What is Lean Supply Chain?

Introduction

The concept of ‘lean’ that is an essential approach that is team- based on a continued improvement that aim on the elimination of activities which does not add value according to the customers’ viewpoint, in one way or another has been around for many years. This paper define and discuss the lean supply chain, determine the potential risks and effects of a corporation and also give a description of the potential solutions to reduce the negative effects on a corporation supply chain management, inventory management or profitability. The supply chain of management involves many areas from the difficult to easy topics. As an independent field, Supply chain of management originated from marketing and managing strategies.

1. Definition of lean supply chain

The supply chain of management is defined as a coordination strategy of the core functions in cooperation and across partners in the supply chain in improving long-term performance purposes of organizations and the supply chain. Lean primarily is defined to the elimination of waste and is a primary philosophy. These philosophy bases are on reducing the cost by doing the elimination of activities that are directly non-value. There are two ways in which cost can be reduced, first is to identify and eliminate the activities that are wasteful which do not add any value. The second one is to enhance that there are efficient in the activities required so that the process throughout is increased. Many activities of the supply chain can leverage this thinking directly. Most activities that are executive in the supply chain are beneficial from lean thinking, for instance, picking, packing and loading and unloading activities in cooperation.

Lean suggests the need for the supply chain to exploit the limited resources for an efficient completion of the job. Inventory, trucks warehouses, laborers and the capital for working are the primary sources in the supply chain (Myerson, 2012). The lean supply chain is designed to include inventories in the framework, warehousing space that is minimal to keep these inventories. It will also design to the establishment of long term, supply contracts that are stable with a negotiated cost that is low, typically without any substantial ability to alter ordered quantities.it will also design the destination of delivery and design the date required after there is an order placed. All these factors will minimize the supply chain cost operations making it efficient in cost and will constrain the ability of supply chain for the adaptation of any demand and supply changes. The supply chains should manage variability and an exclusive aim on lean that prevents supply chains to design an effective to manage the natural variability and then from doing the work that are important to them. At many cooperations, they have several products to manage where these products vary widely in demand and lead time patterns, the supply chain enterprise should be designed to work on all products with no undue aims on one characteristic. The focus of cost that assist in driving the strategy of supply change is not special in any way as it can do any other function in a cooperation.

2. Potential risks and effects of a corporation

There are risks related to fashion, the condition of weather, changes of macroeconomic issues on sustainability, production countries external factors, interventions of trade, foreign takes, and currencies but also connect in expanding new markets while launching new concepts and how to manage the brand.

Fashion risk

While operating in the industry of fashion is a risk itself. Fashion limits shelf life, and a risk in some collection part will not be received in a good way by the customers. It is vital to have the exact volumes in a concept and get the right balance between basics of fashion and the latest trends. Each collection must get the good combination of fashion that is suitable and good qualities at affordable prices. Cooperation buys items on an ongoing basis in the whole season in order to optimize the precision of fashion. It is becoming more globally, but the patterns of shopping are varied in different markets that vary from country to country within a season. The H&M products are bought for sale based on the normal weather (Schniederjans, 2012). Changes in the normal weather conditions affect sales. It is real at the transition among two seasons, such as summer and winter transition.

On the other hand, there is the existence of a risk that negatively affect macroeconomic and changes of geopolitical in many countries that may result in changes that are negative in the business environment and the downturn in the economy which changes the behaviors of consumer purchase and, therefore, affect group sales. (Sparling, 2005) H&M being one of the world’s leading fashion companies has attracted big interest and were constantly in the spotlight. The risk that the company’s reputation and brand will be destroyed gives an implication of lower sales. It is important to safeguard and manage the brand that the company continues to develop and run in accordance with its strong values that are characterized by high ethics of business. To prevent it and to manage any incidents, checking the accuracy, transparency and reliability of communication is fundamental (Schniederjans, 2012).

Half of the group sales are made by euros and the most important currencies for the purchasing group are the dollar and the euro. The US dollar/euro exchange rate fluctuation is the main largest foreign currency transaction exposure to the company. Large and rapid fluctuations in exchange rate, especially US dollar are a sourcing currency. For companies that are multinational, the current global environment is involved in complex tax risks, for instance, the risk of being taxed double and disputes of tax. A large company keeps watching closely on the developments in the tax field and levies such as corporate tax, customs duties, and income taxes and through VAT indirectly on goods sold to customers.

3. Solutions to minimize negative effects on a corporation supply chain management

When risks become a reality, a company that is well prepared can moderate the impact of these risks. Loss of dollars, wasting time and the negative effect on customers can all be reduced. The building is the most common of physical risk. To manage this risk to employees and the company, the following is fundamental; (Franks, 2009) first, the employees are supposed to be aware of the precise street address in a bid to contact the operator whenever an emergency occurs. Second, the employs should know where all the exits are located. Third, fire alarms and smoke detectors must be installed. Fourth, sprinkler systems will ensure more protection for physical assets. Finally, the workforce must be informed that in an emergency event their it is paramount to consider personal safety as a priority. They are advised to leave the building and not consider going back for documents or other goods associated with work. It is, therefore, important to create and implement a plan in order to mitigate the potential risks. Government agents and the local fire department helps to acquire information needed in preventing risks and advising on the measures of controlling and reducing damages.

Location risks

Hazards that face the business location are nearby fires, damages caused by the storm, floods earthquake or other natural calamities. The entire workforce ought to be acquitted with the streets that drive within and without the neighborhood. Vehicles too should be kept with sufficient fuel do drive out as when need be.

The major human risk is taking alcohol and abusing drug to personnel in the workforce. Employees who suffer from such conditions are advised to seek treatment as well as counseling and rehabilitation. It may be difficult to protect against funds embezzlement and theft but unfortunately they persistently hinder good workplace operations. The double signature system requirements for verification of invoices and checks are essential parameters in prevention of fraud and embezzlement (Wook Kim, 2010).

Technology risks

The most common type of technology risk is an outage of power. There is good backup system that is used to give electrical energy functionalities until there is the restoration of power which are known as auxiliary gas-driven power generators. They help in keeping companies producing till the power of utility gets restored. The computer systems need to be quipped with surge-protection equipment in a bid to prevent data loss and equipment breakdown for instance due to lighting storms. However, many risks are insurable, and insurance is the main safeguard in risk management. It is necessary to get insurance for any company that occupies physical space. The coverage extent of the insurance depends on the company’s nature. (Franks, 2009)

Conclusion

From the excerpt activities like branding and transporting in the supply chain management are very beneficial to lean thinking. However, the risk that the company’s reputation and brand will be destroyed gives an implication of lower sales. While companies’ risks abound, and their outcomes could be destructive in nature they ought to recognize that there exist modules for insuring them. Finally, engaging management consultancy for risks is key in prevention and management of risks.

 

References

Franks, S. (2009). Beyond lean [supply chain management]. Manufacturing Engineer, 82(1), 30-40.

Myerson, P. (2012). Lean supply chain and logistics management. New York: McGraw-Hill.

Schniederjans, A. M. (2012). Topics in lean supply chain management. New Jersey: World Scientific.

Sparling, D. (2005). Simulations and supply chains: strategies for teaching supply chain management. Supply Chain Management: An International Journal, 7(5), 334-342.

Wook Kim, S. (2010). Effects of supply chain management practices, integration and competition capability on performance. Supply Chain Management: An International Journal, 11(3), 241-248.