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International Journal of Operations & Production Management

Squaring lean supply with supply chain management


Richard Lamming

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To cite this document:
Richard Lamming, (1996),"Squaring lean supply with supply chain management", International Journal of Operations &
Production Management, Vol. 16 Iss 2 pp. 183 - 196
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Margaret Bruce, Lucy Daly, Neil Towers, (2004),"Lean or agile: A solution for supply chain management in the textiles and
clothing industry?", International Journal of Operations & Production Management, Vol. 24 Iss 2 pp. 151-170 http://
dx.doi.org/10.1108/01443570410514867
H.M. Wee, Simon Wu, (2009),"Lean supply chain and its effect on product cost and quality: a case study on
Ford Motor Company", Supply Chain Management: An International Journal, Vol. 14 Iss 5 pp. 335-341 http://
dx.doi.org/10.1108/13598540910980242
Martha C. Cooper, Douglas M. Lambert, Janus D. Pagh, (1997),"Supply Chain Management: More Than
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dx.doi.org/10.1108/09574099710805556
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Squaring lean supply with


supply chain management

Lean supply and


supply chain
management

Richard Lamming

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Centre for Research in Strategic Purchasing and Supply, School of


Management, University of Bath, UK

183

Origins of the concept: a supply system for lean production


A significant proportion of the research which resulted in the development of
the term lean production[1] was devoted to the investigation of the supply
system comprising the purchasing activities of the vehicle assemblers and the
supply activities of the component (or component system) manufacturers[3].
The first major article on the subject[4] mentioned this. The seminal work by
Womack et al.[2] devoted a chapter to the subject, and several subsequent
outputs from the International Motor Vehicle Programme stable have
concentrated on the supply side[5-7].
Thus, from the outset of the discussion on lean production, there has been a
focus on the role of the supply system (or supply chain, network, stream, etc.
the metaphors are many). In the context of the automotive industry, this was
natural, since a large part of the manufactured value of the car is provided by
component suppliers, and there is evidence to suggest that the same could be
true for the designed value in the form of proprietary product technology[8].
Attempts to understand lean production better, and to develop the concepts
further and in different sectors, must therefore include an investigation of
supply management[10].
Inter-firm supply relationships exhibit very different natures when sectors of
commerce and industry, and indeed, dfferent products within one sector, are
contrasted with one another. In terms of the technology that differentiates the
final product in the mind of the consumer, for example, any one of many
situations may exist. The high street retailer selling washing powder is highly
dependent on the manufacturer of the product for its technology, just as the
computer manufacturer is reliant on the microprocessor producer. The same
high street retailer, however, may invest substantial sums in developing, say, a
suppliers food product to the retailers own specifications. This was noted in the
context of the retail store Marks & Spencer by Tse in 1985:
In order to carry out his task, the [M&S] technologist is seldom found in the office. Apart from
visiting the stores, he spends a tremendous amount of his time at the suppliers plants. He
works closely with the manufacturers technical personnel and is readily available for
consultation and advice. To Marks & Spencer, a manufacturer supplying merchandise to the
company is regarded almost as part of the operation[13, p. 92].

At the time, Marks & Spencer had a team of 350 technologists. Other retailers
learned the lesson also: for example, in developing a new Brazilian wine for its
low price market between 1991 and 1994, the supermarket company Tesco spent

International Journal of Operations


& Production Management, Vol. 16
No. 2 1996, pp. 183-196. MCB
University Press, 0144-3577

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very significant amounts of time and effort not only in perfecting the taste of the
product but also in changing the way the vineyard was managed. The efforts
transformed the wine from unpalatable (to Europeans) to a major UK success.
Many manufacturers of electronic equipment, meanwhile, use standard parts
to build their products, and provide the differentiating technology of the final
product almost entirely from their own research and development resources.
This is so, for example, in the case of base stations for cellular communications,
where the rapid rate of technological development is being faced principally on
the basis of in-house research and development, with suppliers (themselves
high technology companies) acting in a loyal collaborator mode[14].
The degree to which product technology flows between the customer and
supplier depends on the relationship between the two organizations, which is
itself usually deemed to be affected by the different levels and types of power
which each may exercise[15]. One might expect that, in situations in which the
customer is dependent on the supplier because of the nature of the product (e.g.
automobiles/components, retailer/washing powder), the inter-firm relationship
would exhibit attitudes and behaviour indicative of common interests and
collaboration. In fact, such relationships appear to exist only rarely, suggesting
that the crude commercial power (i.e. buyers market or sellers market) has
more influence than the potential benefits in terms of competitive or attractive
final products, which might accrue from efficient flows of technology between
the stages of manufacture (and distribution).
The logic of lean production, leaving aside for a moment its implications for
working practices and social impact, describes value-adding processes
unencumbered by waste (non-value adding activities). This is intuitively
appealing in a scientific sense for two reasons:
(1) It implies a total view of the process from raw material source to end
consumer, and perhaps beyond, through recycling of materials.
(2) It does not limit the focus to traditional assumptions on necessary or
unnecessary activities: wasteful practices must be defined anew in the
search for lean systems.
It must be said immediately that there have been objections from some
observers who feel that a truly lean system would lack the basic flexibility
necessary for it to function in a real situation. This flexibility might take the
form of time to think or space to experiment, etc. These arguments are also
intuitively appealing, since they reflect personal experiences associated with
creativity, enjoyment and survival in a busy, competitive world. Since the
concept of lean production grew out of significant observed competitive
advantage, and the whole principle is based on the existence of a free market,
arguments for the inclusion of non-lean elements in systems (slack) can only be
accepted when expressed in terms of adding to competitive advantage in a
general, long-term sense. For example, a workforce which has no time to think
might not deliver innovation through suggestion schemes, and might dislike
their jobs so much that their organization would derive no benefit from their

