Lean Supply Chain Survey1 - Cranfield School of Management
Transcript of Lean Supply Chain Survey1 - Cranfield School of Management
The Status of Lean Thinking in UK Lean AerospaceInitiative (UK-LAI) Supply Chains: a Survey
Alan Harrison, Jane Pavitt and Jennifer Alexander
School of Management, Cranfield University
January 2002
Abstract
Results of a survey into the status of lean thinking in the supply chains of UKaerospace organisations are reported. Two groups clearly emerged from the survey:those who have a supply chain strategy as part of the corporate strategy and those whodo not. Those business units who reported a close link between supply chain strategyand corporate strategy displayed a consistent set of characteristics. They consider thatsupply chain strategy is important in achieving competitive advantage both now andin the future, and that investing in supply chain infrastructure is important both nowand in the future. They are also significantly more concerned with formal means ofanalysis through supply chain metrics, and with developing external capabilities likeJIT delivery and re-tiering and rationalising their supply bases. Some inconsistenciesare revealed in terms of the links between strategy and performance measurement.
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The Status of Lean Thinking in UK Lean Aerospace Initiative
(UK-LAI) Supply Chains: A Survey
Contents:
Introduction.................................................................................................2
Environment................................................................................................3
Supply Chain Strategy ...............................................................................4
Supply Chain Investment...........................................................................9
Supply Chain Practices and Performance..............................................10
1. Management Issues ...............................................................................10
2. Technology Issues..................................................................................13
3. Supply Chain Metrics..............................................................................14
Lean Thinking ...........................................................................................16
Conclusions ..............................................................................................19
The Impact of Lean Thinking ...................................................................21
Author Contact Details.............................................................................22
Appendix 1: Sections from the Lean Supply Chain Survey..................23
References ................................................................................................27
Keywords Supply Chain Management Performance ManagementLean Thinking Strategic PlanningSurveys
Acknowledgements
The authors gratefully acknowledge the assistance provided by the Society of British
Aircraft Companies (SBAC) in conducting this survey.
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The Status of Lean Thinking in UK Lean Aerospace Initiative
(UK-LAI) Supply Chains: A Survey
Introduction
This paper reports some of the results of a survey, undertaken in the summer of 2001,
to ascertain the types of supply chain practices and behaviours in the UK aerospace
industry, while at the same time identifying the link between supply chain strategy
and corporate strategy of individual organisations. It also aims to identify where the
UK aerospace industry sits in terms of development of lean supply chains. The survey
used was based on a similar design to that used in an international survey of supply
chain strategy and performance management carried out by Harrison and New1.
The survey, which was undertaken by Cranfield School of Management, forms one
element of a collaborative programme examining lean practices in the UK Aerospace
Industry, known as the UK Lean Aerospace Initiative (UK-LAI). The UK Lean
Aerospace Initiative (UK-LAI) is a high profile project, which forms part of the
industry’s competitiveness challenge. It is jointly funded by the Engineering and
Physical Science Research Council (EPSRC) and the Society of British Aircraft
Companies (SBAC), and the academic partnership spans Warwick, Nottingham, Bath
and Cranfield Universities.
Questionnaires were sent out in August 2001 to a total of 525 organisations or
business units operating within the aerospace industry. After sending out reminders a
total of 61 respondents completed the survey and provided useable data. This
represents a return rate of approximately 11.6%. Although this is somewhat low, the
sample size giving details of supply chain operations within the aerospace industry
across a wide variety of business units provides a reasonable cross section.
The questionnaire was targeted at key contacts within organisations that have
participated in SCRIA (Supply Chain Relationships in Action) workshops run by the
SBAC. The focus was on organisations in which at least one part of their supply
chain activities involved some form of operation within a manufacturing plant.
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Because of the type of response required, the questionnaire was limited to fourteen
questions with a closed format. Questions (other than those related to the
organisation’s background) were in two forms based on a Ranking style and a five-
point Likert scale. A selection of the questions asked in the survey is given in
Appendix 1.
Environment
The organisations included in this survey vary in size from the very large where
responses were received from several different business units to the smaller player
whose response covered their whole organisation. Nearly a third of the business units
were reported to have an annual sales turnover in excess of $500million but the
survey was not necessarily dominated by these large operations as the same number
were at the other end of the size scale with turnovers of under $50million per year. Of
the others one in five have turnovers between $150million and $250million, and one
in six of $50million to $150million.
