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African Journal of Environmental Assessment and Management ISSN: 1436-7890
Volume 21 Issue 5 Year 2016

Developing lean and agile automotive suppliers manufactures

supply chain

Akbar Mohammad Lou 1,* - Saideh Barzamini 2 - Mansore Khazir 3

1
MS.c Information Technology Management Mehralborz Tehran
2
MS.c Business Management Payame Noor University of Karaj
3
MS.c Information Technology Management Allameh Tabataba'i University of Tehran

ABSTRACT

Purpose _ The objective of this study is to find out what is important to consider when developing a supply chain in
automotive suppliers manufactures, what is required in order to establish a supply chain orientation and how lean
and agile can be used as process strategies in order to improve supply chain performance.
Design/methodology/approach _ In order to build an empirical framework for using both lean and agile strategies in
automotive suppliers manufacture supply chain management illustrative examples are provided from Iranian
automotive suppliers manufactures (IDEM Co, Irankhodro foundry Co, Iranian Piston Co) setting describing the
patient flow and planning processes. Findings _ Supply chain management has potential to work well as a
philosophy for automotive suppliers sector. However, it should not only be about the use of the concept of lean in
this kind of companies, as in fact is the case in practice today. It is rather about organizing for quick response and
flexibility in a hybrid strategy through combining lean and agile process strategies. This can only be done if a
systems approach is applied together with a strategic orientation, where cooperative efforts by the supply chain
members should synchronize and converge operational as well as strategic capabilities into a unified whole.
Practical implications – The analysis in the paper underlines the importance of focusing on both agility and leanness
combined. Automotive factory suppliers systems that introduce such an approach, as opposed to only relying on lean
strategies, could gain both competitive advantages and improved performance. Originality/value – In automotive
suppliers manufactures, even more so than in the other manufacturing industry, containment of costs without
sacrificing quality is important. This paper applies SCM techniques, tools, lean and agile concepts that have not
been used previously with together for Iranian automotive suppliers manufactures.

Keywords : Supply chain, automotive supplier industry, lean production, agile production

1. INTRODUCTION

In today’s business world, competitions are intensifying significantly in the volatile modern markets, where new
products have been hitting the market frequently. Hence, there arises a need for any organization to look into
producing several models of products to attract customers. In order to produce new products in an efficient manner,
the company should understand the supply chain network of the product thoroughly. This will aid them in
monitoring the flow of the product, raw materials and information flow across the supply chain. Also, for optimizing
the resources and increasing the profit of the products, it is necessary to accomplish efficient Supply Chain
Management (SCM). The SCM helps in increasing profit through optimization and provides expected products and
services at appropriate time and appropriate place as demanded by customers.(Ruben R, Prasanth , Ramesh, &
Naren, 2013)
Nowadays, the customers’ expectations and their satisfaction levels are manifold. Thus, organizations should be able
to quickly respond to the volatile market. For this, the supply chain of the company has to be more agile and
flexible. There are many hidden advantages to the company if it possesses an Agile Supply Chain (ASC).
The key characteristics of the ASCs include the following features:
 Produces high product variety
 Adapts to volatile market demand. Life cycle of the products will be probably short but the profits margin
is high
 Responds easily to unpredictable changes in the market at rapid pace (reference).
 Increases the quality and reliability of the supply chain.

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 Faster flow of materials, information and decisions across the organization’s supply chain network.
 Manufactures the existing products at lower cost
 Manufactures new products speedily and economically.

