Long is not Lean

A recent article in Logistics Management raised my ire a bit.  The title is The Downside of Lean Logistics, but the author completely misses his own point, therefore the title itself is way off base.

"Lean logistics," is also brought into question. In a serious recession, the probability of company failures among transport and logistics vendors is heightened, as is the threat of cargo theft, while moving products from offshore locations to final markets continues to create specific business risks, according to the recently-published report.

“Drewry argues that international sourcing has introduced in global business more and higher risks related to transport and logistics, and that these risks are often more complex and more significant than in the past but are still misunderstood,” said Philip Damas, director of Drewry Supply Chain Advisors.

For example, the dilemma with lean international supply chains, coupled to lean manufacturing, is that they can become more vulnerable to risk factors. If the supply chain becomes longer (due to outsourcing the supply or manufacture) this vulnerability can increase. Vulnerabilities commonly would include stock-outs when lead times become extended to such a degree that variations in the supply and demand that are unpredicted (perhaps due to deficiencies in the demand and supply forecasts), cannot be accommodated without building into the supply chain some slack – or buffer inventory – which is in itself an anathema to the “lean” ethos.

By now you probably see the issue... although no company can or should be completely vertically integrated, international outsourcing is usually not part of a true lean manufacturing operation.  The best lean manufacturers move overseas for only one reason: to be closer to a market.  Long supply chains by definition create more inventory, more inventory consumes cash and creates potential hidden quality risk, and reduces overall agility.  All costs, whether they show up on a P&L or not.

But the other, and perhaps more important issue, is that this portrays lean as reactionary instead of proactive.  A "lean" supply chain that falls apart due to disruption is not a robust supply chain, lean or otherwise.  Robust does not necessarily mean inventory buffers, but could include internal agility to adjust product mix to a change in incoming raw material sequencing, additional backup suppliers, assembly alternatives, and the like. 

Perhaps a better title could have been "The Downside of Long Convoluted Supply Chains."

Comments

[Robert Edward Cenek]

In some instances a particular mineral or natural resource is only found offshore. It's impossible or not practical to shorten the supply route unless the product can be reformulated or a substitute found.

[Bryan Lund]

Another title alternative, "Applying Lean all by it's Lonesome in Logistics".

Articles like this can be frustrating to dispute. There are two things in play, here. One, what is your definition of vulnerability? If it is disruptions in the ENTERPRISE wide supply chain, which includes a close relationship with all aspects of business, then a lean company can react to the disruption by doing innovative things. Example? I don't know, how about being able to transfer product lines within months to other plants, like Toyota did with their Tundra and Prius vehicles last year, IN RESPONSE TO THE MARKET DOWNTURN.

Two: This article is a great example of the biggest weaknesses in mainstream media coverage of Lean: each media segment covers the topic in their own little segment and completely misses the point about ENTERPRISE adoption and adaptation of Lean principles within the culture of an organization.

[Jason Morin]

Having worked in logistics for 12 years, I can tell you that most in this arena lack a basic understanding of Lean/TPS and its core principles. Articles like the one you reference Kevin demonstrate this and only promulgate misconceptions about Lean/TPS. Unfortunately, if you say the word "lean", people immediately associate this with less inventory, less trucks, less forklifts, less warehouse space, and less people.

Some of the TPS tools have been adopted (like 5S and kanban), but of course they are implemented in isolation and completely disconnected from any philosophy.

If you REALLY want to get frustrated, query the word "lean" at the on-line version of Supply Chain Digest. It's a well-respected trade magazine but they miss the mark on Lean every time.

http://www.scdigest.com/text_search.php?keyword=lean

[Martin Arrand]

This annoyed me too. In a very narrow sense there is a dubious truth: if you order infrequently and in large quantities, you are less likely to be affected by supply interruptions, because most of the time you are living off your fat and not your supply.

However, as you point out, long lead times and lean do not go. Moreover, the lean approach of small, regular, reliable orders is more likely to help your supplier maintain a viable business.

The irony of the article is that it pitches high inventory as a risk reduction strategy. Hmmm... like to see that presentation to the CFO.

[Tim Albinson]

Another downside of “long, convoluted” supply chains is that they can’t help but be in direct opposition to sustainability goals. Since the vast majority of a company’s carbon footprint is embedded in its supply chain, it makes sense to focus on the entire value chain for improvements and efficiencies that can reduce GHG emissions. As you say, it’s better to be proactive rather than reactionary, and companies that come out ahead of regulations will have a competitive advantage.

[Jan Husdal]

I think you hit the nail on the head when you stated that 'A "lean" supply chain that falls apart due to disruption is not a robust supply chain'..."lean" does not mean NOT robust and robust does not mean NOT lean. A supply chain can very well be lean and robust, and robust doesn't imply that 'bigger is better' either, it all comes down to design and structure.