The Digitalization of the 21st Century Supply Chain

Stuart M. Rosenberg, Stuart Rosenberg

• Publisher: Routledge
• Year: 2020
• Print ISBN: 9780367516789
• eBook ISBN: 9781000201192
• Topic: Business
• Subtopic: Business General
• Index: Business

The goal of this book is to gain a clear picture of the current status and future challenges with regard to the digitalization of the supply chain – from the perspective of the suppliers, the manufacturers, and the customers. They were the target groups of the book.

Digitization has touched upon all aspects of businesses, including supply chains. Technologies such as RFID, GPS, and sensors have enabled organizations to transform their existing hybrid (combination of paper-based and IT-supported processes) supply chain structures into more f lexible, open, agile, and collaborative digital models. Unlike hybrid supply chain models, which have resulted in rigid organizational structures, unobtainable data, and disjointed relationships with partners, digital supply chains enable business process automation, organizational flexibility, and digital management of corporate assets.

In order to reap maximum benefits from digital supply chain models, it is important that companies internalize it as an integral part of the overall business model and organizational structure. Localized disconnected projects and silo-based operations pose a serious threat to competitiveness in an increasingly digital world.

The technologies discussed in this text – artificial intelligence, 3D printing, Internet of things, etc. – are beginning to come together to help digitize, automate, integrate, and improve the global supply chains. It's certainly an exciting and challenging time for both new supply chain professionals and long-time supply chain professionals.

Part 1

Lean and supply chain management principles

Lean is a methodology that changes the philosophy and culture of an organization. For more than 50 years, organizations have invested time and money adopting the principles of Lean (while originating at Toyota Corporation for manufacturing operations, the principles of Lean have since spread to many types of businesses and functional areas).

The focus of Lean is to maximize quality, minimize unnecessary steps, and optimize customer value. A Lean organization focuses on providing the best quality within the shortest possible lead time, while minimizing waste throughout your processes (waste being classified as any resource that is not being used properly). We may first think that minimizing waste means minimizing inventory, but time, effort, and people are also resources to be utilized properly. Analyzing how people are used and time is spent is a critical step in minimizing waste.

Lean supply chain management requires businesses to examine every process in their supply chain and identify areas that are using unnecessary resources, which can be measured in dollars, time, or raw materials. The analysis can improve a company’s competitiveness, its customer service, and its overall profitability.

1

Introduction to Lean and supply chain principles

When properly implemented, Lean can have an all-encompassing influence in the modern organization. Unfortunately, that is not always the case as management is not fully aware of all the uses this continuous improvement methodology offers. This chapter will describe the full definition of Lean and supply chain principles for which the two can and should be fettered together. This can be used by either the director of supply chain or the head of operations as a guide to develop the supply chain role.

Lean supply chain management represents a new way of thinking about supplier networks. Lean principles require cooperative supplier relationships while balancing cooperation and competition. Cooperation involves a spectrum of collaborative relationships and coordination mechanisms. Supplier partnerships and strategic alliances represent a key feature of Lean supply chain management.

Lean is a concept, a philosophy, a practice, and a set of tools, all wrapped in one. For more than 50 years, organizations have invested time and money adopting the principles of Lean (while they originated at Toyota Corporation for manufacturing operations, the principles of Lean have since spread to many types of businesses and functional areas).

The focus of Lean is to maximize quality, minimize unnecessary steps or waste, and optimize customer value (provide them what they want when they want it). The two primary principles of Lean, just in time and Jidoka, are referred to as the foundation of the Lean culture.

A Lean organization focuses on providing the best quality within the shortest possible lead time, while minimizing waste throughout its processes (waste being classified as any resource that is not being used properly). We may first think that mitigating waste means minimizing inventory, but time, effort, and people are also resources to be utilized properly. Analyzing how people are used and time is spent is a critical step in minimizing waste.

Lean principles and culture can be applied to supply chain planning, the biggest objectives of which are to reduce costs and improve customer service. A sequence of conceptual tools evolved from the Toyota Production System that can be applied to supply chain planning. Let’s take a look at a few and see how they can help organizations become Lean.

Just in time (JIT) ensures all efforts are directed at providing only the goods and services required by customers, both when they want it and in the exact quantity they desire. The goals of JIT are aligned with the goals of supply chain planning.

Value stream mapping involves mapping out all the steps of your processes, including the flow, timing of each step, and wait times for all associated activities. Value stream mapping identifies and eliminates waste. There is no doubt that mapping out the various processes in supply chain planning and how they are all connected will lead to a better understanding of the value of each step and how to streamline and eliminate non-value-added activities.