The survey includes information regarding supply chains in a variety of organisations
involved in the aerospace industry from aircraft and engine makers, components and
systems suppliers to service companies.
The respondents held a wide variety of positions but were predominantly from
operations roles (30%) with Director level accounting for 15% and Operations
Managers, Project Engineers and Team Leaders the other 15%. Procurement and
Purchasing Managers accounted for a further 21% of responses and General Manager,
Managing Director and CEO level for 16%. Supply Chain and Logistics, Marketing
and Business Development, as well as Business Improvement Managers each
accounted for 7%. Finance Directors, Customer Support and Quality Managers also
completed the questionnaire.
The majority of respondents (61%) indicated that making to order was their primary
model of manufacturing plant in their business unit, with 10% engineering to order
and 5% assembling to order.
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When asked to describe their supply chain in relation to the largest or most important
aerospace product or service the company produced almost half (48%) of the
respondents considered their supply chain to be three tier and nearly a third (31%)
thought it to be four tier.
Supply Chain Strategy
A key issue investigated in the survey was the current state of supply chain strategy in
the different organisations and the relative importance of this strategy in achieving
competitive advantage in the marketplace both now and in the future. (Fisher2, Stuart3,
Ansari et al4, Gulati et al5, Pascarella6). Section B in Appendix 1 lists the questions
asked.
The majority of respondents (87%) indicated that their corporate strategy included a
supply chain strategy, although 12% said that it did not. One organisation indicated
this strategy was in development but not yet completed within their business. The data
was examined to discover whether there was a relationship between responses to the
question whether their corporate strategy includes supply chain strategy and other
questions. The eight respondents who indicated they have no supply chain strategy at
all had a sales turnover of less than $150million (Table 1).
Table 1: Does Corporate Strategy Include Supply Chain Strategy?
Does Corporate Strategy Include Supply Chain Strategy?
No Yes Total Sales turnover(Millions)
Count Percent Count Percent Count Percent
Up to $150 8 100 20 38 28 46
$150 + 33 62 33 54
Total 8 100 53 100 61 100
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Corporate strategy includes a SC strategy?
No Yes Total Model of operation
Count Percent Count Percent Count Percent
Make to order 3 38 34 64 37 61 Assemble to order 1 13 2 4 3 5 Engineer to order 1 13 5 9 6 10 Mixed 3 38 11 21 14 22 No answer 1 2 1 2
Total 8 100 53 100 61 100
Figures may not add to 100 due to rounding
Those companies with a supply chain strategy are more likely to have a “make to
order” model of operation (64% as opposed to 38%), however the difference is not
statistically significant (Table 2).
Table 2: Model of operation
Although 63% of respondents with no supply chain strategy have a four tier supply
chain model compared with only 26% of those with a supply chain strategy the
difference is not significant regarding the number of tiers in relation to supply chain
strategy (Table 3).
Table 3: Number of Tiers in the Supply Chain
Corporate strategy includes Supply Chain strategy?
No Yes Total
Number of tiers
Count Percent Count Percent Count Percent Immediate customer& supplier only 3 6 3 5
4 tiers 5 63 14 26 19 31 3 tiers 2 25 27 51 29 48 Other 1 13 6 11 7 11 No answer 3 6 3 5 Total 8 100 53 100 61 100
Figures may not add to 100 due to rounding
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The majority of respondents (77%) viewed the importance of the supply chain
strategy to their corporate strategy as significant or highly significant. It was odd that
7% of respondents felt that a supply chain strategy was only marginally important or
even irrelevant. Table 4 shows that 83% of those who have a supply chain strategy
consider it is a significant or highly significant element of their company’s corporate
strategy whilst only 38% of those with no supply chain strategy consider this to be the
case.
