Thursday, October 2, 2008

Lean Supply Chain Management

Lean Supply Chain Management

The global economy is subject to cyclical ups and downs, enterprises have to transform to cope with internationalisation and globalisation. The collapse of some of the banking giants may be just the tip of the icebergs of the challenges ahead. The US$700 billion bail-out of the American financial industry is absolutely necessary to avoid the repercussions and chain reaction as well as possible massive loss of employment. What will happen to the rest of the world is yet to be seen, and some nations may not be able to survive the financial "tsunami". The potential damages may surface some time in the future.

In a turbulent marketplace, it can be traumatic for the traditional supply chain management that is centred around the decades-old time-tested re-order point technique coupled with the easy to operate MIN:MAX inventory control. More so if the enterprises assume that the future will repeat the past performance without the ability to accommodate possible variation due to intrinsic and extrinsic factors.

The fact that Dell Computer have decided to sell off the manufacturing plants to the would-be contract manufacturers within the next 18 months can be a very good corporate strategy. This is probably in line with the Agility Methodology and the Agile Virtual Enterprise Conceptual Framework, whereby corporations transform to capitalise on the core competencies and leverage with others to remain globally competitive. Apple Computers and HP have been adopting the agility business model for some time now. It is little surprising that Foxconn becomes the world's leading Original Design Manufacturer (ODM) for some of the greatest global brands. The Foxconn Taiwanese owner started off the company in Taiwan as Hon Hai (Red Sea) and venture into China with Foxconn to create a blue ocean with an annual sales of US$70 billion. A success story that has not be well publicised but Mr. Guo is the richest man in Taiwan.

Toyota sale revenue is around US$0.25 trillion per annum and is now the second largest car maker in the world. The famed Toyota Production System (TPS) as been incorporated into the Lean Manufacturing process framework, and have become popular for manufacturers and enterprises wanting to achieve good customer service, high quality product, low cost production, good management, respect for people, short manufacturing lead time, short cycle manufacturing, continuous improvement and all the best practices for planning and execution.

While many enterprises are busy trying to figure out how to implement lean enterprise, Toyota continue to achieve significant success and brand power through the very fundamental philosophy of simplification and standardisation. While Toyota continuously perfect the leadership, management and people development, many enteprises may be too caught up with trying to fit TPS into a rather complex manufacturing environment. The outcomes are often fairly predictable due to the less effective approach of trying to live with the existing habits, norms, performance, systems, traditional management, incompatible metrics, and culture.

Lean does not happen overnight. It requires a subtle cultural change, extensive education & training, value stream process mapping and simplification, a paradigm shift, continuous improvement & innovation, and effective people development and management.

It is time to go lean to survive the global competition.

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