Description
What does it mean for a supply chain to be lean? In manufacturing, lean describes the method that maximizes productivity while simultaneously minimizing waste. A lean Supply Chain also aims to eliminate waste through better inventory control and streamlining all supply chain processes, although supply chains are by nature very complex and frequently see conflicting incentives and points of view.
For example, a warehouse manager may aim at reducing inventory to cut costs, whilst a store manager would rather focus on avoiding stock-outs and stock up instead. Making things smoother for the store manager could jeopardize the performance of the warehouse manager. In manufacturing, making step A leaner, followed by B, then C, tends to make the whole production leaner as a whole. In supply chains however, a leaner step in A could create problems for step B. Aligning incentives would eliminate this issue, but how do we measure how much waste has been reduced?
The financial impact of every decision is key to measure supply chain performance. The return on investment of every action should be compared, weighted and then prioritized accordingly. The higher the return on investment - the leaner the supply chain as a whole.
