Lean Supply Chain Management Strategies

What are the similarities and differences between lean and agile supply chain strategies?

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Lean supply strategy focuses on cost reduction, minimization of waste, and maximization of overall performance (Vonderembse, Uppal, Huang, & Dismukes, 2006). The Lean approach suggests planning-based production that “supports the flow of value, let the customer pull the value from the producer and pursues perfection” (Goldsby, Griffis, & Roath, 2006). Lean supply is less customer-oriented and is closer to mass production.

The agile strategy aims to adapt the production to changes in the market environment and to meet the customer-specific requirements by providing customized products and services. This approach is flexible and less cost-oriented (Vonderembse et al., 2006). The customer plays a crucial role in the supply chain.

If to speak about the similarities, both lean and agile strategies are aimed at the increase of delivery speed, reliability, and quality of the end products (Hallgren & Olhager, 2009). Both manufacturing policies aim to meet the consumer demands at the lowest cost; however, applying different approaches to the definition of those demands (Goldsby et al., 2006).

Explain how manufacturing has evolve

The emergence of manufacturing can be explained by the “human’s discovery and the invention of materials and processes to make things” (Groover, 2010, p. 2). Manufacturing is, in general, the process of active transformation of natural resources to any product. The separation of manufacturing into a particular area of human life was made possible by the division of labor and the development of systems of organized production in contrast to single home-owned natural production. The Industrial Revolution of the XVIII-XIX century led to the transformation of the economic system switching it from agriculture and handicraft to an industrial basis (Groover, 2010).

What is mass customization? Give examples

Mass customization can be defined as “producing goods and services to meet individual customer’s needs with near mass production efficiency” (Moser, 2007, p. 6). The essence of mass customization is in that companies produce some half-finished product, which can be later complemented by agreement with the customer’s requirements. The generic “raw” product is produced in the lean supply manner, while the customization is part of the agile approach. Car manufacturers are among the most illustrative examples of mass customization. Toyota, for instance, offers the visitors of the websites of its Scion model to modify it by choosing the color, style, and filling (Goldsby et al., 2006). BMW and Audi also provide similar modular product options (Moser, 2007).

How does a leagile supply chain work?

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Goldsby, Griffis, and Roath (2006) define three types of leagile chains. The first one suggests that the lean strategy is applied to 20% of the most profitable production. For the remaining 80% agile approach is used with possible make-to-order production. In the second leagile type, most of the time, the company produces its goods and services in a lean manner. When the consumer demand rises, the company may use outside facilities to make customer-tailored production, applying the agile strategy. The third type lies in form postponement when standardized goods are produced in the lean supply manner and then can be accommodated to meet the customer’s demands (Goldsby et al., 2006). In the leagile supply chain, the customers’ demand can be forecasted and satisfied by adding some innovative features to existing products. The company gets a chance to occupy bigger market segments (Vonderembse et al., 2006).

Explain how a lean strategy can work for a service firm (for example, American Express)

Lean supply strategy seems to be more suitable for producers of material goods. However, service companies, with financial companies among them, may significantly benefit from lean management techniques. Carmichael, Mullen, and Mante (2012) state that the modern financial service market is characterized by a significant amount of non-value-added waste, such as over-processing, rework due to error processing, and many more. The lean supply approach helps to identify and eliminate this waste and reduce costs. Moreover, the lean strategy helps American Express to streamline the production, sales, and customer service. The use of this approach may be reflected in the initial production of essential services that later will be tailored to the particular client. The Lean approach should be applied to the internal work of the financial institution, where all the processes, document flows, and operations have to be standardized.

References

Carmichael, C., Mullen, S., & Mante, E. (2012). Banking industry leverages lean principles to eliminate waste. Lean thinking in financial services. Web.

Goldsby, T., Griffis, S., & Roath, A. (2006). Modeling lean, agile, and leagile supply chain strategies. Journal of Business Logistics, 27(1), 57-80.

Groover, M. (2010). Fundamentals of modern manufacturing: Materials, processes, and systems. Hoboken, NJ: John Wiley & Sons.

Hallgren, M., & Olhager, J. (2009). Lean and agile manufacturing: External and internal drivers and performance outcomes. International Journal of Operations & Production Management, 29(10), 976-999.

Moser, K. (2007). Mass customization strategies: Development of a competence-based framework for identifying different mass customization strategies. Raleigh, NC: Lulu Enterprises.

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Vonderembse, M., Uppal, M., Huang, S., & Dismukes, J. (2006). Designing supply chains: Towards theory development. International Journal of Production Economics, 100(1), 223-238.

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