FLOW RESPOND
What
Makes a
Six core attributes characterize the lean supply
chain. They range from the ability to capture and
communicate the demand signal to successful
collaboration with supply chain partners. The
industry leaders that have developed these lean
competencies enjoy a competitive edge that is
manifested in smoother operations, lower stock
levels, and greater inventory turns.
.scmr.com
TECHNOLOGY CULTURE COLLABORATION
ham:
By Kate Vitasek, Karl B. Manrodt, and Jeff Abbott
A
s more and more com|idniL'S ailojit a "hori/onlally
intugralL'd" business mudcl. they arc seeking lo per-
form in hoLisf on]\' their eore functions, while out-
sourcing the noncore activities. In manufacturing,
this means shedding a company's own plants and
turning to domestic and international contract manufacturers.
It also means sourcing from far-flung parts of the globe and
relying on third-party providers for the necessar\- logistics sup-
port. This contrasts sharply with the old-world "vertically inte-
grated" approach in which cvcr\thing from basic raw materials
S L F'I'M C l i \ l \ M \N.\(.. t.\1 E M U: W • O t I (KU.K 2 0 0 39
Lean Attributes
to end customer sulcs mi^ht be under the control of a sinj^lc
global enterprise.
With ihf ni()\c toward horizontal integration, (he supply
chain has lengthened and grown more complex. And with
this heightened complexity comes a new set of challenges.
How do you manage a global supply chain while retaining
speed and flexibility? How can you eliminate waste across
the supply cbain—not just at one point in the channel? How
can lirms collahorate in a way that is mutually rewarding?
How do you meet the needs of a global customer without
excessive work in process or inventories? And, most impt)r-
tantly, how do you accomplish all of this in the face of
shrinking niargins?
Some industry leaders are finding the answers in a busi-
ness approacb witb roots deep in manufacturing: lean.
Specifically, tbey are applying the lean production principles
to the management o\ their global suppK chains.
rhe Lean Supply Chain
A number oF sources ha\'e detailed the basic |irinciples of
lean manufacturing. I'wo of tbe most autboritati\e are Lean
riiiiikiiio and The Machine That (^.haii^ed the WorhL wbich
described the famous Toyota Production System, Both of
these books, which are still widely available, were co-
autbored by lean experts James P. Womack aiid Daniel f.
Jones. As these autboritics point out, tbe o\erarcbing objec-
tives of lean are to eliminate waste in botb materials and
processes and to create value, ImpurtantK, \alue is defined
irom tbe perspecti\e ol tbe customer. If an activity or process
does not add eust(imer vakie. tben it is considered waste.
Wbile tbe principles oi lean ba\e been applied in tbe
manufaeturing space for several decades now, tbe notion ol"
lean supply chain management is relatively new. To belp sup-
ply chain professionals gain a better Linderstanding ol bow
lean can be applied to tbeir operations, we conducted
research that included e\tensi\'c literature search, case stud-
ies, and inteniews with industry experts. We also conducted
a survey among members of APICS, an organization of supply
chain and resource management professionals, to gauge
progress toward implementing lean principles. (For more on
the APICS survey, see sidebar above.)
That research effort led to the identification of si.\ attribut-
es that companies should cultivate to build a lean supply
chain that is creative, fle\ible, and adaptive, Tbrougb tbe
APICS survey results in particLilar, we were also able to
quantify' tbe competitive advantages of developing lean stip-
ply cbain capabilities.
\'oT tbe purpose of this article, we define a lean sujiplv'
chain as a set of organizations directly linked by upstream
Kale \itasek is mufiaging puriner oj Supply Chain Visions. Kurl
6. Manrodt is associate pro/essor of logistics in the Department
(>/i\Iafiugt'mt.'n(, Murketin}> and Lngislics a( Cteorgia Sodlhcrn
L'niversilv- Jeff ,\hi)(>ll is senior directnr-siippiy vhiiin applica-
tions al Orucle.
40 SL C'iMi\ M \ \ A G l ; Mt N I R i \ u Ot I OBI n 2 ( ) 0 T
Research Methodology
In August 2004, APICS asked 5,806 of its members to partici-
pate in an online survey of lean supply chain practices. Six hiun-
dred and eight members participated in the study, representing a
10.5 percent response rate. Given that online surveys of this type
normally have a response rate in the single digits, the level of
participation exceeded our expectations. The large sample
enabled the research team—the authors of this article —to reach
conclusions with a high level of confidence. (A copy of the full
report, titled "Understanding the Lean Supply Chain: Beginning
the Journey," can be downloaded at no charge at www,man-
rodt.com or wvi'w.scvisions.com.)
