Lean Supply Chains– keeping stock levels low, customers happy and money in the bank

On a recent trip to Osaka I was privileged to tour a Toyota Assembly factory and along with other delegates, had face time with some management there. The conversation got onto ‘lean manufacturing’ (though some of us didn’t know it) and the question was asked
“How many days worth of stock do you hold?”     The answer startled many;

“Two days... a bit less”.

A phenomenal achievement in supply chain management considering I watched a Toyota ‘Yaris’ get assembled in 26 minutes. If Toyota (whom makes a car every two minutes) is able to reduce their inventory that much – why can’t you? You can! But you need some clever technology, some fresh thinking and very, very good suppliers.

Why go lean?
Stock on the shelves is cash tied up – cash that could be put to better use, even if it’s just in your bank earning interest. NB: For calculations around this, google ‘cash-to-cash cycle’ and see how it could help you.  

Lean is less about urgent overnight couriers and more about good planning. To know what you will need you really need to understand where you are now.

Close the data-loop
Utilizing real-time integrated ecommerce and reporting systems will be a major step forward. Presume nothing, data is everything. Your biggest selling product may not be this year – as with your biggest client, and so on.

Online Access for Customers and Suppliers alike
You need to automate as much administration as possible. Firstly, get clients ordering via EDI or online – essentially you will be outsourcing your data entry to them. Make sure inventory information (as much as you dare show) is available to clients as well as suppliers. It can be hard to keep track of inventory levels and big orders from clients can wipe your QOH out. Make sure you have systems in place to vet unusually large orders. You would rather fill 100 client orders than 1 key-client order at a lower margin.
Allowing supplier’s access to your QOH makes them more effective partners. They want you to buy more – and therefore will ‘log in’ and check your stock levels of their own volition making sure you have what you need.

Good carriers. Make sure your freight partners have online capabilities and wherever possible, can integrate with  your systems. Time chasing parcels that have already arrived is time you don’t need to pay for.

Involve your staff
One lesson we should all take from Toyota (who took it from Henry Ford) is that there are golden ideas to make your business more efficient, effective and to lower costs, provided staff are encouraged to think about them and share.
By closing the loop from stock order, to client order, to dispatch and stock re-order you can work to refine your processes and learn from mistakes. With every repeating cycle it will get better, which is better for you, your customers and your bottom line.

Brooke Anderson
MD - XM Developments
www.xmdevelopments.com