Lean Management in a Supply Chain Context - Literature review Example

A Study Of Lean Management In A Supply Chain Context number: Module Module number: Module Word count: 2,750 Table of Contents Introduction 3 Organisation and product overview 3 Description of supply chain 4 Raw material supply 4 Manufacturing process 4 Warehousing and product distribution channel 5 Retailer 5 Customer service 5 Discussion on Lean supply chain management 5 Literature review 5 Concept within lean supply chain management 6 Effect of lean supply chain management on consumer satisfaction 11 Application of lean management on the supply chain 12 Raw material allocation 12 Product manufacturing 12 Warehousing and product distribution 13 Retailing 13 Conclusion 13 Appendices 15 Reference List 16 Introduction The report is based on analysing the advantages of implementing lean management within different stages of supply chain of multinational organisations. The globalization of businesses has influenced marketers to distribute their raw material supply and manufacturing procedure within different parts of the world due to the difference in product and labour cost (Perols, et al., 2013). The minimum labour wage structure in different Asian countries including China has influenced various British organisations to set up their product manufacturing facility in those areas. The China market consists of over 40,000 textile and fashion accessories manufacturing firms with near about 19 million worker strength. A huge number of British retail outlets produce their goods in different manufacturing house of China and sell them through retail outlets in the UK (Perols, et al., 2013). According to various academicians, the incorporation of lean management within different stages of supply chain can certainly allow the organisation to eliminate the inventory and cost wastages (Li, 2012). The further discussion will evaluate the supply chain management of the handbag ranges of Burberry Group Plc. It will also detail the benefits of lean supply chain management on the competitive advantage of the organisation. Organisation and product overview Burberry Group Plc. is a London based fashion retail house. The organisation was established by Thomas Burberry in 1856. It is specialized in the manufacturing and retailing of fashion clothing, handbags, accessories, cosmetics and fragrances. The organisation owns 215 mainline stores and 221 concession stores across the UK (Marketline, 2015). By the end of 2014, the organisation has recorded revenue of 2329.8 million pound (Burberry Group plc., 2014a). The designer handbags of Burberry Plc. can be considered as one of the major product lines of the organisation due to the increased demand within the UK population. 40% of the consumers of the UK prefer to purchase handbags from luxury handbag designer stores (Appendix 2). The organisation has been considered as the third highest designer handbag sellers in the UK. In 2014, the organisation has secured only 7% of the overall market share of the UK in terms of luxury handbag sales (Appendix 1). The major reason behind this decline in market share is the incapability of frequent product supply as per the demand of consumers. Most of their manufacturing facility is situated in China. By the end of 2012, the organisation has shifted all their manufacturing facilities of Treorchy and Rotherham to China due to the availability of low cost workforce (Burberry Group plc., 2014b). The handbags marketed and sold by the organisation are mainly manufactured in different production house of Guangdong, China. The complex supply chain of the product line has reduced the product distribution frequency of the organisation within the UK market. The overall cost of their supply chain has also affected the price of their end products. This situation is hampering their competitive position in the UK market (Marketline, 2015). Description of supply chain The supply chain management of the organisation involves a complex network of raw material suppliers, storage facilitator, distributor, retailer, transporter and customers (Moore and Birtwistle, 2004). Raw material supply The organisation sources 60% of its raw materials from different parts of Europe. They also collect a huge portion of their cotton requirement from Peru, Spain. The management of Burberry Plc. prefer to deliver high quality raw material to the manufacturing sites of the organisation (Tokatli, 2011). The organisation allocates a handsome portion of their budget for the selection and purchasing of the raw materials. Entire raw material selection procedure strictly maintains a final approval procedure by the management of Burberry Plc. This procedure causes a huge expense to the organisation. Inadequate analysis of demand and supply also enhances the chances of inventory wastage of the organisation (Fernie and Perry, 2011). Manufacturing process The manufacturing procedure of handbags of the organisation mainly follows external production which is partially controlled by the organisation. This procedure is mainly controlled by different multiband manufacturing facilities in Guangdong, China (Burberry Group plc., 2010). The manufacturing locations of the handbags are mainly controlled by different Korean firms. The partial control influences the organisation to provide product quality and product design guidelines to these manufacturing facilities. Alternatively, this procedure restricts the organisation to control the production lead time, manufacturing cost and labour skill. The delay of product supply and threat of damaged product batch are the main concerns for the supply chain of the organisation. The uncertainty of labour skills also generates threats regarding the quality of the finished products (Moore and Birtwistle, 2004). Warehousing and product distribution channel The organisation possesses their fully