When it comes to driving continuous improvement at the plant level, lean has a long and well publicized history, thanks to its laser focus on eliminating waste from all aspects of the production process. However, in a world that increasingly looks at the global marketplace through a wide-angle supply chain lens, the advantages possible from lean initiatives are now being sought throughout the extended enterprise, not just the shop floor. Clearly, lean is not just for production anymore.
"Lean supply chain touches all aspects of supply chain and logistics as defined by the SCOR model: plan, source, make, deliver and return," explains Paul Myerson, a professor of practice in supply chain management at Lehigh University and author of two books on lean supply chain, including "Lean Retail & Wholesale" (McGraw-Hill, 2014). "When you look at it that way, manufacturing is just one piece of the supply chain, so there is a huge opportunity for lean within supply chains. In manufacturing, lean is typically thought of as a pencil-and-paper process, but when you consider the broader realm of supply chain and logistics, technology not only enables lean but it can help identify and eliminate waste by substituting information for inventory."
Consider the supply chain of Pratt & Whitney, an East Hartford, Conn.-based manufacturer of aircraft engines and a division of United Technologies Corp. (IW US 500/23). Pratt & Whitney is in the midst of a ramp-up to triple production of jet engines by 2020, an effort that will rely on suppliers to produce roughly 80% of the components and parts. As part of that initiative, the company has invested more than $10 billion in long-term agreements with 90 key suppliers.
To manage and coordinate that kind of activity, Pratt & Whitney recently opened an Operations Command Center, which focuses on lean continuous improvement between the company and its supply chain of roughly 400 suppliers worldwide, explains Rita Peralta, general manager of the Command Center. "Our goal is to identify supply chain issues early and collaborate with the suppliers early before a potential constraint or impediment occurs." Using data collection and analytics technology, the Command Center's quality and delivery assurance team gathers and shares information related to each supplier's on-time delivery status.
"We track what we call proactivity charting, and we give positive reinforcements to suppliers who provide early-warning indicators that they might not hit their promise dates," Peralta says. "There are contractual requirements that every week the suppliers will update our portal on their promise dates, so we don't penalize them for notifying us early because that's what we want. When we are notified early we can all take action."
Replication is the Key
Lean Six Sigma is central to the global supply chain efforts of USG Corp. (IW US 500/261), a producer and distributor of gypsum wallboard, joint compound and related products for the construction and remodeling industries. Through various initiatives, USG achieved close to $10 million in savings last year while significantly improving operating efficiencies. One of the keys to the company's recent success is its workforce; every employee in the supply chain organization -- about 100 people -- has been trained in lean Six Sigma.
"The key to our lean Six Sigma efforts is replication," explains Pete Savu, senior vice president, manufacturing and global supply chain with Chicago-based United States Gypsum Co., a subsidiary of USG Corp. "When we successfully complete a project at one of our plants, we apply that process at another 10 or 15 plants, wherever appropriate. You don't want to have to reinvent the wheel." Lean Six Sigma, in fact, is embedded in all of USG's manufacturing plants in North America.
Lean Six Sigma within USG's supply chain is relatively new, Savu notes, but it's becoming much more widespread as the company's training programs take root. "We do a lot of cross-functional work within our supply chain," he says, "so if we have a warehouse in one region with stock-out problems, we'll involve production, transportation, logistics, etc., to solve that problem. We'll use enterprise value stream mapping from several locations throughout the entire process." Lean Six Sigma is even spreading into other corporate offices at USG, including sales and finance. "Nothing here is done in a silo," Savu says.