The survey was based on an extensive literature review, earti-
er research we had conducted, and input from subject experts at
Oracle Inc., another participant in the study. In addition to the
e-mail survey, the research team interviewed supply chain profes-
sionals from a wide range of industries regarding their efforts to
apply lean concepts to their supply chains.
More than 71 percent of the respondents are in manufactur-
ing, which places them near the middle of the supply chain. From
this position, they had a perspective on both upstream and down-
stream supply chain activities. With respect to size of the busi-
ness, 30 percent of the respondents had annual sales in excess of
$1 billion. The remainder had sales of under $1 billion.
With regard to size and type of the responding companies, we
had early concerns that these demographics could significantly
impact our results. Yet while we did find some differences in
individual responses, there were no significant differences among
the groups. No industry group appeared to be leading the race to
develop a lean supply chain, and smaller and larger firms seem
to be making equal progress in adopting lean principles.
and downstream flows of products, services. Finances, and
information tbat collaboratively work to reduce cost and
v\aste by efficiently pulling what is needed to meet the needs
of the individual customer.' While individual firms can
become lean by tbemselves, a lean supply cbain requires
multifile entities to v\ork together. Its important to under-
stand up ^ront tbat lean supply cbain management is not an
exercise in sbifting inventories or costs to a supplier. Instead,
it s a coordinated effort among partners to eliminate waste
across the supply chain. Tbis can only be done by collaborat-
ing across common processes.
So Why B e I e a n r
Wby work to develop tbe lean supply cbain attributes in tbe
first place? Doesn t it take a lot of time and effort? And don't
we all bave enough on our plates as is v\itbotit adding anotber
project?
To belp answer tbese c]uestions, tbe researcb team turned
to tbe APICS survey. We segmented the survey sample into
tbree groups. On tbe lower end of the scale v\ere tbose
resjjondcnts w bo bad not implemented any lean supply cbain
\v w w . s c m r.
practices—and h;id no Firm plans to do so. This ^roup con-
sisted of appro\iniJtcly 60 pcrcenl ot the sample and will hi.'
referred lo as the "nonadopter" group. In the second group
were ihe lean adopters—the compiinies that had integrtited
iheir product Mow iind wci'c working with supply chain part-
ners to hecnme leaner. Lean adopters made up around IS
percent iif the sample. The third group (the remaining 25
[lercent) was in the middle; they had adopted some lean prin-
ei|)les internally and were working lo extend ihem out to sup-
pliers and customers.
The most striking comparisons were hetween the adopters
.md the nonadopters. In pjrtieuiar. we tounil the Following
statisiieally signilicant dit'terences between the two groups:
• Lean adopters see exchange of data as a tactical ad\an-
tage and are more likely lo work with partners on data stan-
dards to enhance inlorrnation integration (40 pereent vs. 1 I
pereent ol nonadopters),
• Lean adopters see employees as a \aluei.l
asset and emphasize employee development (77
pereent), Nonadopters are less likely (47 per-
LL'n!) 1(1 iiro\i(.le support For de\el()pment pro-
grams ami. in general, \iew employees as more
exjX'nd.ible,
• Lean adopters are more likeK to ha\e con-
linnous impro\ement programs ISO percent), Ol
ihe nonatlopters, 4.-^ percent indieated that lhe\
ha\e no sueh programs,
• Lean adopters are more likeK to eoilahorate
with siip[i|\' chain partners on process standards.
Nonadopters are signitieantly less likely to du so.
• Lean adopters are more likeK to entorce
com[ian\ product standards {6^ percent). l\iliy
hall i>l the nonatloptiTs inilieated weak enforce-
ment of conipan\ standards or had no standards
at all,
• Lean ado|neis [iaitici|5ate in standards hod-
ies antl work with partners on standards (48 percent),
\onado|iters were less likek to do so; i4 percent either use
no intiustry standards or attempt to enForee their own stan-
tlards on ttie group,
• I hree-loLirlhs ol the nonadopters either don t share data
\\ ilh key parlners heeause they consider it to he proprietary or.
il the\ do make data available, oFfer no conversion assistance.
