Extended LEAN®: Taking the LEAN Journey from Tactical to

Transformational for the Total Supply Chain

Perhaps the most critical point to make about the Extended

LEAN methodology is to emphasize that Extended LEAN is

not a departure from traditional LEAN principles; rather, it

applies many traditional core LEAN principles to business

elements outside of the original intended target of LEAN – the

factory floor. More specifically, the term Extended LEAN refers

to the examination of the value streams within a facility and

EXTENDING them beyond the receiving and shipping docks to

vendors and customers in the supply chain. To fully understand

the Extended LEAN concept and its impact across the supply

chain, we must first review its origins in traditional LEAN.

The Origin of Extended LEANThe traditional LEAN method emerged as a powerful tool in

manufacturing facilities. It focuses on removing any activity

in a production process that does not create value for the

end customer – the removal of “waste.” Value from the LEAN

perspective is an action or process that the end consumer would

be willing to purchase. LEAN can be considered a management

philosophy, originating from the Toyota Production System, as

well as a set of processes and tools.

LEAN principles focus on eliminating the following wastes (muda)

from the manufacturing operation:

1. Overproduction

2. Waiting

3. Excess Inventory

4. Unnecessary Motion

5. Process itself

6. Producing Defects

7. Transportation

The traditional LEAN attack plan is to document all activities

and processes in the production cycle, identify non-value-

added elements and eliminate them through “kaizen” (change

for the better). Typically when a company embarks on its LEAN

journey, they find that only 5% of the customer-quoted lead

time is actually spent on value-added activities. Focusing on

value-added activity throughout the entire supply chain is a core

element of Extended LEAN.

How Traditional LEAN Became Extended LEANTraditional LEAN focuses its efforts at the plant or manufacturing

line level and works on processes within that operation. The

Extended LEAN approach is different in that it connects the

entire end-customer value stream. This connection aligns all the

sites within the supply chain, from raw material production, to

manufacturing sites, to distribution sites, to points of sale and all

logistics activities between these facilities.

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Mapping the entire value stream from the customer’s

perspective uncovers much more significant and pervasive

wastes than those that exist only within the walls of the plant

or manufacturing operation. If only 5% of the time spent on

manufacturing the product is value-added time, imagine what

the percentage is when we extend the scope of LEAN principles

to the entire supply chain.

A major factor not considered in this approach is the

considerable time and funding required to achieve a return.

Rapid savings can be generated through logistics-related

activities such as enhanced carrier sourcing strategies,

freight invoice audit and payment services, transportation

management systems technology and actionable business

intelligence. By partnering with a third-party logistics provider

that has expertise in these areas, companies can achieve

results relatively easier and more quickly than gaining labor

efficiencies, generating rapid ROI and returning funds to invest

in human development, LEAN training and process changes

for the core business to tackle longer-term improvements.

The strategic advantage of Extended LEAN is that companies

can eliminate wastes not typically examined early in the LEAN

journey. The reality is that by attacking the extended supply

chain wastes, which can be easier, faster wins, companies can

fund the journey in the more difficult areas of manufacturing

that can be capital intensive, heavily complex and expensive

to change.

Faster time to market with improvements that fund higher

quality processes creates a strategic competitive advantage.

Extended LEAN takes decades of LEAN principles and adds

the comprehensive view of the supply chain to deliver faster

payback to the company. Pursuing this approach creates a

tempo of improvements that a company can sustain.

That’s the BIG PAYBACK. If a company can reduce their lead

time by 75%, they are likely to grow two to four times the

industry average (Stalk and Hout, “Competing Against Time”).

Capturing those reductions early in the LEAN journey puts the

company on a trajectory for market share growth.

As the competitive landscape of business continues to tighten,

companies are looking for ways to stand out to acquire new

business and keep existing clients. Extended LEAN enhances

traditional LEAN rather than replacing it. The core of

Extended LEAN is innovation and continuous improvement.

For too long the misconception has been that LEAN stops at

the shipping and receiving docks. Extended LEAN has proven

that process improvement and value streams stretch from

each vendor and supplier to every customer.

The Business Case for Extended LEANTraditional LEAN principles have made significant positive

impact in the organizations adopting and sustaining them. At

right are results from companies applying for the Shingo Prize

from 1988 to 2004. Any plant or company would be proud to

achieve these impressive numbers.

The natural inclination for businesses expecting big paybacks

from LEAN are to focus on high-cost areas first. For example,

labor costs can be as much as 40-60% of all costs in some

businesses, making this a common target for reduction.

Transportation costs, on the other hand, are typically only

5-10% of total expenditures. Moreover transportation costs

are not a common focus area, because they are outside the

company’s four walls.

©2017 Transportation Insight, LLC. All rights reserved. EL R2 3/2017

Traditional LEAN Transformation Impact Based on Benchmark Data from both U.S. and Japanese Companies

Batch Operations Semi-Flow

Productivity +300 – 400% +100%

Inventory Turns +1000% +300%

Defects -95% -80%

Lead Time -95% -75%

Data taken from the Shingo Prize Conference, www.shingoprize.org