How Management Decides Best Lean Strategy for the Business - Report Example

Number: Module Assignment – Lean Thinking Module BSP 545 10:00am Monday 27th June The Essay Title: Lean or Agile? Word Count: 2973 (excluding tables, figures and bibliography) Lecturer: Owen James Introduction Supply chain is a very important aspect of organisational management. This is because supply chain acts as a single phenomenon that controls the movement of products or service right from the point of the supplier to the customer (Senge, 2006). Because between the point of the supplier to that point where distribution is done to the customer is wide, complex and varying, supply chain has actually been described to be a system of organisation, involving people, activities, information and resources (Krafcik, 2008). This means that before an effect supply chain can take place, all these components must come together in a well coordinated manner to form a system. As the global business environment becomes very competitive, effective supply chain has been noted to be an important area that organisations can look to in order to ensure that they are well placed in the competing globe. The reason supply chain has been mentioned as an important organisational process to look to in order become competitive is that supply chain has the power of determining several business operational outcomes that affect the success or failure of the organisation very directly (Senge, 2006). Examples of these business operational outcomes are inventory, demand and supply balance, and rate of production. In the light of this, it is important that each organisation identifies and adopts the best strategy that can help it run its supply chain more effectively. As a means of running supply chain more effectively in a well strategized manner, the use of lean thinking has been suggested in several aspects of literature. Once this is done, the businesses are said to be adopting what is referred to as lean supply management. Holweg (2007) noted that through lean supply management, organisations are able to avoid all forms of waste in the supply chain process. In this essay there, the food processing industry is used as a case study to research and understand how lean supply management takes place within the industry. Very specifically, the essay shall focus on the applicability of flexible and customer focused business strategies to the supply chain of the food processing industry. This means that the way and manner in which the application of lean thinking to supply chain in achieving flexibility and customer focused business strategies must be justified in the paper. As part of achieving this aim, the essay shall seek to investigate the various management decisions the industry takes into consideration in selecting a lean strategy. What is more, the role of information technology (IT) in the management of information flow shall be outlined. This component is considered, given the fact that information has been noted to be one of the major components of supply chain. The importance of managing trade-offs shall also be discussed along with the barriers faced in choosing lean strategy. How management decides best lean strategy for the business Even though leant thinking is very important in supply chain within the food processing industry, it is important that the industry understands what is at stake for it before selecting a lean strategy that is most appropriate for the business. Below, three important factors for consideration have been analysed in relation to the food processing industry. Understanding drivers of supply chain Once companies are selecting specific lean strategies, they are seeking to identify specific components of the supply chain and find means and methods of cutting down on waste in these areas or components (Holweg, 2007). It is based on this that it is very important for the business to have an understanding of the drivers of its supply chain. Taking food industry for example, there are several components of supply chain that managers of various food companies deal with. Each of these components however has a different level of importance and relevance to getting the products to customers. With some of these components of supply chain such as the supplier point, processing point and distribution point, time is so important that a refusal to cut down on waste in time at these points can lead to spoilage. Understanding the importance of these driving areas of supply chain therefore makes it possible for managers to select just about the right and most applicable strategy that avoids waste of time. An important decision that management takes into consideration in the selection of the best lean strategy for the food processing industry therefore has to do with an understanding of what drives the supply chain and how each driver can affect the business in the long run. Tying demand signals to supply management Expiration is an important word in the food processing industry. For this reason, stakeholders in the industry are always particular about ways in which they can avoid waste at various points of the supply chain, including the storage and inventory point. It is based on this that Womack and Jones (2003) advised industry players to tie demand signals closely to the management of supply. What this means is that as much as possibly, supply should not take place when there is no demand. But once there is demand, processing must be so fast that it will not lead to any delays. Once managers take decision on the need to tie demand signals to supply, they are better placed to select the best and most applicable lean strategy. The reason for this assertion is that lean is all about optimising ways to eliminate significant levels of waste (Bennett and Marcus, 2011). Consequently, decision can be taken on such areas as overproduction, waiting, inventory, transportation, over-processing, motion, defects, and workforce, all in the bid of ensuring that there is a perfect balance to within the whole production system to meet the precise scope of demand. In a typical example, a manager of a food processing company may want to cut down on the number of workforce at one department to complement those in another department so as to speed up the production process to avoid the waste of waiting, all in the bid to ensuring that demand can be met on time to avoid spoilage. Operational plans and corporate