The Perils Of Lean Supply Chain Management

The outbreak and spread of COVID-19 has served as a reminder of the flaws within lean supply chain management once a crisis hits. Lean supply chain management is the method of minimising waste and costs throughout the business’ processes.

Whilst it is an attractive framework for many business owners, it can leave businesses in a dire situation once external suppliers undergo hardship, as we are now seeing during this COVID-19 crisis.

Lean methodology has been a mainstay in businesses since the 1930s in which it was adopted by car manufacturers. In recent times, lean methodology has shifted to a focus on innovation and the value it provides to customers, popularised by Eris Reis’ 2011 book, The Lean Start-up.

Business owners are now finding ways to create business models that provide the most value to customers, whilst keeping costs low.

Popular amongst many business owners, examples of lean methodologies are everywhere. They can include outsourcing less important business departments such as IT support, having strong inventory management, and efficient manufacturing and transportation.

Every single aspect of a business can be scrutinised to determine the best process that yields the most efficient output at the lowest cost.

Issues arise when this mindset becomes narrow, and businesses focus only on customer value to the exclusion of everything else. Lean supply chains are at constant risk of becoming fragile, and oftentimes lack the ability to cope with unexpected crises, as we have seen with the impact COVID-19 has had on many businesses.

Once businesses begin to outsource everything deemed “non-essential”, they depend on their external suppliers to stay open and continue providing a service. The impacts of COVID-19 have seen supply chains struggling to keep up, travel restrictions impeding on the ability for staff to travel, and delivery delays.

The idea of what is core to a business has been reduced to the point where businesses are too lean and cannot survive without external support.

Lean methodology is still a valuable method for businesses to reduce costs, however they must be reapplied in light of proper contingency planning processes. In order to do this, businesses must re-evaluate what core activities truly are, and what should not be outsourced.

In order to give your business the best chance of survival in a crisis, it is important to identify every possibility that could impact the decision making of your customers, whether that be a global pandemic, climate change, or civil disruption.

Whilst lean management is effective at reducing costs, businesses must bear the cost of guaranteeing a supply of goods and services to their customers, even in a crisis.