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.

January 2002 1

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.

January 2002 2

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.

January 2002 3

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.

January 2002 4

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

January 2002 5

Corporate strategy includes a SC strategy?

No Yes Total Model of operation


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


January 2002 6

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


January 2002 7

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.


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

January 2002 8

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


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



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


January 2002 9

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


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


January 2002 10

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.


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


January 2002 11

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

January 2002 12

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

January 2002 13

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)


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)


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).

January 2002 15

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


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


January 2002 16

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.


No Yes Total

Importance of LeanSupply Chain strategy increating competitiveadvantage in the future


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


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


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


3. 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


3. Important


5. Very important

January 2002 27

References

1, Harrison A and New C (2001). ‘The role of coherent supply chain strategy and

performance management in achieving competitive advantage: an international

survey’, Journal of the Operational Research Society, Vol.52, 1-9.

2, Fisher ML (1997). ‘What is the right supply chain for your product?’ Harvard

Business Review, Vol.75, No.2, pp 105-117.

3, Stuart FI (1997). ‘Supply-chain strategy: Organizational influences through

supplier alliances’, British Journal of Management, Vol.8, No.3, pp 223-236.

4, Ansari A, Lockwood DL and Modaress B (1999). ‘Supplier product integration a

new competitive approach’, Production and Inventory Management Journal, Vol.40,

No.3, pp 57-61.

5, Gulati R, Nohria N and Zaheer A (2000). ‘Strategic networks’, Strategic

Management Journal, Vol. 21, No.3, pp 203-215.

6, Pascarella P (1999). ‘The corporate geneticists’, Management Review, Vol.88,

No.4, pp 56-57.

7, New SJ (1996). ‘A framework for analysing supply chain improvement’,

International Journal of Operations & Production Management, Vol.16, No. 4, pp 19-

35.

8, Christopher M, and Ryals, L (1999). ‘Supply chain strategy: Its impact on

shareholder value’, The International Journal of Logistics Management, Vol.10, No.1,

pp 1-10.

9, Neely A et al (1996). ‘Performance measurement system design: Should process

based approaches be adopted?’ International Journal of Production Economics,

Vol.46-47, pp 423-432.

10, Ross A, Venkataramanan MA, and Ernstberger KW (1998). ‘Reconfiguring the

supply network using current performance data’, Decision Sciences, Vol.29, No.3, pp

707-728.

11, Stuart FI (1997) op cit (3).

12, Morton R (1998). ‘Logistics fits steel to customer needs: site location,

communications, and transportation infrastructure help the steel industry forge a

strong supply chain’, Transportation & Distribution, Vol.39, No.1, pp 24-27.

January 2002 28

13, Premkumar G (2000). ‘Interorganization systems and supply chain management:

An information processing perspective’, Information Systems Management, Vol.17,

No.3, pp 56-69.

14, Cottrill K (1997). ‘Reforging the supply chain’, Journal of Business Strategy,

Vol.18, No.6, pp 35-40.

15, Richardson H (1997). Close the gap: Become a tech user. Transportation &

Distribution, Vol.38, No.1, pp S7-S10.

16, Hewitt F (1999). ‘Information technology mediated business process management

- Lessons from the supply chain’, International Journal of Technology Management,

Vol.17, No.1, 2, pp37-53.

17, Harrison A and New C (2001. op cit (1).

18, Swaminathan JM, Smith SF and Sadeh NM (1998). ‘Modelling supply chain

dynamics: A multiagent approach’, Decision Sciences, Vol.29, No.3, pp 607-632.

19, Szwejczewski M, Mapes J and New CC (1997). ‘Delivery and trade-offs’,

International Journal of Production Economics, Vol.53, No.3, pp 323-331.

20, Hines P (1998). ‘Benchmarking Toyota's supply chain: Japan vs. U.K’, Long

Range Planning, Vol.31, No.6, pp 911-917.

21, Bradley P, Gooley T and Cooke JA (2000). ‘Study finds inventory turnover on the

rise’, Logistics Management and Distribution Report, Vol.39, No.1, p 17.

22, Braithwaite A (1998). ‘The cost-to-serve method, The International Journal of

Logistics Management, Vol.9, No.1, pp 69-85.

23, Womack JP and Jones DT (1996). ‘Lean Thinking: Banish waste and create

wealth in your corporation’, Simon and Schuster UK Ltd, London.

Documents

Lean Supply Chain Survey1 - Cranfield School of Management