Beyond Lean: The Perfect Lean Market

May 8, 2006
While 80% of manufacturers have lean initiatives, less and 1% have lean practices in place.

Manufacturers continue to make great strides in adoption of lean and just-in-time manufacturing techniques to cut waste and delay from their operations. In working with manufacturers over the past 25 years, I know first-hand that lean manufacturing is serious business. By now, I'd estimate about 80% of U.S. and global manufacturers have lean initiatives.

Yet less than one percent has lean practices in place. Why?

There's still a blind spot in manufacturers' "lean" vision. That blind spot is supply chain communications.

Economists theorize that access to the right information at the right time creates conditions for what they call a "perfect" market. The e-mail, fax machines and telephones that are still the mainstays of manufacturing supply chain communication don't get information to the systems that need it any faster than people can re-enter the data -- hopefully, accurately. By improving supply chain communications manufacturers can aim for the perfect lean market. In the perfect lean market, manufacturing data moves through the supply chain unconstrained by geographic, technical or business obstacles; it doesn't depend on human intervention to get data from one business partner to another.

The perfect lean market exhibits more than waste minimization. The right data at the right time and place might help a manufacturer act before a supply chain or component glitch puts flawed products on the shelves. AMR Research recently cited the supply problems that caused Motorola to stop U.S. shipments of its white-hot Razr phone with a faulty part, and that brought Apple unwanted attention for easily damaged screens in the iPod nano.

What's more, the perfect lean market can provide insight from your office into plants in Europe or South America. The right information at the right time could let you trace and recall only goods containing parts from a specific assembly lot. By introducing timeliness and clarity into supply chain communications, the perfect lean market could serve as a venue for trading partners to collaborate and achieve collective competitive advantage.

The Makings Of A Perfect Lean Market

There are three primary attributes to a perfect lean market. Clarity is one: It characterizes the way data is communicated and the way the supply chain connects. Open standards for technology help create a foundation for perfect lean market conditions by enabling seamless supply chain communication. The Automotive Industry Action Group (AIAG) is one entity that's making strides toward clarity. AIAG is working hard to establish standards for inventory visibility and other functions, such as engineering, quality and warranty and recall.

The second attribute of a perfect lean market is agility, responsiveness to changes in the marketplace. Certainly, lean qualities are important to agility - witness companies such as Sanyo and GM shedding non-core businesses in order to focus and presumably, to eliminate distractions that slow down decision-making and action. But lean practices won't get information to the right place at the right time. That's where technology can introduce agility, through systems that can receive and process information quickly, even instantly, through automation.

Unity is the third attribute of a perfect lean market. For example, Gorton's -- the food manufacturer -- has challenged suppliers to adopt lean practices, and one packaging vendor cut inventory down to a week and also improved service levels. If Gorton's and its vendor can collaborate consistently, they'll likely respond to events more quickly -- and competitively. Getting information to the right place at the right time can fuel that kind of unity. And as manufacturers continue to pair low-cost overseas production with domestic final assembly, this kind of unity will become essential.

Eyes Wide Open

The Aberdeen Group's recent "Lean Benchmark Report" (March 2006) ranked 20% of the study's 300 participants as best-in-class for lean practices including supplier collaboration. Nevertheless, almost a third of study respondents were challenged with integrating both other parts of the company and all their suppliers into their lean programs.

The good news is that in devising their lean strategies these manufacturers haven't turned a blind eye to the supply chain. Technology can help - the tools exist today. Now it's up to manufacturers to commit to supply chain communications with real urgency and rigor. Manufacturers stand to profit by a wealth of prospective benefits, from compliance and resource consolidation to customer responsiveness and ultimately, bottom-line success.

Pamela Lopker is president and chairman of enterprise software firm QAD Inc. QAD applications provide critical functionality for managing manufacturing resources and operations within and beyond the enterprise, enabling global manufacturers to collaborate with their customers, suppliers and partners to make and deliver the right product, at the right cost and at the right time.

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