"Lean concept" is becoming well-known in the current business. Lean principles help any business to get rid of waste running a business activities. By eliminating waste, companies can gain more profitable, flexible, and controllable within the processes. The word "waste" in lean concept is including everything that makes the procedure flow unsmooth. You will find 7 wastes in TPS, that are waiting time, excess inventory, defect, over production, waste in process, useless motion, and transportation [1]. Even lean concept emerged from the manufacturing; it can be put on the other styles of activities; such as supply chain management.
Even though Toyota - japan company - was the main one who made the lean concept widely well-known with the Toyota production system (TPS), there is a fact implies that lean did not just emerging but it was partially found in the United State. For example in 1908, "Scientific management" created by Frederick W. Taylor was the idea of using scientific method such as standardization to apply with the working process. This scientific idea was criticized to be the initial stage of developing the lean concept, since it helped employees to work in system and ignored the unnecessary jobs [2], [3]. However, Henry Ford is known as to be the first person, who used the lean principles. In 1910, Ford is rolling out the concept of continuous flow - called Ford's model T production system (MTPS) - for manufacturing assembly line. This MTPS was to have workers focusing on their individual jobs and moving work from station to station by conveyer until the individual works became a total unit. However, the MTPS was criticized to be not suitable in the permanent production, since it cannot present customers with an increase of variety of products [4].
Figure : Ford's assembly line
Source: [6]
In 1950, Taiichi Ohno and Shigeo Shingo have studied the MTPS and the other principles such as just-in-time (JIT) while visiting the US super market, and then developed the "pull system", that was put on the continuous flow system of Henry Ford; thereby, helping TPS to emphasize on the procedure work rather than the individual works or machines [2], [5], [6]. The term "lean" was emerging in 1980 by the Massachusetts Institute of Technology (MIT); in order to spell it out the TPS [5]. Lean concept became famous and widely-used in many companies throughout the world; however, many organizations then realized that they can not gain the best benefits from the lean system unless their suppliers and customers in the supply chain system became the lean users too. Which means lean concept and offer chain concept then merge together into the lean supply chain management [7].
2. The emerging of lean supply management
Supply chain management has confronted with more complicated issues, as a result of changes in global business. Many challenges have risen up in the current business. Companies suffer from real-time decisions in order to survive in their business. Since lean concept can help businesses to reduce waste or non-value activities in the manufacturing processes and enhance the flow of process to be more fluidity, the idea of lean then overlap with the supply chain management approach as shown in figure 2.
Figure 2: Comparing lean and supply chain management
Source: [8]
In order to gain far better in supply chain management, the lean concept then was applied into the supply chain concept to be lean supply management.
As said by Toyota that developing a good process can show great results than having brilliant people manage the poor process [3], Toyota then adopted the lean concept into its supply management process as shown in figure 3. In the Toyota case, Toyota realized that it's wii idea of choosing the suppliers, who are a long way away from Toyota's plants, due to it does increase the total cost and difficult to regulate lead-time. Toyota also considered way too many suppliers as the supply chain waste, so Toyota made a decision to minimized the number of suppliers as low as possible; to keep the best suppliers rather than the most reasonably priced suppliers [9]. This notion of lean supply management can help Toyota strengthen its supply chain process. Together with the short and strong supply process, Toyota then can has more controllable on its supply chain, since the permanent strategy is needed in today's business.
Figure 3: The lean supply chain in Toyota
Source: [9]
3. The imperative point of lean supply
Unlike the original supply concept, the lean supply considers the entire flow in the supply chain as the whole process. While the traditional supply concept is focusing on the individuals benefits, the lean supply is looking for the great things about the integrated chain in a longer-term. In lean supply, way too many suppliers are believed to be the waste in supply chain; however, more suppliers can offer more reliable for organizations in the traditional supply idea. Whether businesses choose lean supply concept or the others; it is inevitable to point that lean supply management also has benefits and drawbacks.
3. 1 The features of lean supply
In the long term business, lean supply management can serve and play role as a good strategy. By following lean approach, firms can eliminate the unnecessary activities across the supply chain and increase value to the deliverables, since lean supply concept is concentrating on optimizing the performance of supply chain process and provide more value to the clients [7].
