A global transportation management system (TMS) can track the performance of a worldwide logistics network in accordance with lean supply chain principles. Why, then, are TMS service providers not usually one of the strategic providers that manufacturers recruit to help them capture the competitive advantages of global lean operations?
Let’s briefly summarize the evolution of the lean movement, and its convergence with the generation of global TMS™ solutions that a growing number of companies are adopting.
The lean philosophy dates back to the 1950s, when the Toyota Motor Company in Japan pioneered a revolutionary way of producing cars. Production executive Taiichi Ohno developed an integrated process that efficiently managed equipment, materials and the company’s workforce throughout the production cycle.
Academic researchers James P. Womack, Daniel T. Jones and Daniel Roos, studied the Toyota production phenomenon and published a leading book in 1990 called The Machine That Changed The World. The book showed lean manufacturing can be applied in many industries, not just in the auto sector.
The driving idea behind the lean philosophy is that value added activities are identified in the supply chain and are mapped out in a so called value stream. Based on (market) pull, a continuous flow of value is created, ultimately leading to perfection or a process where no waste (i.e operational inefficiencies) exists, which in reality is a vision of continuous process improvement.
While some manufacturing companies have implemented lean as part of their business strategy and are primarily focused on internal operations, others have taken it to the next level by looking at their entire, end-to-end global supply chain.
These companies have adopted an Integrated Supply Chain Management (ISCM) approach based on the following five principles:
- Concentrate on core competencies
- Outsource all non-core competencies to suppliers
- Consolidate all supply inputs into categories of spend
- Concentrate resources on a limited number of preferred suppliers
- Improve supplier and supply chain performance through proactive supplier development activities
The ISCM approach is based on the idea that key companies create lean and efficient supply chains which compete against each other. As part of the approach, core suppliers co-design, co-innovate and co-manufacture products; in effect, they become risk sharing partners. Numerous new, innovative products have been created by these type of risk sharing partnerships, including Apple iPads, Nespresso coffee machines, and even the Boeing 787 aircraft.
Unfortunately, many shippers put less emphasis on logistics when developing these partnerships, especially when their annual freight spend is a relatively small percentage of their total spend. What some do not realize, however, is that logistics can have a substantial impact on cost throughout the end-to-end supply chain. This is particularly the case in lean operations that have reached the maturity state of flow. Any waste, such as transportation not picking up or dropping off in time, has an immediate ripple effect throughout the supply chain. Lean operations are finely balanced, and any disruption can result in serious delays and will ultimately drive cost.
Global TMS™ solutions have emerged recently that provide a near real-time world view of transportation networks. These systems objectively measure Key Performance Indicators (KPIs) and the performance of lean flows, and represent a significant step forward in lean transportation network optimization.
The importance of efficient logistics to lean product flows, coupled with the availability of TMS solutions that can measure lean network performance on a global scale, should encourage manufacturers to consider TMS service providers as strategic partners in these programs. TMS suppliers can help companies to identify waste as well as potential risks in their global operations, and provide the supply chain transparency that they need to reach lean perfection.