Jun 27 2014
“The famous Lean approach, adopted by companies all over the world, considers the expenditure of resources on anything that doesn’t create value for the end customer as waste and seeks to eliminate unnecessary processes within this framework.
The concern, however, is that companies are losing out by either not fully understanding the practice or not committing themselves enough to the change in thinking adopting it requires.”
The points in the article are valid, and could be summarized by saying that, in procurement/supply chain management/logistics, efficiency should never be pursued at the expense of effectiveness.
The more fundamental mistake, however, is the half-baked notion that “anything that doesn’t create value for the end customer is waste.” Any business activity involves tasks the customer is never aware of, let alone values, and a narrow-minded focus on what customers are “willing to pay for” blinds managers to the need and the benefits of, for example, supporting suppliers.
Customer willingness to pay is not an actionable criterion to identify waste. An activity is waste if, and only if, your performance does not degrade in any way when you stop doing it. If eliminating it does not degrade your quality, increase your costs, delay your delivery, put your people at risk, or make your employees want to quit, then it is waste. But, even with a proper perspective on waste, eliminating it only improves only efficiency, not effectiveness. It’s about getting things done right, not getting the right things done.In a manufacturing company, procurement/supply chain management/logistics is the pit crew supporting production, and the business benefits of doing this job better dwarf any savings achieved through efficiency.
Reducing order fulfillment lead times, introducing new products, or customizing them helps the business grow. And it may require spending more rather than less on the supply chain, for example by moving trucks that are not 100% full.