Lean supply management can integrate with both the internal and external aspects along with the supply process. The internal factor in supply management is focusing on the relationship linkage, as the external aspect is considering the operations amidst the suppliers or contractors. Generally, there are five aspects in both internal and external aspects, which many companies cannot fully integrate by using the traditional supply management: product flow, information flow, customer needs, upstream and downstream linkage, and the money flow [10]. Through the elimination of wastes in the supply process, firms can lower their operational cost, which results in better value-added in goods and services. Basically, most production flow is driven with the "push system", which tends to keep inventory in a high level to be able to response to the forecast. In lean supply management approach, it suggests companies to use the "pull system" that helps companies map and re-design the procedure to respond to the true drivers. Not merely the merchandise flow becomes more liquidity, the actual demand from the finish consumers can drive the supply chain process via the effective information flow, because of the supply process becomes lean. Because the lean supply management aims to minimize the number of suppliers as low as possible; to keep only the best suppliers, the relationship between companies and their suppliers then can possibly be improved effectively. Fundamentally, when the whole supply process becomes more efficiency and effective, the money flow in the process then ends up with positive side too.
3. 2 The disadvantages of lean supply
Like the other management concepts, lean supply management also has the disadvantage side too. When companies become leanness with fewer suppliers, companies might face the challenge of erupted chain, if their suppliers meet with the severe risks. For example, there is a fire at the Philips semiconductor plant in New Mexico in March 2000. On that time, Ericsson - one of Philips' customers - didn't have a contingency plan of additional suppliers. Ericsson thought we would wait its suppliers, Philips, and therefore Ericsson confronted with an extended delay in production line and had huge losses in phone business [11].
Furthermore, lean supply management is not suited to unpredictable market. Because of lean supply management is focusing on optimizing the process to do less but gain more, organizations might not be in a position to catch the rapidly changes on demand. That makes lean supply management do more positive influence on the commodities rather than fashion products [12].
Moreover, firms, who use lean supply management with improper balancing, won't success on acquiring new customers. Utilizing the lean supply management concept, most firm only concentrate on the voice of customers (VOC), which helps firms maintain their customers. However, VOC doesn't have more powerful on expanding the clients. In contrast, the voice of the marketplace (VOM) can provide the information on market dynamic, which precisely one of the competitive drivers that helps companies stay competitive in market share aspect [13].
4. Journey to lean supply management
4. 1 Initial phrase
Fundamentally, lean supply chain lowers total cost by shortening the distance of supply chain with the cheapest amount of suppliers. Therefore, any firm should get start by reviewing the current supply system and then create the optimization goal. That is because most of the supply management issues usually come from the level of relationship with suppliers. The greater strength in relationship means the less in waste and cost [14].
According to lean supply concept, companies do need to determine set of key suppliers, that can embark to the lean approach along with companies. The reason is that firms could easily get the benefits associated with becoming lean; however, the chain waste might not be eliminated as seen. The waste is just moving to cover in the suppliers' side, thus it'll be back in the proper execution of extended cost, delay problem, quality problem or whatsoever [14]. After identifying the main element supplier candidates, organizations then need to choose the best key suppliers as first-tier suppliers by concentrating on the lead time, because lead time impact is usually the best key factor on selecting suppliers [7]. Additionally, it should be better to choose the first-tier suppliers, who already implement lean concept, so the first-tier suppliers can cooperate on optimizing the sub-tier suppliers [7]. Next, companies should discuss the optimization goal with the selected suppliers, to be able to map the supply system in the simplest way.
Furthermore, businesses should involve with the first-tier suppliers on selecting the sub-tier suppliers, who can afford to optimize the supply system with the lean approach. Therefore, it could be possible with an opportunity of successful in using lean supply management concept.
4. 2 Develop lean supply stage
When all suppliers are identified, organizations then should cooperate with suppliers to document the macro value stream map (MVSM); to be able to understand and enhance the supply chain system [7]. Due to the supply system is normally an elaborate system, it's very difficult to communicate and cooperate along the stream line; thus the MVSM will help in these activities.