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motivation. A solution to this might be apparent over-manning or time set aside Lean supply and
for thinking, neither of which would add value in the short term, justification
supply chain
(and monitoring) being provided in terms of organic benefits to the system (in
management
the sense proposed by Burns and Stalker[16]).
This same argument may be used for the relationship between a manufacturer
and its suppliers. A lean supply arrangement should provide a flow of goods,
services and technology from supplier to customer (with associated flows of
185
information and other communications in both directions) without waste.
Supply chain management in theory
Supply chain management is a theory grounded in the field of logistics.
Introduced by Houlihan[17] in 1984, its development was initially along the
lines of physical distribution and transport, using the techniques of industrial
dynamics, derived from the work of Forrester[18]. Reflecting this heritage,
Christopher[19] observes that supply chain management covers the flow of
goods from supplier through manufacturing and distribution chains to the end
user. Other titles have been given to this concept, but none has stuck so well
(although the notion of pipeline management is worth exploring)[20].
Recently, research on supply management has focused on a debate regarding
the need for closer relationships between customers, suppliers and other
relevant parties, in the search for competitive advantage. The arguments for
closer relationships begin with the firm theories of Coase and the transactional
economics work of Williamson, sometimes addressing the interorganizational
relationships concepts of writers such as Van der Ven, which led theorists to
identify the concepts of networks, as opposed to supply chains[21].
There is evidence of benefits accruing to proponents of close relationships
sometimes called supply partnerships and also suggestions that initial attempts
have not always brought the expected prizes. For benefits, see [26-33] and for an
account of benefits not realized, see [34]. Some have suggested that such ideas are
only for large organizations[35], while others have shown that small firms expect
and plan to gain benefits from developing close relationships[36].
The theory of supply chain management holds that, for the eventual product
or service to be commercially advantageous to the organizations involved in its
creation and provision, value must be added to a process faster than cost. The
meaning of value derives from the consumer market and is translated back
along the processes in the supply chain. The simplicity of this idea has led over
the last century to a focus on the short-term implications of supply:
optimization of individual benefits within a market-driven context, or dog eat
dog. The only supply chain that has been clearly incorporated into general
management of organizations, therefore, has been that between stages in the
internal process: materials supplied to production; information supplied by
designers to cost accountants; demand figures supplied by market planners to
production planners; products passed from production sales, and so on.
Relationships in such internal supply chains have been typically poor with
departmental, functional, professional and divisional separations reinforced by

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the strengthening provided by the common enemy syndrome, underpinned


by the propensity to blame others for any mistake, in order to protect ones own
position and continued employment.
Beyond the traditional boundaries of the firm, however, the focus on value
and cost accumulation has been limited to the mechanics of purchasing (e.g.
negotiation) and logistical issues (e.g. elimination of noise in supply systems).
The focus on partnerships in supply provides a welcome challenge to
organizations and researchers, perhaps heralding a change in organizational
shape and form, rather than a new tactic in short-term goal optimization.
In the retailing sector, a concept known as efficient consumer response
(ECR) has been developed in the USA[37] to describe supply chain management
with a focus on the final customer for a product (or, in theory, a service). This
concept is akin to others, such as vendor managed inventory, co-managed
inventory, etc., each adding an extra emphasis on modifying traditional
behaviour in supply chains. Associated practices include efficient
replenishment, continuous replenishment and cross docking, each relating
the concept of customer service to a practical logistics technique. While such
techniques are still young, there are many ways in which logistical advantage
may be sought by varying the perspective taken (e.g. whose responsibility is it
to ensure that products are on the shelves in the shop or store?).
Similarly, developments in information technology have provided new
opportunities for supply chain managers to improve their control of logistics
by enabling information to be shared between parties (e.g. via electronic data
interchange), responsibilities to be realigned (e.g. so that the supplier may
access stock level data and take the necessary replenishment action) and new
directions taken in strategic development[41].
Fundamental to the theory of supply chain management is the notion of
exercising control of an identified sequence of activities from a vantage point.
This vantage point is usually occupied by the firm or organization conducting
the last significant transformation of the product before it reaches the consumer
(through the downstream supply chain). Thus the manufacturer of televisions
looks back (upstream) at its suppliers of raw materials, components, packaging,
etc. and decides who should play which role, and forward, via the distribution
network, that dances to its tune. In the case of a service, the organization which
is in direct contact with the consumer may be expected to occupy the vantage
position (e.g. a hotel or an airline). The components suppliers in the first case
might describe themselves as being in the television manufacturers supply
chain. The providers of laundry services to the hotel, or bread rolls to the airline,
might take a similar view.
This notion is unfortunately linked to the aphorism that holds that the
customer is never wrong[42]. The corollary to this is that, in a dispute, the
supplier must be at fault. This is a feature of supply chain management
possibly a fundamental flaw that we shall explore below. It is also a
differentiator in this discussion, since it would have no place in lean supply.

