July 28, 2021Sustaining a Lean Supply Chain in 2021 and Beyond Strategies for continuous improvement of supply chain agility and growthNever before has so much attention been given to supply chain agility and resiliency. Today, everyone is talking and thinking about the supply chain.Whether it’s the cost of lumber, the delays in deliveries of new home appliances, the slowdowns for automotive manufacturers due to chip shortages, or the limited selection of bicycles and other outdoor gear – everyone is feeling the impacts of supply chain interruptions.The combined forces of Brexit, the semiconductor chip shortage, trade wars and tariffs, the boom in IoT, natural disasters, labor shortages, and the pandemic have exposed the fragility of the tenuous links keeping the supply chain afloat.There is renewed debate and question marks around lean manufacturing principles, just in time (JIT) manufacturing, and the balance between efficiency and resiliency.Source: goleansixsigma.comLean manufacturing and six sigma have reshaped thinking around supply chain management, encouraging companies to focus on reducing waste, streamlining efficiencies, and cultivating a culture of continuous improvement.While some are blaming JIT and lean manufacturing for today’s shortages in products and parts, and the general chaos in moving goods from manufacturing/assembly to distribution, it’s important to look deeper than this.The nature of buying and selling in both B2B and B2C markets has changed dramatically in the last two years. Consumer demand for personalization and same-day delivery, and the boom in automation and IoT devices bring to light gaps in supply chain management strategies. What worked before, wasn’t necessarily broken – it just didn’t keep up with the times.Lean supply chain practices are the way forward. But what is needed is an adjustment to how companies adhere to the principles of lean and six sigma – molding them to meet their needs and the demands of their customers. At the core of this is the value and importance of continuous improvement, contingency planning, and change management.As this quote from Ford Motor Company Chief Executive Officer Jim Farley underscores, future supply chain resiliency starts with change:“As the industry changes, we have to in-source now, just like we in-sourced powertrains in the ’20s and ’30s,” said Farley, who has shut down half his factories and seen his dealers’ lots emptying because of a dearth of chips.“We have learned a lot through this crisis that can be applied to many critical components,” Farley told analysts last month as he announced Ford would lose half its production in the second quarter and take a $2.5 billion hit to earnings this year, citing a lack of chips. “We’re also thinking about what this means for the world of batteries and silicon and all sorts of other components that are really mission critical for our company.” Financial TimesLean Six Sigma Supply Chain Management for Today and TomorrowThe key for companies is finding the common ground between lean, six sigma, and the customer-driven supply chain. This is not an easy task, nor is it one that companies have been ignoring.Stimulating change amidst high pressure situations such as a pandemic, labor shortages, floods and fires, stuck container ships, and the forced shutdown of international parts suppliers and manufacturers is a very big ask.The good news is the five principles of lean six sigma are inherently flexible, giving companies the structure, guidance, and freedom required to enable purposeful change that shifts with the times.Always be working for the customer. In today’s customer-driven market, where personalization, customization, and competition have taken on new meaning, companies cannot afford to lose sight of customer wants, needs, and challenges.What represents quality and satisfaction for our customers? How are our customers driving the market? How can we adapt to meet their new demands? What do we know about the technologies and market forces reshaping our industry?Acknowledge your barriers to success and quality. Do not get caught up in change for the sake of change. Keep your focus on identifying key problems, risk areas, and barriers that are preventing you from delivering consistent quality and satisfaction.What does our research and data tell us about our gaps and areas for improvement? What are our biggest barriers and risks? How does change ensure these are eliminated? Will this change bring improvements for our customers? How can automation improve efficiency and eliminate delays?Remove the inefficiencies contributing to these barriers. You cannot and should not change everything. Focus on removing inefficiencies, waste, and processes that cost you and your customers money and time. Ensure that any change in process is truly value-added. Work with a proven team who understands the challenges that come with change and the best way to strategically remove inefficiencies.How long does it take to get from idea to design to production to the customer? How can this process be streamlined and tightened? Where are the weaknesses that could put us at risk? Does this change still have the best needs of the customer in mind?Always be communicating with your employees. Change is hard. It is critical you’re always communicating with your employees. Learn from them about the inefficiencies and gaps they deal with on a daily basis. Encourage your employees to speak up and be involved in changes to process and strategy.What are our employees telling us about areas for improvement? What are our customer-facing employees telling us about customer satisfaction, wants, and needs? How can we train employees on new processes and strategies? Who are our internal leaders who can help foster a culture of continuous improvement?Be flexible, agile, and responsive. There is not one way to do anything. What worked yesterday likely won’t work tomorrow. Remember the lessons from the last two years and use these to reinforce a culture that can be agile, flexible, and responsive. Take advantage of the people, processes, and technology available today so you can be ready for the next disruption.What are the market trends? How have customer demands shifted? What technologies are available that can help us eliminate waste and streamline our processes? How can we learn from what didn’t work and apply this to new strategies for resiliency and agility? How can technologies such as automated