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Being Lean in Supply chain

Well, this blog of mine is different in many ways, from the ones that I have posted so far. I am not going to write too much to describe this topic but I am more interested in knowing what you all know. I want to reach out to each one of you to know what you have seen in industry either as an operations guy or as a consultant. Even if you have not seen it being practiced in real life, I am sure you would have some serious opinion on this matter.

The topic is very simple and well-intuitive. My question is: Have you seen “lean principles” being practiced in supply chain in any industry (preferably consumer goods/discrete manufacturing). I know the term “lean” has been used or mis-used very often, but I am open to hear anything from you – just take a pick, think and find out instances from your experience, that you can bucket under being “lean in supply chain”. Do not just restrict yourself to manufacturing...

Let me give you one example: recently, I had a discussion with a Supply Chain Head of a leading consumer goods organization and they intend to implement a “pull based” system in their supply chain.

Consumer goods companies have been pioneers in supply chain and their performance in supply chain has been best-in-class by any standards. Traditionally, we have seen organizations especially, consumer goods, running a typical push model where sophisticated forecasting is done to predict demand, goods are manufactured and distributed to various POS locations as per the dispatch plan. The product is actually pushed down in supply chain and focus is to improve forecast accuracy because that really drives everything else.

On the contrary, here is this company that would like to implement “pull system” and do away with forecasting to the maximum possible extent. To me, this is one true example of being lean in supply chain. I have always seen companies focusing on improving traditional push model that I described, but I have never seen a “pull model” running anywhere and hence this blog…

Going back to my question to all of you:

Do you think such practices exist in companies (esp. consumer goods)? I don’t know any company implementing a pull methodology in supply chain (please provide examples other than Toyota)? How do you marry push and pull in the supply chain, and where does it exist? Where is the Customer decoupling point? What tools do you use? How do you drive this initiative – what are the critical success factors?

Please share your experiences and insights – looking forward to hear from this great group of supply chain leaders…


I have known one company - Zara, a contemporary/haute apparel vendor, that is quiet 'lean' in this sense. They release products to the market every season, but based on the sales they react immediately. Say if a jacket sells well, they release more designs and colors of similar looking jackets. Re-alignment in every stage of Supply Chain. However, the initial release still starts with a forecast on current trends. Sort of hybrid push-pull if you will. But I wonder if a purely 'pull' model is possible. Geography could play a vital role. Say for example retialers in the US who are a season or two ahead and rely on far east manufacturing bases (India/China/South Korea) perhaps cant be reactive. But the expedition this route is still worth it I think.

Unilever Australia sends their delivery vans everyday to the major store outlets - Coles/ Woolworths. The delivery/ sales guy would essentially replenish their ice cream counters. At the factories near the major markets, they would keep a could of days stock of ice cream, a few more days of milk/ cream perishable stock, more stock of the fruit/flavors et al, and would quickly make new ice cream assortments as per the customer day to day demand. The Sales personal would have handhelds which would quickly update the replenishment orders, demand mgmt systems which would aggregate, review and finalize the demand, mfg systems which would quickly schedule the next run. The crucial success facotrs here are good assortment planning, flexible mfg lines, integrated IT systems and proactive channel management.

Thanks Guruprasad for your comments. Well yes, Zara is one of the typical case studies in Supply chain for being leaders in fashion industry. Do you have any example in FMCG/CPG industry where you would have seen lean being applied in some form? I believe forecasting is must at some stage (may be for a higher aggregate level planning) but how do companies replace forecasting by pull-based model as a process.

Thanks Vikram for sharing this example. Was there any forecasting process in place too? and if yes, then what was it used for?
Replenishment orders - were they decided based on a ROP sizing formula?

Dell uses pull system very effectively to suit its business model. They start manufacturing the product after you do the online order, which effectively means lowest inventory. Offcourse they have now started with a fastrack version of laptops which is preassembled based on the most ordered configuration, but going by their traditional business fundamentals, a big section of their revenues come through make to order system making the inventory levels to very low levels.

Hey when we talk of these big things of "Pull" and "Push" we tend to forget the basics we studied in Class-V. We indulge into jargons, "best practices", "Expert opinion" etc. etc. But are we actually clear of the basics. No we are not…..
So let’s understand the basics. In Class-V (I recollect this as my son is in Class-IV and he has just been introduced to force, work, energy, friction etc. etc… and he asks a lot of questions!!!) we had studied that “If on a level ground on a frictionless surface if you and the object are of the same height and you apply the same force at the same point on an object in the same direct, it would result in the same work done, whether the force is a pull or a push”. You recollect. Well now in real life there is no “level ground” even though so called experts propose “Flat World” and there is no “frictionless” surface. So this ultra-simplistic situation gets complex in terms of the direction of the ground and the presence of friction.
Now when if the ground is inclined upwards, the object is smaller to you, then by the basics of physics a pull force is always better than push. The work effort is less. Cosφ helps you. Yet again if the ground is inclined downwards, the object is bigger than you, a push would lead to a lesser effort…. Do you recollect now.
Well apply the same in supply chain dynamics. Friction is the “lead time”, “service level constraints”… necessary evils in the system. The inclination (upwards or downwards) is dependent on whether it is an upstream or a downstream flow. And the sizes depend on the volume of inventory in the supply chain which it has to handle.
So, if you are handling a single piece flow (least size of inventory) downstream it is better to push it. Again if you are in reverse logistics (returns from market, reversing non-stocking products to master warehouses) the same situation of inventory would make can be done better with pull system, as it is upstream.
So, when you are asked to apply pull in a downstream system, and many “SC Experts” would love to test your Sc skills, tell them that it is very well possible if you either reduce drastically or remove altogether the friction…. I mean the constraints!!! That’s the most convincing way of explaining basics to SC jargon leaders.

I have heard of Caltex petroleum using pull system at their fuel station or atleast at few of them. The machine is completely synchronize with their system indicating when & where they require replenishment.Most of the company like Zara, Toyota(though i am not sure about dell) can implement pull system because they are somewhat vertically integrated(like zara :70% of their supply chain is verticle) or they force their vendors to be close to their facilities(like Toyota city). otherwise implementing lean(though not difficult) increases transportation cost and logistic charges. it also depends on the kind of product type you are dealing with, i.e. is it functional product or innovative product. since functional products have stable and predictable demand implementing lean is not difficult. At the same time, innovative products whose KPIs is not rapid delivery or the products that are luxurious in nature and small niche can implement lean and not loosing their customers because they are willing to wait for the product.

Thanks Muhammad for your comments. It is definitely clear that 'pull' methodology can't be applied universally to all the kind of products. There could be several such factors that one needs to analyse before coming out the 'target scope' for designing such systems. For simplicity sake, just assume that here is this FMCG company with products that are seasonal, but standard, with sales happening through thousands of distriutors. The distributors are fed with warehouses/DCs/depots that in turn get fed by company owned factories or contract manufacturers. Now, how do you design a pull process? what are the factors that one should consider? if replenishment orders are to be placed, where is the ideal point in network? where is the customer decoupling point, where you will marry push and pull? because somewhere you will have to forecast to build/source products - we are not talking of a very ideal "single piece flow" right...
Any thoughts, viewpoint?

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