Figure 4: The exemplory case of basic value stream map
Source: http://leansoftwareengineering. com/wp-content/uploads/2008/02/value_stream_map. gif
Any improvement project cannot be successful, if there is no individual or team to directly take responsibility. To develop lean supply approach, companies need to create the core team, who'll monitor on lean improvement and take responsibility in communication. The member of the core tem should consist of people from various departments - operation, procurement, human resource, and so forth - and from suppliers. Furthermore, the core team should at least have one person, who's the lean expert; in order that can be played role as a lean consultant [7].
Key evaluation metrics is also required in the lean supply management too. As the other projects, organizations cannot improve anything, if businesses cannot find the ways to measure. There is a suggestion from Martin, J. W. on the 12 key metrics in lean supply management. The 12 key metrics are Inventory Investment, Profit/Loss, Inventory Efficiency, On-Time Suppliers Delivery, Forecast Accuracy, Lead-Time, Unplanned Orders, Schedule Changes, Overdue Backlogs, Data Accuracy, Material Availability, and Excess & Inventory [15]. Additionally it is required that organizations should continually evaluate the system; in order to ensure that the improvement will the proper way.
4. 3 Sustaining stage
It is essential for organizations to continually improve and monitor the supply system; to be able to sustain the implementation. As any typical project, there is no end-point in lean supply management too. Companies must prepare to go forward into the future. Firms need to create the culture in lean supply management for the entire stream process in both internal and external. In creating lean culture, it needs a good leader to continually advance the project. There is an notion of leadership standards in leading lean that a good leader should posses: intelligence, integrity, stability, belief structure, self-confidence, flexibility, high-levels of energy, dominance, and sensitivity [16], since these factors are matching consistent with lean supply management.
Continued evaluation must be review frequently to be able to sustain lean supply management approach. This is because there are always changes in doing business. Firms may need to change some activities to achieve the lean approach. If the measuring ways are not match with the changes, firms will get the incorrect results and might fail in sustain lean.
In order to sustain the lean approach, companies should celebrate the success of using lean supply management to all or any participants. That is for encouraging people and also to let people realize on the important of using lean supply management. Furthermore, firms might show the results of lean supply management: less expensive, lead-time, inventory; to attract suppliers to own great passion of becoming leanness [7].
5. Conclusion
Due to the increasing of competitive intense, organizations have to improve the ways of running business. Supply chain management is challenge in the current business. To be able to survive and also have growth, organizations must explore and exploit the supply chain system. Lean supply management is an idea of forming the bigger collaboration. Along with the strong relationship, businesses can help each others make use of the supply chain system; to gain more profits. To attain lean concept, non-value added activities must be eliminated; include with the supply system dynamic improvement. In lean supply idea, choosing the right suppliers is better than selecting the lowest cost suppliers. Even the supply cost seems to be higher; the overall benefits should come to organization in the longer term rather than simply the short-term most reasonably priced. As the other projects, lean supply management can be an eternal improvement. Firms, who like to become leanness, must continually monitor and improve the system. Additionally, the right metrics are needed to be recognized to ensure that organizations do not go ahead the wrong manner. However, lean supply management may well not fit with every organization, and becoming very much leanness may not worth to do. Organizations must pay effort in study the feasibility of using lean concept before embark to the world of lean.
Question #2
1. Introduction
Supply relationship management (SRM) is this issue in the supply chain management, which considered in the aspect of establishing and sustaining the business enterprise relationship over the supply chain. SRM concerns the practical processes to integrate the communication and coordination between organizations and their suppliers.
Supply chain relationship was considered to be one of the critical indicators in most business, since it can influence the potential of supply chain concept. Now, the modern business seems to be more complex with high competition. Due to the information has more valuable in the supply chain management, companies then need to re-design the means of managing and sharing information among each others. Organizations cannot independently run the business enterprise by themselves. Not only good relationship can help companies to have more competitive advantage to survive in the market, but additionally, it may help companies expands the marketplace too.
