Lean and just-in-time (JIT) strategies are still vital to supply chains. Lean management practices JIT strategies may have taken a beating in recent years, but only because companies relied too heavily upon these strategies during a time when global supply chains were left bottle-necked. After all, the key principles of lean supply chain management are to reduce waste and increase efficiency.
By minimizing unnecessary activities and eliminating excess inventory, companies can optimize their supply chain operations and improve their agility in responding to changing market demands. This helps prevent manufacturing failures by ensuring that the right materials and products are available when they are needed, reducing the risk of stockouts and delays in production.
Lean and JIT strategies help manage risk by making supply chain operations more resilient. Supply chain disruptions — such as natural disasters, supplier bankruptcy, pandemics, or political unrest — can have a significant impact on a company's operations and financial performance.
Companies can reduce their dependence on a single supplier by diversifying their supplier base, which helps mitigate the risk of supplier bankruptcy, production delays, or quality issues. By having multiple suppliers, companies can also negotiate better prices and improve their bargaining power.
Through carefully managing supplier relationships and establishing clear communication and collaboration channels with lean strategies, companies can avoid the common challenges of managing multiple suppliers. By using value stream mapping (VSM), it’s easy to determine what suppliers are performing well, are less costly, and are more adept at providing the company with the supplies they need in anticipation of more demand.
Using VSM, companies can also identify potential new suppliers and evaluate their performance based on factors such as price, quality, and lead times. By analyzing multiple suppliers, companies can select the best-fit supplier based on their specific needs and requirements.
Developing Contingency Plans
Companies can develop contingency plans to prepare for potential disruptions in their supply chain, including alternative sourcing options, backup inventory, and disaster recovery plans. By having contingency plans in place, companies can respond more quickly and effectively to supply chain disruptions. Lean management tools can help develop contingency plans by identifying potential risks and vulnerabilities in a company's operations, providing a framework for developing and implementing effective response strategies.
There are several lean management tools that can help develop contingency plans. Enterprise VSM takes a holistic view of your entire business, defining value as determined by the customer, meeting their needs at specific price points and at specific times punctuated by optimal value. Such a map identifies all actions required to bring a specific good or service through key tasks while pinpointing critical areas that must flow well. This streamlining process is more important than ever as post-COVID-19 activities continue to take center stage in this country and businesses are trying to redefine their focus.
Another tool is 5S; by implementing 5S principles, companies can identify and eliminate potential safety hazards, and improve the efficiency of their operations. This can help companies reduce the risk of accidents, and improve their ability to respond to emergencies. 5S principles allow organizations to define value-added versus non-value-added activity and to establish a link between workplace organization, visual controls, and the customer. By doing so, organizations are able to keep their businesses effective, efficient, and standard while creating predictability and mitigating risk.
Kanban is a great lean management tool that uses visual cues to signal when materials or components need to be replenished. By using Kanban, companies can improve the accuracy of their inventory management and reduce the risk of stockouts or shortages, which can help companies develop contingency plans to ensure a reliable supply of materials or components.
With the COVID-19 pandemic, companies can use what they learned and apply it to the Kaizen strategy — a daily, continuous improvement process that aims to eliminate waste and improve efficiency. Kaizen is a philosophy of continuous improvement in which everything can and must be improved. It is a process that engages the “human element” by eliminating the overburdening of people and equipment, unevenness, and waste. With this level of knowledge and engagement, organizations are able to mitigate risk as they create stability across their organization. This can help companies develop contingency plans that are responsive to changing circumstances and minimize the impact of disruptions.
Despite the negative backlash that lean management strategies and JIT have received in the wake of the COVID-19 pandemic, these strategies can still be effective in helping companies manage supplier diversity and develop contingency plans. In fact, many of the core principles of lean management and JIT are designed to help companies mitigate risks and build more resilient supply chains. Understanding these strategies helps us realize that the endgame is less about minimalism and more about maximizing control due to the bird’s eye view it brings to the company.
Izzy Galicia is president and CEO of Incito Consulting Group.
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