Table 4: Importance of Supply Chain Strategy
The survey indicated some clear differences in the relative complexity or
sophistication of supply chain strategy across organisations. Over a third had supply
chain strategies, with either most of their elements defined in detail or already very
detailed and clearly defined. However, more than half the respondents described their
organisation’s supply chain strategy as having some elements defined but lacking in
detail (51%), and 12% of supply chain strategies were either non-existent, patchy or
poorly defined. Table 5 shows that none of those respondents who do not have a
supply chain strategy would describe their supply chain strategy as “most elements
defined in detail” or “very detailed and clearly defined”. It may be that some business
units do not see supply chain strategy as a major issue for them.
Corporate strategy includes a Supply Chain strategy?
No Yes Total
Importance of SupplyChain strategy to yourcompany’s Corporatestrategy
Count Percent Count Percent Count Percent Irrelevant 1 13 1 2 Marginally Important 1 13 2 4 3 5 Important 2 25 7 13 9 15 Significant 2 25 19 36 21 34 Highly Significant 1 13 25 47 26 43 No Answer 1 13 1 2 Total 8 100 53 100 61 100
Figures may not add to 100 due to rounding
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A link between perceived importance of supply chain strategy for competitive
advantage and the relative sophistication with which that supply chain strategy is
defined might be expected (New7, Christopher8). A link with the means used to assess
the business unit’s supply chain performance might also be expected (Neely et al9,
Ross et al10). The use of various performance metrics is examined later.
Table 5: Detail of Supply Chain Strategy
The survey considered the possible future importance of supply chain management in
achieving or maintaining competitive advantage (Stuart11). When asked to describe
how important they think their organisation's supply chain is in achieving competitive
advantage at the present time, the great majority (84%) consider it to be significantly
important or very important, 11% view it as important and only 5% think it is of no
importance or only marginally important.
There is no statistical difference between those who have a supply chain strategy and
those who do not (Table 6) in terms of how important they think their organisations
supply chain is now in achieving competitive advantage.
Corporate strategy includes a Supply Chain strategy?
No Yes Total
Description of Supply Chainstrategy
Count Percent Count Percent Count Percent Non-existent 1 13 1 2 Patchy/poor definition 4 50 2 4 6 10 Some elements defined/lacksdetail 3 38 28 53 31 51
Most elements defined indetail 18 34 18 30
Very detailed & clearlydefined 5 9 5 8
Total 8 100 53 100 61 100 Figures may not add to 100 due to rounding
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Table 6: Importance of Supply Chain Strategy to Competitive Advantage - Now
All except one respondent thought their supply chain could be significantly important
or very important in achieving competitive advantage for their organisation in the
future. The one respondent still felt it to be important. There was no significant
difference between the groups as to how important they thought their organisation’s
supply chain could be in the future in achieving competitive advantage (Table 7).
Table 7: Importance of Supply Chain Strategy to Competitive Advantage – In
the Future
Corporate strategy includes a Supply Chain strategy?
No Yes Total
How important is SupplyChain strategy NOW inachieving competitiveadvantage?
Count Percent Count Percent Count Percent Of no importance 1 13 1 2 Marginally important 2 4 2 3
Important 1 13 6 11 7 11
Significantly important 6 75 22 42 28 46
Very important 23 43 23 38
Total 8 100 53 100 61 100
Figures may not add to 100 due to rounding
Corporate strategy includes a Supply Chain strategy?
No Yes Total
How important is SupplyChain strategy in achievingcompetitive advantage in theFUTURE?
Count Percent Count Percent Count Percent Important 1 13 1 2
Significantly important 3 38 23 43 26 43 Very important 4 50 30 57 34 56 Total 8 100 53 100 61 100
Figures may not add to 100 due to rounding
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Supply Chain Investment
To support their supply chain strategy organisations need to invest in appropriate
infrastructure (Morton12, Premkumar13). This investment includes systems support,
training and development of personnel. Further investment is typically necessary in
terms of direct IT support to run supply chain systems (Cottrill14, Richardson15,
Hewitt16). Section B in Appendix 1 lists the questions asked in the survey.
It might be expected those businesses with a supply chain strategy would be most
likely to invest more in their supply chain infrastructure. Overall, almost half (49%) of
all respondents considered the level of investment in terms of infrastructure, systems
support, training, etc., their organisation put into implementing its supply chain
strategy to be high or very high (Table 8). However organisations that have a supply
chain strategy invest a higher amount than those who do not (54% compared to 13%
have high or very high investment).
