MRO Today - Help suppliers get lean

Help suppliers get lean

by Dave Melhus

I recently gave a lean supply chain presentation at a client’s supplier conference. Having sat in the supplier’s seat, I can appreciate the anxiety many of the suppliers faced when their customer brought up the subject of lean. They were likely thinking, “What do they want now? I already reduced my prices. I absorbed my raw material cost increases. My delivery is the best in the industry. This customer has already cost our firm a bundle in schedule changes, overtime, large demand swings, special product, obsolete inventory.”

Toyota uses the expression, “We do not want your profits; we want your waste.” Unfortunately, it is too easy to attack a supplier’s profits (demand price concessions) or give away profits (by not changing inefficient customer or supplier processes). As a supplier, I recommend being proactive and becoming part of the solution vs. taking less profit.

I also encourage the customer to expect improvement from their suppliers (partners) or find a better alternative. A partnership is only as good as the next best alternative. In other words, when the benefits of the partner relationship become a commodity, the partners (either the customer or supplier) have become lazy. The partners must not solely rely on historical relationships to make future procurement decisions or secure future business.

Lean can help a partnership stay strong by making it difficult or impossible to find that next best alternative. How? By establishing a common understanding of the current wasteful processes within the extended (supplier to end-user) supply chain and collaboratively identifying wastes to eliminate.

While most companies identify key supplier performance indicators or establish random fundamental lean supply chain tactics, they seldom establish ongoing cross organizational (company to company) improvement teams aimed at significantly enhancing the extended supply chain’s performance. Instead, they achieve improvements through management attention (muscle) vs. true and lasting process changes.

Muscle doesn’t work
Muscling performance improvement leaves the perception that a lean supply chain is about measuring, managing, passing waste on to someone else, having less people doing more — or worst of all — having the customer help with “your” problems when the helper is the source of many of the problems.

My past columns discussed an approach called value stream mapping or analysis (VSA). The VSA methodology is a great tool to help an organization see the waste in the flow of material and information within its supply chain. For example, a simplified extended supply chain flow path might look like this: End-user places an order, producer schedules, producer orders, supplier enters order, supplier schedules, supplier manufactures, supplier handles, supplier warehouses, supplier ships, supplier delivers, supplier invoices, producer receives, producer pays, supplier processes payment, producer warehouses, producer handles, producer manufactures, producer handles, producer warehouses, producer ships, producer delivers, producer invoices, end-user changes his or her mind….and the process steps go on.

The complexity of extended supply chain value streams and functional process mentality causes most organizations to shy away from diving into the waste of these functional/cross organizational processes. But the rewards are enormous.

Where to begin
Those willing to tackle supply chain waste typically ask, “Where do we start?” and “How much detail is required?” Start at the level that allows you to see enough waste to accomplish your goal. Often, people make the mistake of mapping everything and doing nothing.

Once you’ve identified the goals of the supply chain, determine key stakeholders required, and allow the time and structure to support the improvement process. Many organizations talk about continuous improvement but do not have the infrastructure or involvement of the entire supply chain to implement potential improvements.

If your organization tried a similar approach but you have not achieved desired results, ask yourself:
1) Was the waste that you eliminated tied to your objectives?
2) Are there processes that have been deemed off-limits?
3) Are your efforts intense enough?

I can think of no better way to become an indispensable partner with a supplier than to become intimate with the downstream processes that affect your organization. Be part of the solution and you will not have to look for the next best alternative.

Dave Melhus, the former vice president of operations for Iowa’s Vermeer Manufacturing, is currently a VP with Simpler Consulting. He can be reached at 641-620-1320 or by e-mailing davem@simpler.com.