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What do you understand by a 'lean supply chain' Why have lean supply chains evolved in many industries? Why are many organisations and industries moving away from lean supply chains?
* Lean Supply Chain: Produces just what/how much is needed, when/where it is needed
* Focus on reducing costs and lowering waste as much as possible - generally used in organisations with high volumes of purchase orders as waste/costs accumulate quickly
* Type of supply chain depends on business environment used (i.e. demand uncertainty, supply uncertainty, customer preferences) - changes in business environment has lead to movement from lean supply chains to agile supply chains Paragraph 1: Characteristics of Lean (Efficient) Supply Chains (vs Agile Supply Chains)
* Leung et al (2014): Compared lean vs agile supply chains - Lean: pull approach, inventory reduction, quick setups/orders, quality source, supplier networking, continuous improvement
- Agile: closer supplier relationships, enterprise integration, concurrent business activities, customer requirement satisfaction, rapid development cycles, customer driven innovation, flexible product technology
* Given these characteristics lean more applicable for goods with lower demand and supply uncertainty (Lee et al, 2012 - uncertainty framework) - grocery, basic apparel, food, oil, gas - lean supply chains more relevant in times of Fordism
* However current operating environment has changed - innovation has led to more products with high demand and supply uncertainty (telecoms, high-end computers etc.), greater demand for customisation/personalised - lean supply chains no longer optimal Paragraph 2: Trade-off Between Service & Efficiency
* Desire for variability - segment clients - difficult for SC to support/cost-inefficient
* High supply & demand uncertainty - need flexibility (Lean SC does not support this!)
- Zara Fast Fashion: in-sourcing/near-sourcing - only maintain capital-intensive operations in house, subcontracted labour intensive operations - more flexibility
* Flexible SC (spare capacity) vital for clients needs but lacks strategic agility/efficiency Paragraph 3: Trade-Off Between Resilience & Efficiency
* Design SC to contain impact of disruption:
- Segment supply chain (e.g. by product line), regionalise,, reduce concentration of resources (e.g. common parts), overestimate likelihood of a disruption
Trade-off between resilience and efficiency - build in features to allow resilience that are inconsistent with lean supply chains Paragraph 4: Effect of E-Business in SCM
* Hackney et al (2004) - Shifts towards collaboration rather than competition
* E-business creates challenges and opportunities in supply-chain environment (information sharing/visibility) - need to redesign core business processes
* Efficient Consumer Response - management more efficient and interlinked
* Pramatari et al (2009)
- Implemented CRP in Greek Supermarket Chain through ECR Hellas initiative
- Driven by individual retailers or large suppliers - P&G, Unilever
- Mostly successful, but not always on the first attempt, numerous implementation problems: recruitment of trading partners, errors in inventory reports - accuracy problem, slow speed, scalability & inflexibility of system, lack of trained personnel etc.
Movement away from lean supply chains to fit with e-business environment Conclusion
* Supply chain needs to fit with operating environment - e-business led to need for high integration, collaboration, coordination (demands on technology & relationships)
* Movement away from lean supply chain towards agile one to support these changes
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