I he research also re\'ea!ed sharp dlHerences in how the
two groups performed on the key logisties metrics of inventorx'
Itirns and the numher of days of sales in inventory'. As shown
in Lxhibit I, lean adopters had statistically significantly higher
iii\entory turns as well as lower days' sales in in\entor\' on
hanti. And because the leaders are not carrying excessive lev-
els of in\enior\, their cost of goods sold is lower and they are
heUer able lo respond to changes in the supply chain. In
short, they are enjoying two oF the key benefits oF lean supply
chain management.
Our research further suggests that ihe lean adopters com-
municate and collaborate more successfully with their supply
chain partners, "They have a higher use of standards in
processes and materials. The lean adopters also enjoy redueed
SKU counts and in\entory le\els and report a general reduc*
tion in cost ol goods sold v\hen compared to the nonadopters.
Notably, all of these lactors coTitribute to the hottom line.
Attributes tA'a Lean Supply Chain
How do companies develop the lean supply chain capabilities
that will lead to the kind oF superior supply chain perFor-
mance demonstrated hy the top ado[)ters and the industry
leaders? We've identified six attrihutes that companies should
stri\'e to develop-
1 • Demand Management Capability
An LindcrKing tetiet nf tlu' le.m philosoph) is that produet
should be "pulled" by actual customer demand rather than
"pushed" into the market. Ideally, point-of-sale
(POS) data is gathered in real-time, or near real-
time idailyl. and transmitted u|>slream to all the
supply chain members. Ibis doesn t mean just
the tier one suppliers but the tier two and tier
three suppliers as well, Ihus, suppliers at each
lc\cl ol the proeess would recei\'e the customers
demand signal and eon\ert it into something
usable Isiicb as part numher antl t|uantity) lor
tbeir upstream partners. In tbis way, all members
in the channel can understand tbe total \()lume
being s{)kl, ()\ertime. tbis capability shoultl mini-
mize the need For forecasting, since the sii|}ply
chain is responding to actual demand,
Ibe consumer goods sector |iro\ ides sonie
good examples ol effective demand management
in a lean suppK' chain. In particular, the tech-
ni(,|ues of collaborative planning, torecasting, and
re[ilenisbment (C:PLH) and efficient consumer
response (LCR) are enabling point-of-sale data
to L!ri\e store deliveries. In eFfect, the retail manufacturer/dis-
tributor only deli\ers stock to the store when specified by a
pull signal for a speeific c|iiantity issued from tbe retailer,
Ciiflelte is one of tbe best practitioners of demand man-
EXHIBITl
Benefits of a Lean Supply Chain
Days' Sales in
Inventory
Nonadopter
Adopter
Turns
10 20 30 40
M I R i \ i i : u • O tI O B K K 2 0 0 ^ 4 1
Lean Attributes

agement in the consumer goods space. Gillette receives actu- in an organization is typical!}' great. It increases exponentially
Lil demand data from POS systems at the retailers tmd uses when one etjnsiders the data tlows among members in a sup-
that data to create replenishment orders to ship just the right ply chain.
amount oF a product to each store. The company is even Note that the emphasis here is on reducing waste, and not
working to develop radio-Frcqucncy idenlification (RFID) cost, riiis is not a matter of semantics but of philosophy.
processes that could ultimately lead to continuous monitoring Iheres not always a direct one-to-one correlation between
of backroom and shelf inventory, providing automated nolili- eliminating waste and cutting cost.s. Yet waste reduction
cation when replenishment is required. almost always results in lower costs. In the supply chain con-
The consequences of nut managing the demand signal text, the elimination of waste yields a significant by-product:
have been well documented. The biggest problem is often a reduction in costs for all members of the supply chain.
referred to as the "bulKvhip effect," whereby additional units A focus on waste, and not cost, also makes the conversa-
are added to the original demand signal as it moves further tion with suppliers and eustomers less threatening, il the goal
upstream, lor instanee, an order is to reduce waste, most parties arc
may grow 10 percent at each node more willing to discuss their
as it moves From the retailer to the processes with one another. A cost-
distributor, then to the manulactur- eutting program, by contrast, is
er. and then to the tier one suppli- olten seen as just another way nl
ers anil their suppliers, The result is squeezing a little more out ot the
e\cessi\e in\entor\ held hy all {)l suppliers or ser\iee providers.