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Lean supply in theory


Lean supply and
In lean supply, the entire flow from raw materials to consumer is considered as
supply chain
an integrated whole. Interfaces between stages (i.e. between companies
management
suppliers and customers) are thus seen as artificial created not as natural
transformation stages in the development (or addition) of value, but as a result
of the economic arrangement of assets (boundaries of firms) governed by many
other factors (e.g. labour skills, convenient configurations of technology,
187
geographical location of raw materials, etc.).
The fundamental principle of lean supply is that the effects of costs
associated with less than perfect execution of a sub-process are not limited to
the location of the execution. In other words, the need for, say, a progress chaser
within the customers organization, to expedite deliveries traditionally arriving
late from the supplier, is to the detriment not only of the customer, but also of
the supplier in fact of all the suppliers, even those whose delivery performance
does not warrant expedition. This is a fundamental point, since lean supply
does not recognize the traditional positions of customer and supplier, which
tend to obscure the central quest for the removal of waste. In the example given
above, suppliers developing lean supply would identify the costs to them of
dealing with a customer that needed progress chasers to manage deliveries, and
switch, in the long term, to those which did not. In this way, the lean suppliers
will ensure that their value is transferred to the end consumer in the most
efficient way, thus ensuring their survival[44].
Similarly, while the pressure placed on the customer by the end (consumer)
market, for lower retail prices, and thus reduced production costs, may be
logically passed on to the suppliers of materials and components, any departure
from perfect execution within the suppliers operation thus caused is of concern
to the customer, as well as to the supplier. Thus, the early attempts to implement
just-in-time operation, which resulted in problems (as embodied in inventory)
being passed back along the supply route to suppliers, failed to recognize that
the impact of the problem had not been removed[46].
This realization may be characterized as the customer and supplier being in
the same boat, or, perhaps, by the concept of mutual destiny recognized by
neighbours in the supply chain. It is certainly a close relative of the development of process-oriented organizations (as opposed to functionally oriented).
Lean supply may be summarized, therefore, as the product of an operating
attitude that recognizes the cost associated with any departure from perfect
execution of the tasks necessary to provide long-term customer satisfaction,
thereby achieving total eradication of those costs. While in theory it is an
absolute, in practice it may be acceptable to be leaner than competitors while
never achieving total leanness. At the level of overall operation (or total
supply chain) it may be impracticable to achieve such philosophical perfection.
At the level of a specific point in a supply chain, however, it should always be
possible to identify whether or not the current practice is lean, and perhaps how
far towards total lean operation it might be possible to move.
A discussion of three specific features of the theory of lean supply at this
point should help in the subsequent comparison of lean supply and supply

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chain management: cost transparency, relationship assessment, and excuses