For the past two decades researchers around the globe were carrying out researches in ALSCM and reaping its
benefits. Many firms implemented ALSCM thus, enhancing their competitive advantage. The automotive sector is a
key industry in the Iran economy. The economic contribution of this sector is immense, with significance linkages to
the manufacturing and services sectors. Given the significant challenges facing the automotive industry, in particular
globalization, liberalization and increasing competition, has resulted a considerable amount of pressure on Iranian
manufacturers to shorten time to market, increase customer service levels, provide higher level of conformance and
quality, and offer more variety in product lines. Manufacturers must enhance their resilience to remain competitive
domestically and identify new potential for exploiting the international and national markets, as well as the global
market at large.
This paper presents the implementation of Agile and Lean SCM in an Iranian Automobile supplier manufacturing
companies which is located in the city of Tabriz and Gazvin. This study reviewed the literature to determine factors
affecting of lean and agile SCM adoption at the implementation stage by Iranian automotive suppliers and to
construct some hypotheses. Data were collected from the Iranian automotive suppliers (IDEM Co, Irankhodro
Foundry Co, Iranian Piston Co) using a set of questionnaire. The results obtained from this study, provide some
directions and guidelines to Iranian automotive suppliers companies upon adopting or implementing lean and agile
SC. Agility again has not been extensively discussed in this companies although the combination of the two
concepts has formed a discourse in literature on industrial supply chain settings. The objective of this exploratory
paper is to find out what is important to consider when developing a supply chain in automotive suppliers
companies, what is required in order to establish a supply chain orientation (SCO) in an automotive suppliers
companies and how lean and agile can be used as process strategies in order to improve supply chain performance.
Our approach in doing this is to treat lean and agile as process strategies and not as companywide concepts as they
often are described in literature. The paper starts with an overview of the development of SCM in industry and its
use in automotive suppliers companies. This is conducted in order to set the stage for analyzing how the concepts of
lean and agile have been used both in industry as well as in automotive suppliers companies.

Lean Strategy Agile Strategy

Non value-added work Decrease No Change
Worker's productivity Increase No Change
Production cost Decrease No Change
Quality of product No Change Increase
Responsiveness to customer demand No No Change Increase
Change Increase
Flexibility on production schedule No Change Increase
Inventory level Decrease Decrease

Table 1: A Comparison between Lean and Agile Strategy by Ruth Banomyong

2. SCM in industry and automotive suppliers companies

D. R. Towill provided a time compression model for logistics information management and derived results on
logistic models and complexity in supply chains.(Towill, 1996)
Yusuf, Y.Y et al proposed a conceptual model for assessing the agile supply chain model. The author also conducted
a questionnaire with 600 manufacturing companies of varied size in order to measure seven dimensions of supply
chain and its impact on business performance. The results showed that the agile supply chain capabilities provide
more impact on competitiveness than lean and traditional supply chains. (Yusufa, Gunasekaranb, Adeleyec, &
Sivayoganathanc, 2004)
Marcus I provided a model for agile supply chain and its impact on business performances. (Marcus, 2010)
Naylor, J.B et al introduced a term Leagility, which integrates the lean and agile manufacturing paradigms in the
total supply chain. (Ben Naylora, M Naima, & Berryb, 1999) Christopher, M.et al, proposed an integrated model for
the design and complexity of agile supply chains. (Martin Christopher, 2001) Christopher, M et al, (Martin
Christopher, Lowson, & Peck, 2004)proposed ideas on creating agile supply chains in the fashion industry, which
reduces the cycle time by increasing the responsiveness Van Hoek et al identifies the drawbacks and unavailability

