Introduction
The 21st century has seen an upsurge and turbulence in the economic sector, creating a need for more competitive strategies for growth and development of businesses. Economics, businesses, and the political sectors in the society are being subjected to discontinuities and unexpected shocks. Therefore, as Mason-Jones, Naylor & Towill (2000) states “The success and failure of supply chains are ultimately determined in the marketplace by the end consumer. Getting the right product, at the right price, at the right time to the consumer is not only the lynchpin to competitive success but also the key to survival.” The understanding of the market place and issues of customer satisfaction are some of the fundamental factors necessary for establishing a new supply chain strategy. It is only when issues which compound the marketplace are understood, that a business can create a strategy which will meet the needs of the end consumer and supply chain (Mason-Jones, Naylor & Towill 2000). Therefore, this paper will explore a business can create a formidable supply chain strategy which will give it the necessary competitive advantage in the market.
With the environment being very intensely competitive in the global economy, many companies or organizations will survive if only they will improve their quality continuously while reducing costs (Hadrawi, 2018). Therefore, there is need for sustainable supply chain management, which responds to how the production strategies are influenced by the emerging customer driven markets. The systems of production should always respond to the constant changes and requirements of sustainability. One of the essential practices for organizations has been the development of changes in production on activities with low inventory, from high inventory which has a leaner operation (Hadrawi, 2018). Organizations have embraced learner enterprise as the key to survival in the competitive global place. Therefore, many organizations have taken interest in the lean thinking paradigm to improve competitive advantage and optimize performance. in another sense, the lean thinking paradigm has been used interchangeably with sustainability development as a way of compounding development and success of the organization (Hadrawi, 2018).
Supply Chain Performance
Supply chain involves many parties who interact directly or indirectly to fulfil the request of the customer. It not only includes production and supplies, but also deals with aspects such as warehousing, transporters, retailers and the end consumers themselves(Manzouri & Rahman, 2013). In each organization, such the one dealing with production, supply chain deals with aspects such as marketing, new production creations, finance, distribution, customer service and operations. A dynamic supply chain involves a constant movement of information, funds and products in different stages. The primary significance of nay supply chain is to create satisfaction to the end consumer while creating profitability to itself. The activities of supply chain begin with the customer making an order and end with the end consumer having paid for the delivery and the service (Franks, 2003).
A typical supply chain involves retailers, consumers, manufactures, distributers/wholesalers and raw material supplies and components. However, not every stage is needed to be there at every aspect of supply chain, because it will depend on the functions of the stages involved and the customer needs (Franks, 2003). Therefore, supply chain can be described as the thread linking each factor from the supplier to the customer, through production, and services, so that the movement of funds, materials can be managed effectively for the success of the organization (Manzouri & Rahman, 2013). Many companies in the 21st century have realized that for a supply chain to be effective and efficient, there is need to have assessment of supply chain management and its performance. that is why supply chain can be defined as the fabric which presides raw materials procurement, have them transformed into intermediate goods or final products, and deliver them to the end consumer through an elaborate distribution system.
Lean Thinking Paradigm and Supply Chain Management
The Lean Thinking Paradigm is characterized by five aspects which include defining the specific value of a product, having a definitive value stream for every good, making interrupted value flows, pursuing perfection and letting the end consumer derive value from the producer (Singh & Pandey, 2015). When an organization understands these values and puts them together in supply chain management, they can utilize lean techniques for their benefit. For an organization to be successful, it has to has to specify value from the end consumer point of view. This is because end consumers value results and not the products delivered to them. as a result, organization have to specify the value of the product they are trading to the end consumer (Singh & Pandey, 2015). However, the value of the end consumer can only be assessed by the end consumer, and if it reaches the customer at the right time, specific price, and meets the needs of the end consumer. Therefore, to incorporate lean thinking, then the organization must specify the value of the product, because it is fundamental for the organization to consider value from the perspective of the end consumer(Singh & Pandey, 2015).
For the paradigm to work, it requires less space and stock, a small labor force, minimal time for machinery installation, minimum movement of materials, and little incorporation of technology (Manzouri & Rahman, 2013). Therefore, lean production strategies would capitalize reducing wastes, and assists organization to eliminate activities which do not add value. These activities include labor costs, inventory and space, and equipment across the supply chain(Manzouri & Rahman, 2013). Therefore, the lean paradigm would enable the organization to reduce costs, improve quality, and better customer service.