financial goals Another way that management decides which lean strategy is most appropriate for their food processing business is the overall operational plans and corporate financial goals of the business. Womack and Jones (2003) noted that it is possible to base on operational plans and corporate financial goals to decide on lean strategy because lean thinking can actually be used as an overall organisational management strategy to focus on corporate and financial growth. Explaining further, Bennett and Marcus (2011) added that waste may be seen as a qualitative phenomenon but can actually be quantified in monetary terms. But even in its qualitative form, waste influences several other aspects of competitive advantage such as customer satisfaction and prices arising from high cost of production. Consequently, companies that have specific financial goals and operational growth plans can adjust their lean strategy such that specific aspects of organisational management are addressed in cutting down waste. In a typical example, a food processing company that wants to focus its operational plan on raising new customer base can look to lean strategies that focus on workforce, whereby employees whose roles do not directly contribute to raising new customers can be cut down for new marketers to come on board. Companies seeking to adopt cost leadership strategic option as part of their financial goals can also look to lean strategies focusing on overproduction so that the cost of production can be low (Krafcik, 2008). Role of IT in supply chain Information is an important component of supply chain. Because of this, it is important to use lean to ensure that the flow of information can be as rapid and forthcoming as possible. But to achieve this, mention has been made of IT as a working tool. This section thus discusses the role of IT in supply chain. Promotion of Speed and Precision In lean supply management, the customer is the ultimate goal. This is because it is important to ensure that all forms of waste that can impede the quick delivery of products and services to the customer can be addressed (Hounshell, 2004). Very often, the flow of information can affect such things as waiting time, creating so much waste in this area. A major solution to this issue has been identified by Olson, van Bever & Verry (2008) to be the use of IT within the organisational structure. The reason for this position is that IT has been noted to offer platforms that enhance and promote the quick and precise transfer and flow of information within the rank and file of the organisation. As part of lean thinking, waiting time has been identified to be a major hindrance and form of waste that confronts companies, including food processing companies. The situation gets worse where there is a bureaucratic organisational structure. This is because it takes so much time to get information to and from top management. But on the wings of IT system, it is possible to decentralise the information system of the company so that the flow of information can be as rapid, precise to which it is meant for, and fast as possible. In such a situation, customers can be assured that their demands will be attended to promptly. Enhancement of wider scope of information Apart from the fact that IT allows for speedy and precise delivery of information, it has also been noted that companies that have IT systems benefit from a wider scope of information. What this means is that it is possible for such companies to always have very large array of information within their database with which they can take customer based and customer focused decisions (Bicheno and Holweg, 2009). For example, using various platforms of IT system, it is possible to gather information on customers and the food processing market at large from both primary and secondary sources. Part of this information could be customer purchasing behaviour and spending style. With such wide array of information at hand, the company is always in a position to take the most accurate decisions that meet customer needs. Lean thinking comes in here because having to manually go round to look for information, which could cause so much waste in terms of time spent the IT system available could make it possible to use such platforms as social media networking to gather a lot of these information at the click of a button. Another unique feature of IT that enhances effective use of information across the organisational flow is that even though it leads to the gathering of wider scope of information, such information is nothing more than what is exactly useful for decision making for the company. Efficient use of information One other way IT has been used to manage the information flow and helped to configure the supply chain to provide flexible response to customer demand is by enhancing the efficient use of information. Information is said to be in efficient use when much information is able to flow within a very little time frame (Hounshell, 2004). On the wings of IT, this is very easy to achieve among food processing companies and among all sectors of the supply chain. When using manual form of information dissemination, organisations are often required to carry information in person from one end of the supply chain to the other. Because of this, not much information flows within shorter time frames. When trying to convoy large information manually, the credibility of information also becomes affected due to such things as human errors and mistakes. On the wings of IT however, this situation is catered for. For example a simple IT system can be used to create a portfolio for each entity within the supply chain. As and when information comes in, this information is put into the portfolio to be made accessible by all who have access to the portfolio. Those receiving the information can also act on the information by using various IT tools such as printing, emailing, forwarding of messages, storage, and coding to take the right decisions on information so that the wastes that comes with doing these things manually will be catered for (Maskell & Baggaley, 2003). Managing changes during costs, lead times and demand volatility trade-offs The management of trade-offs between costs, lead times and demand volatility has been described to be a very important exercise in lean thinking. Writing on the subject, Meadows (2008) noted that there is one outstanding