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of integrated techniques in the supply chain and developed a framework for agile supply chains. This virtual teaming
concept is explained by the author by providing the example of automotive supply chain. (Martin Christopher et al.,
2004)
Aurelie Charles et al discusses that lead time reduction and enhancing the information flow across the supply chain
will increase the agility in the supply chain. They also illustrate that the Total Cycle time reduction utilizes the
synergized benefits that are available from reduction of both material and information lead time. (Charles, Lauras, &
Wassenhove, 2010)
H. Sharifi et al (Sharifi, Ismail, & Reid, 2006)contributed innovative ideas on achieving agility in supply chain
through simultaneous “design of” and “design for” supply chain” Manisra Baramichai., et al found out that
outsourcing tool has drastically enhanced the flexibility, leanness and agility of the supply chain.(Baramichai, Jr, &
Marangos, 2007) Rachel Mason-Jones et al, framed a method for analyzing which variable enables more impact for
increasing agility in supply chains. These variables were called as driver variables.(Mason‐Jones, Naylor, & Towill,
2000)
Edmund Prater et al, introduced Agile Supply Chain Transformation Matrix (ASCTM) tool for enhancing agility at
the supplier- buyer supply chain. Here the ASCTM tool is developed by utilizing Quality Function Deployment
concept.(Prater, Biehl, & Smith, 2001)
Baker, P et al investigates about the designing and operation of the distribution centre that exist within the supply
chain. For investigating, the author carried out case study in nine companies which were selected from
manufacturing, wholesaling, retailing and direct selling. (Baker, 2008)
Jari Collin et al discussed the Plan for supply chain agility at Nokia, Lessons from the mobile infrastructure
industry, which explained the complexity of mobile industry. M.N.(Collin & Lorenzin, 2006) Faisal et al(Faisal,
Banwet, & Shankar, 2007) projected an integrated framework model of simultaneous design of supply chain and
design for supply chain in order to enhance agility at the required supply Sreenivasa C.G. et al proposed 30criterias
for measuring the agility level of an organization. This paper reports about implementing agility in the supply chain
of automobile horn manufacturing company No researches have been reported so far on applying Agile Supply
Chain principles in automobile horn manufacturing companies. (Sreenivasa, Devadasan, & Murugesh, 2012)

Suppliers Automotive Distribution

Manufacture
Iranian Diesel
Engine (Enterprise)
Manufacturing
(IDEM Co)

Iran Khodro Casting Iran Khodro Customers

Industries Company Industrial Group
(IKCI Co) (IKCO)

Iran Piston
Manufacturing
Company (IPMC Co)

Flow of Information, Product’s, Services, etc.

Figure 1: Suppliers involved in the supply chain of Iran Khodro Co

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3. The importance of agility in SCM Context

As competition in year 2000s become intensified and markets become global, market are becoming more
international, dynamic, and customer driven; customers are demanding more varieties, better quality, higher
reliability and faster delivery; product life is shortening and product proliferation is expanding; technological
developments are occurring at a faster pace. The management of supply chain is then as well characterized by high
degrees of difficulty, due to the complexity of the multiple relationships and interactions between trading partners.
These interactions are not just complicated by their volume and variation in processes, but also by the complexity
inherent in the dependencies exists between parties in time and space(Kamaruddin & Udin, 2009).
The origins of agility as a business phenomenon can be traced to the manufacturing literature. Agility was
popularized in 1991 by a group of scholars at the Iaccoca Institute of Lehigh University. Soon after its introduction,
the concept became a focal reference for manufacturing systems studies(Hallgren & Olhager, 2009).
Agility resulted from the vision of industry executives whose intent was to bring about a profound shift in the
manufacturing paradigm to address changes in the competitive global environment. The group originally defined
agility as a manufacturing system that has the capability to meet the rapidly changing needs of the marketplace by
quickly shifting among product models or between product lines. Some scholars believed that agility as expounded
by the Iacocca Institute was ill-defined and that it lacked grounding in a theoretical perspective (Yusuf, Sarhadi, &
Gunasekaran, 1999).
Agility has risen in significance as the modern business paradigm has shifted the notion that individual businesses
no longer compete as solely autonomous entities, but rather as supply chains. It has been recognized that in order to
achieve a competitive advantage in the rapidly changing business environment, firms must align with suppliers and
customers to coordinate operations and together achieve a level of agility beyond that of competitors’(David Marius
Gligor, 2013).
Supply chain members must be capable of rapidly aligning their collective capabilities to respond to changes in
demand and supply.The term agile supply chain best describes the overall agility level of respective supply chain
members considered as a unit (e.g., supply chain), while the term firm supply chain agility best describes the focal
firm’s ability to be agile by reconfiguring resources within its supply chain. This research investigates agility from
the perspective of the focal organization (i.e., firm supply chain agility). Agility is a broad and multidimensional
concept bridging many disciplines(David M. Gligor & Holcomb, 2012).
As the positive impact of agility has gained increased recognition, researchers have offered different theoretical
conceptualizations. While a comprehensive supply chain agility definition is developed in subsequent sections, it is
important to present a preliminary working definition. In essence, a firm’s supply chain agility can be defined as the
firm’s ability to quickly adjust tactics and operations within its supply chain to respond or adapt to changes,
opportunities or threats in its environment.
Today's business world is undergoing changes that these changes are discussed below:
1. Instability in the market is due to the changing market, increasing costs, increasing competitiveness
and rapid development into new products.
2. Intense competition is due to the drastic changes on the market and international competitions.
3. Change in customer’s needs arises due to custom demands, increasing expectations regarding quality
and faster delivery time.
4. Accelerating technological changes can be achieved by introducing new and efficient production
facilities and integrating hardware and software systems.
5. Changes in social factors appear in order to protect the environment, labor expectations and legal
forces(Martin Christopher, 2000; Sharifi & Zhang, 1999).

