Insights from The Lab

How To Implement a Lean Supply Chain Transformation in Just Six Months

Article by : The Lab Consulting

The Next Industrial Revolution

This case study focuses on a supply chain process improvement initiative that was implemented for a Fortune 500 company with lean transformation from The Lab Consulting. It zeroes in on the order management process in the supply chain. Specifically, it targets the lean transformation of the order-to-cash cycle in the wake of an ERP investment that wasn’t paying off as it should.

But first, let’s mention the client in this case study. We can’t tell you their name, but they’re a global Top 3 cosmetics manufacturer. Their U.S. subsidiary (where we did our work) generates 30 percent of global sales—and supports 80 different brands across numerous retail channels.

Lean supply chain transformation examples of cost analysis vs. vendor promises

This cosmetics maker had just invested in a big ERP upgrade. The vendor made numerous promises to company leadership, claiming:

  • The new system would give them built-in lean supply chain management capability for the order-to-cash process.
  • It would deliver automated cost cutting.
  • It would provide continuous supply chain process improvement capability.
  • It would make manual process improvement unnecessary. That is, management wouldn’t need to do anything in advance to improve the order-to-cash cycle.

But more than one year later, these promised results had failed to materialize:

  • There was still no automated lean supply chain cost reduction.
  • There was no measurable gain in supply chain operational efficiency.
  • The order-to-cash process was not improving.

What’s worse, other pressures were affecting the company:

  • An acquisition was pending. This meant that supply chain management needed to rapidly take a lean transformation approach to productivity, because 25 percent more volume was on its way.
  • An overall industry slowdown was exerting its own pressure. Customers were cutting their own costs by reducing inventories. At the same time, they were clamoring for faster deliveries and fewer errors.

It was against this backdrop that this Top 3 cosmetics maker called The Lab Consulting for a Phase 1 lean supply chain initiative process review and Phase 2 lean supply chain transformation project.

Lean supply chain transformation initiative reviewed

The Lab’s sponsor on this supply chain improvement initiative was the company’s Senior Vice President for Order Management. Our objectives were numerous. They included:

  • Improve order to cash cycle times.
  • Supply chain operational efficiency gains.
  • Cost-cutting benefits while increasing customer satisfaction.

The lean supply chain transformation initiative spanned numerous aspects of the order to cash and supply chain management organization, including:

  • 80 different brands.
  • Diverse retail channels.
  • Customer service.
  • Credit and collections.
  • Master data and inventory.
  • Shared services.

We started our client with a seven-week analysis and business process review. Here, we documented the end-to-end order-to-cash cycle and supply-chain operations. To implement this lean methodology, we then launched into a six-month lean supply chain transformation. During the course of this initiative, The Lab implemented 175 lean supply-chain process improvements. And not one of them required new technology. To the contrary: They finally maximized the client’s investment in their recent ERP upgrade.

The transformation process improvements can be seen in the lean supply chain examples below:

Lean Supply Chain Transformation Example 1: A lean supply chain leverages efficient customer ordering options

Before The Lab stepped in, this customer’s clients were bewildered. They faced a virtually limitless number of ordering options, including labeling, packaging, and shipping. Applying lean supply chain principles, The Lab revealed that only 15 percent of these options were actually used often.

We then eliminated three-fourths of the ordering options. This simplification enabled Lean Six Sigma supply-chain process standardization. It also yielded faster delivery times—and major cost reduction.

Do you seek lean operations in your organization’s order management? Might some of these lean principles apply to you, too?

Lean Supply Chain Transformation Example 2: A lean supply chain brings discipline to error management

When The Lab stepped in to scrutinize this company’s supply chain and order-to-cash cycle, process errors were poorly tracked. The unfortunate results were hardly surprising.

  • Shipments from vendors were delayed.
  • Returned goods from customers were unacceptably high.
  • The company was spending too much time on avoidable customer contact.

Within the first month, The Lab implemented lean supply chain performance and productivity metrics. This hard data in the supply chain opened management’s eyes. They were finally able to see the most frequent errors—and impose discipline on the biggest “offenders” that increased cost of their supply chain operations.

Might a lean supply chain transformation initiative improve error management in your business?

Lean Supply Chain Transformation Example 3: A lean supply chain takes advantage of dedicated service teams

As it turned out, the majority of this client’s orders and product volumes were concentrated among just a few large customers. Yet each order was being processed as a standalone item, increasing redundancy while diminishing customer service.

To fix this, The Lab created dedicated order-to-cash service teams for high-volume accounts. Using team-based lean supply chain process standardization, we were able to eliminate repetitive service issues. And we were able to improve the customer experience, from order entry through delivery and collections.

Bottom line process improvement impact of this lean supply chain transformation

This transformation initiative paid off handsomely for our client. Examples of lean supply chain process improvement results are below:

  • Supply chain operating cost dropped more than 16 percent.
  • Capacity improvement leapt up 23 percent.
  • Order fulfillment cycle time dropped more than 25 percent.
  • Lean supply chain productivity in the order-to-cash cycle increased 30 percent. (This alone, by the way, was enough to absorb the anticipated increase in volume from the pending acquisition.)
  • Order errors plummeted more than 70 percent.

As we’d hinted above, this entire engagement broke even—that is, it paid for itself in hard dollars—in just six months. And by Month 12, the client’s investment in The Lab had paid for itself three times over. The customer had successfully completed lean supply chain transformation with The Lab.

Does your organization need to effect a lean transformation? Might you benefit from lean principles, lean methodology, and a lean supply chain? If so, contact The Lab. Between our unique self-funding engagement model and irresistible money-back guarantee, we can make your organization a lean case study, too.