Everything You Need To Know About A “Lean Supply Chain”

by Josh Biggs in Business on 18th February 2021

You don’t need to have a degree in economics to understand the basics of supply and demand. In effect, the price of a product is controlled by the available supply versus the current demand. If you have a large supply and limited demand the price will be low. If the opposite is true, the price will be high. In an equal market, the price will settle at the perfect balance between supply and demand

Controlling Demand

A company may find it difficult to control the demand for their product. Even the most popular products in the world have a designated market and a defined level of customers. In order to maximize prices the company needs to limit supply.

Limiting supply makes the product rarer, harder to find, and therefore more valuable. Customers that were interested will become more eager to purchase as they know they will join a limited band of people.

It should be noted that the product quality needs to be established before you can restrict supply. In order to control supply and still maintain the flexibility to produce more products when needed, you need a lean supply chain.

What Is A Lean Supply Chain?

A lean supply chain uses as few steps as possible and minimizes resource usage to create a high-quality product. In effect, you’re finding a balance between producing enough to satisfy all customers and too little to make the product too difficult to acquire.

A lean supply chain means your costs a kept to a minimum but you’re able to react quickly to changes in the market and increase or decrease supply. 

It can be difficult to balance your supply chain and get the right proportion of leanness.

Don’t forget that a lean supply chain doesn’t just refer to your production methods, you also need to ensure the transport service is flexible and reliable. You’ll find it’s useful to attach data loggers to your stock as these will confirm how well the product is being treated while in transport.

Creating A Lean Supply Chain

Creating your own lean supply chain means assessing your current production procedures and refining them, allowing you to optimize profit, quality, and customer satisfaction. You’ll need to consider the following:

  • Evaluate Your Systems

The first step is to look at your current production processes. You’ll want to identify the weak spots and eliminate them. You’ll also need to identify where processes can be merged to save time and costs without losing quality. Your employees are usually the ones that know the most about this step. 

  • Know Your Customers

You need to know your market in order to understand its fluctuations and when you should be ready to increase o decrease supply. The more you monitor the market the quicker you can react, that’s crucial to a lean supply chain. 

  • Ensure best Practice Is Adopted

It’s essential that you always adopt the best practice possible. This ensures quality is upheld throughout the production and delivery process. You can check industry standards for the best practices you should adhere to.

  • Consider Market Fluctuations

The market is generally predictable but various things can cause sudden increases or decreases in supply. You need to be aware of the signs that this is about to happen and react quickly. This is only possible with a lean supply chain but it will help to ensure you maintain the balance of supply and demand o favor your price. 

  • Monitor Performance

Finally, a lean supply chain needs constant monitoring. This ensures you can tweak processes as necessary and get the best possible results at all times. That’s a lean supply chain which drives a successful business.

Categories: Business