How Organizations Extend Lean to Their Supply Chains
Spend Matters welcomes another guest post from Becky Partida of APQC.
There are many opinions on how organizations can achieve efficiency and effectiveness in their supply chains. One method organizations employ to achieve these goals is the adoption of lean processes. According to APQC's Open Standards Benchmarking in procurement, 27.5 percent of organizations have invested in lean process development for their procurement function, and 12.8 percent plan to invest in this within the next two years (see figure below). With over 40 percent of organizations interested in incorporating lean in their supply chain, organizations can benefit from examples of how to do so.
APQC recently conducted in-depth interviews of organizations that have embraced lean concepts throughout the enterprise, including in their supply chain functions. We focused on winners of the Shingo Prize, which recognizes organizations for operational excellence. Two of the organizations APQC interviewed, Lycoming Engines and US Synthetic, adopted lean processes internally but have extended these programs to their suppliers so that they can provide the best value to their customers.
Lycoming Engines, which provides engineering, manufacturing, service, and support to the general aviation industry, aims to eliminate waste throughout the enterprise. All of its staff members are trained in lean processes, practical problem solving, and conducting root cause analysis, and each employee takes responsibility for the quality of Lycoming’s products. For its manufacturing operations, the organization has established standard work processes aimed at eliminating waste from production activities. It holds regular meetings to review performance, discuss quality improvement, identify defects, and evaluate its inventory management process. Members of Lycoming’s leadership walk the shop floor every afternoon to identify any production issues. However, Lycoming’s employees are also empowered to suggest additional lean processes that the organization can adopt to improve its performance.
To ensure that customers receive the most reliable products possible, Lycoming extends elements of its lean program to suppliers. It challenges its suppliers annually to identify the lean processes they have adopted to improve product quality, materials availability, and cost. Lycoming has invited some of its suppliers to participate in training on lean processes and has sent some of its employees to work with suppliers to implement lean practices in their manufacturing operations.
US Synthetic, the other organization we interviewed, is a manufacturer of diamond inserts used in down-hole drilling tools for oil and gas exploration. Advancing technology in its industry means that US Synthetic must develop new products that can be produced and delivered to customers quickly. The organization uses lean processes to facilitate its product development and manufacturing, but it has also extended these processes to ensure a supply chain that can meet the demands of its rapid product development cycle.
US Synthetic manages its supply chain through value stream teams that focus on the needs of individual customers. Each team has its own engineering, manufacturing, and supply chain groups, and it monitors performance from suppliers to the customer. The culture at US Synthetic emphasizes collaboration to ensure the best value to customers as well as the best results for suppliers. The organization does not provide global guidance to its suppliers on the use of lean tools, but it will work with suppliers as needed to improve their systems and improve delivery time. Supply chain staff members regularly identify and document lessons learned and best practices so that US Synthetic can improve its processes and avoid repeating inefficient activities.
Both Lycoming Engines and US Synthetic extend their lean programs to their supply chains. These organizations have realized that, to provide the highest quality products to their customers, they need to collaborate with their suppliers so that the entire supply chain is focused on eliminating waste. By offering training to suppliers and using their own resources to help their suppliers streamline processes, Lycoming and US Synthetic ensure continuous improvement that extends from their suppliers to their customers.
Becky Partida is a research specialist in the area of supply chain management at APQC, a member-based nonprofit and one of the leading proponents of benchmarking and best practice business research.