mobile robots (AMRs) and big data bring resiliency and agility to our processes?Supply Chain Realities and Challenges“I’ve turned down a million dollars’ worth of work in the last two weeks. Doing that, it’s hard to go to bed at night when you put your head to the pillow. I have open capacity, but I need more people.” Matt Guse, owner of MRS Machining, Augusta, GA“We’re seeing gangbuster levels of orders. But the sector has a lot of challenges, like a rise in raw material costs, supply chain disruptions, logistics bottlenecks and worker shortages.” Chad Moutray, chief economist for the National Association of Manufacturers“It was a lot easier to turn the lights out than to ramp up. Manufacturers weren’t prepared for a surge of demand in goods. They’ve been caught a bit flat-footed.” Diane Swonk, chief economist at the accounting firm Grant Thornton, Chicago, ILThese three quotes from a recent New York Times article titled, As Economy Rebounds, Manufacturers Face New Hurdles, sum up the core supply chain challenges.Across every sector – manufacturing, hospitality, travel, health care, education, and technology – companies are operating within a fine balance. Success and survival are directly linked to readily available people, products, knowledge, and demand.Consider these three examples of disruption to people, products, knowledge, and demand:April 14, 2010, eruption of Eyjafjallajökull in Iceland grounded an estimated 7 million passengers and resulted in global GDP losses of $4.7 billion. (Eyjafjallajökull and the 2010 Closure of European Airspace: Crisis Management, Economic Impact, and Tackling Future Risks)The global semiconductor chip shortage will cost automakers $110 billion in lost revenues this year, up from a prior estimate of $61 billion, and the crisis will hit the production of 3.9 million vehicles. (Chip Shortage to Cost Automakers US$110 Billion in Revenues in 2021)More than 90% of state and local chambers of commerce say worker shortages are holding back their economies. More than 90% of industry association economists say employers in their sectors are struggling to find qualified workers for open jobs. (The America Works Report: Quantifying the Nation’s Workforce Crisis)Lean supply chains did not cause these disruptions, rather it was the accumulation of mounting pressures that ultimately caused the breakdowns and interruptions.With an estimated 2.3 million women leaving the workforce due to the pandemic, the pre-pandemic labor shortage was exacerbated.5G, IoT, the surge in mobile technology in the automotive industry, and semiconductor chip manufacturing capacity operating at full capacity meant there was zero room to respond to increasing demands or to rebound quickly after forced plant closures.Customer demands for personalization, same-day delivery and the rise in ecommerce triggered a change in what customers value most. The pandemic then caused a change in buying patterns – shortages of swimming pools, lumber, appliances, toilet paper, and hand sanitizer – and a lack of workers. These factors coupled with new health and safety requirements, and the grounding of distribution links, meant very few companies were able to respond quickly and efficiently to this surge in chaos. There is opportunity within these challenges. With a commitment to continuous improvement, focusing on the customer, eliminating barriers, streamlining efficiencies, and agility – companies can recover and be ready for the next disruption.Five Strategies for Continuous ImprovementIn the peak of the pandemic there were numerous articles and discussions about how JIT and lean manufacturing were the root of supply chain challenges. However, it is important to acknowledge that too many companies are attempting to utilize JIT and lean manufacturing within supply chains strategies that are too long, have too many dependencies, and are using outdated technologies.Ultimately JIT and lean supply chain are about giving customers what they need.Doing this effectively demands attention to the core principles of lean six sigma and building in continuous improvement strategies that take advantage of experience, technology, and people.Always be looking for opportunity: Supply chain management is not a static process. Continuous improvement means you’re constantly looking for the barriers to success, ways to speed time-to-market, increasing flexibility and agility, sticking to a zero-errors culture, standardizing processes to ensure safety and quality, and building a supportive employee environment.Take advantage of Industry 4.0: Technologies such as IoT, 5G and 6G, automation, artificial intelligence, additive manufacturing, and 24/7 connectivity give companies the tools and insight to be responsive and agile.Streamline warehousing and distribution: Co-locating warehousing and distribution, using automation such as robots to move goods safely and securely, and redefining JIT inventory level benchmarks are just some of the ways companies can fix one of the largest bottlenecks in modern supply chains.Eliminate waste: Core to lean manufacturing is reducing waste within the supply chain. Look for ways to eliminate defects, under-utilized employees, transportation slowdowns, excess inventory, inefficient processes in moving goods, and delays.Focus on the customer: Your goal is to provide value to the customer, and the best way to do this is by optimizing quality and reducing cost. For example, use big data to understand and predict customer patterns. Use automation and machine learning to improve product quality and speed time-to-market. Technologies such as AI, analytics, robotics, and more deliver real insight into what your customers want and why they want it. Use big data to define, measure, analyze, design, and verify new products, services, and processes.The Toyota Product System (TPS) was developed in response to the production and delivery issues Ford experienced in the 1930s and post-World War II.And now as we emerge from a global pandemic, we are on the cusp of the next wave of change within lean manufacturing and the application of lean six sigma to supply chain management.This is an exciting time – never before has there been the experience, people, processes, and technology available to build truly resilient and optimized supply chains. Contact us to learn more about our approach to lean supply chain management and how automation can be a key partner in your lean manufacturing strategies.