Table 8: Level of Investment Now
Organisations expect to make a greater level of investment in the future than at
present with two thirds (66%) of all respondents replying that they expect it to be high
or very high. There is a significant difference in the amount of investment an
organisation intends to put into implementing its supply chain strategy between the
two groups with only 26% of those with no supply chain strategy planning high or
Corporate strategy includes a Supply Chain strategy?
No Yes Total
Level of investment NOW
Count Percent Count Percent Count Percent Very low 1 13 1 2 2 3 Low 4 50 4 8 8 13 Moderate 2 25 19 36 21 34 High 1 13 23 43 24 39 Very high 6 11 6 10 Total 8 100 53 100 61 100
Figures may not add to 100 due to rounding
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very high investment compared with 71% of those with a supply chain strategy (Table
9).
Table 9: Level of Investment in the Future
Supply Chain Practices and Performance
We consider supply chain practices and performance under three headings –
management issues, technology issues and supply chain metrics.
1. Management Issues
Improving supplier delivery performance was seen as the main supply chain
management priority whilst reducing total supply chain costs was nearly as important
to respondents. Reducing order fulfilment cycle time was ranked third and increasing
customer service levels fourth with improving supplier cost performance fifth.
Reducing inventory costs and reducing cash-to-cash cycle time were sixth and
seventh. Respondents indicated other priorities including quality of product, saving
money using smaller number of vendors, quality performance to customers and
showing customers we differ to competitors. When asked to rank what they see as the
main supply chain management priorities respondents with a supply chain strategy
and those without gave the same four items the first four ranks (Table 10). Section C
in Appendix 1 lists the questions asked in the survey.
Corporate strategy includes a Supply Chain strategy?
No Yes Total
Level of investment infuture
Count Percent Count Percent Count Percent Very low 1 2 1 2 Low 2 25 2 3 Moderate 4 50 13 25 17 28 High 1 13 33 62 34 56 Very high 1 13 5 9 6 10 No answer 1 2 1 2 Total 8 100 53 100 61 100
Figures may not add to 100 due to rounding
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Table 10: Supply Chain Management Issues
An attempt was made to discover whether those respondents who ranked “improving
supplier delivery performance” in the first four identified a different set of
management issues than those who ranked it in the last four. There did not appear to
be any difference as the three issues chosen the most often were the same in both
cases.
The majority of respondents selected business process improvement (87%), followed
by partnership sourcing (67%) and benchmarking (20%) as those management issues
with the greatest potential for improving their supply chain performance. Vendor-
managed inventory (VMI) by supplier (54%) was seen to have more potential for
improving performance than VMI by the business unit for their customers (16%).
Outsourcing by the business unit or by their customers was seen to have limited
potential (15% and 13% respectively).
When analysed by those who have a supply chain strategy and those who don’t
(Tables 11a and b) it was shown that both groups selected “business process
improvement” the most often (88% and 87%) and then “partnership sourcing” the
second most often. None of the respondents from those companies who have no
supply chain strategy mentioned “benchmarking”, although this was ranked third by
those with a supply chain strategy. Very few thought warehouse management had any
potential for improving supply chain performance and this was the least chosen issue
for both groups.
Rank Without Supply Chain strategy With Supply Chain strategy
1 Improving supplier deliveryperformance
Improving supplier deliveryperformance
2 Reducing total supply chain costs Reducing total supply chain costs
3 Increasing customer service levels Reducing order fulfilment cycle time
4 Reducing order fulfilment cycletime Increasing customer service levels
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Table 11a: Management Issues Selected by Those WITHOUT a Supply Chain
Strategy
Table 11b: Management Issues Selected by Those WITH a Supply Chain
Strategy
Management issues Count Column %
Business process improvement 7 88
Partnership sourcing 4 50
Vendor managed inventory: by supplier for you 3 38
Outsourcing: by your customers 3 38
Vendor managed inventory: by you for customers 2 25
Outsourcing: by you 2 25
Warehouse management 1 13
Total respondents 8 (100) Each respondent ticked up to 3 items
Management issues Count Column %
Business process improvement 46 87
Partnership sourcing 37 73
Vendor managed: by supplier for you 30 59
Benchmarking 12 23
Vendor managed inventory: by you for customers 8 16
Outsourcing: by you 7 13
Outsourcing: by your customers 5 10
Warehouse management 4 8
Total respondents 53 (100)
Each respondent ticked up to 3 items
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2. Technology Issues
Fewer technology issues than management issues were identified as having potential
for improving supply chain performance. Overall 70% of respondents thought E-
commerce (Internet, Intranet, E-procurement, etc.) would have the greatest potential
for improving their supply chain performance whereas only 7% thought that Factory
Automation would have any potential for them.
