Exploring the application of "lean" to complex, dynamic business challenges

Posts in category Managing Supplier Challenges

Think Lean to Combat Today’s Turbulence



Today I ran across an article titled Black Swan Alert: Low Tech Links Devastate High Tech Supply Chains that I feel requires a response.  The article cites Nassim Taleb, author of The Black Swan, as a way to take a shot at lean, just-in-time supply chain management practices that seem to be gaining favor:

A solution proposed by Dr. Taleb and others is to build a robust system (in this case supply chain) with redundancies and disaster recovery processes to properly manage extreme event risk…

This article makes two important points.  First, Dr. Taleb is right–leaning out a supply chain in a way that presumes that we live in a stable, predictable environment should not be accepted as an optimal business practice.  Second, many companies seem to be optimizing for “normal times” in the name of going lean.

But this is not what going lean is about.

It is important to understand that lean, just-in-time practices  far more than what they seem to be on the surface. They are about far more than optimizing inventory for predictable conditions.  Fortunately there are some in this business who seem to understand.  I ran across an article in Outsource  that points out why lean must be more than simply a means of applying what is seen on the surface at a manufacturing organization…

In his book Going Lean, author Stephen Ruffa cites standouts such as Walmart and Southwest Airlines as pioneers in adopting Lean to combat a turbulent business environment. The lesson here is that even when external forces are restless, companies can weather the storm by adhering to the stabilising forces of a Lean culture.

I must admit that I have become concerned about the direction of this lean movement as a whole.  Lean was originally employed as a means for companies to overcome their unpredictable operating environments–and thus, this approach is well suited to managing within the extreme turbulence that has become the norm for businesses everywhere.  Too often, however, this powerful approach is relegated to implementing a discrete set of tools and techniques, offering only modest benefits rather than the competitive advantage it has been shown to produce (see A Roadmap to Success or a Lesson in Map Reading?)

For those who wish to learn about how lean principles can be used to slash costs, promote innovation, and overcome the risks created by operating in uncertain, dynamic conditions (known as lean dynamics), I provide a history, a description, along with cases showing how it is used in my book Going Lean: How the Best Companies Apply Lean Manufacturing Principles to Shatter Uncertainty, Drive Innovation, and Maximize Profits.  I subsequently wrote The Going Lean Fieldbook: A Practical Guide to Lean Transformation and Sustainable Success to break this down further into a framework to support an action plan.

 

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Downsizing Still Isn’t Enough



[Updated 12/8/10]  It is clear that companies everywhere are working furiously to better align their operations with the realities of today’s struggling economy.  For many, this means ”leaning” out excesses within their operations, and turning to their suppliers to do the same.  Yet, just as I wrote nearly a decade ago, downsizing alone isn’t enough.*

What is missing?  Quite often, the dynamic aspect of the business.  For many organizations, downsizing and cost cutting seem to be based on a mindset that business is inherently stable and predictable.  Too many organizations focus on synchronizing operations for current demands–an approach that works well during stable conditions, but quickly breaks down when conditions suddenly change.  The effect on their supply chains can be particularly severe (see my post, “Avoiding the Collapse of Your Supplier Base“), perhaps contributing to the concerns noted in the recent Industry Week article, “Concern About Supply-Chain Disruption Risk Increases.”  

What, then, is the answer?  Rather than directly targeting the most visible outcomes of lean, they can achieve far greater results that will stand the test of time by progressively building an underlying foundation promoting smoother operations across the broad range of conditions they will face.  This takes addressing fundamental disconnects in operations, decision making, information and innovation, sequencing well-known lean techniques in a way that makes the greatest impact and promotes responsiveness to uncertainty and change (as described in my new book, The Going Lean Fieldbook: A Practical Guide to Lean Transformation and Sustainable Success).  Doing so does take more effort, but it is critical to producing results that will stand the test of time. 

*Reference:  “Downsizing Isn’t Enough to Make Supply Chain ‘Lean’,” Aviation Week & Space Technology, February 12, 2001

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Avoiding the Collapse of Your Supplier Base



Since early in the decade I have cautioned about the perils of downsizing one’s supplier base as a focal point for going lean.  My article, “Downsizing Isn’t Enough to Make Supply Chain ‘Lean’” (Aviation Week & Space Technology, February 12, 2001) drew from the results of a government-industry study I led across the aerospace industry that highlighted reason for concern.  Among other findings, it showed that slashing suppliers’ numbers had little correlation with reducing bottom-line costs.  However, it did point out a real risk: such downsizing  can significantly increase supplier uncertainty from sudden changes in business conditions.

This is precisely the situation that Josh Cable explained in his Industry Week article, “What You Can’t See Can Hurt You.”  Today’s severe economic conditions are exposing a number of real risks that can result from how companies have streamlined their supply chains to gain greater efficiencies–causing the potential for some to fail completely, leaving critical capabilities missing.  And many companies are particularly vulnerable because they do not seem to have the ability to determine how much supply chain risk they face.

Creating visibility into the ongoing health of important suppliers must be a central part of going lean.  By increasing firms’ “span of insight” as part of the way work is arranged and managed, corporations and institutions can better track critical aspects of supplier performance so they can make adjustments before problems spiral out of control.

This is a core part of the lean dynamics philosophy and implementation approach as described in Going Lean, and the upcoming book, The Going Lean Fieldbook.

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