Logistic outsourcing and Lean Snapshot

Lean manufacturing is a widely adopted business philosophy that has been embraced by many corporations globally. Originally developed by Toyota, a top Japanese automobile manufacturer, it has become a standard practice in many industries. Some of the terms used in lean manufacturing processes are derived from Japanese, such as kaizen, kanban, and andon.

One way companies are implementing lean manufacturing is through the use of third-party logistics outsourcing. This approach involves hiring a third-party company to handle the logistics aspect of manufacturing.

Example

General Motors in North America is one such company that has embraced outsourcing as part of its competitive advantage strategy. They have utilized third-party logistics to implement lean manufacturing principles, resulting in a more efficient manufacturing process and resolving transportation issues. The company has also extended the use of this approach to its entire group to achieve economies of scale.

When choosing a third-party logistics provider, General Motors considered factors such as quality of service, technology, innovation, and cost. The outsourcing arrangement also included a gain-sharing component to ensure continuous improvement in line with lean manufacturing principles.

The strategy has been successful for General Motors, resulting in improved on-time performance and significant savings. The use of third-party logistics also provided unexpected benefits, such as increased visibility of products and supply chain data.

The outsourcing journal suggests that outsourcing transportation functions can leverage the strength of the supplier and achieve objectives such as cost reduction and on-time performance. The third-party logistics supplier can manage the transportation function or use subcontract arrangements to perform the services, while the gain-sharing mechanism in the outsourcing contract incentivizes continuous improvement.

Curious about Lean Manufacturing and Supply Chain Management? Dive deeper with this article that covers its origins, principles, and practical applications.