Lean Supply Chain – Few Do It Right

I previously wrote about a study by the Aberdeen Group, focusing on The Low Rates of Lean Implementation that the study confirmed in a wide range of manufacturers.

            Now Aberdeen has released a follow-up study, looking at efforts to extend lean into the supply chain. Guess what? Talk is cheap, but successful efforts are few and far between.

            (There’s also a third report, which I’ll write about in my next post.)

            The supply chain study looked at 308 enterprises in aerospace and defense, automotive, high-tech, industrial products and other industries. The survey covered a range of job titles and functional areas, and the companies were of varying sizes, though 43 percent had annual revenues of more than $1 billion. Seventy-nine percent of those responding were from the U.S., the rest from other parts of North America, the United Kingdom and the Asia-Pacific region.

            Ninety percent of the companies surveyed said they were committed to lean. But, the study said, “further analysis found that less than 10 percent of these companies can be considered Best in Class.”

            Aberdeen Group didn’t make clear the precise criteria that make a company best in class, though I suspect they include a variety of fairly standard financial metrics.

            For those best-in-class companies, life is sweet. The study said the lean implementations at more than 70 percent of these leaders met or exceeded performance expectations in areas such as customer service and supply chain flexibility. For example, the best in class performers are “able to quantify the value of lean and measure their efforts towards initial investment with ROI at 33 percent.”

            One of the more intriguing – though again, not surprising – comments in the study is a statement that “lean philosophy takes a back seat to lean business processes and lean enabling technologies. Enterprises are more likely to take a pragmatic view and turn to enabling technology in support of lean, streamlining benefits across the supply chain.”

            I suspect that’s part of what’s wrong with a lot of companies that fail to achieve the greatest benefits of lean, one of the prime examples being the U.S. automotive industry. They think lean is all about tools, and they fail to get that it’s a total-enterprise business strategy requiring an entirely different kind of culture.

            By the way, the study also said that technology solutions are a key part of what the best in class companies are doing, by enabling them to continuously measure, monitor and respond to key production and supply chain metrics in real time. The study was partially sponsored by technology company E2open, though Aberdeen claims that sponsors were solicited after the fact and had no substantive influence on the direction of the report.