To stay competitive in present-day market conditions, companies should effectively deal with increasing uncertainty due to high demand fluctuations, needs for extended product variety, and reduced product life cycles. To respond to these problems well, efficient supply chain management practices must be implemented. Lean supply chain systems are conventionally associated with greater flexibility than traditional manufacturing models.
They have proved to result in significant cost reduction and the betterment of organisational processes because of its core focus on waste management and value creation (Kumar & Kumar 2014). Nevertheless, it can be argued that the utilisation of lean systems is not always advantageous in all contexts and may not be so effective in handling growing market uncertainty. Considering this, the present paper will aim to explore the factors that can inhibit organisational success when using the lean approach and also suggest how companies can enhance their market responsiveness and supply chain performance.
The main market-specific factors defining the success of supply chain systems include production volume, product variability. According to Basu (2017), lean practices are primarily efficient when the volumes are high and there is no significant variability or, in other words, when demand is relatively predictable and stable. The automotive industry is an example of a market with such characteristics.
The case of Toyota Corporation illustrates the successful implementation of the lean system. The company’s leaders emphasise the importance of developing a lean culture and vision and accentuate the significance of commitment to it at each organisational level (Sisson & Elshennawy 2015). However, the overall traditional features of the industry, including high-volume production, low variety, and repeatability of processes played a role in determining the success of lean practices in Toyota as well.
In the industry like this, businesses primarily aim to gain advantages in terms of cost and quality, whereas the speed of product delivery and customisation are not their priorities (Sprovieri 2004). Considering that in such settings work times for each product are equal, lean practices serve well to support a proper balance between production capacity.
However, customisation and higher product mix become more common trends even in the automotive industries worldwide. As research findings indicate, not all lean principles can be functional in these circumstances. According to Buetfering et al. (2016), in complex and highly dynamic production and supply chain environments characterised by low-volume, high-variety production (LV/HV) such lean principles as level scheduling, takt time and Kanban usually tend to be ineffective.
In addition, Wiegel and Brouwer-Hadzialic (2015) also observe that high levels of output, demand, and input variation, as well as coproducership provoke a need for modification of lean supply chain methods to make them work effectively. It is worth mentioning here that coproducership means the level of customers’ involvement (input) in the process of product development, while input variation implies the degree to which customers differ among each other in their demands, preferences, interests, and so forth.
The main reason for poor performance of lean practices in LV/HV environments is that when sequences and production cycle times vary too much, it becomes harder to achieve a properly balanced workflow. Nevertheless, Buetfering et al. (2016) note that such lean principles as just-in-time, total productive maintenance, and continuous improvement are still applicable in LV/HV environments. At the same time, control mechanisms, line balancing, and normalisation of products and processes must be more flexible in LV/HV production.
It means that in this situation lean systems must be adjusted a little, and it is suggested that the utilisation of agile supply chain principles can be of tremendous help in achieving required results. The main advantage of the agile system is that it is concerned with responsiveness and shortening of the delivery period (Watt n.d.). In spite of underlying differences in the concepts of lean and agile, they can be used complementary to each other. While more uncertainty takes place in distinct markets, industries, and production environments, businesses should implement a hybrid model to meet their distinct needs.
In order to maximise the benefits of the two models, companies may apply such approaches as Pareto curve, de-coupling point, and separation of base and surge. The first one implies that the volume of products with more and less stable demand must first be identified and, based on findings, items characterised by high demand fluctuation are managed through agile principles while the rest of products – through lean practices (Watt n.d.). The second approach suggests “to hold some inventory of generic or modular products, and postpone the final assembly until the more accurate demand information is available” (Watt n.d., para. 1.4).
Lastly, the separation of base and surge means that a certain number of items is produced through lean practices consistently with a base demand forecast. However, that portion of goods for which demand cannot be forecasted is produced by using agile practices (Watt n.d.). A company may implement either one or all three of the reviewed methods as they can help to achieve significant efficiency in various situations.
It is worth noticing that organisational factors determine the success of supply chain systems to a significant extent. According to Jedynak (2015), small and medium enterprises are characterised by faster communication, quicker response to customers, and overall greater flexibility, while large companies usually have better know-how for analytical decision-making, sufficient financial and workforce resources, and so forth.
Thus, the former company types are typically more comfortable with applying agile systems and the latter – with lean systems (Jedynak 2015). To implement either of the supply chain models or the hybrid model, a company should assess its internal environment and modify some of its aspects to fit le-agile system characteristics.
Overall, considering the favourable impacts of lean systems on organisational efficiency in multiple areas of performance, it should be implemented. However, the findings of the literature review make it clear that not all standard lean principles are functional in LV/HV production environments and, thus, supply chain must incorporate some agile production practices to deal with factors that lean processes cannot address. Through the implementation of the hybrid model, a company can both increase its flexibility and eliminate all waste, which will result in greater productivity and competitiveness.
Reference List
Basu, R 2017, Managing project supply chains, Routledge, New York, NY.
Buetfering, B, van der Stoel, A, Sriram, P K, van Landeghem, H, Ickerott, I, Wiegel, V & Alfnes, E 2016, Lean in high variety, low volume production environments − a literature review and maturity model. Web.
Jedynak, P 2015, ‘Lean management implementation: determinant factors and experience’, Jagiellonian Journal of Management, vol. 1, no. 1, pp. 51-64.
Kumar, R & Kumar, V 2014, ‘Barriers in implementation of lean manufacturing system in Indian industry: a survey’, International Journal of Latest Trends in Engineering and Technology, vol. 4, no. 2, pp. 243-251.
Sisson, J & Elshennawy, A 2015, ‘Achieving success with Lean: an analysis of key factors in Lean transformation at Toyota and beyond’, International Journal of Lean Six Sigma, vol. 6, no. 3, pp. 263-280.
Sprovieri, J 2004, ‘Managing high-mix, low-volume assembly’. Web.
Watt, N n.d., Supply chain management – the agile supply chain. Web.
Wiegel, V & Brouwer-Hadzialic, L B 2015, ‘Lessons from higher education: adapting Lean Six Sigma to account for structural differences in application domains’, International Journal of Six Sigma and Competitive Advantage, vol. 9, no. 1, pp. 72-85.