Lean Enterprise Supplier Networks

Introduction
Method and Implementation Approach
Implications for Environmental Performance
Useful Resources

Introduction

Lean manufacturing can entail significant organizational and technological changes to a firm's manufacturing operation. With these changes, and the potential for significant resulting gains, companies may often determine that it will be more productive to work with suppliers who have also adopted lean techniques and who can pass on resulting financial savings and better accommodate their "customer's" lean production schedules. It is estimated, in fact, that a company can only lean operations by 25 to 30 percent if suppliers and customer firms are not similarly leaned¹.

Fundamentally, lean supplier networks involve the application of lean manufacturing techniques across multiple supply chain partners to deliver products of the right design and quantity at the right place and time, resulting in mutual cost and waste reduction benefits for all members of the network. Because leaning can require a dramatic change in production thinking and organization amongst suppliers, working closely with existing suppliers to either directly or indirectly facilitate lean is preferable over threatening to switch suppliers if they do not lean on their own.

Organizational Scope

In many supply networks, a tiered effect exists where the supplier network itself is structured into 1st, 2nd, and 3rd-tier suppliers. 1st-tier suppliers produce for the assembler, making major components or sub assemblies, who are, in turn, supplied by the 2nd-tier manufacturers. Theoretically, in each chain, each level has fewer suppliers.

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Method and Implementation Approach

In creating lean supplier networks (and attempting to introduce lean to suppliers not yet exposed to lean), the first step is to convey the obvious benefits of leaning – not only to the network, but to each individual participant. The next step is to take a role in helping suppliers make the "lean transformation" by sending experienced trainers to work with the suppliers (free of charge), and/or by agreeing to share the ultimate savings with them. More specific options are listed below.

Network Technical Assistance. Often, the most effective approach is for a leaned "customer" within a network to send its own lean production team out to work with suppliers. Here, experts can conduct both lean instruction and "learning by doing" sessions for suppliers, and make periodic return visits to ensure thorough understanding and implementation.
Network Lean Exchanges: Where members of the network have already begun to implement lean but can benefit from the wisdom of their supply chain partners, companies can "swap" lean technical experts and other employees, and learn from each other's experiences.
Lean Consultants: Companies who would like suppliers to become lean can hire outside consultants with leaning experience in their industry to assist in the transformation.
Supplier Associations: Supplier associations represent another way to accrue benefits from shared lean experiences. Such associations can be organized by "tier" (where all 1st-tier suppliers are brought together to learn from each other). These associations can then pool its resources to focus on leaning 2nd-tier suppliers.

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Implications for Environmental Performance

Potential Benefits:: By encouraging and facilitating lean supplier networks, many or all environmental benefits of lean production (reduced waste through less defect, less scrap, less energy usage, etc.) will be magnified across the entire network.; By introducing lean to existing suppliers, rather than finding new (already lean) suppliers, lean companies will benefit from maintaining a long-term supplier relationship, and ensure that the environmental benefits of lean are more broadly realized.
Potential Shortcoming:: If there is little or no stock in the supply chain, shortages may occur, inhibiting just-in-time production, and potentially resulting in a tendency for suppliers to increase inventory.; In working with suppliers and developing a lean supplier network, care should be taken to ensure suppliers consult with environmental staff regarding changes made to environmentally sensitive processes.

Useful Resources

Copacino, W. Supply Chain Management, The Basics and Beyond (Boca Raton, FL: St. Lucie Press, 1997).

Emiliani, M. "Supporting small business in their transition to lean production." Supply Chain Management 5, no.2 (2000) 66-70.

Macduffie, J.P., & S., H. "Creating lean suppliers: Diffusing lean production through the supply chain." California Management Review 39, no. 4 (1997) 118-151.

Michaels, L. "The making of a lean aerospace supply chain." Supply Chain Management 4, no.3 (1999) 135-44.

Womack, James P. & D. Jones. Lean Thinking: Banish Waste and Create Wealth in Your Corporation (New York, NY: Simon & Schuster, 1996).

Footnotes

1. Womack, James P. & D. Jones. Lean Thinking: Banish Waste and Create Wealth in Your Corporation (New York, NY: Simon & Schuster, 1996), 266.

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