and blame.
Cost transparency
In attempting to control the supply chain from their vantage points, customers
have developed techniques which are known collectively as open-book
negotiation. In fact, this is not a new concept, but a traditional ploy of
purchasers, used to obtain increased power over suppliers. The reasoning goes
something like this: the customer would like to help the supplier to improve
(supplier development discussed below) in order to become more
competitive. If the supplier is competitive, then both the customer and supplier
should benefit. The customer has expertise (e.g. in production engineering) and
thus, if the supplier reveals all the cost data relating to the process that results
in the product or service that is being provided to the customer, it should be
possible to generate improvements, solve problems, etc.
Best practice in supply chain management might therefore be expected to
include a process of formalized open-book negotiation.
Suppliers are, of course, not fooled by this for one moment. Why should the
customer be intrinsically able to help the supplier to improve? In the case of, say,
a vehicle manufacturer discussing panel stamping with its tooling supplier,
there is an apparent logic to the argument. But, what does the airline know
about baking bread rolls?
In the famous cases of strong customers developing so-called philosophical
approaches to operations (e.g. Toyota production system[47]) the influence on
the supplier might be profound and not limited to product/service specific
improvement. Items such as housekeeping, employee development, and
even good general business management might be areas where an
accomplished customer might help a (very grateful) less developed supplier.
Open-book negotiation is typically not this way, however, and has gained a bad
(or at least doubtful) reputation because of its use as just another weapon in
the customers arsenal[48].
As noted above, lean supply does not recognize artificial boundaries in the flow
of supply invented for the convenience of commercial arrangements. The search
for improvements is an essential part of lean supply (i.e. inter-firm kaizen) but
there is no natural reason why this should not take place in several directions: at
least two the customers involvement in the suppliers process and vice versa.
For lean supply to be a reality, therefore, customers must share process
information, including cost data, with suppliers and accept ideas that come
from upstream, as readily as they expect to influence their supply chain
partners. They are survivors in the same boat joint guardians or stewards of
the same value-in-transit.
Relationship assessment
Another practice developed from the vantage point syndrome is that of vendor
assessment. We have dealt with this elsewhere[49] but a brief summary is
worthwhile here.

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The original approach to vendor assessment was based on the customer Lean supply and
assessing the supplier applying techniques and processes with steadily
supply chain
increasing levels of sophistication, during the 1970s and 1980s.
management
During the late 1980s, some purchasers began to see the fatal flaw in the
traditional version of vendor assessment the complacency derived from the
vantage point. Customers might be able to criticize and even improve
189
suppliers, on the basis of vendor assessment schemes, but might themselves
remain very bad (inefficient) customers, without the benefit of the suppliers
criticism, experiences and viewpoints. Best practice in supply chain
management might therefore be expected to include some formalized scheme
for two-way assessment: the customer assesses the suppliers performance, at
the same time asking for feedback on how good a customer they are. In lean
supply, however, this context is revealed as flawed. Even if the organizations in
the supply chain could be optimized through this process (itself a very doubtful
premiss) the health of the vital link in the chain the supply relationship
would not be addressed. Thus, it is necessary to develop relationship
assessment programmes, in order to focus on the critical feature of supply the
way in which value flows from one organization to another[50].
In order to develop this, a customer would have to adopt considerable
humility in agreeing that the supply relationship was a jointly owned entity,
with the supplier having an equally important view on its development. This is
not yet a commonly apparent feature of supply chain management.
Excuses and blame
A common feature of operating systems is the use of excuses and blame by its
managers. When something goes wrong, it is usual to make an excuse, in order
to avoid penalty, and to blame another party for the problem and thus not only
avoid penalty to oneself, but possibly gain some moral high ground type of
advantage over the blamed party.
Excuses and blaming result in increased process cost for the party using
them, since the problem that has given rise to their use is not resolved but stored
for future re-emergence. The opposite of this process is embodied in such
practices as the five whys and Ishikawa diagrams, employed in total quality
management[51,53].
The false importance given to the interfaces in supply chains (i.e. the focus on
each firms fate in isolation) gives an opportunity for the use of blame and
excuse and is in part dependent on it: (It wasnt this companys fault the
supplier let us down).
The luxury of this laxity is denied by lean supply. Problems that occur are
targets for solution, not opportunities for reinforcement of artificial
impediments in the flow of the supply chain. Lean supply therefore may be seen
at best as a no blame-no excuses culture, or at least as one in which blames
and excuses are identified and costed. The cost of blaming may then be
attacked in similar ways to the cost of non-quality, again a feature of total
quality. The concept of honesty that is embedded in this proposition may