Adel Azar and et al. (2010) identified 11 factors for agile supply chain, and the results from the research show that
the three factors in the development of staff skills, use of information technology and appropriate planning are the
cornerstones in supply chain agility. This means that, in order to commence agility in the system, we must start from
these factors. As a result, a context is provided for the agility of higher-level factors (integration of processes,
sensitivity and responsiveness to the market, flexibility and speed of delivery) and the procedure is repeated to
achieve customer satisfaction(Azar, 2010).
As Jafarnejad et al (2010) mentioned more agile company has customer-oriented characteristics and uses hard and
soft techniques to accommodate changing conditions. Participation of the suppliers in the process of achieving the
highest level of customer satisfaction is vital for them. More agile companies use the Internet technology to improve
productivity, new-product development and customer satisfaction. Investigators suggest the use of virtual
communication to increase the agility of the system. In fact, one of the most important factors related to supply

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chain agility is sharing information throughout the chain. Access of components of the supply chain (producers,
distributors and customers) to information via the Internet, the possibility of access to internal information network
(intranet) by the supply-chain members, to update the relevant information, to enhance the data mining, to do
exchanges without using papers, to use web application and exchange of information within the organization is the
items that may have an effect on this issue and increase the speed, on one hand, and the ability to respond to
demands on the other(Jafarnejad, 2010).

Virtual

Market Agile Process

sensitive Supply integratio
chain n

Network
based

Figure 2: Agile supply chain model(Martin Christopher, 2000)

4. The importance of lean production in SCM Context

The underlining principles that are the foundation of lean began in Japan during the 1950s with manufacturing
firms that wanted to make maximum use of limited resources available at that time. A set of waste removal
guidelines emerged, which were collectively referred to as JIT principles. The name JIT refers to resource
utilization, that is, units of material, subassemblies, and components arrive in a manufacturing setting “just in time”
for their use. Suppliers deliver their supplies just in time for their use in production, and customers receive finished
products just in time for their convenient use. Hence, there is no wasted movement of materials, use of labor or
equipment, or idle inventory in a JIT system. All resources arrive just in time for their consumption. The body of JIT
principles initially evolved from manufacturers’ shop floors dealing with common shop floor production issues. JIT
authors generally agree that JIT principles did not just appear all at once, but evolved on a continuous basis over

