A lean supply chain starts with operating on the same principles of efficiency, but emphasizes overall quality. This means a reduction of wastes, lowering defective goods, and increasing efficiency as a result.
Conventionally, manufacturing industries used to rely on purchasing large amounts of supplies in order to get better prices on material. The process involved buying bulk material at a lower price and then warehousing the material until it was needed. Many companies have now eliminated the concept of bulk ordering and have moved to lean supply chain practices, due to large amounts of money that can be tied up in inventory.
Lean supply chain management is about removing waste or unwanted components from a process. Most often this process is applied to manufacturing, where supplies can be ordered as they are needed rather than back-stocking a lot of inventory. With a lean approach, it is important for organizational leadership to identify the value and non-value parts of the supply chain. By identifying what is of value in the supply chain, a determination can be made on how to focus the business on those valued parts. Equally, non-valued parts can be eliminated to keep cost and inefficiency at a minimum. Non-valued parts are those parts in the process that have zero or negative return on investment. The elimination of non-valued parts has positive or no impact on the outcome of the process.
Lean supply chain management represents a new way of thinking about supplier networks, which requires cooperative supplier relationships while balancing cooperation and competition. Cooperation involves a spectrum of collaborative relationships & coordination mechanisms, as supplier partnerships & strategic alliances represent a key feature of lean supply chain management.
