Tuesday, June 26, 2007

Why Involve Suppliers In Your Lean Journey

According to Lean Thinking by Womack and Jones, the five principles of lean are:

1. Specify Value
2. Identify the Value Stream
3. Flow
4. Pull
5. Perfection

I thought it would be worthwhile examining these five principles in the context of supplier involvement in a lean program. In most analyses, supplier involvement falls only into #5. That is, involving suppliers is part of "seeking perfection." In actuality, however, working with suppliers to improve the value stream is critical to success. Let's examine each principle:

1. Specify value. Value is defined by the customer. The end customer defines value as does each customer in the process. If you are on a lean journey and involve suppliers, you are the customer to your tier 1 suppliers, tier 1 suppliers are customers of tier 2 suppliers, etc. Looking at the entire value stream helps determine what creates value for each customer in the process (as well as the end customer). For manufacturers whose products consist of many purchased components (or whose material cost far outweighs labor cost), understanding the entire value stream and the what customers need at each point is critical. Leaning the internal operations of such an organization is good; however, stopping at that point would be a mistake.

2. Identify the value stream. The value stream includes all of the information and material flow steps necessary to bring a product to the end customer. This obviously involves suppliers. In many cases, both the information and material flows going in and out of each player in the value stream are full of wastes that would go unseen without mapping the value stream.

3. Flow. Flow means moving material or information from one value-added step to the next with as little delay as possible. In many cases, it is associated with internal manufacturing only. However, it is applicable to both information and material flows within an extended value stream. Having information flow through the value stream without delays or errors can result in dramatic improvements in customer service and reductions in lead times and inventory. Better material flow within supplier plants and between plants can result in improvements as well.

4. Pull. This has a very obvious implication for suppliers. Most organizations do not pull from suppliers, and many of those that do have "pull" systems in place are pulling from a supplier that is operating in "mass production" mode. This means that additional costs, in the form of inventory, defects, and other wastes are inside the supplier's four walls. Any customer that assumes that those costs are not being passed on to them is naive. Thus, it is important to setup true pull systems with suppliers, who have bought in to the philosophies of lean.

5. Perfection. For the extended value stream, seeking perfection simply means continuing to remove wastes in the entire value stream by working closely with suppliers on programs such as product design for manufacturability, supplier associations, and other programs that aim at leaning the value streams out.


Anonymous said...

Good post. I like how you applied to purchasing.

If you know of "real live" examples that would be a great subsequent post.

FoxfireWMS said...

Nice slant on this issue. Often we forget/impose lean programs on suppliers without factoring the entropy costs.

Kendall Gordan, SE