reason why it is important for companies, especially those in the food processing industry to do this. The reason is that knowing what cannot do through trade-offs is considered a value that can be quantified into worth creation. Knowing what one cannot pursue has actually been noted to be as important as knowing what is good at. In relation to lean thinking and the food processing industry, when companies know what they cannot pursue and thus decide to select the option of trade-off between costs, lead times and demand volatility, it is possible to find the best approaches to dealing with this so that undue waste in doing these wrongly can be avoided. To maintain the changes made, the use of outsourcing has been greatly recommended (Bicheno and Holweg, 2009). Through such outsourcing methods, it is possible for the company to still have production in the forms it could not have handled so well taking place. The only challenge here however is that the company may lose some form of control over the production process, once the outsourcing is undertaken. Barriers to choosing lean strategy Whiles food processing companies strive to choose and stick with the use of lean strategy, there are a number of challenges and barriers that they face. Most of these barriers go a long way to cause the failure of the lean strategy if not addressed well and in time. Two of these barriers are discussed below. Lack of resource availability Applying lean strategy ultimately seeks to avoid waste. This however must not be taken to be the ordinary cutting own of resources within the workplace. It rather means that the company is trying to avoid the use of resources such as time, people and assets that are not needed for the purpose for which they are used (Maskell & Baggaley, 2003). With this noted, the need to still have a lot of resources to carry out the lean strategy is very important. According to Meadows (2008), three important forms of resources that are needed to carry out effective lean strategy are time, expertise, and financing. Unfortunately though, there have been times that these resources are simply lacking in their availability. A company that does not have much time, expertise and financing to train its workforce on the implementation of lean strategy cannot be compared to one that has all these means to do so. In the food processing industry, there are several companies that continue to face challenges with time, expertise and financing for the implementation of lean strategy. For this reason, they are faced with the challenge of abandoning the strategy all together. This is because applying lean strategy wrongly could also come with its own negative effects on the organisation. Cultural differences within the supply chain Another common barrier to the choosing of a lean strategy is the issue of cultural difference within the supply chain. The supply chain is always made up of several entities and components. Whiles some of these are within the company, others are located outside the company. Very often, each of these external components and entities such as suppliers and distributors are independent companies with their own organisational culture. Consequently, tying to introduce a lean strategy must be considered acceptable by all components within the supply chain if they can be considered functionally effective (Olson, van Bever & Verry, 2008). Very unfortunately though, there are times that cultural differences within the supply chain prevent food processing companies to have the forms of supply strategies they most prefer to operate within their means. In such cases, they are forced to abandon their strategies, even if these strategies have a lot of promises for avoiding waste within the organisation. Conclusion There are several interesting revelations and findings that have been made from the discussions that have gone on so far. It has been noted that lean supply management has come to be a necessity that the food processing industry can hardly do without. This is because of the structure of the industry, which makes wastes and excesses a very derogatory factor to failure. It is for this reason that the selection and application of lean thinking in supply chain in the food processing industry is something that cannot be ignored in today’s competitive business environment. The study has however showed that having a realisation and a conscious effort to selecting and applying lean supply management does not in itself guarantee success. The success would come after the most important and critical considerations have been made on what is appropriate for the business. In this, such things as the demand trend, drivers of supply chain, and overall operational plans of the business must be well understood and taken into consideration. Information was also found to be an inevitable part of the supply chain. But with modern advancement, the adaptation and use of IT in supply chain is very important in ensuring speed and precision with information flow. The study has also emphasised on how important it is for businesses to management the tradeoffs between costs, lead times and demand volatility. Last but not least, it has been said that the need to choosing lean will not always come easily but with barriers such as lack of resource availability and cultural differences with the supply chain. References Bennett, H. And Marcus, P. (2011). We Never Called Him Henry. New York: Fawcett Publications. Bicheno, J. and Holweg, M. (2009). The Lean Toolbox. London: PICSIE. Holweg, M. (2007). "The genealogy of lean production". Journal of Operations Management 25 (2): 420–437. Hounshell, D. A. (2004), From the American System to Mass Production, 1800-1932: The Development of Manufacturing Technology in the United States, (2nd ed.) Baltimore, Maryland: Johns Hopkins University Press, Krafcik, J. F. (2008). "Triumph of the lean production system". Sloan Management Review 30 (1): 41–52. Maskell G. & Baggaley R. (2003). "Practical Lean Accounting". Productivity Press, New York, NY. Meadows, D. H. (2008). Thinking in systems: A primer. White River Junction, VT: Chelsea Green. Olson, M. S., van Bever, D., & Verry, S. (2008). When growth stalls. Harvard Business Review, 86(3), 50–61. Senge, P. M. (2006). The fifth discipline: The art & practice of the learning organization. New York, NY: Doubleday. Womack, J. P. and Jones D. T. (2003). Lean Thinking. New York: Free Press. Read More