Indeed, those actively engaged in lean initiatives seek to reduce inventory levels, automate process controls, and enable supply chain integration both internally and through suppliers globally. Many Tier One manufacturers report that inventory savings have exceeded $1million in saving in just three months in a single cell with a single supplier, with one international transportation component leader achieving an $8 million reduction in less than six months with 1000 percent increase in turns. A global environmental systems leader accomplished a 78 percent reduction in transaction costs and a 500 percent improvement in customer response time as a result of a Demand Drive Supply Chain automation solutions delivered securely over the Internet. A distinct advantage that drives the rapid, even instant, ROI is the SaaS process requires a far smaller up front investment financially than a similar software system that requires maintenance and installation costs.

Maximizing productivity and reducing total costs

Whether distributors or manufacturers (or a blend of both), there is a need to continually innovate to maximize productivity and reduce total costs; initiatives of process improvement and waste reduction result in cost-saving efficiency. Productivity is output, efficiency, and production. Waste is identified many ways, yet ultimately is any activity that requires allocated resources but adds no value from the customers perspective. Some activities, while not directly adding value to a product or process, such as time spent on equipment maintenance or an accounting function, are necessary in the production of goods or services and must be perpetuated. Non-value-added activities must be reviewed and constantly reevaluated, identified as waste, and eliminated. Foolishly, many firms still maintain inventories of a million plus items. Using extensive networks of distribution centers and warehouses to ensure prompt and reliable deliveries to their customers, success is still not guaranteed. Lean methodologies represent problem-solving tools and must allow enterprise-wide integration with the firms core strategy. Purchasing organizations wrongly assume that just-in-case inventories are less costly than the cost of downtime or lost production. Preparing for an emergency or downtime situation usually creates inventories of items never used. Lean procurement activities must be directly related to production; otherwise they are waste. Many organizations have lean strategic sourcing initiatives implemented, yet find nearly half the purchases are spot buys or unplanned. This inefficiency trumps the possible advantages of warehousing regionalization to manage inventory control.

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