The interplay between Lean manufacturing and retail

Manufacturing and retail are two closely related industries that depend on each other to succeed. Retail decides which products to buy from manufacturers, while manufacturers need to produce goods that retailers can sell to customers. If there is a holdup from one party, it can affect the productivity and profitability of the other.

With both manufacturers and retailers reeling from the economic recession, major companies in the two industries have begun integrating Lean practices and policies. It's crucial that when one part of the equation opts to implement Lean methodologies, the other does as well.

For example, one reason retailers are switching to Lean practices is to reduce the impact of dead inventory. In a pre-recession environment, merchants may have made huge orders for products and inventory at the beginning of a busy season. If they had leftover stock, they could quickly and easily liquidate it by slashing prices.

However, the recession has showed many merchants how dangerous dead inventory can be. When every penny counts, having stock just sitting in storerooms ties up money that retailers need. At the same time, they can't just slash the prices and sell products because profit margins are smaller. Instead, they take a page from the “just in time” production strategy and decide to only order products as inventory runs out.

If manufacturers aren't using Lean practices, then they too can feel the sting from this change in operations. If they were expecting retailers to order all of their goods at the beginning of the season and can't adjust to “just in time” ordering habits, they may be unable to respond in a timely fashion, thus hindering both their sales and the potential sales of retailers.

Lean throughout the supply chain

Across all parts of the retail supply chain, from manufacturing to the point-of-sale, Lean provides businesses with the ability to remain flexible and adapt to changes as they pop up. Both retail stores and manufacturers should consider integrating Lean practices, programs and policies to help them capitalize on the recovering economy without jeopardizing their future success.

By switching to Lean, both parties can react to what other parts of the supply chain are doing. This way, a small change in economic conditions and business practices won't majorly impact their own operating procedures.