Lean Lessons in Supply Chain Management

Dec 10, 2008 3:10 AM  By

Understanding the value of lean logistics is important — but knowing how and where to eliminate waste and trim down costs is the true benchmark of successful supply chain management.

Lean thinking has been discussed and practiced with varying levels of success for decades. In the early 1990s, James P. Womack, Daniel T. Jones and Daniel Roos outlined principles of lean thinking in their bestseller “The Machine That Changed the World: The Story of Lean Production.” These principles have since been adapted by countless businesses to meet the challenges of increased efficiency and customer-driven response.

More recently, books like “Streamlined” have expanded upon the findings of Womack et al., presenting seven steps for creating leaner supply chains:

–Develop systems thinking
–Understand customer value
–Value stream mapping
–Benchmark best practices
–Design to manage demand volatility
–Create flow
–Performance metrics

Cross-docking is one procedure that can show huge improvements in any supply chain. Simply put, cross-docking enables you to move your inventory from receiving to shipping with no interim storage, drastically reducing storage and warehousing costs. In keeping with lean principles, cross-docking strives to eliminate “muda” — a Japanese word for anything wasteful that does not increase value.

Further, cross-docking allows you to facilitate fast replenishment of goods. It supports just-in-time (JIT) manufacturing efforts by capturing goods from suppliers at the cross dock and delivering them in small batches after sorting by location and schedule.

What’s more, cross-docking consolidates inbound production material while capturing and redistributing reusable containers. All of these benefits have shown significant improvements for companies with time-sensitive and intricate logistics operations, such as mass merchandisers, grocers, manufacturers, assembly operations, LTL trucking companies, and cargo carriers.

Another aspect of operations that benefits from scrutiny and attention is the reverse supply chain. The considerable impact that reverse logistics has on a company’s bottom line has generated a greater awareness of the importance of reverse logistics. Forbes estimates that U.S. firms spend $100 billion annually on returns, and that returns represent up to 7% of a company’s gross sales.

Working to implement a performance-based culture that will increase service levels while still cutting costs is essential to long term growth and success. The best way to ensure happy customers is by building a healthy, performance-based culture that keeps lines of communication open and minimizes waste in operations. Simply follow these steps.

Step 1: Ask yourself what kind of culture your business has now. This step requires a critical look at how your people view themselves, how they view each other, and how they view the organization. A culture that focuses on lean operations means a business that relies on its people to be as efficient and responsible as possible.

Doing this involves encouraging your staff to take pride in their work and be engaged in the culture. This will mean trying new approaches, stretching your abilities, and risking failure. Creating an improved culture starts with you.

Step 2: Organize your toolbox. To create a leaner supply chain through a performance-based workforce, you need both a plan and the tools to complete it. You need a blueprint (a statement of your strategy that provides a view from 50,000 ft.) and the appropriate tools (the day-to-day tactics and methods that you use to build a culture that drives effective communication) to get the job done. While you focus on your core competencies, also make sure you have the tools you need to succeed.

Step 3: Tearing down the barriers to success. Creating incentives is a proven method for encouraging an improved culture and leaner operations. This provides you with an opportunity to make clear the importance of improved communications by putting your money where your mouth is.

As you see improvements in communications, you should also begin to see improvements in your bottom line. And using financial incentives allows you to reward people for having an impact, both on your company’s culture and your finances.

Ron Cain is president/CEO of TMSi Logistics (
www.tmsilog.com) with locations in New Hampshire and Florida.