Lean supply chain

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THE LEAN SUPPLY CHAIN:
USING COLLABORATION AND TECHNOLOGY TO REDUCE INVENTORY, TRANSACTION COSTS, AND LEAD TIMES

A joint white paper by QAD Inc. and The University of Michigan.

Contents
BACKGROUND ..................................................................................................1 SCOPE AND METHODOLOGY ................................................................2CONCLUSIONS ................................................................................................3 Primary Benefits ........................................................................................3 Secondary Benefits ....................................................................................4 RESEARCH............................................................................................................5 CASE STUDIES ..................................................................................................5 Case Study A ..............................................................................................5 Case Study B ..............................................................................................6 Case Study C............................................................................................7 SIMULATION ......................................................................................................8 FINANCIAL ANALYSIS ..................................................................................9 GENERAL RESEARCH ..................................................................................10SUMMARY ..........................................................................................................11

©2002 QAD Inc. All rights reserved

White Paper:The Lean Supply Chain

“ In the future, we would love to be able to have our vendors look into our inventory position and help replenish some elements of our supply chain automatically or semi-automatically.”
- VP of Supply ChainManagement, S&P 50 entertainment firm

BACKGROUND

LEAN MANUFACTURING IN THE AUTOMOTIVE INDUSTRY Lean operations and just in time (JIT) production, concepts introduced by Toyota, eliminate manufacturing waste by reducing inventory holding costs and continuously making improvements to maintain production quality. Lean manufacturing is smoother and less expensive than current mass productionmethods, but the change to lean operation is intensive. Integrating and synchronizing the entire supply chain and manufacturing process require efficient logistics, increased flexibility and reduced variability. Although the Big Three American automotive manufacturers have not universally adopted lean methodology, the industry is moving toward a leaner business model by striving to manufacture vehiclesin response to customer orders. This strategy is most effective when customer demand is the signal that pulls product throughout the supply chain. In the last two years, there has been significant growth in the development of software purchasing and supply chain management tools. Many companies are using Extensible Markup Language (XML) technology to create system-to-system connections withsuppliers and customers. According to The Status Report from the Trenches by Steve Odom, “collaborative forecasting and replenishment is seen by many to hold the promise of reducing inventories and costs through real-time connectivity.” The Web and the advent of e-business tools have made it possible for enterprises to work more closely with suppliers and customers. Now a company can dynamically sourceproducts from its supply network, track the order status at each supplier, coordinate and ship to the final customer – all under one invoice. Connectivity means time compression. The next step is to collapse forecast horizons so that supply chain planning becomes supply chain execution. Now e-tools can connect the entire supply chain, speeding communication, eliminating waste and freeing time...
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