the channel partners, which makes With a joint goal of reducing
it mueh more ditlicult (or everyone waste, supply chain partners can
to respond effectively to change. work together to modily those poli-
Our sur\ey oT APICS members
showed that while many companies
Lean adopters had cies, procedures, and data-collec-
tion practices that produee or
undcrstanti the importance o[ get- higher inventory turns encourage waste. Iypically, waste
ting demand data Irom eiistomers across the suppK' chain will mani-
and to suppliers, they have a long
and lower inventory on hand test itself in excess inventory.
way to go toward achieving that than the nonadopters. Effective ways to address this are
goal. The majority ot respondents through postponement and cus-
are hasing their manulaeturing and tomization strategics, which push
sup[)ly ehain planning on usage history or on projected sales the tinal assembly ot a completed iirotiuct Ui the last practical
based on usage rather than aetLial demand. Less than 50 per- point in the chain.
cent ol the respondents reported any kind ot ongoing dialog Deli pr()\'ides an excellent iNustralion ol how to reduce
with the downstream siippK chain to impn)\e demand-data waste in the supply ehain through ettecti\e demand man-
accuracy and timeliness. Only 33 percent indicated that agement. The eompanys build-to-order model produces a
product was being "pulled" through the downstream ehain hy eomputer only when there is actual customer demand. Dell
actual usage. Of those, just I S percent indicated any "real- works closely with its suppliers on redi.ieing in\entories and
time" exchange ol actual usage data w ith their eustomers. imjiroving ]irocesses to achieve a system where in\entory
There has been much discussion about companies com- turns are measured in hours rather than days. Thus, De!l is
peting "suppK ehain \s. supply ehain." If this is to hecome a able to introduee new technologies sueh as taster CPUs
reality, all of the supply chain partners v\ill ha\e to do a het- much more quickty than the competition, ln fact, it can
ter job of managing the demand signal. Ihe lean supply chain start shipping computers with the new teehnology the very
runs on knowing what is actually heing sold, at what quanti- day that it becomes available trom, say. Intel—without
ties, and where the sales have taken plaee. Results ol our concern about Hooding the supply chain with excess or
study suggest that there is significant room for improvement obsolete processors. And since Dell does not maintain
on thjs key attrjhute. stocks of unsold tinistied goods, there is no need to con-
duct "tire sales" to unload complete computer systems that
2* Waste and Cost Reduction arc considered out ot date. The result: Waste has been
Elimination ol waste is another key tenet ot lean supply chain eliminated both on the component side and on the finished
management, just as it is with lean manufacturing. In the goods side.
hroadest sense, waste can be time, inventory, process redun- Most ol the respondents to our sur\e\ ha\'e yet t(j reach
dancy, or even digital waste. Digital waste is especially detri- Dells le\el ol performance in this attrihute. Less than H) per-
mental to the supply chain. It refers to redundant or unnec- cent are working with their supply chain partners to eliminate
essary data that is collected, managed, and stored for no waste. Again, this is clearly an area of lean supply chain man-
tactical or strategic reason. The amount of digital waste with- agement with much room for improvement.

42 S U P P I > C II \ l \ M \ \ \ ( : [ I R I \ li 0 ( r o n F li 2 0 0 S .»,cmr,cnni
3* Process and Product Standardization tberetore not shared w itb tbeir supply cbain partners.
Process and pioduLl standardi/.ation is llie third attribute oi a In addition to standardizing processes, eompanies can
lean supply chain. It's importiint to develop standardization beneiit irom standardizing produets used in the manufacture
across both jiinecsscs ami produLts for ihc reasons elahoratcd or assembly of goods—in other words, sbaring subeompo-
below. nents aeross produet lines. In this way, fev\'er unique eompo-
I'rocess staiidardi/alion cnahlcs continuous How—tliat is, nents are needed, tbereby reducing manutaeturing, ware-
ihc uninterrupted movcmenl of a produLi or ser\'ice through housing, and development costs. Component standardization
ihe company s system and to the customer. Major inhibitors also can help promote postponement initiatives that, in turn,
ol tlow include work in queue, batch processing, and trans- can reduee inventory levels of finished goods. Take, for exam-
portation issues. These roadblocks slo\\ ihe lime from prod- ple, a large original et|uipment manufacturer (OHM) tbat
uct or ser\iee initiation to deli\ery.- bimdles various soltvvare games v\itb its gaming console for
Continuous tlow needs to be accom|i!ished with a "value dillerent retailers. Instead ot baving a "Costeo" SKU and
si r e a m " p e r s p e c t i v e , w h i c h "tU'st Buy" SKU tbal was eustomized
m e a n s viewing p r o c e s s e s in at manufacturing, tbe OLM sbifts tbis
terms of how tbey add value to value-added aelivity downstream to
ihe eiistomer. This |ierspecli\e its distribution partners. So v\ben
tiemaiids ,i sliill Irom vertical to C'ostco jiurcbases products, the dis-
hori/on(al thinking. Horizontal tribution partner generates the cus-
thinking ret|Liires that managers tomer-specitic SKU and does tbe
look aeross the traditional verti- bundling and labeling. By performing
cal lunetions to integrate aeti\i- tbe value add activities downstream
ties in a value stream that Hows at distribution ratber tban at manu-
from suppliers, through the orga- faeturing, the OEM streamlines ils
nization, and on lo customers. Cultural change is one inventory witb one generic gaming
This ellort is taeilitated h\ having of the biggest SKU ratber tban baving a separate
SKU lor eacb retailer.