operated company-owned warehouses within different parts of the British market. The management prefer to conduct quality check for all the finished good batches before transferring them to the company-owned as well as franchisee retail outlets (Fernie and Perry, 2011). The supply model of the organisation tends to transport their finally checked goods to different third party logistics for the final packaging and levelling procedure. These third party logistics are responsible for distributing the products to different retail outlets in the UK (Burberry Group plc., 2010). This procedure takes a long time to supply final goods to the potential consumer. It also generates huge cost to the organisation that provides very less leverage to the marketers to introduce competitive pricing (Moore and Birtwistle, 2004). Retailer The next stage of the supply chain management involves the retailing of end product to the consumers. The organisation mainly operates through different company-owned retail outlets. The organisation actively monitors the sales and marketing procedure of this retail outlet (Burberry Group plc., 2010). The organisation also directly distributes their finished goods from the company-owned warehouse to consumers through the digital marketing procedure (Moore and Birtwistle, 2004). Customer service The last step of supply chain management includes the customer servicing procedure. The organisation mainly follows over-the-phone customer service procedure. They lack customer service and feedback collection executives in the physical stores (Moore and Birtwistle, 2004). Discussion on Lean supply chain management Literature review Over a period of time, a number of researchers have provided their views regarding the application and process of lean management. The researchers of The National Institute of Science and management has defined lean management as the systematic approaches of businesses to increase the product and services value to their consumers. This systematic approach is focused on reducing the waste of material, time and efforts of the organisation through rigorous improvement and pursuit of perfection (Christopher, 2012). Buzby, et al., (2002) has described lean management as the procedure of creating utmost value for the potential consumers by utilizing minimum amount of resources. According to Wu and Wee (2009), lean management demonstrate a range of activities that assist organisation to improve value added operations by eliminating different non-value added processes. Several researchers have developed the concept of lean management within the supply chain procedure of organisations (Lummus et al., 2003). According to these researchers, the information flow within the different stages of supply chain can be distorted by the participants of this procedure. This situation can further misguide the management of organisation regarding the decision making procedure of production and waste management (Lummus et al., 2003). As per Gordon, (2008), the elimination of waste and introduction of value added approach of lean supply chain management has allowed the management to focus on the economic production of minimum quantity and high quality goods. A research program of Accenture has shown correlation within the supply chain strategy and financial success of organisations. This correlation has highlighted different major perspectives of lean supply chain management procedure (Skjoett-Larsen, et al., 2003). The main perspective of lean supply chain is to identify the smooth, uninterrupted and cost effective delivery procedure of product and services from the suppliers to consumers of the organisation (Skjoett-Larsen, et al., 2003). A number of researchers have criticised that the process of lean management is still not properly extended within different parts of the supply chain management procedure of organisations. They have argued that though the presence of lean management facility within supply chain has dramatically reduced the overall product manufacturing and supply time, a huge number of consumers still experience delays on their final product delivery system (Beske, 2012). Concept within lean supply chain management Different researchers have demonstrated that the maintenance of lean supply chain consist six major attributes such as demand management, cost and waste reduction, process standardisation, industry standardisation, cultural change and cross-enterprise collaboration. According to the researchers, the proper combination of these attributes can allow any organisation to create an effective supply chain (Bruce, et al., 2004). Before applying the attributes to the supply chain management the organisation need to utilize the value stream mapping method (VSM). Rother and Shook, (2003) have defined that VSM is a process of visually mapping the flow of material and information to prepare a future state map with better performance as well as method. The researchers has evaluated that the VSM includes two flows out of which one flow concentrate on resources from supplier to customer while the other flow describes the communications from customer back to supplier (Rother and Shook, 2003). This method will assist the management to design the future series of events in supply chain management by analysing the current state of the organisational supply chain. The method include total five steps- (Source: Teichgräber, et al., 2012) According to McDonald, et al., (2002), value stream mapping (VSM) is one of the important tools of lean management of organisational operation to representing material and information flow as well as the proper visualization of the end-to-end organisational operations and its outcome. According to Lasa et al. (2008), VSM plays an important role in redesigning the productive system of organisation and it also assist organisations to find the key points which