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seem far fetched. It is, however, precisely the same concept that underpinned
the massive success of the Quakers in the nineteenth century[54-56].
The techniques contained in the strategies of efficient consumer response,
vendor managed inventory, and the exploitation of new information
technologies to remove delay and duplication in the supply system find
resonance in lean supply a similar approach of modifying basic assumptions
may be seen to apply, with the same acceptance of new roles for suppliers and
customers beyond traditional hierarchical stances.
It may be seen, therefore, that the theory of lean supply calls for development
of revised attitudes in purchasers and suppliers. The concept of the vantage point
is not helpful in developing genuine shared benefits and, indeed, while some
degree of leadership might be necessary in any given supply situation, the notion
of customer infallibility may be leading purchasers to a fatal misconception.
Current best practice in supply chain management
It must be said at the outset that the term best practice is intuitively
unappealing. The suggestion that anything can be called best attracts criticism
from two fronts: that challenging the idea of universal applicability (the horses
for courses argument) and that supporting continuous improvement (the best
is the enemy of better concept). Since research in the area of operations
management is intrinsically linked with practical considerations, however, the
concerns of managers are close to its heart and influence both the direction and
nature of conceptualization. The identification of some best practice is, perhaps,
more attractive to the practitioner, who has to survive today as well as envisage
tomorrow a notion that is supported by the growth in popularity of
benchmarking projects over the past decade.
In attempting to manage, or conceptualize, the complex relationships between
business organizations, there can be no authentic, identifiable best practice there
are simply too many variables. We may speak, however, of beneficial practice
that combination of practices and concepts which appears, within a discrete time
frame, to provide some competitive advantage to a business organization. The
most beneficial practice might, within a limited context, be termed the best.
So, what might best practice in supply chain management look like?
One of the defining features of supply chain management (as opposed, for
example, to purchasing) is the extent of vision required on the part of managers,
with respect to their value-adding system, and the influence they must seek to
have over it. It has become fashionable to speak of tiers of suppliers a term
taken from the Japanese keiretsu form of organization, in which suppliers close
to the final industrial customer (i.e. that firm whose market is the consumer)
play a strategic role, marshalling the efforts of their own suppliers who are
seldom in touch with the eventual customer, and so on down the supply base
structure. In fact, there is much more to tiering than simply requiring some
suppliers to report to others: the horizontal links within a tiered supply base are
of crucial importance (as they are in other types of tiering, e.g. theatre seating).
The concept of the kyoryokukai or supplier organization is a newcomer to

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western management, but may represent a fundamental shift in practice, within Lean supply and
the context of supply chains (see [57]).
supply chain
Best practice must, it would seem, take account of a structured view of the
management
entire supply chain, presumably with greater detail of the operations closest to
those of the firm itself (however it is organized and bounded), and some form of
horizontal structure, to provide stability for the supply base. The early work on
industrial dynamics set the scene for the role of information systems within
191
supply chains from Forresters anomaly of distortion to the simplicity of the
kanban in just-in-time systems. Clearly, a strategy for managing information
smoothly and effectively is essential for supply chain management[41].
Strategies for supplier development: cascade versus intervention
As discussed above, the concept of supplier development arose from the practices
of open-book negotiation and vendor assessment, coupled with the hegemony of
successful companies and the conviction of infallibility on the part of customers.
In addition to this, the past three decades have seen the growth of awareness,
in the West, of the importance of product quality in global competition
(especially in contrast to the successful developments in this respect in Japanese
exports), and a resultant widespread emphasis on total quality. The
standards and ISO 9000 has reinforced the fashion for customers to develop
their own supplier performance criteria and exclude suppliers that fail to
conform. Two strategies have emerged from this practice, named, for the
purposes of this discussion, cascade and intervention.
The cascade metaphor is not new in management terms: the suggestion is that
some decision is taken at a high level and the implications flow down to lower
levels which, in turn, pass them on to their subordinates, and so on, like a
cascading fountain. It is a term frequently used in practice, in the field of policy
making. Its use in the area of supply, however, requires acceptance of the
customer occupying a higher position than the supplier (the vantage point)[58].
The cascade strategy in supply chain management thus entails passing the
customers ideas to the supplier, assuming that they will pass downwards to
the suppliers suppliers, and so on. The customer sits atop a pyramid of
companies, each of whom is washed with the same policy which originates on
high. Forgetting for a moment the invidious implications of this rather crude
hierarchical model, let us consider the likely effects of this approach.
First, the cascade model assumes that it is sufficient for the customer to dictate
and to delegate responsibility for implementation of the policy. This would be the
case in a statement such as: All our suppliers are required to become certified to
ISO 9000. After 1 January 1995 we shall only buy from suppliers who have
achieved this. A similar case would be represented by the substitution of a
company specific vendor assessment scheme in place of ISO 9000.
An apparently more justifiable cascade approach might be, The suppliers
competitive position is his own concern: we will deal only with those suppliers
who can meet our requirements and survive in a competitive market. The
practical manifestation of this policy, of course, is traditional competitive
tendering. The effect of either of these strategies is to emphasize the divide

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between customer and supplier. This is a competitive position between parties


