Supply chain management within the business market

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This post module work consist of two parts, the first part talks about lean supply management, its effectiveness and efficiency, and a general approach to its initiation, development and sustenance in an organization.

The second part talks about the critical importance of supplier relationship management for supply chain competitiveness, a critical review of some relationship management models and framework, and a discussion on the approach a business might take in deciding the most appropriate relationship portfolio management.

1.1 LEAN: MEANING

According to (Plenert, 2007), Mainstream management consulting firm defined lean as a "systematic approach that focuses the entire enterprise on continuously improving quality, cost delivery and safety by seeking to eliminate waste , create flow and increase the velocity of the system's ability to meet customers demand". (Abbott et al., 2004) also defined lean as "systematic approach to identifying and eliminating waste (non-value-added activities) through a continuous improvement by flowing the product at the pull of the customer in pursuit of perfection".

The common words from the above definitions are; systematic, waste, flow, customer, improve. So what this implies is that lean is mainly focussed on delivering a qualitative product to a customer at the least expensive price, and at the right time and this can be achieved by the continuous flow improvement and waste elimination along the whole chain of activities needed to deliver the product.

(Abbott et al., 2004) further mentioned that the American Product and Inventory Control Socitey (APICS) sees lean not as a system as mentioned above but as a philosophy used in reducing all the inputs needed in an organization to achieve a result while Dough Howard of the Lean Enterprise Institute sees lean as a set of tool box where one can take any tool in making better whatever needs to be made better in an organization.

Whichever way lean is seen, whether as a philosophy, systematic approach, a philosophy or a set of tool box or a combination of the three , what is key is that it should be applied in such a way that will lead to the maximisation of the results it tends to achieve.

1.2 LEAN PRODUCTION: A BRIEF HISTORY

The term lean which has its roots in manufacturing was coined in 1988 by a researcher, John Krafcik at the International Motor Vehicle Programme (IMVP), Massachusetts Institute of Technology (MIT), USA (Womack, et. al., 2007) .However, two books; The machine that changed the world and Lean Thinking by James Womack and Daniel Jones made the term very popular. (Dennis, 2002).

Around the 1900s craft production was the order of the day, to have a car, one would need to visit a craft specialist who would then make the car according to the clients specification. The craft production system was characterised by the low production, and high cost. (ibid).

According to Daniel Jones although the term lean just became popular in the 1990's its principle can be traced back to Henry Ford's mass production assembly line at Highland Park (Taylor & Brunt, 2001). (Womack, et. al., 2007) further reiterated this point that by inventing the "moving assembly line" in 1913 and justaposing it with his earlier 1908 technique of 'continous ineterchangeability of parts",Henry Ford was able to increase astronomically the number of cars produced with the same number of people and equipment when compared with his earlier mass production model of 1908 which climaxed with Ford T model .

(Womack, et. al., 2007) attribute the lean production system, which according to (Wilson, 2010) can also interchanged with the Toyota Production system to a Japanese engineer, Ohno, who visited the Ford production system in Detroit in the late 1940s and noticed that a lot of the whole system was filled with waste which he referred to as muda. After carefully understudying the Detroit factory and experementing with the presses he bought from them, when he got back to Japan, by late 1950s he was able the time to reduce needed to change a die from one day to three minutes in the where he Toyota car factory worked as an engineer.

Ohno identified the different muda as seven and he listed them to be waste due to excessive inventory, waste due to waiting, waste due to transportion, overproduction waste due to, waste due to defect, waste due to movement and waste due to excessive processing . (Wilson, 2010)

The Figure 1 below shows a schematic diagram of the seven wastes in a production process as identiffied by Ohno.

(Womack, et. al., 2007) further stated that Ohno introduced measures which were totally different from the Fords mass production system. Ohno believed in getting it right at the very first time, thereby eliminating the need for rework, his philosophy was also hinged on what he referred to as Kaban or Just in time which tends to eliminate the need for inventory as materials were delivered in small amounts as needed in the factory. Ohno also developed multiskilled workers and gave them the power to stop production in the entire assembly line should any while defect be noticed working. The whole wokers would then to solve gather and try the problem by asking the "5 whys" which (Wilson, 2010) referred to as the "Therefore" technique.

(Fern, 2002) stated that with the application of the lean principles, Toyota was able to develop a system called "mass cutomisation" as coined by Joseph Pine in 1993 because they were able to manufacture cars which met different customers needs at a price cheaper than that of mass production.

LEAN SUPPLY MANAGEMENT

MEANING AND EMERGING CONCEPT

Will define supply chain later.

Lean supply chain as defined by (Abbott et al., 2004) is a set of organisations directly linked by the upstream and downstream , flows of products, servies and information that collaboratively work to reduce cost and watse by effectively and efficiently pulling what is needed to meet the individual customer.

So basically, lean supply chain looks at leanness not just in an individual organisation, but the application of lean across a chain of organisations which are interconnected to one another and also tend to have one common goal in mind which is satisfying the customer.

According to (Phelps et al., 2003) while the method of lean manufacturing tend to look at bringing value to the customer by eliminating waste in the internal production process, lean supply management tend to look at ways of bringing value to the customer by the "optimisation of the whole supply chain" ,

((WMG, 2010)) lists some attributes of a lean supply system summarised below as :

Having a tier based supply structure where a strong relationship is developed with a small tier one supplier usually one or two.

Supplier being chosen not just on the traditional lowest bidder case but on how well they have done overtime.

Making sure the suppliers are involved at an early stage when introducing a new product which will necessitate the buyer to share some design and proprietary information with the supplier

Materials being delivered just as needed in small but regular quantity ( JIT)

Using a competitive price the customer is willing to pay less profit (Target costing) rather than the traditional supplier cost plus profit approach.

The figure 2 below shows how a lean supply structure should look like as opposed to the traditional supply structure show in fig 3.

(Lamming, 1996) further reiterated the relationship between the supplier and buyer in lean supply management that for there to be leanness in the supply chain, the buyer and supplier must see theirselves as being in the "same boat" and having a "mutual destiny" . This can be achieved through cost transparency and collaborative efforts. He further stressed that the buyer must be willing to share information on cost and deisgn process, he must also be willing to carry out mutual assesment as opposed to the traditional vendor assesment method where the buyer asseses the supplier. Finally, the buyer must be willing to share blame with the supplier when someting goes wrong which is opposed to the traditional thinking where the buyer is seen as the "lord" and tends to blame the supplier should any problem arise.

However, (McIvor, 2001) argued based on the research he carried out between an electronic company and its suppliers argued that lean supply is difficult to achieve based on the reasons stated below:

Design personnel in the electronic company being reluctant to sharing information with the suppliers in the deisgn stage and also internal conflicts in between the design team of the electronic company and the its purchasing department as to who to lead the collaboration effort with the supplier.

Open book negotiation and costing difficult as a result of numerous and varying costing technique used between suppliers and the electronic company

Suppliers not being comfortable disclosing their "true" production cost to the electronic company for fear of being shortchanged in the long run

(Cox & Chicksand, 2005) also argued that lean suply has its limitations as academic scholars such as Fisher in 1997, Christopher and Towill in 2002 and Lee in 2002 all of the agile school believe that lean supply is mainly useful when there is high volume, predictable demand with supply certainty and for functional product. What this implies is that lean can not be applied to products say in the fashion industry that have demand which is highly volatile. The table 1 below shows the basic differences between lean and agile product profile.

EFFECTIVENESS AND EFFICIENCY OF LEAN SUPPLY

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