SRM is not the new concept found in today supply chain management, but was recently exploited in order to increase benefits over the supply chain. SRM has now become one of the key factors that influence the supply chain. In the future, SRM will not only only a choice for firms, but it will be one of business fundamentals, which companies need.
2. The growing need for SRM
Business has changed many times within the last decade. Only making and selling are not enough for organizations to survive in current business. Since we have now live in the age of information, information then becomes the essential aspect in supply chain management. There are some points illustrate that some organizations need supply chain management; in order to reduce costs and improve their benefits, not the info. Information is probably not the acquisition of using supply chain concepts, but information is the key driver in supply chain mechanism. Information, on the other hand, can lead to the goal of reduce cost, increase benefits, reduce lead-time, reduce variability, better forecast the demand, improve distribution system, effectively manage the supply chain, and so on [17]. To be able to focus more on information, organizations has changed from independently develop supply chain to a multiple coordination with supply chain relationship idea.
Before the value of supply relationship has been more considered, firms believed that strong customer relationship was very important, due to the belief of existed customers will be more important than the new customers. In addition, businesses believed that the future direction of these business should come from the feedback of their existed customers, who have more experience on firms' products or services [18]. To obtain the benefits associated with existed customers, the concept of customer relationship management (CRM) has emerged into the world. The purpose of this idea is to increase customer satisfaction and find out customer expectation, so companies then can truly add more value with their products. Down the road, companies have realized that satisfying customers is insufficient to gain more competitive running a business. Because of the procurement cost is criticized to be one of the most significant expenses generally in most companies, the idea of proactive strategy with the advanced collaboration, called SRM, then pop up [19].
Not only procurement can cause trouble to the buyers in supply chain, it can also make the sellers suffer in real pain too. For example, Boeing - the aircraft suppliers - has confronted with the $2. 7 billion financial impact, due to American Airlines has postponed the purchase of 54 out of 56 aircrafts from Boeing in 2004 [20]. This example illustrates the problem of sharing the forecasting information, because these two firms did not consider on establishing the sufficient supply relationship; to be able to provide information and set contract truthfully. Firms, who only concern themselves rather than consider on their reputation, usually cannot survive in the long-term business. Therefore, SRM plays an important role in assisting both suppliers and buyers concern each others, that their strategies will support their future business collaboration.
The growing of changes in modern economical environment is now beyond the foundation market mechanism. Due to the changes of technology in communication area such as online baking and online trading, it is clearly that the business enterprise behavior across industries is currently more complexity and competition. Firms need to rethink their way of fabricating strategies; conducting business solely is possible, but very difficult. Effective coordination with partners is more desirable to be able to overcome any changes in modern business. Ohmae (1994) has suggested a concept that firms will no longer solely compete in the new business but as supply chains, because of the coming of information technology get rid of the business boundaries [21]. Therefore, SRM were developed to resolve the challenges of new business relationship and communication along the supply chain.
SRM provides benefits for organizations over the supply chain; by reduce risk and negative impact in the supply chain. Moreover, SRM can helps organizations improve and integrate performance in procurement and sourcing process. A couple of four benefit areas that SRM can build a collaborative framework along the supply chain as shown in figure 5 [22].
Figure 5: The worthiness of SRM
Source: [22]
Collaborate and execute: SRM provides solutions to form basis network collaboration such as decision-making, procurement process, and so on. In this field, SRM can ensure that the entire supply chain will reach the business enterprise objective. Furthermore, SRM can optimize workflows across supply chain with different partners, cultures, and geographies as well as communicate in internal organization.
Progress monitoring: Since information is precisely important in supply chain management, real-time information should be tracked effectively; in order to overcome any business issues. SRM can notify businesses in required details visibly; to increase more degree of agility to track and respond any changes.
Measure performances: Suppliers performances must be visible, since it is involved in supply chain mechanical reaction. Clear measure performances make organizations control on logistic operations, sourcing process, and so on easier. Accurate data also helps in establishing commitment and relationship along suppliers and buyers; which results in more effectively arrange firms' strategies.