who need each other to survive. The supplier will react accordingly to the
message such a strategy imparts: traditional interaction is based on the
assumption that the other party (customer or supplier) will employ guile. Taken
to the extreme, this situation can paralyse entire industries[60].
The cascade strategy has clear potential as a weeding out tool, a necessary
item for many purchasers in the process of rationalizing their supply bases[61].
Despite its shortcomings in a more mature situation, however, it is still widely
used in supply chain management. The alternative to cascade is intervention.
This strategy is based on the belief that the customer is able to intervene in the
suppliers business operations and bring about change for the better so called
supplier development. As noted above, this term has paternalistic overtones
implying that it is only the supplier that needs to develop (or be developed) and
that the customer can see how to do this (from the vantage point).
In practice, two sorts of intervention strategy are apparent. In the first, the
customer takes the paternalistic role (We send a team of experts to the supplier
to sort out his business and recommend action). In the second, the approach is
more co-operative the customers experts work side by side with the suppliers
personnel, in order to develop improvements though joint effort.
The UK automotive industry provides an example of this. Two of the key
vehicle manufacturers (VM-A and VM-B) currently operate intervention schemes
that appear similar until examined closely. Both have the concept of a quick
response improvement identifying an opportunity for improvement in a day or
two of discussions and implementing it in a further three days. A large part of the
efficacy of this technique is due to the sense of urgency which it creates. As
happens with some crash diets, however, unless the work done is consolidated, it
is likely that the benefits will be short lived. The policy of VM-A is to intervene
for three days, in which time the supplier and customer identify an opportunity,
implement the improvement and measure the benefit. Following this, VM-A
withdraws and expects the supplier to carry on the good work a switch from
intervention to cascade. VM-B has the same initial technique, but follows the
intervention with a further team visit some days later. The members of this
second team remain with the supplier until everyone is satisfied that the
improvement has been integrated into working practices. Thus, intervention may
be seen to be more than the opposite of cascade: it is a multi-stage strategy, with
different types of intervention being employed, as appropriate.
The cases of Marks & Spencer and Tesco, referenced above, provide other
examples of intervention strategies. In both cases, the customer may be said to
have adopted a benevolent approach, the results of which left the supplier
arguably better suited not only to that customers requirements but also to the
wider demands of the market in general. Best practice in supply chain
management might therefore be expected to include some mix of strategies
cascade and intervention designed in contingent fashion to be adapted to the
needs of the relationship. The customer must ensure that the supplier is not
insulated from the consumer market forces (as might happen, for example, in
the case of vertical integration which might be characterized as a total

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intervention strategy) but must also recognize the common interests which Lean supply and
may be served by a shared response to competitive pressures.
supply chain
Lean supply versus partnership an example
In order to illustrate the differences between lean supply and intervention
strategy in supply chain management, we may consider the case of an Italian
manufacturer, identified here as Ditta SpA. This company is located in north
east Italy and manufactures a high technology, high complexity product that
fits into its clients products, to be marketed to consumers. The clients are all
skilled in manufacturing processes similar to those conducted by Ditta but are
accustomed to working in high volumes. Ditta, on the other hand, has chosen to
specialize in making high profile, niche products (or systems which constitute
large parts of them) for its clients to market.
A French client has been dealing with Ditta for many years but has only
recently begun to treat the Italian firm as a partner. In fact, although the
systems that Ditta makes constitute almost the total value of the French clients
product (i.e. the package that it sells to consumers) in some cases, the
relationship has been one of master-servant, with Ditta allowed to make only
minor decisions in sourcing components. This is a very limited expectation for
the French client to exhibit in respect of a first-tier supplier.
As part of its supplier development programme, the French client has now
started to intervene in Dittas supply operation. Ditta has its own supplier
accreditation (vendor assessment) scheme, but the French client insists on
visiting the second-tier suppliers itself. This is an intervention strategy which
may only be considered part of a partnership approach if it is conducted in a cooperative manner. In this case, however, the visits to second-tier suppliers are
characterized by the French clients representatives insisting on activities being
done in the way they stipulate, embarrassing Ditta in front of its suppliers. Ditta
cannot refuse the clients proposals, even though it often has a better way to solve
a particular problem. It also needs to develop its relationships with suppliers but
finds the intervention of the French client disruptive in this respect.
Finally, the French client exhibits nationalist tendencies, often refusing to
condone Dittas choice of supplier, requiring instead that a French firm is
awarded the business. If Ditta persists and does manage to gain agreement for
one of its partner suppliers to supply a component in preference to the choice of
the French client, it feels that the French are just waiting for something to go
wrong to say I told you so. The French client is using a vantage pointintervention strategy in this case. As a result, it is unable to develop lean supply,
since the potential contribution of Ditta is not valued. Dittas strategy is to
develop lean production in its own operation and to demonstrate to the client
and others that it is capable of running its own supply base, perhaps with cooperative, rather than dictatorial, intervention from the client.
Conclusion: lean supply as a challenge for supply chain management
The challenge of lean supply for proponents of supply chain management is to
redesign the way in which responsibility for value management is shared, in

