Encouraging (Lean) Innovation in Supply Chain Management
Did you know that an entire book covering the best way to manage a startup business was written based on key learnings from the supply chain industry, or more specifically, manufacturing processes? The book is called The Lean Startup and was written by entrepreneur and new venture advisor Eric Ries. This book came to my attention at the end of 2015. I was apparently a bit late to the entrepreneur party as it was first published in 2011. Nevertheless, the content is still very relevant today, especially for an industry currently undergoing a significant amount of change. Increasingly complex operating environments are forcing supply chain departments and service providers to get creative.
In his book, Eric Reis credits the lean manufacturing revolution started by Taiichi Ohno and Shigeo Shingo at Toyota as the main inspiration behind his lean start-up business model. Ries references lean supply chain concepts such as the shrinking of batch sizes, just-in-time production and inventory control, acceleration of cycle times, and the encouragement of creativity and knowledge sharing as key contributing factors to his lean start-up model. In essence, the author highlights the importance of focusing on value-creating activities while eliminating waste in an attempt to build a successful new business or product. In contrast to manufacturing, in which success depends on whether a high quality product was produced or not, a successful start-up will be measured on its ability to learn and adapt its strategy based on what it has learned from its operating environment. Ries encourages entrepreneurs to therefore rely less on assumptions and more on key learnings, which is why he introduces the “Build-Measure-Learn” feedback loop in his book.
Two key takeaways for innovation in supply chain management
Considering the fact that the entire Lean Startup business model is based on supply chain principles, I believe this book provides an interesting read for any supply chain manager. I mentioned in a previous post that the “entrepreneurial spirit” is alive and well within the supply chain industry, and this book can help take some of these innovations to the next level. For me, there are two main takeaways for supply chain managers in The Lean Startup that can help encourage innovation within the supply chain industry:
1. You don’t need to quit your day job to be an entrepreneur
Eric Ries argues that an entrepreneur is someone creating a new product or business under a high degree of uncertainty no matter the size of the company, industry or sector of economy in which this innovation is taking place. Therefore, it is possible to be an entrepreneur from within the four walls of your existing company. It all boils down to creating a culture of innovation, which must start from the top management board and work its way down to include every employee in the building.
To this point, Eric Ries uses the example of the “7,000-person Lean Start-up”. He argues that established companies face the same challenges new ventures face when it comes to the level of risk associated with entrepreneurship and the launch of new products and ideas. Therefore, it is essential for start-ups and existing entities alike to adopt an approach of Build-Measure-Learn when considering new ideas.
2. Supply Chain professionals have the potential to be great entrepreneurs
This is not something Eric Ries explicitly says in the book, but represents a logical conclusion that can be drawn based on his presentation of the lean start-up process. Supply chain professionals deal with a high level of risk on a daily basis and are accustomed to operating in situations filled with uncertainty. Furthermore, any supply chain grad or seasoned professional within the industry has had the concept of lean hammered into their heads a million times over. Now it is a matter of shifting the focus to a broader spectrum of application, namely the successful launch of new products and innovative ideas. As mentioned before, there is a strong need for innovation within the supply chain industry to address the rapidly changing operating environment.
Examples of supply chain start-ups
In recent years we have witnessed a plethora of start-ups entering the logistics and supply chain industry. Four major areas stand out: last mile delivery, transparency/traceability tools, cloud applications for supply chain process optimization as well as automated technologies.
An example I always come back to when writing on innovation is Sourcemap, a tool used to help supply chain managers map their supplier networks, enabling the tracing of raw materials from their source through to the consumer. Interestingly enough, company creator Leonardo Bonanni was defending his PhD thesis on Sourcemap during the same year The Lean Startup was published. 2011 was also the year the tragic earthquake and tsunami struck in Japan, resulting in many deaths and significant supply chain costs. This event further highlighted the importance of knowing the various sources along a supply chain. Since its commercial launch in 2011, Sourcemap has grown its cloud-based platform to include many food, clothing, pharmaceutical and electronics firms.
Speaking of the cloud, on a personal level, I have had the opportunity to participate in two start-up projects over the past several months focused on improving inventory management in the cloud. The first of which, SampleTime, launched its beta phase in February. Drawing on the principles of The Lean Startup, a rough product core was developed and is currently being tested on the market. During this test phase, the team plans to learn from the market in order to start the next round of development. The end goal is to create a tool that simplifies and creates a more accurate stocktaking process.
The second cloud-based product launch I am a part of is called itemPRO which is an intelligent inventory optimization tool (launch date April 4th 2016). The goal is to help planners make cost-optimized buying decisions while keeping the right amount of stock on hand. It is safe to say that these two projects have delivered the most on-the-job excitement I have ever experienced.
Being involved in a startup project is risky business, but it is also a lot of fun. One of my favorite quotes from The Lean Startup serves as a fitting conclusion to this article: “StartUp success can be engineered by following the right process, which means it can be learned.” If you have an idea that has the potential to improve supply chain or logistics processes, I encourage you to read this book and start innovating!
Have you been involved in a start-up project? What are some exciting start-up projects you have come across in the supply chain industry?
This blog was originally posted on the Inventory & Supply Chain Optimization blog.