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many years. Lean principles at Toyota evolved out of their Toyota Production System (TSP). There are many
different principles, but we will group our work into four broad categories: seek the elimination of waste, seek
improved quality, seek increased product flow, and seek reduced cost. Seek the Elimination of Waste. By
eliminating wasted resources from any manufacturing or service system, we can immediately increase that system’s
productivity. If we increase productivity while reducing the resource inputs into the system, we reduce costs, which
are passed along to the customer in terms of lower prices, resulting in an increase in market share that will improve
profitability in the long-term. This has been a driving strategy of all Japanese manufacturers that have embraced lean
principles(Chandan Deep Singh, 2013).
Chen and el (2013) presented that the goal of lean manufacturing is to reduce waste in human effort, inventory, time
to market and manufacturing space to become highly responsive to customer demand while producing quality
products in the most efficient and economical manner. This approach focused on the elimination of waste. Waste
took many forms and can be found at any time and in any place. It may be found hidden in policies, procedures,
process and product designs, and in operations. Waste consumes resources but does not add any value to the product
(Chen, Cheng, & Huang, 2013).
Analysis of the complete suppliers system indicates that the supply management system is one of the primary areas
where cost reductions are a predictable outcome. The rest of the paper focuses on how industrial knowledge can
support the design of suppliers supply chains using a combination of lean and agile process strategies.
5. Lean and agile as process strategies in industry
The lessons learned from Toyotas lean production principles have had a profound impact on manufacturing
companies in a wide range of industries. Lean has brought with it an emphasis on creating good supplier
partnerships, reducing the number of suppliers, transferring responsibilities to the supplier of just-in-time deliveries
and quality. Changing conditions of competition and increasing levels of economic and environmental turbulence in
concert with the requirements for organizations to become more responsive to the needs of customers, has raised
interest in the concept of “supply chain agility”.
A common thread of the literature defining agility has been the focus on being able to compete within a state of
dynamic and continuous change. The concept of agility, according to Naylor et al. (1999) received attention later
than the concept of lean thinking. (Aronsson, Abrahamsson, & Spens, 2011)
The choice between agility and leanness can purposefully be related to the industrial organization school of thought
in that agility may be a source of differentiation whereas leanness is a source of low costs. Agility is therefore not to
be confused with leanness. Lean focuses on doing more with less, to be efficient, while being “agile” includes that
the organization is able to respond rapidly to changes in demand(Martin Christopher, 2000).
Christopher (2000) introduces that one single supply chain can consist of agile as well as lean parts, terming this a
hybrid strategy. Christopher also makes a division into different parts of the organization’s supply chain, and argues
that a lean process strategy is appropriate upstream where the supply chain activities performed are planned based
on forecasts. An agile strategy again is suitable downstream the supply chain, where demand is known and visible.
The shift from lean to agile is done at what Christopher defines as the decoupling point(Martin Christopher, 2000).
A prerequisite for combining lean processes and agility in supply chains is the understanding of how activities and
departments in hierarchic organizations can be integrated. Abrahamsson et al. (1998) point to separation as a means
of integration in distribution channel reengineering, arguing separation to be “the key to the restructuring process
and facilitates the other important aspect of channel reengineering - the integration of activities”(Aronsson et al.,
2011).
In their argumentation, organizational separation and integration of functions improves the efficiency of the
distribution process in three ways:
1. Economies of scale are exploited as a result of physical activities to be separated from administrative
activities such as planning, allowing the physical activities to be consolidated. Cost advantages are then
gained by increasing volumes, while reducing fixed costs.
2. A positive effect from this separation is greater specialization and increased expertise, from focusing on the
core competencies, e.g.
3. A prerequisite of this separation is modern IT/IS allowing increased coordination and control of
information, both within functions and between functions in the supply chain.
Supply chain integration involves defining a clear division of roles between organizational units to increase
specialization and to avoid double work and then defining internal processes, in order to build up a supply chain
orientation in the organization(Mentzer et al., 2001).
This division of roles along the supply chain is meant to redesign a traditional functional set-up to a more process
oriented one. With this demand on processes, the flow of goods is expected to be performed in a standardized way
with high efficiency from a lean set-up. It is also flexible from high agility in some of the processes, to support

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different requirements and changing conditions. These processes are then used as pieces in a puzzle that can be
solved in different ways, depending on how many of processes that are to be combined and how. This requires lean
and agile process strategies to be combined in different ways in order to design the required output from the supply
chain in focus, to, e.g. different customer segments. The industrial experience points to the need for functional
specialization as a means to achieve economies of scale, as well as the positive effects of mixing lean and agile
process strategies in the same supply chain. The need of coordination between functions is also pointed out as a key
issue. The purpose with the empirical description in the next section is to describe such a flow (supply chain) in
automotive supplier manufactures, as a basis for a more detailed discussion of the usage of lean and agile process
strategies in that sector.