It can be seen from Tables 12 a and b that when technology issues are examined those
respondents with no supply chain strategy chose Enterprise Resource Planning (ERP)
Systems the most often (63%) whilst those with a supply chain strategy chose E-
commerce (75%) as having the greatest potential for improving their supply chain
performance.
Table 12a: Technology Issues Selected by Those WITHOUT a Supply Chain
Strategy
Technology issues Count Column %
Enterprise resource planning 5 63
Advanced planning & scheduling 4 50
E-commerce 3 38
Factory automation 1 13
Total no. of respondents 8 (100)
Each respondent ticked up to 3 items
Table 12b: Technology Issues Selected by Those WITH a Supply Chain Strategy
Technology issues Count %
E-commerce 40 75
Enterprise resource planning 29 55
Advanced planning & scheduling 29 55
Factory automation 3 9
Total no. of respondents 53 (100)
Each respondent ticked up to 3 items
January 2002 14
3. Supply Chain Metrics
The relative detail used to assess the performance of supply chains was discussed
earlier. Based on responses to question C2a (Appendix 1) only 11% of business units
revealed they had extensive formal means for analysing supply chain performance,
57% indicated some formal means, 18% had limited formal means, and 12% had
mainly informal or no formal means at all.
A smaller percentage of those respondents with no supply chain strategy had some or
extensive formal means for analysing supply chain performance (25% compared with
75%, see Table 13). When compared with the responses given regarding the
significance of supply chain strategy to competitive advantage both now and in the
future it again raises the question (Harrison and New17):
If supply chain strategy is significantly important or very important to your business
unit in terms of achieving competitive advantage, should the relative sophistication of
your supply chain strategy not reflect this and should you not have in place the
appropriate means of assessing your supply chain’s performance?
Many of the business units need to address this question as a matter of priority. Some
might justify their lack of performance assessment by stating that measuring
something will not necessarily improve it. However, if they do not measure it how
will they know? Metrics provide the value systems of the business and the choice of
metrics is important because they tend to drive behaviour (Swaminathan et al 18).
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Table 13: Formal Means of Analysis
The survey asked what supply metrics or measures the respondents’ organisations
monitor on an on-going basis (Table 14).
Table 14: Supply Chain Metrics/Measures
Corporate strategy includes SC strategy?
No Yes
Supply Chain metric/measures
No. times
chosen
Percent No. times
chosen
Percent
Customer delivery performance 6 75 49 92
Supplier delivery performance to you 5 63 49 92
Delivery schedule adherence 5 63 43 81
Customer return rate 7 88 38 72
Inventory turn 5 63 37 70
Order fulfilment lead time 4 50 31 58
In the questionnaire (C2b in Appendix 1) respondents were asked to identify which of
the listed measures or metrics were used in their business unit and to add any
additional items they monitored on an ongoing basis.
Corporate strategy includes SC strategy?No Yes Total
Formal means of analysis
Count Percent Count Percent Count Percent
No formal means 3 38 1 2 4 7
Mainly informal means 1 13 2 4 3 5 Limited formal means 2 25 9 17 11 18 Some formal means 2 25 33 62 35 57 Extensive formal means 7 13 7 11 No answer 1 2 1 2
Total 8 100 53 100 61 100
Figures may not add to 100 due to rounding
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The six supply chain metrics or measurements chosen most often were the same for
both groups. There was a small difference in the ranking with those respondents with
no supply chain strategy choosing “customer return rate” the most often whereas
“customer delivery performance” and “supplier delivery performance” ranked higher
for those respondents with a supply chain strategy.
The key measures monitored by the majority of organisations are customer delivery
performance (Szwejczewski et al19, Hines20) and supplier delivery performance,
followed by delivery schedule adherence and customer return rate.