management
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194

order to exploit expertise wherever it lies in the chain and to recognize the
impacts in one part of the chain of decisions made in another. The precepts of
vantage point and customer superiority that are central to supply chain
management are directly contrary to those of lean supply. Though leadership
and initiative are necessary parts of continuous improvement, preconceived,
intransigent ideas of who should play such roles are not productive in the long
term in a supply relationship.
The theory of lean supply does not lend itself to straightforward implementation. The implicit attitudinal shifts may be more difficult to achieve than the
practical approaches of vendor assessment and open book negotiation, or the
strategic choices of intervention or cascade. However, lean supply, as lean production, derives from market competition: its exploitation may not be a matter
of choice for very long.
Notes and references
1. International Motor Vehicle Programme, MIT, Cambridge, MA, 1986-1990. This research
is reported in [2].
2 Womack, J.P., Jones D.T. and Roos, D., The Machine that Changed the World, Rawson
Associates, New York, NY, 1990.
3. Eleven of the 55 researchers involved in the project were engaged on research in this area.
In addition, later activities on the central benchmarking work incorporated supply issues,
from the assemblers point of view. Several of the industrial sponsors of this research were
component manufacturers.
4. Krafcik, J.F., Triumph of the lean production system, Sloan Management Review,
Autumn 1988, pp. 41-52.
5. Helper, S.R., How much has really changed between US automakers and their suppliers?,
Sloan Management Review, Summer 1991, pp. 15-28.
6. Lamming, R.C., Beyond Partnership: Strategies for Innovation and Lean Supply, PrenticeHall, Hemel Hempstead, 1993.
7. Nishiguchi, T., Strategic Industrial Sourcing: The Japanese Advantage, Oxford University
Press, New York, NY, 1993.
8. This is discussed at length in Lamming[6] and by Clark and Fujimoto[9].
9. Clark, K.B. and Fujimoto, T., Product Development Performance, Harvard Business School
Press, Boston, MA, 1991.
10. The term supply management is used in the sense proposed in Kraljic[11] as a
replacement for less satisfying terms such as purchasing or procurement (with too
much emphasis on the act of spending money) and supply chain management (an
incomplete metaphor see New[12]).
11. Kraljic, P., Purchasing must become supply management, Harvard Business Review,
September/October 1983, pp. 109-17.
12. New, S.J., Supply chains some doubts, Proceedings of the 3rd International IPSERA
Conference, University of Glamorgan, Wales, 1994.
13. Tse, K.K., Marks & Spencer: Anatomy of Britains Most Efficiently Managed Company,
Pergamon Press, Oxford, 1985, p. 92.
14. This term was developed by Lamming[6].
15. Ramsay, J., Purchasing power, European Journal of Purchasing and Supply
Management, Vol. 1 No. 3, 1995, pp. 125-38.
16. Burns, T. and Stalker, G., The Management of Innovation, Tavistock, London, 1961.

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17. Houlihan, J., Supply chain management, Proceedings of the 19th International Technical
Conference of the British Production and Inventory Control Society, 1984, pp. 101-10.
18. Forrester, J.W., Industrial Dynamics, MIT Press, Cambridge, MA, 1961.
19. Christopher, M., Logistics and Supply Chain Management: Strategies for Reducing Costs
and Improving Services, Pitman, London, 1992, p. 13.
20. Farmer, D.H. and Ploos van Amstel, R., Effective Pipeline Management: How to Manage
Integrated Logistics, Gower, Aldershot, 1991. This is worthy of note not only because it was
derived by some of the leading thinkers in the area, but also because it raises the question
of key influences in the flow.
21. The original work in Coase[22] provides the starting point for discussions on inter-firm
relationships, largely developed by the equally important work of Williamson[23]. The
organizational context is developed further by Van de Ven et al.[24]. These three sources
led to the work of the so-called Industrial Marketing and Purchasing group summarized
well in Ford[25].
22. Coase, R.H., The nature of the firm, Economica, Vol. 4, 1937, pp. 386-405.
23 Williamson, O.E., Markets and Hierarchies, Free Press, New York, NY, 1975.
24. Van de Ven, A.H., Emmit, D.C. and Koenig, R., Frameworks for inter-organizational
analysis, in Negandhi, A.R. (Ed.), Interorganizational Theory, Kent State University Press,
Kent, OH, 1975.
25. Ford, I.D. (Ed.), Understanding Business Markets: Interaction, Relationships, Networks,
Academic Press, London, 1990.
26. Ring, P.S. and Van de Ven, A.H., Structuring co-operative relationships between
organizations, Strategic Management Journal, Vol. 13, 1992, pp. 483-98.
27. Kanter, R.M., Collaborative advantage: the art of alliances, Harvard Business Review,
July-August 1994, pp. 96-108.
28. Macbeth, D.K. and Ferguson, N., Partnership Sourcing: An Integrated Supply Chain
Approach, Pitman, Financial Times, London, 1994.
29. Partnership Sourcing Ltd, Partnership Sourcing, CBI, London, 1991.
30. Partnership Sourcing Ltd, Making Partnership Sourcing Happen, CBI, London, 1992.
31. Partnership Sourcing Ltd, Partnership Sourcing in the Service Sector, CBI, London, 1993.
32. Roy, R. and Whelan, R., Successful recycling through value chain collaboration, Long
Range Planning, Vol. 25 No. 4, 1992.
33. Griffiths, J. and Whitehouse, J., The Bisons project, European Journal of Purchasing and
Supply Management, Vol. 1 No. 2, 1994, pp. 107-13.
34. Sako, M., Lamming, R.C. and Helper, S.M., Supplier relations in the UK car industry: good
news bad news, European Journal of Purchasing and Supply Management, Vol. 2 No. 1,
1995.
35. Ramsay, J., The forgotten majority academia and the small buyer, Proceedings of the
3rd International Conference of the IPSERA, University of Glamorgan, 1994.
36. Lamming, R.C. and Oggero, D., Purchasing and supply relationship management between
small customers and their larger suppliers (SCuLS), Proceedings of the 4th International
Conference of IPSERA, University of Birmingham, 1995.
37. The notion of efficient consumer response appears to have little depth to it, consisting, in the
literature, mainly of a series of checklists and generalized good intentions (i.e. with regard to
customer service). It is, nevertheless, being developed and explored and may give way to some
deeper concept regarding interaction of customers and suppliers in supply chains (see [38-40]).
38. Kurt Salmon Associates, Efficient Consumer Response: Enhancing Consumer Value in the
Grocery Industry, London, January 1993.
39. Cleveland Consulting Associates, Continuous Replenishment An ECR Best Practices
Report, Cleveland, December 1994.