Global Supply Chain Management
For organization to meet the emerging global economic crisis, supply chains have to be dynamic, especially when it concerns capital network controlling (Connelly, Ketchen & Hult, 2013). This is fundamental because net working has a crucial role to play in management of supply chain. This is because globalization has made supply chains overly complex, and increasingly interconnected because companies desire to try new strategies such as entering new markets. Organizations also see it necessary to reduce costs and increase the quality of services to customers. According to Connelly, Ketchen & Hult, (2013) research done on globalization and supply chain observed that the common drivers of globalization are connected directly to procurement and purchasing, following the drivers on the market side.
When there are cases of economic crisis, the management of capital such as receivables, payables and inventories are some of the key tasks of supply chain. This is because organizations have to use very opportunity to release funds to improve the position of cash (Faraoni & Petretto, 2009). However, in such scenarios, controlling of net working cash is usually neglected. What is given precedence by the management is reduction of inventories and restructure their supply chain. Therefore, the impact of globalization is interdependent of customers and suppliers. Faraoni & Petretto, (2009) argues that economic trends happening globally influence supply chain management objectives such as customer service improvement, reduction of costs, creating new products, getting products to the market faster and sustainable supply chain actions.
The interchanging aspects of supply chain are such that in one dimension, the cash tied working capital, cost of supply chain which includes inventories should be kept as lower scales, while the requirements of the customer such as the lead time should be increasing (Connelly, Ketchen & Hult, 2013). This also includes the availability of the required product and reliability of the distribution a delivery system. For developing markets around the globe, reduction of costs is more fundamental in anticipation of increasing costs. This is because the uncertainty of the market can be turbulent to those markets which enjoy lower costs production (Connelly, Ketchen & Hult, 2013).
For this matter, strategies incorporated in supply chain are increasing the efficiency of the processes of supply chain, thereby, actively managing risks which might manifest along the supply chain and gaining of inputs from lower cost production economies. Many companies such as the Apple, Inc. manage production and logistics from outside the United States to reduce production costs. When opportunities present, organizations seek to create economics of scale, with many companies managing it as a shared utility(Faraoni & Petretto, 2009). This is usually to take advantage of the synergies and improve their expertise of operation.
Supply Chain and Logistics
Logistics in economics is usually seen as the defining factor in ordinary tangible goods organizations which enables the management to either increase value or lower costs (Ślaski, 2017). Lower costs are one of the fundamental factors which have been traditionally in focus of logistics, with value being considered in the early stages, factoring tangible or intangible value of products. therefore, logistics is concerned with both the flow of information and materials (Ślaski, 2017). While it is materials flow from the producer to the end consumer, information flows in the other way. It is concerned with resource utilization, inventory, and also customer response. In general, logistics can be termed as the chain between production and the marketing aspects of the company. In earlier ages of economics, organizations treated them as separate entities, but the increasing competitive advantage and globalization has led to development of value addition (Ślaski, 2017). This has resulted to the integration of the two entities because of their feedback channels and interdependence. Ślaski, (2017) notes that as more participants in the supply chain increase, then the level of coordination becomes tougher to ensure that the end consumers get the product in lower prices. Therefore, it requires optimization of the flow of information and materials.
Supply chain management and logistics has the following functional areas where lean practices can be incorporated:
a. Inventory Planning
Inventory planning has a linier relationship with costs, therefore, organizations have to minimize inventory levels. When the demand forecast is done accurately, there is no need for inventory planning because products would smoothly flow from the manufacturer to the end consumer, or from the producer warehouses (Peck, 2006). However, such a scenario would only happen if the in the ideal world, but in reality, inventory planning is necessary to handle any upsurges in demand of products. this is because the cost of unsatisfied end consumers would be immeasurable, especially those have not been serviced.
Also, overstocking can lead to high requirements of working capital, increase blocked resources and insurance costs. These are aspects which could be productive in other places of the organization and lower costs (Peck, 2006). Demand forecasting for businesses is usually a relative process and highly subjective, however, using data-based decision making, it has been made easier and more accurate. The forecast can depend on previous sales, seasons, recent or emerging trends, business cycles and promotional sales (Peck, 2006).
b. Transportation
Slack, (2017) notes that one of the fundamental strategic decisions in logistics involves transportation because it accounts to around one third of logistics total cost. This is in terms of the geographical ground to be covered, end consumer profiles, the risk exposure to the product. Truck shipments is cheaper but takes longer time than air transport, and therefore, calls for higher inventory levels. Transportation is essential because it serves more than one purpose because it facilitates the distribution of goods and also acts as a storage (Slack, 2017). This is because the time spend transporting the goods means they are freeing space from the warehouse. Also, the time spend distributing goods means less time spent by the product in the ware house. However, the cost of reloading and offloading is the same is greater than letting goods stay in the distributing vehicle.
