November 15, 2018

Trimming the Fat: How Lean Supply Chains Improve Businesses

The supply chain is a sequential series of processes that occur when distributing a commodity. A lean supply chain rids waste from operations, striving toward the lowest possible cost for individuals in the system. With goods seamlessly travelling through the chain, businesses can meet the precise customer need for the product, thus maximizing profits.

A business can only go as far as the “leanness” of its own supply chain. By ensuring the smooth movements of the transported goods reduces the time the product spend in transport or storage when it could be moving towards the end-user and thus benefit all parties.

We've all probably ordered something from one webstore or another, got confirmation of our order, possibly waited for the seller to order the product from their supplier, got a confirmation of the package being shipped and... waited two weeks without any information, when the package has traveled who knows where, maybe returned to the seller, been sent again, spent some time in warehouses or postal offices, and finally arrived at the place it was delivered to.

The leaner a supply chain is, the less "stops" there are for the product during its journey from the producer to the end-user. When products move through the supply chain and meet demand with pinpoint accuracy, wasteful overproduction ceases and customer satisfaction can be better guaranteed. Every inefficient step causes not only financial consequences to the producer, shipper and recipient, but emissions and trash as well.

A lean supply chain Is healthy for business

When the Canadian restaurant chain Tim Horton’s took on a lean initiative, employees learned each individual’s responsibility in the chain, and productivity improved by approximately 15%. When key members of a supply chain communicate, they can analyse results and set what is called a “future state”, which is the lean supply chain they’ve aimed to accomplish.

Achieving a situation where everyone involved works in harmony can be difficult, but it’ll ensure a smoother flow in operations and make it easier to assess obstacles. In the "leaning" process, the circumstances must be monitored: they simply can’t be unknown if an improvement is wanted.

Whether it’s eliminating defects in manufacturing, decluttering the procurement process, reducing unnecessary inventory in the warehouse, or simplifying transportation and shipping, businesses must painstakingly monitor the results with the necessary metrics. It starts with leaning out one logistical process, then creates a blueprint that will reduce waste throughout the entirety of company operations.

Reduce waste, increase profits

There are seven common kinds of waste that truly hinder a business’s profit margins. As a whole, waste in regards to a supply chain involves the superfluous practices only serving to hinder efficiency.

Yet these practices are often embedded into the everyday fabric of a business without being given a second thought. For instance, many larger businesses believe there’s a need for multi-faceted purchasing operations when only one facet is needed. It often leads to unnecessary confusion and hitches in product purchasing, otherwise avoided if they would simply streamline processes with only one level of purchasing. "We've always done it this way" is just an excuse.

Businesses grow at a feverish pace and it’s hard to keep up. All they need to do is sit down, analyse the operations, then trim the fat. The trimming can be achieved can be achieved either by streamlining processes, improving communications and monitoring, or even implementing artificial intelligence that could handle the management. Each organization probably has a different approach that suits them, but I doubt there is barely any existing company that couldn't streamline their processes.

AIs and Big Data to revolutionize the lean approach

The initial step toward better supply chain management and monitoring was made because of the enormous amount of time and money saved, but the big picture is painted with artificial intelligence. Turning to AI may at some point lead to supply chains that adjust their operations on their own based on how different solutions appear to work. Of course, this requires a large amount of data in order to work and for the AI to learn what to do, but the

Just a year ago, Logistics Bureau wrote about using AI to build a "thinking" supply chain. While still slightly utopian, the technology is becoming more and more capable of taking care of low-level tasks faster and collecting data into a knowledge base that can be used to improve both the AI and human employees' work.

Did you enjoy this blog post? You might want to take a look at our posts Intelligent Apps: the Future of Applications, Tech Innovations in Supply Chain and Big Data in Supply Chains as well.