Lean supply and


supply chain
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40. Partch, K., ECR 93: playing the consumer card in supply chain management,
Supermarket Business, May 1993.
41. Scott Morton, M.S. (Ed.), The Corporation of the 1990s: Information Technology and Organizational Transformation, Oxford University Press, New York, NY, 1991, for a discussion on
the opportunities for business network redesign, business scope redefinition, etc. offered by
advanced approaches to information technology.
42. The phrase is attributed to H. Gordon Selfridge, American founder of the British
department stores which bear his name[43].
43. Rees, N., Dictionary of Phrase and Allusion, Bloomsbury, London, 1991.
44. This is akin to the notion of the gene as a long-term survivor (as proposed by Dawkins[45]).
The surviving entity in this model the gene uses bodies in which it exists, to ensure
its survival. In the commercial version, the value that reaches the consumer may be seen to
use the business organizations through which it passes. In order to survive, the value must
choose efficient organizations.
45. Dawkins, R., The Selfish Gene, Oxford University Press, Oxford, 1976.
46. In a study by Sako et al.[34] over half of all automotive components suppliers in the USA,
nearly a half (46 per cent) in Europe, and just over a third of all suppliers in Japan agreed
with the statement: JIT only transfers inventory responsibility from customers to
suppliers. In both the USA and Japan, the statement was less likely to be endorsed by
suppliers with partnerships (one-third in the USA and 30 per cent in Japan).
47. Monden, Y., Toyota Production System, Industrial Engineering and Management Press,
GA, 1983.
48. Quote from a UK materials supplier in a recent postal survey.
49. Lamming, R.C., Cousins, P.D. and Notman, D.M., Vendor assessment: the state of the art,
working paper, Centre for Research in Strategic Purchasing and Supply, University of Bath
School of Management, 1995.
50. The concept was first introduced in Lamming[6] and is discussed further in Lamming et
al.[36].
51. For an explanation of total quality techniques such as these and the five whys,
mentioned later, see [52].
52. Crosby, P., Quality Is Free, McGraw-Hill, New York, NY, 1979.
53. Ishikawa, K., What Is Total Quality Control? The Japanese Way, Prentice-Hall, Englewood
Cliffs, NJ, 1985.
54. Barbour, H. and Frost J.W., The Quakers, Greenwood Press, New York, NY, 1988.
55. Binton, H.H., The Religious Philosophy of Quakerism, Pendle Hill, Wallingford, PA, 1973.
56. Hurst, D.K., Crisis and Renewal: Meeting the Challenge of Organizational Change, Harvard
Business School Press, Boston, MA, 1995.
57. Hines, P.A., Creating World Class Suppliers: Unlocking Mutual Competitive Advantage,
Pitman, London, 1994.
58. It is a curious anomaly that proponents of supply chains frequently use two directly
conflicting terminologies simultaneously. The suppliers are upstream of the customer (who
should thus look up to them) and yet ideas and requirements may be passed, or cascaded,
down to suppliers. It may be that preoccupation with the Japanese tiered model is
responsible for this. The jargon of strategy compounds the issue, speaking of backward
integration when referring to a takeover of a suppliers operation a horizontal metaphor.
59. Lamming, R.C., A Review of the Relationships between Vehicle Manufacturers and
Suppliers, DTI Vehicles Division/SMMT, London, UK, 1994.
60. For an account of such paralysis in the UK automotive components industry, see [59].
61. Cousins, P.D., Supply base rationalisation myth or reality, Working paper, Centre for
Research in Strategic Purchasing and Supply, University of Bath, UK, 1995.

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