Source: SRM can solve some issues of conflict in procurement process. For instance, Win-Win sourcing is just how of sharing a long-term commitment. This notion help organizations and their suppliers avoid irritable negotiation process. Firms can utilize and optimize in the way that everyone will receive their benefits throughout their coordination.
3. Essential considerations for appropriate relationship with suppliers
There can be an idea shows that establishing relationship is more strategic, while managing relationship is more operation [18]. Fundamentally, the performance of SRM is depended on the level of trust relationship. In SRM, trust is not only the confidence in partnerships, but also involves in considering the effect on partners from our action too [23]. Before getting start, organizations need to evaluate the overall performance of these partners; to identify who'll be the key partners in the supply chain. The least expensive suppliers aren't the key suppliers, but the best suppliers in term of coordination are rather worth.
3. 1 Strategic basis
Strategically, businesses should strengthen their internal relationship across functions and folks; in order to advance in external relationship. The real reason for this idea is the fact organizations, which have weak internal relationship, are not dependable [24]. The important thing in long-term SRM is the power of trust must be balance. When one stage in supply chain has more power than the others, it usually causes the trouble of resistance and conflict, which cause the supply chain disaster. Chopra, S. , and Meindl, P. (2007) have given a concept of designing strategic relationship in four stages as follow [23]
Evaluate the value of partnership: The first step in SRM method is to spot the value and benefit that organizations might have in establishing relationship. The idea of this stage is the fact the total profits from relationship can be made by the partners' competences. Moreover, equity is the key factor, which helps companies sustain the relationship. In order to obtain those criteria, organizations must ensure that their partners can provide or improve the successful factors across in the supply chain.
Design the operational tasks for every single stage: To be able to balance the power in relationship, every organization along in the supply chain must obviously decide on each player's role. If one stage has more allocation than the others, the benefits of relationship will not be success. That's because there is no-one wants the others to adopt the upper hand rather than themselves. To achieve this balanced power, the mechanism, such as performance measurement, progress tracking, and information sharing, must be developed to fill the roles in collaboration.
Set the effective contracts: Generally in most practical relationship, there are always issues. The clear coordination mechanisms and contingencies should include in the contracts. The effective contracts can improve the degree of trust and benefits in collaboration. Within the longer-term, the contracts must be reviewed over time, because it works more effectively than the original fix contracts.
Prepare the conflict solution: Conflicts are usually fall under coordination. Firms should prepare the answer mechanism to deal with the conflicts, which might happen over time to time. It is greatly importance that the conflict resolution and contracts must not conflict each other. Communication and information sharing are the important factors that will help strengthen the relationship. Frequently meeting and reviewing plan are also importance in order to avoid conflicts and sustain relationship too.
3. 2 Operation in relationship
3. 2. 1 Initiating stage
To achieve the operational relationship, businesses should choose the design of relationship that fit to the procurement and market characteristics. The four factors which should include in selecting design of relationship are flexibility, quality, delivery, and cost. Quite consideration on these four factors is sometimes these four factors cannot go along together in constructing the partnership. Therefore, organizations should gauge the best benefits, while evaluating these factors [25]. The example of relationship styles are shown in figure 6.
Figure 6: The style of relationship
Source: [25]
Clear strategic goals and objective must be achieved in this stage too. Firms might begin by initiate and implement the inner approach and mechanisms within themselves. So organizations can prepared to support with the external supply relationship; to be able for taking the mutual benefits of SRM.
3. 2. 2 Replenish relationship
The relationship will never be successful, if companies choose their partners poorly. The reason is companies and their alliances cannot get along with too much different in culture, strategies, and vision [26]. To be able to implement relationship, firms should start in a small scale, and then change the relationship as time passes; to motivate the relationship to be evolved. When the value of relationship is generated, organizations should appreciate this value to all or any internal and external partners; in order to encourage people to have more confidence in forming and developing this relationship. Technology can support and enable the partnership in the supply chain. The supportive technology can give more advantages and competitiveness to the supply chain; especially the info technology is very useful in geographic relationship. There's a relationship implementation model called 5-s framework, which helps organizations give attention to their core dimension of relationship management [18].