processes ihat are standardized
across the sup|)K ehain to reduce challenges in getting lean .\s our full report notes, more tban
complexity. In other v\ords. the accepted in the organization. 88 percent responded tbat tbey were
organization lirst determines the making some efforts to standardize
best way to manage a process produets internally, witb nearly 40
aiul then standardizes this process aeross the organization, pereent aelively involved in pnjcesses used to establish and
taking into account regional or cultural tiiffcrences. use internal product standardization.
I lere we think ol the Toyota Production System, the foun-
dation lor most lean and lust-in-timc strategies. Toyotas 4* Industry Standards Adoption
emphasis on standardized processes antl tooling has led lo a Standardization also needs lo extend beyond a company's par-
signiiieant reduction in the lime ret.|uired to manufaeture anticular supply ebain to the industry' overall. Industry product
automobiie. While eaeh new Toyota ear antl truck model ma\ standards benefit not only eonsumers but also companies by
appear to be dillerent from on e another, t h e processes reducing the complexity of produet variations. I h e consumer
involved in bringing these vehieles to market are very similar.
electronics industry' provides many examples of effeetive use
This a|iproach allows Toyota to foeus on perfecting both the of eross-industry standards—from tbe pin arrangement for
new vehicle and ihe underlying processes used, loyota also is various eleetronie components, to the size oi a bard disk drive
v\ell-known for working v\ith its suppliers to help them adoptused in a computer, to tbe dimensions oi" tbe racks for
similar lean pr.ictiees. v\hieh extends ihe benefits of stan- mounting telepbone sv\itching equipment.
tlardization across the supply ehain. Industry standards help ensure tbat components from vari-
\ thorough understanding of the \alue stream will help ous su|ipliers ean be used interchangeably, thereby redueing
suji[ilv chain partners standardize ini|ioriant processes development eosts for tbe original equipment manufaeturers
and shih work lo the most efticient point in the chain. and allowing lor standardized processes in assembly. lo illus-
V't, for many eompanies, this remains a challenging task. trate, tbe popular USB memory stick produets ha\e become a
Planning and production. lv\o ke\ processes that pertain great tool ior transterring large amounts of data. Witbout a
to most organizations, are examples. l-ev\er than 20 pvr- standardized USB port, bowe\er, a uni\ersal memory stick
eenl oi respondents to the AIMCS sur\e\' reported that would not bave been possible, hlad eacb computer manufac-
ihese processes were "well understood." I-urther, only 6 turer developed its own solution for a USB port conneelion.
|)ereent intlicated that these processes have been stan- we would bave needed as many diflerent memory sticks as
tlartlized aeross supply chain partners. More tban .-^0 per- there were eomputer models.
eent said tbat tbeir p r o c e s s e s were "proprietary" and loday, tbe majority ot components in a personal eompuler

v\ ww.scmr.com ^Tl•N^ REVIEW • Ot 20f)S 43

Lean Attributes

niLintifjctiirecl by Dt'l! or HP are the same for any given per- getting lean accepted in tbe organization.
loniiaiicc and c|uality lc\el. The biggest diiterentiators are llie Successtul cultural change requires a clear roadmap.
