Is the Lean Supply Chain Model Still Viable?

Lean supply chain dynamics are one hallmark of globalization. By many accounts, supply chains became leaner and leaner during the last two decades of the 20th century and first two decades of 21st century. But in the wake of the ongoing supply chain crisis, it appears that many lean supply chains were in fact brittle.

We understand the supply chain crisis at this point. The Covid-19 pandemic triggered an e-commerce boom. Since March of 2020 we’ve seen accelerated demands that the existing supply chain couldn’t handle. Infrastructure is over-burdened. And even if it wasn’t, trade between the East and West is imbalanced.

So, the question worth asking is this: is lean broken? If not, what still works about lean methodologies? And, ultimately, can we apply the lean principle of continuous improvement to develop better lean principles?

A Primer on Lean Principles

Depending on your branch of the supply chain, there are various methodologies. So, today we’re going to look at the lean method because it’s been very successful and popular as an organizing system.

How popular? Well, have you ever heard about supply chain terminology like the Toyota Production System (TPS), just in time (JIT), Six Sigma, or black belts? These all reference lean principles. Indeed, the lean approach, which developed from TPS, has three principles:

• improve continuously
• eliminate waste
• deliver value—as defined by the customer

Beyond those three principles, I like this definition of lean on Study.com: “Lean supply chain management is about promoting efficiency by removing unwanted or wasted components from a process. This process is most often applied to manufacturing, where supplies can be ordered as they’re needed rather than holding a lot of inventory as backstock.”

What’s to like about that definition you ask? Well, it clearly states the major potential problem with lean in today’s supply chain. For example, in the past, lean organizations carried as little inventory as possible, right? They continually removed waste from every process possible. This, in turn, delivered value to the customer in the form of the lowest possible prices.

But What Happens to Lean When the Supply Chain Itself Becomes an Inefficient Process?

This post will investigate what happens to lean when the supply chain becomes inefficient. We’ll define lean methodologies and summarize a few of the classic models. We’ll look at how these lean methods have held up during the supply chain crisis, especially amid e-commerce and current consumer trends.

What happens if the supply chain bottlenecks are never solved? If there’s a spike in fuel prices, will it make things even worse? What about a war in Europe? How are we evolving? And what does technology bring to lean principles?

Ultimately, we’re trying to understand what the future holds for lean supply chain methods and the organizations that employ them.

Defining Lean

What exactly is lean? Lean is an idea. Lean is a system. It’s a way for businesses to do things.

As noted, lean is essentially a mindset fixated on the elimination of waste. To clarify, that’s a holistic statement. Waste can mean a host of things. Wasted space, wasted time, wasted money. Even wasted talent. Thus, lean organizations continuously look for ways to prevent waste.

5 Key Principles of Lean Operations

As you peel back the layers and get deeper into lean concepts, more principles and ideas emerge. Here are some examples of terminology, principles, and practices of lean:

• value
• value stream
• flow
• pull
• perfection

As you can see, these concepts are fairly open ended. So, let’s flesh these ideas out a little.

Value

We create value when we create and provide a product (or service) that achieves a customer’s objective. I’d add that value and customer satisfaction go hand in hand.

Value Stream

The value stream is the vital steps that make up the process of creating the product of service. The value stream identifies the unnecessary or non-value-add steps of any given workflow process. Put another way, think addition by subtraction.

Flow

Remove steps in the workflow that cause interruptions, delays, or bottlenecks. Efficient processes and steps are created instead. This principle comes into sharp focus when bottlenecks emerge throughout the supply chain.

Pull

It all might have sounded inward-looking until this step. Pull essentially means an organization should produce only when a customer pulls. In Business 101 terms, an organization will only supply as a result of demand. This concept evolved into JIT manufacturing. Pull is also the concept that fractured during the supply chain crisis.

Perfection

This could be rephrased as the pursuit of perfection. This principle reflects the organization’s commitment to continuously remove layers of waste as they are identified. This process in turn maintains value or promises to create new value.

8 Examples of Waste in Lean Methods

At an elemental level, lean methods define roughly eight areas of waste:

• overproduction: When supply outstrips demand, you’ve overproduced.
• inventory: The physical result of overproduction. This represents wasted space, wasted capital, and wasted resources.
• defects: Bad or damaged product. This jeopardizes customer loyalty of the end user.
• motion: The shortest distance between two points is (the shortest possible) straight line. This could mean the repetitive motions of a factory worker, or even how to design the factory itself.
• over-processing (aka busy work): Can be summarized by the term “work smarter, not harder.” We’ll touch on this one more in the next section on technology for lean methods.
• waiting (aka bottlenecks): If any subprocess spends time waiting in queue for the next step, it’s a bottleneck. Picture cargo ships bobbing up and down in San Pedro Bay waiting weeks outside the Port of Long Beach. Waiting is a measure of wasted time. And, as we all know, time is money.
• transportation: Transportation itself is obviously a service. But transporting a product doesn’t necessarily add value to the customer. We’ve learned this loud and clear throughout the supply chain crisis. So, to improve transportation waste, the idea is that you must shorten the supply chain. That means building production facilities closer to each other and the end customers. I find this fascinating. Why? Because this notion flies completely in the face of globalization. In fact, it contradicts many of the continuous improvement efforts enacted by lean practitioners of yesteryear.
• everything else that’s a waste: Additional forms of waste might include, but certainly aren’t limited to, meetings that could’ve been an email, printing the entire Excel spreadsheet accidentally, and doomscrolling on your phone past 11:30 p.m.

How Is Technology Shaping the Future of Lean Supply Chains?

The promise of technology is and always has been efficiency. Technology has already changed the supply chain. Cloud-based transportation management systems (TMS), control towers powered by AI, IoT devices, and real-time GPS integrations are all products that meet lean principles.

Waste elimination? Continuous improvement? Customer satisfaction? Check, check, check.

It’s worth pointing out that one of the biggest wastes in business is paper. Any office that operates off paper documents is going to fail almost any lean checklist. That walk to the filing cabinet to search for a missing file? It’s a waste of time, money, trees, resources, and human potential.

This is just one example of why document digitization is the first step toward a modern supply chain business. When documents are digitized, they become data. The technological wonders like management software, AI, and IoT integrations all require digitized data.

Learn more about document digitization from an industry leader, Vector.

Are Lean Supply Chains Still Viable?

So, are lean supply chains still viable?

No. And Yes.

No because we’ve seen how a hyperfocus on one principle can neglect another. Continuous improvement efforts to eliminate waste and reduce cost created the far-flung supply chains of globalization. The supply chain crisis stressed by e-commerce trends subsequently buckled in a series of choke points. But this isn’t the first time lean principles have been criticized for solving only a narrow set of problems.

And on the other hand, to lean’s credit, it clearly identifies transportation as a source of waste. So, perhaps we can still use lean principles to find a new degree of balance and resilience in the supply chain.

Final takeaway. And yes this sounds corny. But whether you realize it or not, you’re employing lean principles right now. By reading this post and doing research, you’re continuously improving yourself and your organization. Ultimately, we’re all trying to figure things out. So, when I look at the supply chain through lean principles, I still see reason for optimism about the future global value stream.

This post was written by Brian Deines. Brian believes that every day is a referendum on a brand’s relevance, and he’s excited to bring that kind of thinking to the world of modern manufacturing and logistics. He deploys a full-stack of business development, sales, and marketing tools built through years of work in the logistics, packaging, and tier-1 part supply industries serving a customer base comprised of Fortune 1000 OEMs.