The measure for inventory turn (Bradley et al21) was popular with 69% of respondents
but it was surprising to find that there were no overall cost measures in the top 6 items
and delivery cost per unit was used by only 23% of business units. Only 7% used the
relatively sophisticated measure of “cost to serve” (Braithwaite22). Additional
measures identified by respondents included:
Supplier Quality Performance,
Non-conformance,
Quality – reject rate ppm,
Respondents indicated they used an average of seven performance measures from the
list given.
Lean Thinking
Lean thinking, as developed by Womack and Jones23, is summarised in five
principles: precisely specify value by specific product; identify the value stream for
each product; make value flow without interruptions; let the customer pull value from
the producer; and pursue perfection. It therefore concentrates on the elimination of
waste in all its forms.
January 2002 17
To ascertain what aspects of lean thinking are incorporated into their organisation’s
supply chain strategy respondents were asked to rank a list of twelve items, seven of
which related to suppliers and five to internal operations. Section D in Appendix 1
lists the questions asked.
It was found that respondents considered establishing long term collaborative
relationships with suppliers to be the most important aspect of lean thinking to
incorporate into supply chain strategy. Increasing trust and advocating open
relationships with suppliers closely followed this. The next three aspects were
considered to have approximately equal importance in the group as a whole, these
being: just-in-time delivery from suppliers, conduct root cause elimination of frequent
problems to prevent recurrence and standardisation of tasks ensuring consistent
performance. These were closely followed by: re-tiering or rationalising supplier base
to level that can be effectively managed, and pull systems or Kanbans.
Those with a supply chain strategy ranked just in time delivery from suppliers in third
place and so placed far more importance on this aspect than those without a supply
strategy who ranked it a lowly ninth (Table 15). Retiering and rationalising the
supplier base was of greater importance to those with a supply chain strategy than
those without who ranked it eighth. Those without a supply chain strategy placed far
more importance on standardisation of tasks, ensuring consistent performance and
zero goods-in inspection.
Respondents also included Value Stream Mapping as an important aspect of lean
thinking. The least important aspect was “dividing up the working day and tasks into
standard work cycles”.
January 2002 18
Table 15: Aspects of Lean Thinking Incorporated into Supply Chain Strategy
Nearly all respondents (95%) felt that a lean supply chain strategy could be important,
significantly or very important in creating competitive advantage in the future. There
was no significant difference between those with and those without a supply chain
strategy as to how important they considered that a lean supply strategy could be in
creating competitive advantage in the future (Table 16).
SC strategy No SC strategyAspect of Lean Thinking Mean
score Rank Meanscore Rank
Long-term collaborative relationshipsestablished with supplier 9.4 1 8.4 2
Increasing trust and advocating openrelationship with supplier 8.0 2 8.9 1
Just-in-time delivery from suppliers 7.8 3 5.6 9Re-tiering/rationalising supplier base tolevel 7.5 4 6.5 8
Conduct root cause elimination of freq.problems. 7.5 5 7.3 5
Pull systems /Kanbans 7.4 6 7.0 7
Standardisation of tasks, ensuringconsistent performance 7.3 7 8.1 3
Control progress & irregularities througheasy visual control 6.7 8 7.1 6
Zero goods inspection 6.4 9 7.6 4
Dividing the workday & tasks into standardwork cycles 4.4 10 4.9 10
Other (suppliers) 2.7 11 2.9 12
Other (internal operation) 2.3 12 3.6 11
Total respondents 51 8
January 2002 19
Table 16: Importance of Lean Supply Chain Strategy
Conclusions
The results collated in this survey have highlighted what types of supply chain
practices and behaviours exist within the UK aerospace industry. The report has
considered whether there is a link between organisations’ supply chain strategy and
their corporate strategy, where they sit in terms of size, investment in infrastructure
and their views regarding the importance of supply chain strategy to achieving
competitive advantage both now and in the future. By analysing the responses to
certain questions it has been possible to see where the UK aerospace industry sits in
terms of development of lean supply chains.
The sample of respondents was split approximately 50/50 between large business
units (i.e., those exceeding $150m total annual turnover) and SMEs (small and
medium enterprises). It was also split fairly evenly between those who consider their
supply chain to have three tiers and those with four in relation to the largest or most
important aerospace product or service their company produced.