name on the box, the marketing strategy, and ibe after-market During times of ehange or uneertainty, employees want to
support, b^vfr wonder bow we can now purcbasc an entire knov\ where things are beaded. Wbat does tbe future look
computer system of good quality from a leading name vendor like? Wbat will 1 bave to do different^ in order to sueeeedr
for under $500? lndustr\'-wide standardization is a big reason. Done ]iropcrly. a lean supply chain initiative can pro\ide a
Witb regard to proeess standardization in tbe supply ebain "roadmap" tbat provides employees witb tbat long-term per-
space, industry' associations like tbe SuppK-Cbain Couneil and spective. It can clearly communicate tbe objectives and bcne-
APQC are taking a lead role. APQC, for example, bas devel- !its ot going lean. The roadmap then can map bow tbe com-
oped a Process Classification Framework (PCK) tbat establisb- pany will move from tbe "as is" condition to tbe desired state.
es a common nomenclature for \'ari<)us activities ranging from And as with any major change management initiative, tbe
Iitiman resources to supply cbain management. Based on tbe lean roadmap must have tbe unconditional support ot top
premise tbat organizations have similar processes for many management.
activities, tbe framework allows companies to "get on tbe same rbe company's view ot its people uitbin the organization
page" witb respect to process definition. Ibe Supply-Cbain also is crucial to successful cultural change. In tbis regard,
Council's SCOR (supply chain operations refer- it s interesting to note how lean adopters view tbeir
ence) mode! defines eommon supply ebain man- employees as compared to nonlean organizations.
agement proecsses across ibe plan-souree-make- Tbe adopters tend to view tbeir people as \aluc'd
deliver-return spectrum. I rameworks like those assets and place significant empbasis on employee
offered hy APQC and tbe Supply-Cbain dexclopment. In contrast, nonadopters are more
Couneil belp companies talk about tbeir stijipK likely to see employees as expendable and provide
chain |)roecsses in a common language. little support lor development programs.
lndtistr\' standardization also should extend Nearly 70 percent of the respondents to our sur-
to inlormation. As companies increase tbeir vey report baving programs in place to enbanee
supply cbain systems ca|iabi!itics, tliey increase employee deveiopment and reduce tLirno\cr. \\ bile
tbe ann)unt of data to organize, understand, and tbe sur\ey did not ask speeifically about training
lc\erage. Add in Rril) capabilities, POS data, programs targeted to lean supply ebain manage-
and eommtmication uitb trading partners, and ment initiati\cs. sLicb programs would elearly be
tbe data increases exponentially. To eltccti\ely central to de\eloping tbis attribute.
manage tbis le\el of data, suppK cbain partners During our inter\iew process, we fourui tbat
sboiild adbere to indtistr\ standards tor leaders in lean adoption were empbasizing lean
exchanging intormation wherever possible. and total quality management (TQM) training as
Ciroups sucb as tbe Hosetta Net, VlCS part of tbe new cmplo\'ec indoctrination. Over
(Voluntary Interindustry C'ommcrce Standards), time, tbis tbinking becomes ingrained in tbese
and GSl US (kirmerly tbe Unilorni Code Council) are lead- individuals as tbe way they do business. Several o! tbe lead-
ing the way for companies to impro\e tbeir data eommuniea- ers we spoke witb tackled cultural cbange tbrougb tormal
tions tbrough standardized data lormats. training programs led by a "lean team ot subject-matter
On this attribute, our stir\'ey results sb{)w tbat r{)ugbly 70 experts. Tbese experts v\ould work v\ith \arious business
percent of the res|)ondents make use ol industry standards units witbin tbe company not only to do tbe lormal training
wben de\ eloping new products. But fewer tban 20 percent but also to take an active role in implementing lean supply
are using standardized formats to exchange information cbain initiatives.
between supply cbain ]iartners. Twenty percent ol tbe sur\e\'
respondents consider tbeir data to be proprietary and make O* Cross-enterprise Collaboration
no attempt to sbarc it w itb tbeir partners. Anotber 42 percent
The tinal attribute of tbe lean supply cbain is cross-enterprise
of those sur\eyed simply make tbe data a\ailable witbout collaboration. I brotigb collaborative practices and processes,
iTiaking any eff{)rt to belp tbeir partners tise it, supply cbain partners must v\()rk to maximize tbe \alue
stream to tbe customer. To do tbis rigbt, of course, it's neces-
5 . Cultural Change Competency sary to first understand how tbe customer defines \alue.
