When supply chain challenges seem insurmountable, Lean 4.0 can open the door to new solutions.
“The supply chain is a disaster.” These words, expressed by a manufacturing executive during a prep call for a recent Operations Executive Roundtable, sum up the current sentiments of many business leaders. Some are at the point of throwing up their hands. But, even though the hits seem to keep on coming, there are things you can do to ease the pain and gain greater visibility and insight into what’s happening on both the inbound and outbound sides of your supply chain.
As one leader put it, even if the news is bad, seeing it sooner and more clearly makes a big difference. Enabling this line of sight requires the right data and technology. It takes the right mindset, too.
A Lean 4.0 approach, when applied to current supply chain challenges, can help you move past the gridlock and take steps that will improve your ability to operate efficiently today and down the road.
A lean 4.0 supply chain is a connected supply chain.
Lean 4.0 is one of the newest buzzwords in the industry, and when people hear it, they automatically think about connected machines. In TBM’s view, Lean 4.0 means connected everything, your supply chain included.
Just like you’d put sensors on machines to draw out performance data, you can put sensors on shipping cartons to gather information about where they are in the world. However, that’s just one part of a much larger equation. Lean 4.0 is about getting the holistic view of everything impacting the availability, cost, and flow of materials and finished goods, and using actionable data and advanced technologies to make the best possible decisions, reduce lead times, cut costs, and ultimately improve business performance.
Here are five ways to bake this philosophy into your supply chain operations to drive rapid results:
1. Proactively engage your suppliers. This isn’t just about daily phone calls to find out the status of an order, only to hear the same news that suppliers’ hands are tied, and they’ll get it to you as soon as they can. It’s about taking the conversation deeper and working with suppliers to explore new options or solutions around materials and pricing. When you initiate this collaboration and show willingness to talk about what can be done as opposed to what can’t, you may be surprised at the results.
One participant in a recent TBM Operations Executive Roundtable discussion, tired of operating in survival mode, has made the effort to proactively engage with every supplier, whether they are currently experiencing issues or not. “Even if something’s not broken, we’re still reaching out to key suppliers to ensure they remain non-problematic. We thought due to everything being so tight, we’d be talking to a lot of hands. But we’re actually getting good engagement from current and potential new suppliers that we didn’t expect.”
If there’s ever been a time to think outside the box and try new things, this is it. If nothing else, opening up the channels of communication can lead to additional information and insight beyond just knowing that your order is still delayed.
2. Better understand your spend. Efficiency and cost cutting are fundamental tenants of any lean approach, and Lean 4.0 is no exception. To identify savings opportunities, you first need to know where you are spending, both by supplier and geographic region. Conducting this kind of analysis can turn up issues you may be able to solve for right away.
For example, you may have similar items with different part numbers, such as screws, bolts, or other common components. Or maybe you are using multiple suppliers for the same item. If this is the case, you could be missing opportunities to leverage volume and spend to get preferential treatment and pricing and potentially receive your materials sooner at a lower cost. Given that some organizations are facing up to 500% increases in shipping costs, it’s worth looking for consolidation opportunities that can help you save wherever you can.
On the other hand, if you are working with just one supplier for a specific part, and that part is a bottleneck, then you may need to look for additional suppliers to help meet this need. Several executives in our Roundtable expressed that, right now, customers are much more willing to look at and accept alternative sources for components such as microchips that have been particularly difficult to come by. They are also more willing to review and quickly approve alternative designs that work around constrained components, especially for high-stakes or critical parts. While substitutes and stand-ins may have been met with resistance in the past, times have changed. Customers are more readily accepting plan B if it means they can get what they need to keep their own operations moving.
In any case, investing in a spend analysis will help you understand you true costs right now and may open the door to possibilities you haven’t considered in the past. Many manufacturers tell us they are looking at the possibility of flying parts to help circumvent port delays and surging freight costs. A spend analysis can tell you if such an option makes sense or if there are other cost-effective avenues you haven’t explored. We recently worked with a client to analyze its indirect spend (i.e. expenses not related to critical parts.) We identified several opportunities, including more aggressively considering alternate suppliers, offering more significant supplier incentives, consolidating suppliers where possible, and fully leveraging category management techniques. With these strategies and tactics, the customer is positioned to take full advantage of cost reduction opportunities in the supply markets.
3. Take advantage of good data and the tools that can help you interpret it. Spend data is just the tip of the iceberg when it comes to available information related to your supply chain. There is no shortage of data out there that can tell you where your materials are in the supply chain, down to the SKU level. And you can tap into information about delays happening at every major port. While executives agree that effective supply chain decision-making is only as good as the data influencing it, the challenges typically revolve around accessing that data, analyzing it properly, and getting it into a format you can use.
This is where a good supply chain control tower is invaluable. Such a solution gives a singular view into all your real-time shipment-related data. It lets you see in advance when and where issues may arise and enables you to respond in a timely manner and make decisions that can help prevent delays. While most mid-sized manufacturers lack a fully built-out supply chain control tower, many have elements of such a solution already in place, such as a way to get alerts from suppliers and shipping companies. Taking that data and marrying it with analytics and visualization capabilities can be a relatively easy next step when you leverage existing digital manufacturing software solutions. For example, with Dploy Solutions, you can quickly create dashboards that let you visualize and manage critical supply chain KPIs, all in one place, enabling you to identify, investigate, and quickly respond to delays and issues.
4. Leverage advanced technologies such as AI/machine learning. Even with the most basic supply chain control tower in place, it is possible to set up your systems to trigger automatic response to the data that will help ensure the best possible outcomes in any scenario. This is especially useful for organizations that have very complex supply chains.
For example, another Roundtable participant shared how his company is keeping transportation and warehousing costs low by tapping into a digital fulfillment provider’s warehouse management and transportation management control modules. The company receives real-time information on the location of inventory in the supply chain including alerts at critical milestones, such as loaded onto ship. “Before we had too much inventory, too much cost, and then everything was affected by COVID. Now we have a better handle on the supply chain across the board.”
5. Manage your connected supply chain long-term. S&OP process and discipline remain especially critical as manufacturers continue to deal with fluctuating demand complicated by supply chain constraints and, in many cases, labor shortages as well. Again, this process relies on quality real-time data and analysis to help you efficiently manage and allocate critical resources to meet customer demand in the most profitable way for your business over the long-term. In the words of one Roundtable participant, “Especially with the long lead times when you’re looking 12 months out, it gives you the ability to react. It’s the windshield that gives us better visibility.”
When you see the whole picture, you can spot the solutions and not just the roadblocks.
Lean 4.0 cannot solve for all the supply chain issues that manufacturers are contending with right now. But it can make it easier to see all your options and make the best decisions that impact availability, cost, and flow of materials and finished goods. At a time when organizations need every advantage they can get, leveraging data and technology will help you respond to today’s challenges better while guiding longer-term decisions for restructuring the supply chain for optimal efficiency.