Corporate strategy includes a Supply Chain strategy?
No Yes Total
Importance of LeanSupply Chain strategy increating competitiveadvantage in the future
Count Percent Count Percent Count Percent
Of no importance 1 13 1 2
Important 1 13 6 11 7 11
Significantly important 4 50 21 40 25 41
Very important 2 25 24 45 26 43
No answer 2 4 2 3
Total 8 100 53 100 61 100
Figures may not add to 100 due to rounding
January 2002 20
Over three quarters of respondents regarded supply chain strategy to be significant or
highly significant, however only two fifths described their own supply chain strategy
as having most elements defined. Surprisingly nearly a quarter regarded supply chain
strategy as not significant.
Do you consider your supply chain strategy lacks detail?
A supply chain strategy in name only is not a strategy.
Although the majority (95%) regarded supply chain strategy as being important to
very important for competitive advantage at present only about half currently have
high levels of investment in their supply chain infrastructure to support this. More
(66%) did indicate that they plan to invest high or higher levels in the future in terms
of infrastructure, IT systems support and training.
Why don’t all aerospace companies invest in supply chain infrastructure?
A number of respondents (13%) indicated they currently have no supply chain
strategy but they still regard it as important to achieving competitive advantage. The
question must therefore be asked of them how do they plan to achieve it?
Supply chain strategy is seen by most as important to competitive
advantage so why don’t all aerospace companies have one?
This question is particularly directed at SMEs (see Table 1), who also seem reluctant
to benchmark their supply chains (Table 11a) and to have less formal means of
analysis (Table 13). Even among large organisations (Table 4), only half give it
highest priority. On the basis of this survey, it would appear that aerospace supply
chains are far from the seamless ideal, and that motivation to plug the gaps is partial.
The most important supply chain management priorities within business for both
groups irrespective of whether they had a supply chain strategy or not were identified
as improving supplier delivery performance and reducing total supply chain costs.
January 2002 21
Business process improvement (BPI) and partnership sourcing were selected as the
management strategies with the greatest potential for improving supply chain
performance. Similarly both groups selected comparable metrics or measures to
monitor their supply chain performance.
With regard to technology issues those businesses with a supply chain strategy saw
more potential benefits in utilising e-commerce for improving their supply chain
performance than those without a supply chain strategy. These organisations felt more
comfortable selecting enterprise resource planning (ERP) systems to aid improvement
in supply chain performance.
Whilst more than half (57%) had some means of monitoring their supply chain
performance only one in ten (11%) felt that they had extensive means in place to
undertake this type of analysis.
If supply chain performance is important to competitive advantage
why isn’t it being measured more robustly?
The Impact of Lean Thinking
Considering where the UK aerospace industry sits in terms of development of lean
supply chains virtually all respondents (96%) felt that a lean supply chain strategy is
important in creating competitive advantage. Establishing long-term collaborative
relationships with suppliers, and increasing trust and advocating open relationships
with all suppliers were identified as the top two aspects of lean thinking incorporated
into organisations supply chain strategy.
For those with a supply chain strategy, just in time delivery from suppliers and
retiering or rationalising the supplier base to a level that can be effectively managed
were the next lean thinking priorities. Standardisation of tasks and zero goods-in
inspection were more important for those organisations without a supply chain
strategy.
January 2002 22
It seems that organisations without a supply chain strategy are struggling with lean
thinking and giving high priority to internal improvements like task standardisation
and zero goods-in inspection. Organisations with a strategy in place are pushing
ahead with JIT deliveries and re-tiering their supply base.
A striking lack of harmony again emerges from this survey between organisations
with a supply chain strategy and those without. Those with a strategy have more
formal measures of performance and are more aware of their position through
benchmarking. Such organisations are giving higher priority to implementing external
improvements to the supply chain. Those without a supply chain strategy are more
pre-occupied with internal improvements, have limited formal means of measurement,
and are less aware of their relative performance.