subsequently enable them to design suitable information system for their end-to-end team management. Therefore, it can be said that the value stream mapping will assist the management to analyse the lack of information flow in the supply chain management (Christopher and Rutherford, 2004). Shah and Ward, (2007) have explained that the p[roper implication of VSM model assists organisations to eliminate a number of waste in business process such as non-utilized talent, transportation, inventory, motion, extra-processing cost etc. Therefore, it assist organisation to reduce their cost and waste of business operation. A number of researchers have evaluated the importance of waste management procedure for proper execution of organisational operations while minimizing the waste and cost of the business functions (Hajmohammad, et al., 2013). Researcher Coelho and De Brito, (2012), waste management process assist organisation to gain flexibility to frame and analyze quantitative and qualitative information across different scales. The author has also mentioned that the waste management model provide proper logic to consider the potential probability and consequences related to a particular option as well as adequate communicability to clearly impart major ideas to key stakeholders (Coelho and De Brito, 2012). According to Staniškis, (2005), though waste minimisation and resource efficiency are becoming increasingly important in the workplaces, waste management process cannot be uniform for all the organisations and sectors as individual waste management procedure of different organisations cannot be able to deal with all potential waste materials in a sustainable manner. McDougall, et al., (2008) has also supported the view by describing that waste management system needs to be flexible in terms of environmental, social and economic condition of the specific organisations. Therefore, the researchers have illustrated that this process generally allows the organisation to follow an environmentally resourceful, economically efficient and cost effective way to manage the end-to-end supply chain (McDougall, et al., 2008). The primary focus of this method is to avoid the excess production that can lead to product pile up. The proper demand management will allow the organisation to product adequate amount of products. The further steps allow management to reuse and recycle the remaining resources to reduce cost of the company. This method also advises the management to recover or dispose the waste properly to maintain their production and supply chain procedure (Hajmohammad, et al., 2013). (Source: Hajmohammad, et al., 2013) According to Shah and Ward, (2007) lean manufacturing and supply chain emphasize on accumulating all the tools of any organisation to work together to create streamlined and high quality system to produces products at the demand of the customer with little or no waste. On the other hand, Brady and Allen, (2005) have explained that six sigma analysis, a statistical evaluation of organisational performance, assists organisation to measure the defects per million opportunities which could include anything from a component, piece of material or an administrative form. Brady and Allen, (2005) explained that adopting the Lean Six Sigma within the supply chain team is also important to improve the collaboration in the team effort which will systematically enhance performance and reduce waste. The author have mentioned that lean six sigma allow organisations to combine lean manufacturing to the six sigma. This process assist businesses to eliminate eight kinds of operational waste such as defects, waiting, overproduction, transportation, non-utilized talent, inventory, extra-processing and motion (Brady and Allen, 2005). Lean six sigma assists the organisation to combine the lean management with six sigma. Proper training regarding six sigma allows the management to follow a set of techniques to improve the organisational processes. This technique includes- (Source: Manville, et al., 2012) According to George, et al., (2007), the proper training regarding incorporating six sigma in the lean supply chain management also assist organisations to create special infrastructure of employees, such as yellow belt, green belt, black belt and champions, who are efficient in the application of lean management method. (Source; Manville, et al., 2012) The concept of process standardisation defines the uninterrupted flow of product within different stages of supply chain management. Industry standardisation allows organisation to standardize the product manufacturing procedure as well as communication procedure (Duclos, et al., 2003). Various organisational researchers have illustrated that a successful lean supply chain can provide a positive effect on organisational work culture. The promotion of this procedure needs to be continued through various periodic meetings and discussions within the supply chain management executives (Stratton and Warburton, 2003). The cross enterprise collaboration emphasises on the strong relationship of organisations with all their suppliers and manufacturers. This procedure of lean supply chain management assists organisations to create a closer relationship with all the channel partner of their supply chain (Stratton and Warburton, 2003). Effect of lean supply chain management on consumer satisfaction The practice of this lean supply chain management will assist organisations to reduce their overall cost of product delivery by streamlining the multiple production facilities. The demand management process of lean supply chain management reduces the product and inventory wastage of the organisation (Agus and Shukri Hajinoor, 2012). The process will allow the organisations to allocate adequate inventory to the production procedure as per the demand of the consumers. Therefore, this process will ensure