Transport operates as the rule of the thumb, with several aspects being involved. Shipments which are full are better than those with less-than shipments (Singh & Pandey, 2015). This is because storage space is a perishable commodity in logistics. For example, a single product going for 1000 kilo meters is more expensive than two products going for 500 kilo meters. Therefore, it is essential for organizations to understand the logistics involved in the distribution of products to ensure they not only lower costs of warehousing and transport, but also deliver on time.
Organizations which want to incorporate lean thinking process usually streamline their transporting procedures. Many organizations discover that there attempts to improve customer satisfaction usually leads to poor decisions while shipping the product (Singh & Pandey, 2015). This is because expensive shipping procedures are undertaken at the request of the customer or an order can be shipped without combining with others to minimize costs. Therefore, integrating a lean paradigm makes organizations discover that they are unnecessarily using more suppliers while they could easily reduce costs.
c. Packaging
The end goals of packaging are tentative in such a manner that it can either be done for logistics considerations or done for the end consumer. The form factor of the product plays a crucial role on how it will influence the satisfaction of the end consumer (Singh, 2017). Retaining customers and winning their loyalty is fundamental as it will be determined by the status of the product when they receive it. therefore, it is the prerogative of the distributer to ensure that the product is delivered safely, and on time, depending on the preferences of customers. Utilizing the lean thinking paradigm would ensure that the production process and packaging is improved to reduce resources and wastes while optimizing operational performance (Singh, 2017). quality of the product is an essential part of lean production as it determines the level of customer satisfaction. Creating zero defects in production and packaging of the product increases efficiency in the business enterprise. With greater quality in packaging, warehousing and transportation would be streamlined making the products less susceptible to recall or return of the product to the manufacturer (Singh, 2017).
Responsive supply chain to market demand
A lean supply chain employs a continuous supply chain improvement strategy which focus on elimination of waste and non-profitable activities within the supply chain. Therefore, the organization have to match the supply chain with the product type of the preferred end consumer (Faraoni & Petretto, 2009). In a lean paradigm, the customer buys a specific product which he or she expects to be delivered in a specific time. This is because one of the failures of organization and supply chain is their failure to understand the nature of demand of product (Faraoni & Petretto, 2009). This misunderstanding often leads to mismatched supply chain and interrupted flow of information and materials. Therefore, the supply chain needs to be responsive to any demand of products in the market and facilitate how the product will reach the end consumer in time.
Developing a responsive supply chain ensures that an organization will be well suited in conditions affected by low demand forecasting, high errors in predictability, short life cycle of product, many product varieties, and high probability of new product introduction (Hadrawi, 2018). Therefore, a progressive organization should have a supply chain which has intermediate or flexible flows, high capacity economic cushion, minimal cycle time and lower inventory levels. The use of technology can alleviate the challenges posed by supply chains between suppliers and buyers and create virtual supply chains where information will be information based rather than being based on inventory (Hadrawi, 2018).
Product type and supply chain
The organization must be able to cope with various types of products such that there will be a strategy which will be able to match market demands and supply (Peck, 2006). In adopting an optimal approach, it is necessary for an organization to create a sound relationship between product type, sales demand forecasting and supply chain. For example, supply may be influenced by commodities or fashion which are two generic commodities. Fashion has a high demand uncertainty and lower life cycles, because the fashion trending this month may be obsolete in a few months (Peck, 2006). This activity therefore, exposes the supply chain to both obsolescence and out of stock factors. The challenge for an organization is to deliver a product which will match the demand and supply; for a quicker response to the need in the market place. This results to fashion lines being precarious in supply of trendy fashion to the market. Commodity products on the other hand, such as utensils have a definitive demand, longer life cycles and have a known consumption patterns (Peck, 2006). Therefore, at the core of every organization, the key drivers for supply of products in the supply chain is cost reduction.
