The benefits of a lean supply chain

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With so many elements to them, supply chains can end up becoming complicated, even bloated. In fact, supply chain inefficiencies are reported to be costing the UK more than £1.5bn. Applying the lean philosophy to the supply chain offers the potential for efficiency-based savings and increased customer satisfaction.

What is a lean supply chain?

A lean supply chain is a supply chain operating at its very best: it supplies the goods or products to the end customer in the most efficient manner possible, with minimal waste, loss, and with enough flexibility that it can adapt to unexpected delays.

Essentially, a lean supply chain is the result of trimming the fat, such as ensuring that products aren’t spending too long being unprofitable in warehouses, or eliminating any unnecessary operation costs (such as excessive fuel consumption).

What benefits does a lean supply chain offer?

Boost profits

Implementing a lean supply chain can reduce unnecessary processes, your need for storage, and waste. Aside from the increased revenue this could bring to your business, it can also boost your profits too.

That’s because, by trimming the fat from your supply chain, you also remove the associated costs. And, of course, fewer expenses mean that the profit margin on each of your sales is that much greater.

Reduce waste

When you’re trying to make your supply chain as efficient as possible, waste is going to prevent that. Waste needs to be disposed of, which requires processes and reports and transport.

The process of implementing a lean supply chain will identify areas where waste can be reduced. There may be new manufacturing methods you could adopt that use more of the materials, or technology that recycles the waste back into usable resources. You could also identify different materials you could use that enable your customers to recycle more of their product once they no longer need it.

Manufacturing

Analysing the manufacturing process can still identify areas for improvement and efficiency opportunities that can help cut down on manufacturing defects, waste, and returned goods.
Faster upgrade cycles

Being able to offer your customers a superior product can give you an edge over your competitors, and beating them to the market with this product can give you the advantage.

But if the new product is ready to ship and you still have stacks of old inventory to shift first, the resulting delay might prevent you shipping the new product and destroy any advantage you might have gained. Reducing your reliance on inventory means that you’ll have less old inventory to clear before you can start shipping your new product.

Streamline your processes

As your supply chain grew, incorporated new third parties, and became more complicated, your processes may have naturally evolved to become complicated too. Sometimes these evolutions can bring with them inefficiencies, inherit now-defunct steps, and develop duplications.

All of these result in time being spent where it isn’t needed at the expense of being spent in areas that could reap better returns for the investment.

Customer satisfaction

Removing unnecessary steps in the supply chain puts your products in your customers’ hands that much faster, boosting their satisfaction with your company and increasing the likelihood that they will become repeat customers.

The benefit doesn’t end there, though; satisfied customers are more likely to recommend your business to their friends, family, or colleagues, boosting your revenue as a result.

Can a supply chain become too lean?

Incorrect implementation of lean principles (which one industry writer has humorously coined as L.A.M.E. – Lean As Misguidedly Executed) can undo the benefits you could have gained by building your lean supply chain. For instance, American farming machine manufacturer Deere & Co began to lose market share because they had been overzealous in making their supply chain lean, resulting in order fulfillment times that were much longer than their competitors.

The trick is not to eliminate too much waste. While having some inventory in stock will cost you storage fees, it means you can quickly dispatch orders. Maintaining contracts with two suppliers might duplicate some processes, but might also prevent your supply chain grinding to a halt if one supplier faces problems, or help if you need to quickly react to a spike in demand.

How ISO 9001 can help build a lean supply chain

ISO 9001 can help your company make huge strides in building a lean supply chain by fostering a quality management system that will help you achieve better productivity, improved efficiency, and reduce waste; all key ingredients of a lean supply chain.

And, with international recognition and a proven track record of helping organisations win new business, ISO 9001 is a straightforward way of demonstrating your company’s dedication to efficiency and quality.

Take our free online course to find out more ISO 9001 and how you can implement a quality management system to help you build your lean supply chain.

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Written by Mark Nutburn

CTO - technology professional with over 20 years of IT experience building bespoke CRM systems and designing customised software solutions. A key part of the management team at The British Assessment Bureau for many years and a part of AMTIVO’s management team.

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