You’ve been doing Lean for a while and made great strides internally. But now you’re noticing your suppliers need to catch up in order for you to make further leaps ahead. It’s time to look outside your own factory walls and upgrade your supply chain.
Value Chain Management (VCM), an effective method for supply chain improvement, is not just for the large OEM’s. Even small and midsize manufacturers can benefit from the basic concepts of supply chain improvement. There are significant financial results to gain from VCM without substantial capital investment including:
- Increased operating margins
- Improved asset turnover
- Increased return on assets, while
- Increasing cash conversion efficiency
VCM starts with seeing the supply chain as a whole and balancing tradeoffs between key areas: inventory, transportation, facilities, and information. And it’s not rocket science. Many of these benefits can be gained by applying the familiar Lean principles that you already know to your supply chain. Here are a few simple steps to get started:
- Examine your flow of information: Have you conducted an Office Value Stream Map to see the information flow? Office functions often eat up from 70 to 95 percent of the time that goes into manufacturing a product. This also includes information flows of and communications with your supplier. Can you eliminate transactions by using web based communication or EDI?
- Examine your flow of product: Have you conducted a Value Stream Map (VSM) to see the product flow? The VSM will help you find bottlenecks in the flow and reveal problems that may be traced back to your vendors. Do you use Pull/Kanban to replenish material? Pull/Kanban provides a systematic, routine way to re-supply what you need when you need it originating from signals on the factory floor.
- Review and improve your purchasing practices: There is a lot of potential waste in purchasing. Of course, Lean can also be applied to purchasing functions. For example, a Lean purchasing department’s buyers spend their time on strategic supplier devel¬opment, not on replenishing purchased items.
- Evaluate your suppliers and select top performers: How do your major suppliers compare on price, delivery, quality, responsiveness, etc.? You may have other criteria that are critical to your business or industry to add to this list. How does each of them stack up? Designate preferred suppliers based on a comparison of key criteria and reward them with your business.
- Examine and upgrade your logistics: Do you use a carrier or your own truck? How often? Could you or your suppliers use different methods to ship and get better results for less? Depending on the customers’ needs you may find that consolidating deliveries or expanding their number would work better.
One key to this effort is closer communications with your suppliers. Suppliers need to know what you expect so that they can help you meet your customers’ needs. Without a clear understanding of these needs, your suppliers will be guessing and filling in the blanks. In turn, you also want quick feedback and responsiveness from your suppliers. If there’s an issue with a part or a problem meeting your requirements, you want to know right away instead of days later.
Working to improve your supply chain will also provide you additional benefits. As you improve speed of delivery and shorten your supply chain, you create a competitive advantage against overseas competition. Speed of delivery is one thing foreign competitors cannot match with their extended supply chains. In addition, if you are closer to your suppliers, you can take care of problems more expeditiously and make changes quickly. These advantages grow from an improved supply chain.
VCM allows you to see your supply chain as an extension of your business. Using Lean tools, you can address specific bottlenecks and issues in your supply chain. Without VCM, you are denying your business the opportunity for more dramatic improvements and future success. Don’t hold your opera¬tion back anymore.
For more information or assistance on Value Chain Management, please contact WMEP today at 888-603-6957.