Recommendation
An organization should eliminate all waste so that only activities that add value in the supply remain(Faraoni & Petretto, 2009). For a better flow of products downstream, it is necessary for all departments in the organization is to work in together. Several aspects in the supply chain which need to be assessed to gain a competitive advantage is undo system complexity such as confusing processes and unnecessary steps. Evaluation of lead time, inactive or rigid inventory, poor packaging, unnecessary space for inventory, unnecessary movement of products and wasteful use of energy (Faraoni & Petretto, 2009).
An organization also needs to deployments to technology to advance supply chain such as freight tracking through GPS, Labor force Management, Customer Order Management, and Freight System Management (Manzouri & Rahman, 2013). Lean practices would ensure that logistics and supply chain are integrated for value addition in the organization.
An organization should reduce lead time, where there is minimal outbound and inbound logistics (Ciolek, 2016). This ensures that the management understands customer demand resulting to accurate on demand forecasting, reducing overstocking or over production and improving flexibility. Brainstorming and working to reduce lead times will develop a lean supply chain which will add value beyond the expectations of the end consumer (Ciolek, 2016).
An organization should focus on meeting the expectation of the end consumer at the lowest costs possible(Ciolek, 2016). This is no matter what happens in between the supply chain, by doing away with activities which benefit only one section of the supply chain. This can be done when all departments of the supply chain are working together, to identify issues, the root causes of the problems and taking concerted efforts to address the issues for the benefit of all parties (Ciolek, 2016).
Conclusion
Lean is fundamentally how a well-designed and operated supply chain should function. A lean supply chain ensures that operations have been optimized, while reducing costs and cutting wastage. Elimination of non-value adding activities is crucial for increasing information and material flow in the supply chain. Wastes can be measured in terms of unnecessary costs, inventory and time. Therefore, activities which add value are the ones which influence the product being delivered to the end consumer efficiently. Therefore, any activity which is done by the management to stop the flow should add value, just as any activity which involves the inventory. Using a lean thinking paradigm in the supply chain would ensure that the organization improves on competitiveness and increase the overall profitability of its enterprises. Meeting the needs of the customer would ensure that their needs are integrated into the operations of the organization, while improving efficiency, reducing costs and cutting wastage.
References
Ciolek, M. (2016). The lean thinking in overhead cost-cutting / Lean thinking w cięciu kosztów ogólnych. Prace Naukowe Uniwersytetu Ekonomicznego We Wrocławiu, (441). doi: 10.15611/pn.2016.441.03
Connelly, B., Ketchen, D., & Hult, G. (2013). Global Supply Chain Management: Toward a Theoretically Driven Research Agenda. Global Strategy Journal, 3(3), 227-243. doi: 10.1111/j.2042-5805.2013. 01041.x
Faraoni, M., & Petretto, L. (2009). Market Driven Management and Global Supply Chain. Symphonya. Emerging Issues in Management, (2). doi: 10.4468/2009.2.06faraoni.petretto
Franks, S. (2003). Beyond lean [supply chain management]. Manufacturing Engineer, 82(1), 38-40. doi: 10.1049/me:20030106
Hadrawi, H. (2018). The impact of firm supply performance and lean processes on the relationship between supply chain management practices and competitive performance. Uncertain Supply Chain Management, 341-350. doi: 10.5267/j.uscm.2018.7.003
Manzouri, M., & Rahman, M. (2013). Adaptation of theories of supply chain management to the lean supply chain management. International Journal of Logistics Systems and Management, 14(1), 38. doi: 10.1504/ijlsm.2013.051019
Mason-Jones R, Naylor B, Towill DR (2000). Lean, agile or leagile? Matching your supply chain to the marketplace. Int. J. Prod. Res., 38(17): 4061-4070
Peck, H. (2006). Reconciling supply chain vulnerability, risk and supply chain management. International Journal of Logistics Research and Applications, 9(2), 127-142. doi: 10.1080/13675560600673578
Singh, M. (2017). Optimization of Food Commodity Supply Chain in Logistics Service Provider Business by Implementing Lean Management. SSRN Electronic Journal. doi: 10.2139/ssrn.3071632
Singh, S., & Pandey, S. (2015). Lean Supply-Chain: A State-of-the-art Literature Review. Journal of Supply Chain Management Systems, 4(3). doi: 10.21863/jscms/2015.4.3.013
Ślaski, P. (2017). Logistics Processes Management in Supply Chain. Archives of Business Research, 5(1). doi: 10.14738/abr.51.2457
Comments