Author Contact Details
Alan Harrison, Jane Pavitt and Jennifer Alexander
UK Lean Aerospace Initiative
Cranfield Centre for Logistics and Transportation
School of Management, Cranfield University
Cranfield, Bedford, MK43 0AL
Tel: +44 (0)1234 754121
Fax: +44 (0)1234 751712
E-mail: [email protected]
January 2002 23
Appendix 1: Sections from the Lean Supply Chain Survey
Section B: Supply Chain Strategy
B1 Does your corporate strategy include a supply chain strategy? No / Yes
B2 How important an element is supply chain strategy to your company’s Corporate
Strategy?
1. Irrelevant
2. Marginally important
3. Important
4. Significant
5. Highly significant
B3 How important do you think your organisation’s current supply chain?
1. Non-existent
2. Patchy/poor definition
3. Some elements defined/lacks detail
4. Most elements defined in detail
5. Very detailed and clearly defined
B4 How important do you think your organisation's supply chain strategy is NOW in achieving
competitive advantage?
1. Of no importance
2. Marginally important
3. Important
4. Significantly important
5. Very important
B5 How important do you think your organisation's supply chain strategy could be in creating
competitive advantage IN THE FUTURE?
1. Of no importance
2. Marginally important
3. Important
4. Significantly important
5. Very important
B6 What level of investment in terms of infrastructure, systems support, training etc., has your
organisation so far put into implementing its supply chain strategy?
1. Very low
January 2002 24
2. Low
3. Moderate
4. High
5. Very high
B7 What level of investment in terms of infrastructure, systems support, training etc., does
your organisation intend to put into implementing your supply chain strategy?
1. Very low
2. Low
3. Moderate
4. High
5. Very high
Section C: Supply Chain Practices and Performance
C1(a) What do you see as the main supply chain management priorities in your business?
• Reducing order fulfilment cycle-time
• Reducing total supply chain costs
• Improving supplier delivery performance
• Improving supplier cost performance
• Reducing cash-to-cash cycle time
• Reducing inventory costs
• Increasing customer service levels
• Other (please specify)
C1(b) Which of the following do you think have the greatest potential for improving supply
chain performance in your business in relation to the highest priority areas identified in (a)
above? (tick no more than 3 from each list).
Management issues:
• Vendor managed inventory: By you for customer
• Vendor managed inventory: By suppliers for you
• Business process improvement
• Warehouse management
• Partnership sourcing
• Benchmarking
• Outsourcing: By you
• Outsourcing: By your customers
Technology issues:
• E-commerce (Internet, Intranet, e-procurement etc.)
• Enterprise resource planning (ERP) systems
January 2002 25
• Advanced planning and scheduling (APS) systems
• Factory automation
C2(a) Does your company have any formal means for analysing supply chain performance?
1. No formal means
2. Mainly informal means
3. Limited formal means
4. Some formal means
5. Extensive formal means
C2(b) What supply chain metrics/measure does your company monitor on an ongoing basis?
(tick all relevant boxes)
• Customer delivery performance
• Perfect order fulfilment
• Documentation error rate
• Inventory turn
• Obsolescence rate
• Customer return rate
• Returns processing costs
• Cost to serve
• Supplier delivery performance (to you)
• Supplier cost performance
• Asset turnover
• Line item deletions
• Order fulfilment lead-time
• Telephone response time
• Inventory days of supply
• Delivery cost per unit
• Warranty costs
• Delivery schedule adherence
• Other… … .
Section D: Lean Thinking
D1 Which aspects of lean thinking are incorporated in your organisation’s supply chain
strategy? (rank in order of priority).
Suppliers:
• Just-in-time delivery from suppliers
• Re-tiering/rationalising the supplier base to a level that can be effectively managed
January 2002 26
• Zero goods-in inspection
• Long-term collaborative relationships established with suppliers
• Increasing trust and advocating open relationships with all suppliers
• Pull systems/Kanbans
• Other… .
Internal operations:
• Control progress and irregularities through easy visual control boards
• Conduct root cause elimination of frequent problems to prevent recurrences
• Standardisation of tasks, ensuring consistent performance
• Dividing the working day and tasks into standards work cycles
• Any others… .
D2 How important do you think a lean supply chain strategy could be in creating competitive
advantage in the future?
1. Of no importance
2. Marginally important
3. Important
4. Significantly important
5. Very important
January 2002 27
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