Sunday, March 26, 2006

Welcome to the Lean Supply Chain Blog

Welcome! This blog is intended to be a resource to readers of Improving the Extended Value Stream(available for purchase now but to be released in mid-April by Productivity Press) and anyone else interested in creating lean supply chains. This first post will answer a question that some might be asking: "Why extend lean to the entire supply chain if we already have lean implemented throughout our company? Why worry about suppliers and/or customers?" One might ask that question because he/she assumes that placing demands on suppliers such as more frequent deliveries, kanban requirements, and decreases in price will create value for his/her company without worrying about whether or not the supplier(s) are actually implementing lean. This assumption, at least when we apply it to the long term, is incorrect. "Squeezing" suppliers might force them to implement lean in some cases, but in more cases some far less desirable things are likely to happen:
  • Suppliers will decrease their quality in order to meet price decreases.
  • Suppliers will hold more inventory to meet delivery demands and kanban requirements and will begin to lose profitabilty.
  • Suppliers will decide to stop working with their "lean" customer because they are losing money.
  • Suppliers forced to deal with "lean" customers will slowly go out of business.

Just as we all know that optimizing a given process within a company (or single point within a value stream) will not necessarily lead to increased profits (though it might reduce "standard costs" on paper), optimizing one company within a supply chain will not optimize the overall profitability of the supply chain. In the short term, it will increase cash flow and profits for the one supply chain participant that has implemented lean; however, to optimize long term profitabilty for all participants and to create the most value for the customer, it behooves a company to extend lean to its entire supply chain. This is in the best interest of the company's long term survival.

Using the resources listed on our "Lean Supply Chain" website, you can learn more about lean and why you would want to create a lean supply chain that includes your suppliers and customers.

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