Kaizen (continuous improvement) is an ongoing process of looking for improvements in every area of the process. This philosophy can be embraced at all levels of the organization and applied to any task. Finding ways to do things more efficiently, accurately, and effectively minimizes waste and adds value to supply chain planning processes. Doing more with less is all about finding ways to minimize waste and improve efficiencies.

5S stands for Sort, Straighten, Standardize, Shine, and Sustain. This five-step process organizes all areas of the workplace. The Sort process consists of distinguishing needed tools from unneeded tools and eliminating clutter. Straighten is the concept of keeping everything in the correct place to allow for easy access. Shine focuses on keeping the workplace neat and clean. Standardizing is the process of making the previous three steps habitual. Sustain is the concept of keeping and maintaining established procedures for every function and step of the operation. Substitute ‘data and software’ for ‘solutions’ and you can see how 5S could apply to supply chain planning.

The Five Whys is the philosophy of always asking questions. Small children love to ask ‘why?’. Asking questions leads to an understanding of how things work and to finding potential fixes for problems. This should be a core principle in supply chain planning. Determining why something happened in the supply chain leads to the ability to anticipate and optimally respond.

Are you using Lean principles in your supply chain organization?

2

Just-in-time

A JIT (just-in-time) system is an inventory management philosophy aimed at reducing waste and redundant inventory by delivering products, components, or materials just when an organization needs them. There is immense interest from the supply chain community on how it in overall inventory management system; therefore, I thought to expand on this topic.

It is a well-known fact that the JIT system was developed by the Toyota Motor Company during the 1950s and 1960s. The philosophy of the JIT system is that parts and materials should be supplied at the very moment they are needed in the factory production process. Here are five significant features of the JIT system you might find useful:

• There are three JIT system principles.
• There are six inventory management principles.
• There are implications for logistics integration.
• There are benefits for implementing a JIT system in an organization.
• There are some problems with implementing a JIT system.

The three JIT improvements can only become available with efficient supply chains. There are three JIT system principles which are of importance when considering implementation. The JIT system focuses on improving the efficiency of material processes, and quality is very important. The JIT system focuses on improving the effectiveness of processes and operations that add value to the materials. Inventory is considered as waste and should be reduced as much as possible. The company’s employees are its most valuable resource. It is essential that everyone understands the JIT system and gets involved with making it a success.

Mitigating waste is one of the basic aims of the JIT system. This requires the effective management of inventory throughout the entire supply chain. A manufacturing firm will initially seek to reduce inventory and improve operations within its own organization. It is also vital to an organization that improvements are carried out continuously to enable it to maintain competitiveness. This is in line with the concept of continuous improvement. In an attempt to minimize waste attributed to inefficient inventory management, six principles related to JIT have been identified through the implementation of Lean. They are the following:

• Reduce lot size and increase frequency of orders.
• Reduce buffer inventory.
• Reduce purchasing cost.
• Improve material handling.
• Seek zero inventories.
• Seek reliable suppliers.

Although the application of JIT has been concentrated on manufacturing operations, material handling and storage, and supplier deliveries, its principles can be extended throughout the supply chain. JIT methods have proven quite successful in simplifying and streamlining the material supply chain and the information flows which plan and control it. JIT has a number of implications for supply chain logistics:

• Transportation becomes an even more vital element of logistics under a JIT system. This means supply chains need shorter, more consistent transit times and more sophisticated communications.
• Proper implementations of JIT require that the firm fully integrate all logistics activities. Many tradeoffs are required, but without the coordination provided by integrated logistics management, JIT cannot be fully implemented.
• Warehousing assumes an expanded role of consolidation of facility instead of storage facility.

As with any system or methodology that is being planned, there are pros and cons. Just-in-time is no exception.

JIT produces benefits for firms in four major areas: improved inventory turns, better customer service, decreased warehouse space, and improved response time. Other specific benefits are: productivity improvements and greater control between various production stages; diminished raw materials, work in progress, and finished goods inventory; a reduction in manufacturing cycle times; dramatically improved inventory turnover rates; reduced distribution costs; lower transportation costs; improved quality of supplier products; and reduced number of transportation carriers and suppliers.

Not all organizations find it suitable. The JIT system has three inherent problems which need to addressed and su...

Table of contents

• Cover
• Half-Title
• Title
• Copyright
• Contents
• Introduction
• PART 1 Lean and supply chain management principles
• PART 2 Digitalization of supply chain procurement
• PART 3 Supply chain logistics
• PART 4 Inventory management in the age of digital automation
• PART 5 Supply chain warehousing in the 21st century
• PART 6 Supply chain and the new demand planning
• PART 7 Supply chain in the age of customer service
• PART 8 Supply chain and predictive analysis
• PART 9 The human factors in supply chain digitalization
• Glossary
• Index