less wastages of raw material, cost and time to generate and supply high quality product and services. It also enables the management to allocate flexible pricing as per the market norms (Li, 2012). The process and industry standardization process assist the management to improve the product as well as production quality. Hence, this process allows the management to increase the satisfaction of consumers by delivering high quality and affordable products within minimum frame of time (Ellinger, et al., 2012). Application of lean management on the supply chain The proper execution of lean supply chain management will allow the organisation to reduce their overall operation cost while minimizing the production lead time. It will also enable the management to enhance the end product quality (Bruce, et al., 2004). Raw material allocation The demand management process will assist the management to properly plan the demand and supply ratio of the organisation. This process will allow them to allocate adequate amount of raw materials as per the demand of the potential consumers. The material requirement planning will enable them to reduce their expenses regarding raw material allocation. It will also influence the management to focus on the cost and waste reduction procedure of material allocation system (Zylstra, 2012). The lean supply chain management also direct the organisation to allocate local raw material purchasing group within the manufacturing location of China. This process will reduce the overall cost of inventory allocation of the organisation (Bruce, et al., 2004). Product manufacturing The industry standardize procedure will entitle the organisation to fully control the manufacturing process. This will allow the management of Burberry Plc. to analyze the manufacturing facilities and labour skills through smooth communication procedure. This process will enable the management to set a certain standard to their production and labour management procedure. Therefore, it will ensure the maintenance of product quality throughout the different manufacturing locations of China (Zylstra, 2012). This standardization process will also enable the management to offer similar wage structure to all the labours of Chinese manufacturing locations. The process standardisation aspect of lean management will influence the organisation to select a standardised transportation procedure to ensure the smooth transfer of inventory and raw materials to the manufacturing location. This procedure will not only reduce the product and raw material delivery time, it will also reduce the changes of product damage during the transportation procedure (Bruce, et al., 2004). Process standardisation will also allow them to incorporate the freight auditing facility in their product and raw material transportation procedure. This auditing facility will enable the management to analyse the accuracy of freight charges and delivery time to eliminate the wastage of finances and time (Christopher and Rutherford, 2004). Warehousing and product distribution The cultural changes in the organisation as per the implementation of lean supply chain procedure will assist the management to impart and update the knowledge of the employees regarding the proper management of the distribution channel and product warehousing. The warehouse management will ensure cleanliness of product storage to eliminate wastage (Bruce, et al., 2004). The cross-enterprise collaboration will also allow them to improve their relationship with the third party logistic management organisations. This collaboration will enable the management to properly monitor the product shipment from the logistic departments. Therefore, it will reduce the wastage of final goods (Christopher and Rutherford, 2004). Retailing The lean supply chain management will enable the organisation to reduce the cost of production and product delivery procedure. It will also enable them to maintain the quality of products while reducing the product pricing (Zylstra, 2012). The demand management procedure will ensure the timely availability of products in the retail outlets as per the demand of the potential consumers. Therefore, the final product retailing procedure through different channels will ensure utmost consumer satisfaction. The collaboration with consumers and proper in-the store and online feedback collection procedure will also strengthen the supply chain of the organisation (Christopher and Rutherford, 2004). Conclusion The discussion evaluated the proper implication of lean management within the supply chain of luxury handbags of Burberry Group Plc. It has also demonstrated various drawbacks of the complex supply chain structure of the organisation such as waste of resources, raw material and finish goods and long production lead-time. This situation has affected the consumer loyalty towards their product line. The discussion has also elaborated the effectiveness of collaborating lean management to the supply chain of the organisation. It has detailed that the proper implementation of lean supply chain can reduce the overall production cost and lead time taken for product delivery. Therefore, this process can enhance consumer engagement and satisfaction through quality of product, timely delivery and flexible pricing. Appendices Appendix 1: Market share of luxury handbag retailers in the UK (Source: Martyn, 2014) Appendix 2: Demand of Luxury handbags in the UK (Source: Martyn, 2014) Reference List Agus, A. and Shukri Hajinoor, M., 2012. Lean production supply chain management as driver towards enhancing product quality and business performance: Case study of manufacturing companies in Malaysia. International Journal of Quality & Reliability Management, 29(1), pp. 92-121. Beske, P., 2012. Dynamic capabilities and sustainable supply chain management. 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