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Lean Operations

Smart companies are fueling growth through leaner operations.

Growth is slowing in mature and emerging markets alike, which makes reducing operational costs even more important for consumer products companies. Organizations that rank as top value creators typically reduce costs faster than their peers. Companies seeking to achieve operations excellence must focus on five critical actions: striving for product line simplicity, adopting lean practices, modernizing network design, optimizing supply chains, and managing transportation costs.

Five Levers for Operational Excellence

  1. Simplicity. Apply a holistic approach, starting with the consumer in mind. Address complexity drivers throughout the value chain.
  2. Lean Manufacturing. Combine a top-down approach that focuses on specific costs and a bottom-up approach that focuses on management skills.
  3. Network Optimization. Align the manufacturing network with a long-term vision of market evolution.
  4. Supply Chain Optimization. Focus on improving forecasting accuracy, inventory management, planning, and manufacturing systems.
  5. Managing Transportation Costs. Integrate transportation into strategic business planning to better manage rising costs, driver and capacity shortages, and other key structural challenges.

Custom Forecasting Leads to Quick Payoffs

Advanced forecasting tools tailored to product category and geography are enabling consumer products companies to achieve six important supply chain benefits:

  • Fewer Missed Sales. Knowing where demand will occur ensures that the right inventory is in the right place at the right time.
  • Higher Customer Service Levels. With a deeper understanding of both consumer demand and subsequent retailer ordering behaviors, companies can more effectively deploy inventory to provide higher fill rates, improved on-time availability, and fewer stock-outs.
  • Lower Working Capital. Companies can operate with less inventory because they are more confident about demand.
  • More Efficient Manufacturing. Production schedules can be optimized through a better understanding of demand and the prevention of last-minute changes.
  • Less Waste and Spoilage. With less inventory, companies are more likely to sell stock before it reaches its expiration date.
  • Reduced Effort. Automating the forecasting function gives the sales force more time to focus on selling, and reduces the time management must devote to overseeing the forecasting process.

Four Management Systems for Successful Lean Programs

Organizations can’t rely on any quick fixes when implementing lean practices. But companies can achieve lean goals by focusing on these crucial areas:

  • Operations. Improve processes and share best practices. Focus on improvement levers, standards, and lean tools.
  • Business Requirements. Set the right objectives. Decide on customer segmentation, the right 80/20 trade-offs, and the choice between seeking breakthroughs or continuous improvements.
  • Performance. Steer performance by understanding how to calibrate objectives and incentives, knowing which key performance indicators are best, and outlining the role of functional and central teams.
  • Personnel. Free up collective intelligence by fostering cooperation, building the right capabilities, and learning how to increase job satisfaction.
Consumer Products Industry
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