Structure: Organizations should construct their relationship in two levels: first is the internal structure and the second is the macro structure along the upstream through down stream in the supply chain.
Staff: Any activity requires respond. Folks are absolutely the core resource in business. Furthermore, people will be the crucial dimension of relationship. Organizations must obviously identify the representatives for SRM, or the relationship may not happen or maintain.
Style: As stated before, the right design of relationship is the key factor in SRM. Companies, who select their relationship style poorly, won't success in managing their relationship.
Systems: Effective mechanisms, such as procurement process, relationship performance, service function, and supply chain process, will be required in order to satisfy the relationship. The unclear operational processes usually conflict the partnership, and cause the collapse of relationship.
Schemes: Support relationship programs are incredibly importance in order to implement relationship. SRM is not the logical function, but involve with the emotion too. Relationship will never be replenished, if firms don't have more interact or communication with the partners.
3. 2. 3 Sustaining relationship
Frequently review and improve are necessary in keep up with the relationship. Firms should review the key contracts that influence the relationship. If it is better to update or change the detail of contracts, businesses should do rather than keeping the original contracts. Furthermore, organizations should frequently define the new potentials or benefits in this supply relationship, and then improve them into the coordination. It is importance that companies should identify and solve any problem together with their alliances; to avoid conflicts and increase their degree of relationship. The greater interaction means the more close-relationship. Furthermore, close-relationship can affect to just how of these collaboration too. Bowersox, D. J. , Closs, D. J. , and Cooper, M. B. (2010) have given the idea that sustaining relationship depends on three key factors: strategic and operational goals, performance measurement, and feedback mechanisms [26].
Strategic and operational goals: Even goals must be identifies in the initial stage of construct relationship, it is best to examine, and update in the longer-term. Goals can be changed, because there are always changes in running business. Moreover, the initial goals may not suitable for managing the partnership, since companies might have not much knowledge on constructing relationship at the beginning stage.
Performance measurement: Basically, we can not manage things, which we can not measure. Not merely performance measurement can influence in managing relationship, it also helps all the conflicts too. However, it is necessary that the measurement must not be one-way measurement. Any firms use in the same supply relationship program must have possibility to track each others. Moreover, the measurement process must be clear and clean; in order to increase and keep maintaining the level of trust.
Feedback mechanisms: Feed back mechanisms should be visible, or organizations might not have the huge benefits on feedback. It is not importance that the feedback must maintain formal report. An informal feedback also available too. As the formal feedback might set in an gross annual report for top management, the informal ones, such as weekly or monthly, are usually more proper for support team or staff. That's because the relationship issues can happen in any way and any moment. Firms should be more agile; to be able to deal with any uncertainty.
4. Conclusion
Since we are in age information, it includes changed the marketplace behavior. Firms cannot solely survive in business as these were in the past. Supply relationship management then becomes the important factor in running business. SRM can help organizations reduce the negative impacts and increase benefits along the supply chain. SRM provides four benefit areas in the supply chain: collaborate & execute, progress monitoring, performances measurement, and source; which relate with firms' strategies and operational processes.
In order to success in developing and sustaining the partnership, organizations need to indentify the best partners and consider the level of relationship. Inside the first phrase, organizations should clearly decide on each partners' roles and benefits include with the complete goal and objective in forming the partnership; to avoid any conflict when start the SRM. A clear effective contract is very necessary too, since it can helps companies settle their agreement on any changes. Moreover, the contracts can increase trust, which is the key factor in the SRM concept. Not merely preparing the contracts, firms should prepare the contingencies too, since conflicts might happen as time passes to time.
Organizations should select the varieties of relationship that match the characteristics of the supply chain. The proper style can influence just how of running business and help companies achieve the mutual benefits from SRM. Firms should think about the core dimensions of managing the relationship such as the 5-s framework: structure, staff, style, system, and scheme. That's because businesses and their partners may have the variations in cultures, strategies, and visions. Frequently review and improvements are believed to be necessary in sustaining the partnership. The appropriate interaction can improve the level of relationship, and the benefits associated with SRM. However, organizations should review the SRM in the holistic approach too, since SRM also can bring disaster to the supply chain.
