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COVER PAGE |
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IBT |
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ISG |
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ETHANOL |
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IMT |
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RECRUITING |
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PT |
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FLUID POWER |
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GENERAL INDUSTRIAL |
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IBT MEDIA |
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LEAN SIX SIGMA |
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ELECTRICAL |
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RUBBER |
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MATERIAL HANDLING |
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TRAINING |
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SAFETY |
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Lean Supply Chain: Advantage or Necessity?
By Anthony Akin
Manager, Lean Six Sigma
A supply chain is a coordinated system of organizations, people, activities, information and resources involved in moving a product or service from supplier to customer. The entities of a supply chain typically consist of manufacturers, service providers, distributors, sales channels (e.g. retail, ecommerce) and consumers (end customers). Supply chain activities transform raw materials and components into a finished product that is delivered to the end customer.
The primary objective of supply chain management is to fulfill customer demands through the most efficient use of resources, including distribution capacity, inventory and labor.
In the face of global competition and discerning customers, more and more businesses are turning towards Lean Manufacturing principles to become more efficient and effective. It seems to be working. According to the SCM Research Center, 50 percent of all U.S. manufacturers report that they’re using some lean manufacturing techniques.
As a company continues its lean journey, it seeks to lower cost, improve quality, and compress lead time. The result is that they become more competitive. Their next step might be to explore the concept of extending their value stream through adopting a lean supply chain.
During the past few years, I have read at least a dozen articles claiming that a “lean supply chain is a competitive advantage.”
My conclusion: “Is it an advantage or a necessity?” Today's competitive advantage is quite likely to become a tomorrow's absolute necessity.
It would appear to be a needed reform. Today's supply chains are becoming longer due to an ever-expanding global marketplace. Supply chain activities transform raw materials and components into a finished product that is delivered to the end customer.
Historically, businesses in the supply chain have operated relatively independently of one another to create value for an ultimate customer. Independence was maintained by buffers of material, capacity, long lead-times and arms-length relationships (leading to higher cost throughout the supply chain).
Due to lack of effective communications, the manufacturers, suppliers, distributors, and retailers each have their own (and usually incomplete) understanding of the demand by the true end customer. Lack of understanding or visibility is further complicated by long lead times and high demand volatility, which lead to excessive inventory being held to try and maintain acceptable customer service levels.
This is commonly referred to as ‘Bullwhip Effect.’ The term bullwhip effect refers to the magnification of demand variability, as orders move up the supply chain. Each group has control of only part of the supply chain. Each group, however, can influence the entire supply chain by ordering too much or too little and are influenced by the decisions other are making.
The ‘Bullwhip Effect’ shows the discrepancy between real consumer demand and channel demand as orders propagate through the supply chain. Channel partners can often over-order to compensate for demand variability and lack of visibility of end customer demand. Orders get significantly inflated as one goes up the supply chain, resulting in excess inventory carrying cost and obsolescence. Companies frequently may share data, but rarely do they share enough to effectively smooth out the supply chain. The result of the traditional supply chain leads to higher total cost of ownership for everyone involved.
Competition is stronger than ever; consumers have more choices and are demanding products and services that are delivered as fast as possible (speed), with no errors (high quality), and at the lowest possible price (low cost). As a prospective supplier to our customers, IBT is striving to be the strongest link in the chain, consistently delivering service, quality, speed and efficiency to exceed customer expectations. To meet our customer’s evolving needs, we at IBT are continuously challenging the traditional value proposition of distributors. IBT is applying lean principles to the distribution model and transforming the traditional supply chain.
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To learn more about Lean Six Sigma services from IBT, contact us today!
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