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May 30, 2011

Lean Logistics (Supply Chain Management)

Supply Chain Management (SCM) is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by the end customers. SCM was developed over time to help effectively coordinate the procurement of parts and materials between organizations that are connected through their supply processes.

Supply Chain Management spans all movement and storage of raw materials, work-in-process and finished goods from the point of origin to the point of consumption.
In today’s domestic and global economies, wholesalers, distributors, manufacturers, retailers, suppliers, and everyone else concerned in the supply chain are under pressure to reduce and balance their costs, time and inventories in order to continue to be profitable while still meeting their customers’ demands. The best way for them to achieve this is to implement lean logistics. Lean logistics are focused on eliminating waste from the internal and external supply chains and this is achieved by reducing excessive inventories, replenishment times and unnecessary costs. Lean supply chains are designed to pull, not push, to replenish inventory levels.

Lean logistics presents a business with several challenges due to the many different hand-offs that are involved when moving items along the supply chain. Global lean logistics particularly has a huge challenge for businesses due to the additional time needed for their shipments to be transported over long distances. On top of that, there are often many different organizations that will be directly involved with each shipment. Some reports state that it requires the involvement of as many as 17 different organizations to deal with one single shipment. These organizations would be the suppliers, terminals, truckers, freight forwarders, customs brokers, railroads, air and ocean carriers, etc. So bringing lean logistics into such a large and extended multi transactional supply chain is not an easy task. It often means that some of those organizations involved are sometimes working together and at odds at the same time with each individual shipping transaction. This leads to additional non-value added activities being generated throughout the supply chain which creates waste (muda).

Today’s, global and domestic economies are forcing companies to change the way they do business. They are utilizing lean logistics in order to support initiatives for cost reductions and quality improvements. Although lean logistics are not easy to implement, they are extremely cost effective and a business that can successfully execute them will receive multiple benefits. When a business is focusing its sights on the global markets, it will need to put together a project team to work on creating a lean logistics system. Doing this upfront will be cost effective because it will help everyone involved to understand the needs of the organization to identify and reduce a number of potential failures occurring throughout the supply chain process.

With the many benefits that lean logistics can bring to a company it is hard to understand why it has not already been implemented by every business. The issue is that some view the work involved as being too big or too difficult to do. Although it isn’t easy, the benefits far out way the difficulties if they take the time to start by developing their own internal system. Later they can extend their process out to other organizations in their supply chain suppliers, customers and end users.