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Introduction
WHY THIS BOOK AND WHY NOW?
With any new work, the question that always has to be answered is—why? Why a new book on supply
chain management and procurement? Why another book about lean systems? Why should we care? Is
there anything more important that we can learn from the concept of lean supply chain management?
Why a new book on supply chain management? The answer is simply because the works that exist
tend to treat SCM as product movement and delivery, and SCM is really something greater than that. In
fact, many books state that SCM is the same as logistics management,[1] using the Council of Logistics
Management definition. Practitioners in SCM will undoubtedly tell you there are very unique differences
between logistics and supply chain management. Throughout this book we revisit this difference and
demonstrate how integrating SCM into other business elements delivers the greatest improvements of
performance—with, yes, financial benefits as well!
Why a new book on lean? Most books on lean systems center on manufacturing operations and
material management within that environment. These books describe the tools and methods by which
to implement lean initiatives, the measures by which success is observed, and the support needed to
allow for implementation success. What they don't address is the pre-implementation events that need
to occur in the supply chain to enable the lean efforts within the four walls. This is where the value of
practical experience comes to play in how this question is answered. Linking supply chain efforts with
lean efforts—really making them one and the same—is the way in which both efforts are optimized. So
while this book addresses the use of lean tools and the integration with lean implementation internally,
it really creates a new definition and practice in lean.
Why should we care? Again, the answer is simple, cost … or, more important, profit. In a typical
manufacturing firm, procurement and supply chain costs make up about 50 percent of COGS (cost of
goods sold), and manufacturing contributes 30 percent. Improvement in these two factors can provide
the single biggest opportunity for profit improvement. At a 20 percent gross profit, it takes $5 of
improved sales to equal the profit effect of $1 of supply chain savings. While most readers of this work
will be either SCM practitioners or students, the truth of this story needs to be heard by the executive
management of our organizations so that the appropriate focus and effort is placed here. Typically,
organizations rally around sales strategies or overhead reduction strategies for improving profit, with
this biggest piece of SCM being lost.
Finally, does this or any book provide the roadmap to integrate SCM strategy into the larger business
strategy of a company? Many SCM initiatives have either been only moderately successful, or have
completely failed. Why? They've failed because they haven't been part of a corporate strategy other
than saving money. The tendency is that these plans are stand-alone, not usually an extension of the
company's manufacturing or technology plans, and may in fact be in direct conflict with the company's
goals and approach. This book was written specifically to be used as a strategic planning tool in
developing a world class supply chain and procurement plan.
This book doesn't jump immediately to implementation steps, but builds the overall business and value
systems that must be in place first. It addresses the different commercial and financial environments in
which an organization might find itself, and recommends specific approaches tailored to those
conditions. Finally, the book concludes by focusing on the SCM steps and implementation order that
facilitates the implementation of lean manufacturing within your own organization.
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