1 here is one recurring obstacle to successfully a|iplying Added serviees, regardless ot bow tbe supply ebain jiartners
lean stipply cbain concepts—resistance from tbe people view tbem, are of true \alLie only ii tbe customers understand
wbo will be asked to embrace and implement tbe cbange. and desire tbem.
1 bese are tbe same people who ba\e been doing things Cross-enterprise teams are a major enabler of SLipply chain
tbe old way for a long time—and, in lact, have a vested collaboration. In a lean supply cbain, tbese teams are not
interest in doing things tbe \\a\ tbey bave always been functi{)nalK oriented or internali\' focused. Rather, they are
done. Cultural cbange is one ol tbe biggest cballenges in {Continued on

44 S i p r n C n vix M M R i \ M:\V • O i r o i i i n 2 0 OS .stmr.cdm

oriented [oward the v\hi)le supply
chain and work toward solutions
tluit benefit all of the members. I'he
most effective teams comprise
members from all of the end-to-end
supply chain partner companies.
The team members should repre-
sent A\ of the principal supply chain
iunctions of plan, source, make, and
deliver as well as the enabling func-
tions of finance and technology.
The best examples of collabora-
tion in the supply chain come from
the retiiii sector. Giants such as
Wal-Mart and Tesco have imple-
mented collaborative processes with
suppliers that allow them to reduee
llieir backroom stock while improv-
ing shelf availability for the con-
sumer. Both of these benefits result from close cooperation
Lind communication between these large retailers and their
suppliers.
In terms of our survey respondents, nearly 90 percent have
inifilemented some form of cross-functional teams, but less
than 2T percent have cross-enterprise supply chain teams
in [ilace. Developing the collaboration attribute not only
impro\es the working relationships among the supply chain
partners, but also creates a positive atmosphere that con-
tributes to the success of luture supply ehuin initiatives.
Where To Start?
There's an implietl assumption in articles such as this that all ot
the prinei|iles cs|ioused descne equal cnijibasis. Put in terms of
the lean supply ehain, you ha^e to develop all six attributes at
the same pace and to the same degree. Yet, few things in lite
work thai uav. Runners have stamina and lower body strength,
but don't spend a lot ol time building upper muscle mass.
Tennis players i)lten have incredible strength on one side of
their body, but not the other. In the same way. companies ha\'e
to locus on those attributes that match their strategies, their
su|i|ily chain capabilities, and tbeir competiti\e positioning.
It you cuultl toeus on only one lean attribute—and only
one improvement—in your supply chain, it should be the
demand management capability, f^ffectively managing the
demand signal across your organization and then communicat-
ing that signal to your suppliers will reduee waste, cut costs,
and ultimately lead to higher supply chain |>ertormance.
If you could focus on only
one lean attribute-and only one
improvement—in your supply chain, it
should be the demand management
capability.
flow do you begin to focus more intently on the demand
signal? A good starting point is to create a process map that
charts ail of the steps involved in moving the demand signal
from the end user into your organization and on to your sup-
pliers. Once you understand the key processes, you can then
work to improve them. Answering a few questions like these
will point you in the rigbt direction.
• How can the signal's velocity be increased?
• What are the benefits of increased velocity? Who benefits?
• Who sees the signal now but doesn't use it?
• Who doesn't see the signal but could benefit trom it?
• What are the roadblocks that hinder the signal?
• What support or training is needed?
• What metrics need to be put in place to measure and
encourage changes?
• What compensation plans are in place that may run
counter to this initiative?
Creating a lean supply chain is not an easy assignment.
Lean supply chain management, much like lean manufactur-
ing, is not a destination, but a journey. And as with any stren-
uous journey, the big question is always, "Is it worth it?" Our
data—both qualitative and quantitative—confirms that the
journey is worth the time and effort. By working to develop
the six attributes described here, companies and their supply
chain partners can greatly impro\e their overall [lerformance
while delivering greater value to the customer.
Beyond this, your competition is likely considering a lean
future. Can you aftord not to take the lean journey? 080
Footnotes
•*• This definition is based on the work of the Council of Supply
Chain Management Professionals as well as the University of
Tennessee Supply Chain Research Group.
^ Dave Nave,"Hov\/ to Compare Six Sigma, Lean and Theory of
Constraints/' Quality Progress, March 2002.
^ Mike Rother, " W h a t Are We Learning Since We Started
Learning to See?" wvi'w.iean.org.
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