First introduced to the auto industry in the early 1990s, the philosophy of lean manufacturing centers around a kind of “less is more paradigm.” Though the principles were originally meant to perfect production logistics, the greater automotive supply chain gains tremendous value by reducing superfluous processes and orchestrating smooth, synchronous flows throughout the supply chain.
As supply chain processes continue to go global, businesses face unprecedented levels of complexity. However, by adopting a methodology centered around efficiency, consolidation, collaboration, and continuous improvement, they can leverage opportunities to reach new levels of business potential.
1. One-Piece Flow & Heijunka: Reduce Batching
Lean manufacturing tenets like “one-piece flow” and Heijunka (“leveling”), both favor the efficiency and higher quality output of reduced batching. When handling products in bulk, it’s harder to catch defects, customize, and predict shipment times. Yet, the rigid, batch-processing framework is pervasive, and extends beyond production logistics.
Consider the traditional order management and shipping process: ERPs create order releases, pass them on to the transportation management system (TMS), and these systems then determine how to ship the batches. Such a batch-and-release approach is too rigid for the global and networked supply chain. It doesn’t offer the necessary flexibility to make adjustments when conditions or rules change, thereby limiting customer choice, optimization, and efficient rush order handling.
Alternatively, the order-centric TMS treats every order as unique and dynamically models flows according to each order’s exact specifications and requirements. Changes can be applied at any time before release, and configurable rules determine the optimal shipment release as well. The system also creates optimized workflows, or “micro supply chains,” by calculating the best way to route and consolidate each order through the multi-enterprise network. Its flexibility further accommodates complex transport flows and is natively multi-modal and multi-leg, so businesses can leverage all available options.
2. Just in Time
In lean manufacturing, “just-in-time” refers to producing what a customer wants, in the quantity they require, as well as its delivery where and when they need it. Rather than overstocking a warehouse, the idea is to create just enough, so that you meet expectations without creating excess.
Parts suppliers must feed the production lines at automotive plants ‘just-in-time,’ usually multiple times a day. Considering the enormous complexity surrounding parts, accessories, and packaging, the optimal way to run a leaner service, cut labor costs, and reduce expedite fees is by automating various steps in the process. The MPO system leverages a range of data, including product purchases, sales forecasting, and current stock levels, to calculate inventory levels to maintain in the warehouse and provide a dynamic parts replenishment plan.
The system also optimizes delivery and productivity by consolidating shipments, monitoring for exceptions through comprehensive tracking and visibility from order to delivery, and empowering users to resolve those exceptions.
3. Takt Time: Orchestrate across the supply chain
Takt time, the German word for “pulse,” aims to deliver the right product to the right customer at the right time as efficiently and cost-effectively as possible. The idea is to create a kind of synchronicity and continuous flow across the supply chain, while making full use of all your available resources.
Vehicles, on average, have tens of thousands of individual parts that are often sourced and transported from third-party providers. Any delay within the automotive supply chain can easily impact component manufacturing and distribution and ultimately impair production. One of the greatest issues causing disconnect in the global and networked automotive supply chain is fragmented data, often from having multiple ERPs.
The MPO system creates synchronicity and optimizes orchestration by integrating disparate ERPs throughout the multi-party network. Through advanced transparency features, users gain the comprehensive visibility they need to monitor execution, anticipate problems via alerts, and take corrective action in real-time. The system also leverages dynamic modeling, so businesses always make full and optimal use of their multi-party networks.
4. Continuous Improvement
This principle is perhaps the most straightforward: Always push yourself to achieve higher levels of quality and efficiency. Though the tenet is usually applied to the assembly line, it easily lends itself to improving any process within the supply chain, including logistics.
Supply chain expert and author of the informative series, Making the Case for a Digital Transformation, Bryce Boothby, shared some insight about the industry’s propensity to accrue waste:
“When you consider the various buffering and safety stocks built into a typical supply chain – tracing back to raw materials, components, manufacturing, finished goods inventories, multiple warehouses and distribution centers – there’s typically excess and overages, even if each company in the chain is efficient. This “hedging” compounds at each step in the supply chain and can really add up to measurable and avoidable waste.”
When businesses within the multi-party network have limited insight into inventory, supply or capacity constraints, and the status of shipments, and if they cannot respond to what they see in real-time, they have little choice but to create buffers for all eventualities.
MPO’s Control Tower offers both global and granular visibility to reveal and eliminate waste across the automotive supply chain. It also provides intelligent automation and timely alerts, so companies can proactively manage events, reduce delays, and leverage more accurate forecast information to effectively allocate constrained materials.
The system’s internal and external, end-to-end supply chain visibility also offers greater context surrounding planning impacts, as businesses trace materials through the full process, eliminating waste through better asset utilization and fewer line stops, and by reducing overhead from fewer expedites. Having this breadth of insight and transparency is invaluable to improving supply continuity, on-time shipments, and responsiveness to changes in supply and demand – especially in an industry where inventory frequently changes custody.
Beyond a leaner supply chain, the analytics capabilities improve a business’ root cause analysis, short- and long-term strategic decision-making, and their collaborations. Fact-based performance management helps businesses spot inefficiencies and continuously improve their partnerships and overall supply chain management.
In the automotive industry especially, success is inextricably linked to quality, and given the thousands of parts and parties involved, it has to be maintained at every link in the global supply chain. That means easy system integration, optimizing every order, maximizing visibility and real-time exceptions control, and leveraging performance analytics to continuously improve. Digitization is a start, but reducing silos is the ultimate aim.
The most central principal of lean manufacturing is eliminating superfluous processes and components. As you strive to create a leaner, more effective supply chain, apply this principle to your technology infrastructure as well. Siloed systems, software, and organizational structures minimize your ability to fully collaborate and optimize your supply chain. Rather than piece together such capabilities through disparate solutions, opt for a holistic system that is natively built for the global and networked future.