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VOL. 127 | NO. 68 | Friday, April 06, 2012

Lean Supply Chain Process Taking Root

By Bill Dries

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When Toyota Motor Corp. began making its cars and moving the parts for them as well as the cars to market in a different way than its rivals in the auto industry, it changed the concept of a supply chain.

The methods were first called “lean production” in an MIT study and that’s where the relatively new idea of lean supply chains has taken root.

But other companies that aren’t manufacturers are using the concept these days and it has the promise of broader changes in the approach those companies take toward their basic mission.

For instance, International Paper Co.’s Paul Blanchard told a recent lean supply chain discussion at the University of Memphis that for the Memphis-based company it means an end to the endless resurrection of projects that have the same outcome but continue simply because it’s time for a review of that process.

Blanchard, who is IP’s supply chain and consumer packaging director, talked of the several incarnations of a project to see how a truck could hold more rolls of paper that always came to the same conclusion. There wasn’t a way to do that given the circumstances.

“We weren’t great at supply chain,” Blanchard said as he talked of changes that include a common goal and more collaboration toward that goal instead of compartmentalization that some companies continue to favor.

Ernie Nichols, the associate professor of supply chain management at the University of Memphis, said lean supply chain methods have applications outside of manufacturing.

“It is pretty well established on the shop floor,” said Nichols, who is director of the university’s FedEx Center for Supply Chain Management.

“It was used to contrast the traditional mass production effort and it really came down to a good way of describing how Toyota was doing business with their production. They were actually doing more and getting better results with fewer resources.”

But Nichols is the first to admit that lean supply chain philosophy is a big adjustment for those outside manufacturing.

“You don’t see a wide embracing of the topic. And one of the reasons that companies are kind of standoffish is there are some significant challenges,” he said, talking about quarterly performance pressures.

It requires some different ways of looking at how goods and services move for many companies.

Forecasts and projections that are perhaps equal parts bottom-line goal and assessment of reality give way to “real and tangible signals of demand.” Those making the projections in sales have to work in a more coordinated way with those in operations.

The gap between the two is what Nichols refers to as “the great divide.”

“We’ve always had six months on hand and we don’t want to cut back on that. … We might need that,” Nichols said in describing the hesitancy from the marketing part of a company reacting to what other parts of the company see as the way to the same goal.

“The companies that do a good job with lean – their perspective on timeframe tends to be a bit different,” he said. “They are willing to take a longer-term perspective on a particular initiative instead of that quarter-to-quarter mentality that tends to characterize how a lot of businesses do business here.”

Bob Garrison, vice president of global transportation services for FedEx Trade Networks, came to the FedEx Institute of Technology gathering with two case studies – two phone manufacturing companies FedEx Corp. has worked with.

The company still struggling with the concept but making headway is a demonstration that more travels on the supply chain than goods and services and it’s not a one-way flow to the market.

Their basic goal was to go from a two-month and two-week gap between someone ordering a phone and its delivery to them to a two-week order to delivery time.

The company, Garrison said, made excellent phones and believed that was enough until it discovered later than its rivals that what customers wanted more was apps to go on those phones. Garrison said the company was very good at manufacturing but not so good at marketing and had to be good at both.

They now use a “control tower concept” in which those in different parts of the company physically work together in the same space and share the same data with instant access to it by all.

Garrison has also noticed supply chain leaders are beginning to turn up in CEO positions at corporations like Walmart.

“Now you are having to think about planes, trains and automobiles,” he told the group.

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