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Leaning on Suppliers: The Push to Lean Manufacturing

Dear Valued Supplier:

We are implementing lean manufacturing principles across our factories beginning on at the first of the year. We request that your company's leadership team join us for a weeklong lean overview presented by the lean consulting company that we have hired. As a valued supplier to our firm, out expectation is that you will also implement a lean initiative concurrently to ensure our success. Attendance is not optional. Our best wished for a Happy New Year.

Best Regards, Your Favorite Electronics OEM

Can a customer 'demand' that a supplier go lean as a condition of continued business? If a letter like this were to land in their mailbox, would a supplier be compelled to comply? 

Lean manufacturing continues to gain momentum with companies around the globe, improving their operational, financial, and customer service performance. Manufacturing companies don't become lean overnight, and many experts feel that some of the greatest rewards of lean lie in the journey of continuous improvement and incremental change. Lean manufacturing is evolutionary process and a company wide positive attitude and honest self-analysis are important during the process.

All companies begin the lean process by concentrating on critical areas of their business. By maintaining a strong customer focus, evaluating and streamlining manufacturing processes, deeply integrating the supply chain into operations, and improving organizational effectiveness, companies can experience the early benefits of lean quite quickly. Lean success is best viewed incrementally. Many small improvements add up quickly, allowing for a ramp up of enthusiasm and the desire to see even more improvements. Lean success can be contagious.

Pressure on all levels of the supply chain is building as companies restructure and improve operations through lean manufacturing activities. Suppliers are under constant pressure to reduce costs, improve on-time delivery, and maintain flawless quality levels. Offshoring and outsourcing has created an increasing dependence on a global supplier community.

Lean recognizes the importance of suppliers and advocates the inclusion of supplier performance metrics into operating plans. Once lean efforts have begun in the factory, suppliers are often asked to begin the lean process themselves in an effort to reduce their lead times, reduce costs, improve quality, and make smaller and more frequent deliveries to their lean customer. Companies successfully implementing lean often evoke an almost evangelical approach to their process and try to convince their supplier community to join them.

While tier one suppliers to lean organizations may have embraced lean, there might be increasing pressure on other non-lean members of the supply chain to follow their lead. The underlying question is whether it is required, or optional, for a supplier to change their business model to meet a customer demand. Can a customer 'require' that a supplier go lean, with the associated implied threat to reduce or terminate their business relationship? 

Implementing lean methodology is not an overnight decision and companies typically undergo extensive training and hire consultants to help with their companies' transition. This is primarily an inward facing activity and begins with incremental successes around improving the operation of a production line, or organizing a Kaizen event to encourage employee participation, and to develop some amount of organizational momentum. In a successful lean implementation that momentum gains strength through each success, which creates opportunities for more. Lean is never considered complete, but a process of continuous improvement.

In some cases, suppliers may be involved early in a customer's lean program, asked to work on logistics and inventory management issues like breadman programs or kanbans. But as lean progresses there is often an announcement to the greater supplier community to join their lean journey. And this can send a shudder through the supply chain.   

In some cases it makes sense for a major supplier to adopt some level of lean processing in order to best align supply and demand with an important customer who is leaning out. As companies are moving towards a more streamlined and integrated supply chain, it behooves the supplier to make the necessary changes to be more responsive and in the same vein improve their overall manufacturing and distribution process. This is just good business.

But ultimately whose decision is it? The disconnect can occur when companies demand that companies change their operations, to lean or another initiative, as a requirement of doing business. This is a dangerous precedent and immediately creates a strained relationship. Suppliers who react to one customer's demand can put their business at risk. They may also alienate their other customers who have different or competing requirements. 

Other suppliers balk at the expense of wholesale changes to their operation, especially if they are already successful companies. Still others may react negatively to a mid-level staffer who send them a letter demanding that they change their process to support a customer, or else. Unreasonable demands on suppliers can lead to fractured relationships and create risk in the supply chain. Some very important and critical suppliers will just say no. It happens frequently, and it is their right to say so. Just ask.

1 comment on “Leaning on Suppliers: The Push to Lean Manufacturing

  1. Redding McLemore
    September 28, 2016

    The “invitation” at the top of your article is all too familiar – be it lean, green or Zero-Defect.  companies can become unwitting dupes in expanding a consulting company's engagement by “expanding the initiative to the supply chain”.  What the supplier often does not know is how well received the initiative is within the customer's company.  What is being sold as the new paradigm might be a passing fad at their customer.  Then again, it may indeed be real.  This forces the supplier to walk a tightrope of engagement. 

    Every company has initiatives of its own (even lean) and an customer initiative, particularly onto a well diversified supplier, forces the supplier to switch focus to be responsive to the customer, but often at the expense of their own initiatives. 

    Lean, green or any other supply chain integration will be more meaningful to the supply chain when the customer represents a large portion of the supplier's business.    Failing that, a different approach is warranted.  Otherwise, customers run the risk of getting minimal buy-in and just enough supplier engagement to keep the customer at bay.

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