and adequate processes
- Pulling materials, parts, products, and information from customers
- Continuously improving to reduce and eliminate waste
The value stream consists of the value-adding activities required to design, order, and provide a product from concept to launch, order to delivery, and raw materials to customers. To develop a value stream map for a product, you select a product family and collect process information. Then, you map the steps in sequence and by information flows; this is called a current-state map. The current-state map provides a clear picture of the processing steps and information flow for the process as it exists today. Next, you search the map for improvement opportunities using the concepts of lean, and create a future-state map. This will portray a vision of the future for the process or supply chain you are creating. This future-state map helps you to visualize the roadmap to get from the current state to the future state.
Mapping the value stream for the supply chain is a similar process. However, the current-state map includes product flow, transportation links, defects and delivery time and steps, and information flow. After creating the current-state map for the supply chain’s value stream, supply chain partners should scrutinize it for bottlenecks, waste, and process improvements. They should use what they discover to create future-state maps for the supply chain. An ideal-state map can also be created that provides a vision of how the supply chain could look if perfect integration of all components were to occur. This is in effect an entitlement map for the supply chain process.
Here’s how it works: A current-state map might indicate that flow within facilities is well defined, but that transportation methods between facilities is creating excess inventory and is not cost effective. The current state map may also show a weakness in the information flow that is not adding value to the process. The future-state map should create flow between facilities, levelling pull within each facility, and eliminating waste. The method for levelling pull might be to install frequent transport runs or milk runs. Information flow could be improved by installing a Web-based process to allow real-time flow of information between all supply chain partners as demand changes. The ideal-state map of this supply chain might have a greatly compressed value system with relocated operations and short transportation deliveries.
“Waste” Reduction
The “Waste” reduction process begins with the question “What can we do to improve?” Some answers may include:
- Stop defective products at their source
- Flow processes together or change the physical relationship of components of the process
- Eliminate excess material handling or costly handling steps
- Eliminate or reduce pointless process steps
- Reduce the time spent waiting for parts, orders, other people, or information
In manufacturing environments, these waste reductions create the benefits of reduced manufacturing cycle time, reduced labour expenditures, improved product quality, space savings, reduced inventory, and quicker response to the customer. When waste is reduced or eliminated across the supply chain, overall cycle time is improved, labour and staff costs are reduced, product quality and delivery are improved, inventories are reduced, and customer lead-times are shortened. The net effect is the entire supply chain is more efficient and responsive to customer needs.