Any discussion of supply chains in manufacturing has to include cost reduction. Every time a company solidifies a shaky supplier, improves logistics or finds a more durable moving part for an assembly, that company has added value to its overall worth. It has also reduced overall costs. Improvement to a process or part improves the total production line. Reduced inventory also reduces cost throughout the supply chain, from company to company.
There are many plans designed to reduce costs for businesses. They include savings tips in everything from tax credits to property leasing terms. In manufacturing, one sure way to save money while still improving your products and systems is to go lean.
“Lean” manufacturing does not mean cuts and reductions alone. Lean manufacturing is based on continuous improvement (see our previous improvement article here) in which every person in the production line is responsible for his operation. In this style of production, waste is reduced by eliminating unnecessary bottlenecks, eliminating wait time, and greatly reducing defects and rework.
Most manufacturers have automated systems within their design and production departments. Computer-aided design and production have become mandatory. They save time and money, but are only as good as the input they receive. Computers are also used to run supply and logistics systems. Lean principles can help in these automated systems by triggering spontaneous releases. Spontaneous supply is a process in which automated triggers for parts production or shipping quantities are released at the supplier level. Often, suppliers are still making large numbers of parts and holding them on the shelf for customers’ just-in-time releases. For years, this service has been performed by industrial suppliers, the true middleman in the manufacturing supply chain. The parts maker uses the industrial supplier as a warehouse, but this again does not help the supply chain become lean. Someone is absorbing storage costs.
This habit of overstocking for release is costly and parts are subject to obsolescence. Because the end user is paying for the storage, this is a process that must become lean. To do that, the manufacturer and parts maker need to agree to better forecasts. The parts maker needs to make parts just in time, not simply ship them in time.
Spontaneous supply requires advanced materials requirements planning (MRP). This is another process in the supply chain that has become largely automated. However, materials planning needs close human monitoring because requirements change abruptly and often. Every error in requirements is costly; and every error caught in time and eliminated saves even more.
Build to order
Smaller manufacturers and assemblers can benefit by making goods specifically to fill orders. When finished goods are not held in stock, costs go down considerably. This is a key tenet of lean manufacturing: the goal is zero waste, and products sitting on shelves are considered big waste.
Building products to order demands that suppliers and manufacturers are both on the same JIT page. Suppliers are delivering the right parts and the right time. The average person probably doesn’t realize that most manufacturers forge, mold or assemble pieces that go into a larger item, which then goes to the end user. Automobile manufacturers are supported by hundreds of smaller manufacturers who supply large and small assemblies that are mounted in cars. So, most makers are also suppliers. Even the major assembly plants that put out finished cars and trucks have huge distribution facilities waiting for products.
The bigger the business, the more product diversity they might have. However, that isn’t nearly as important as micromanaging every factory line, aiming at zero defects and zero waste. Whether the company produces cars or chairs, aircraft or stools, everyone in the supply chain benefits when they all participate in lean manufacturing.
To read more on Supply Chain see Operations Duties.