Lean Enterprise Institute Logo
  • Contact Us
  • Newsletter Signup
  • Cart (78)
  • Account
  • Search
Lean Enterprise Institute Logo
  • Explore Lean
        • What is Lean?
        • The Lean Transformation Framework
        • A Brief History of Lean
        • Lexicon Terms
        • Topics to explore
          • Operations
          • Lean Product & Process Development
          • Administration & Support
          • Problem-Solving
          • Coaching
          • Executive Leadership
          • Line Management
  • The Lean Post
        • Subscribe to see exclusive content
          • Subscribe
        • Featured posts
          From Supply Chains to Value Streams

          Lean Product and Process Development at Scale:...

          craftsmanship

          Pursuing Perfection: Craftsmanship in Product Development

          • See all Posts
  • Events & Courses
        • Forms and Templates
        • Featured learning
          • The Future of People at Work Symposium 

            July 18, 2024 | Detroit, Michigan

          • Hoshin Kanri

            September 06, 2024 | Coach-Led Online Course

          • Lean Warehousing and Distribution Operations

            September 11, 2024 | Plant City, Florida and Gainesville, Florida

          • Key Concepts of Lean Management

            September 16, 2024 | Coach-Led Online Course

          • See all Events
  • Training & Consulting for Organizations​
        • Interested in exploring a partnership with us?
          • Schedule a Call
        • Getting Started
        • Leadership Development
        • Custom Training
        • Enterprise Transformation​
  • Store
        • Book Ordering Information
        • Shopping Cart
        • Featured books
          Managing to Learn: Using the A3 management process

          Managing to Learn: Using the A3 management process

          A3 Getting Started Guide 2

          A3 Getting Started Guide

          • See all Books
  • About Us
        • Our people
          • Senior Advisors and Staff
          • Faculty
          • Board of Directors
        • Contact Us
        • Lean Global Network
        • Press Releases
        • In the News
        • Careers
        • About us

The Lean Post / Articles / From Supply Chains to Value Streams

Article graphic image with repeating icons

Operations

From Supply Chains to Value Streams

By Dan Jones

May 8, 2007

FacebookTweetLinkedInPrintComment

Fifteen years ago I first began to study lean supply chains, by observing Toyota’s inbound parts supply chain and later their aftermarket parts distribution system. This was the beginning of a fascinating journey with Unipart, Tesco and many other firms, during which we learnt a great deal about assembling all the elements that transform a supply chain into a value stream that flows towards the consumer in line with demand.

It is very encouraging that interest in lean supply chains is growing again. Many manufacturers are now ready to extend their lean efforts to their suppliers. Leading retailers are also challenging their suppliers to produce and ship in line with their lean distribution systems. As lean takes root in healthcare delivery organisations their suppliers will also come under similar pressures. Despite their differences, the issues to be addressed in turning their supply chains into value streams are very similar. Here is my list of six questions that need to be addressed in any supply chain.

First ask why, if it only takes minutes of value creating time to make a product and only a few days to ship it to consumers, are our supply chains typically several months (or even years) long? Even if we add a few days buffer stock to cope with real variations in demand from end consumers the gap is still huge – a few days compared with several months. You only need to walk and then map your supply chain from end-to-end to see the scale of the opportunity.

Second, ask what can be done to close the gap between the use of the product and when and how it is ordered or purchased? For example, we have been staggered to see the amount of supplies hidden away in cupboards in every hospital ward ñ literally thousands of pounds worth – all because of the rather chaotic reordering and unreliable and infrequent delivery from central stores. This is not only extremely wasteful but means reorder signals sent to suppliers bear very little relationship to actual use in the ward or theatre. The closer the order signal is to actual use the less volatility is passed upstream and the smaller the buffer stock required to guarantee availability.

Third, ask what can be done to increase the frequency of production or delivery at every point down the chain? Picking up just the right amount of products from several suppliers on milk rounds rather than waiting for several days for suppliers to send you a full truck means you need to carry less cycle stock. It also levels the workload, improves the accuracy of picking and delivery and results in much better truck utilisation.

Fourth, ask how to synchronise the rate of production with the pattern of demand? In our experience this begins with digging behind the point optimisation, the short-term plan changes and the fire-fighting to discover the underlying stability in our order and product flows. Then it involves establishing a common rhythm to make and to ship Every Product Every Cycle (EPEC). Then it involves using the lean tools to speed up the cycle from roughly every month to exactly every week and ultimately to making and shipping every product required by consumers every day. And finally, it involves linking every step in a dramatically compressed flow that responds quickly and accurately to demand. As a result you need to carry less safety stock at each point down the value stream.

Fifth, ask what are the win-win gains that will encourage partners to work together that can only be achieved through collaboration – both between functions and between firms? The biggest win-win is often smoother order signals in return for closer synchronisation of production with demand.

Sixth, ask who is going to be the architect of this end-to-end value stream redesign? Who is going to put all the pieces of the value stream together? Who will take the tough decisions about the appropriate division of labour, the right degree of risk-sharing and the correct location of suppliers to enable the value stream to flow?

Being able to respond quickly and exactly to local customers is a critical competitive advantage for all kinds of manufacturers in advanced economies. It is interesting that this responsiveness is achieved by focusing on stability and time compression, rather than flexibility and fire-fighting. And it ends up costing less rather than more!

Turning supply chains into value streams does not happen overnight. It takes time and requires a clear overall vision of where you are going and an understanding of the most effective sequence of actions to get there.

FacebookTweetLinkedInPrintComment

Virtual Lean Learning Experience (VLX)

A continuing education service offering the latest in lean leadership and management.

Written by:

Dan Jones

About Dan Jones

Founder and Chairman of the Lean Enterprise Academy in the U.K., Daniel T. Jones is a senior advisor to the Lean Enterprise Institute, management thought leader, and mentor on applying lean process thinking to every type of business. He is the author with James P. Womack of the influential and…

Read more about Dan Jones

Leave a Comment Cancel reply

Your email address will not be published. Required fields are marked *

Related

A digitized brain exploding into vectors and jumbled computer code.

Operations

A New Era of Jidoka: How ChatGPT Could Alter the Relationship between Machines, Humans, and their Minds

Article by Matthew Savas

improvement kata coaching kata model 2

Operations

The Fundamentals of Improvement and Coaching Kata

Article by Lean Leaper

sensei back belt close up

Operations

Ask Art: Why is a Lean Sensei Necessary?

Article by Art Byrne

Related books

The Power of Process book cover

The Power of Process – A Story of Innovative Lean Process Development

by Eric Ethington and Matt Zayko

The Gold Mine (Audio CD)

The Gold Mine (Audio CD)

by Freddy Ballé and Michael Ballé

Related events

September 11, 2024 | Plant City, Florida and Gainesville, Florida

Lean Warehousing and Distribution Operations

Learn more

September 26, 2024 | Morgantown, PA or Remond, WA

Building a Lean Operating and Management System 

Learn more

Explore topics

Operations graphic icon Operations
Executive Leadership graphic icon Executive Leadership

Subscribe to get the very best of lean thinking delivered right to your inbox

Subscribe
  • Privacy Policy
  • Sitemap
  • LinkedIn
  • Twitter
  • YouTube
  • Instagram
  • Facebook

©Copyright 2000-2024 Lean Enterprise Institute, Inc. All rights reserved.
Lean Enterprise Institute, the leaper image, and stick figure are registered trademarks of Lean Enterprise Institute, Inc.

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Learn More. ACCEPT
Privacy & Cookies Policy

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Non-necessary
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.
SAVE & ACCEPT