Implementing Lean Manufacturing by Third Party Logistic Outsourcing
Lean manufacturing is one of the business philosophies of today that have been embraced by most corporations around the world. Though it was initially intended for the improvement
of manufacturing systems and processes, it made its mark throught the rest of the enterprise as well.
Lean manufacturing originated from the business policies of
one of Japan's top automobile maker Toyota. This is very obvious since several of the terms used in the lean manufacturing processes or systems are Japanese words like kaizen, kanban and andon.
Lean manufacturing has since been part of the business system and is regularly observed by most companies around the world.
Lately, lean manufacturing is being implemented by companies by hiring third party logistics. Lean manufacturing by third party logistics is possible by outsourcing.
Lean Manufacturing By Third Party Logistics
Outsourcing is currently the trend in most businesses today. In fact, General Motors of North America has been using outsourcing as part of its competitive advantage strategies. This company has plenty of experience when it comes to the analysis of an outsourcing company’s capabilities and solutions.
Lean manufacturing by third party logistics is being utilized by most of the companies today including General Motors. General Motors identified the Powertrain Warren plant where General Motors can implement lean manufacturing and they used third party logistics to do this.
It embraced lean manufacturing principles by third party logistics and used the plant to effectively manufacture engines. It also used lean manufacturing by third party logistics to resolve transportation issues.
Later general Motors decided to further use lean manufacturing by third party logistics for the entire group. Greater benefits are evident from the economies of scale. Clearly, the teachings of lean manufacturing are to add value and eliminate waste simplifying the manufacturing process.
Steps Done In Choosing Lean Manufacturing By Third Party Logistics
General Motors made its choice on what potential supplier or third party logistics to choose from a number of factors enumerated below:
1. The overall quality of the lean manufacturing by third party logistics.
2. The service of the lean manufacturing by third party logistics.
3. The available technology or innovation of the lean manufacturing by third party logistics.
4. The price of the lean manufacturing by third party logistics.
The Benefits From Lean Manufacturing By Third Party Logistics
In line with the principles of lean manufacturing, the outsourcing party must be able to do it all in the least costly and the most relaxed manner.
The strategy of General Motors to outsource its transportation function has been very effective and is rather working well. The third party logistics have a 99 percent record for on-time performance and has met its objective to gain significant savings for General Motors.
The lean manufacturing by third party logistics has been implemented rather well in the case of General Motors. The available visibility of the products and data information via the supply chain pipeline of General Motors has been a value that was unexpected.
Furthermore, the lean manufacturing by third party logistics strategy covered scanning of all the General Motor’s freight and updated the advance shipping notifications of General Motors.
To make sure that both parties will combine their efforts to continuously improve processes in line with the principles of lean manufacturing, the outsourcing arrangement will include a gain sharing component.
Lessons Available From The Outsourcing Journal
The lean manufacturing by third party logistics strategy is effective since outsourcing several of the company’s functions such as the transportation functions will allow a buyer to possibly leverage the strength of the supplier in the economies of scale in order to be able to achieve a number of objectives that include on-time performance and cost reduction.
From the view of the third-party logistics supplier, it will manage the transportation function. It may also decide on using subcontract arrangements for some portions of the route, or otherwise perform and deliver the transportation services along with the management decisive component.
Lean manufacturing by third party logistics have a gain sharing mechanism indicated in the outsourcing contract which is a highly effective option for an incentive as well as for continuous reduction of cost and the improvement of services.