6. Iranian automotive supplier manufacture’s in a lean and agile supply chain

This section of study, focused on the studies at Iran automotive industry and try to present any aspects of lean
and agile processes in supply chain at suppliers companies. In the following sections the supply chain from a
supplier’s perspective is described. A manufacturing company desires to select an appropriate strategy to improve
long term performance of its supply chain. The definition of a process is in this study borrowed from Aronsson et al.
(2003) who define a process as: a chain of activities with a clear starting point and a clear end point, consisting of a
number of steps, is both planned and repetitive, and has a clear goal and expected results. A characteristic of a
process is that it is spread beyond organizational functions and includes several activities, which are often both
operative and administrative in nature. The characteristics of a standardized process are foremost that the process is
planned and executed in a standardized manner(Aronsson et al., 2011).
During 2014-2015 Mohammad Lou (2015) has interviews with 8 top managers and production managers of three
main suppliers of Irankhodro automotive manufacture, from all involved departments were conducted to supply
chain and company agility. The results of study showed that, most of the companies have two main problems.
Firstly, all of them need to reduce cost of production and secondary they need to be agile in all process of
manufacturing(Lou, 2016).
Nickabadi and et al. (2012) in their study mentioned that there is a significant relationship between organizational
culture and the culture of the supply chain on transmission, sharing and distribution of knowledge in the supply
chains. They also suggest that the culture expressed in the supply chain has a maximum impact on organizational
culture. On the other hand, organizational culture has the greatest impact on supply chain performance and the
distribution, sharing and transferring of knowledge has the greatest effect on non-financial performance of the
supply chain. The findings show that two indexes of tools and communication networks and information systems to
facilitate communication and sharing of relevant information among members of the supply chain and mutual
communication between senior managers, and the members are considered the most important indicators of
organizational transition and sharing and distribution of knowledge in the automotive industry supply chain. Results
show that communication factor, within the organization or among supply chain members, is the most important
factor in transferring, sharing and distribution of knowledge in the supply chains(Nikabady, 2012).
Seyyed Hoseini and Ydrnjy Aghdam (2009) in their research as “A model based on knowledge management in the
distribution of supply chain, transport and logistics” have led to minimize the costs of logistics, purchasing,
distributing and marketing by knowledge management processes. To apply this model, scientists implemented the
study in a food organization and introduced factors such as management and leadership, organizational and
employee culture, technological infrastructures of the organization to implement success. Researchers have stated
the benefits of implementing the knowledge management model in supply chain and logistics system organizations
as follows: 1. Prevention of the loss of knowledge 2. Improved decision-making 3. Flexibility and adaptability 4.
Competitive Advantage 5. Development of Finance 6.Increasing the value to the product and services 7. Customer
Management 8. Use of investment in human capital. They also suggest that there is a direct relationship between
knowledge management and supply chain integration. (Hosseini & Aghdam, 2009).
The degree of complexity caries as well, from one supplier to another, and also from one section of supplier to
another section, are very deferent. Similarly, cost and agility or other problems of one department can involve
several departments. Depending on the diagnosis the time frames (response time) for production and demanding can
vary from three days to even weeks. Since manufactures are functionally organized, each function, e.g. foundry or
production or assembly department is involved in different supply chains, both short and long complex chains as
well as in planned or lean and agile supply chains. This allows for functional specialization but makes it more
challenging to design the supply chain in an efficient manner from a systems perspective. In Iran, as in many other
countries, the production department, foundry department, and logistic are different organizations representing

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different responsibilities within the public sector. All steps can be performed by one or several organizations
depending on the customers. For example, the first stages of a diagnosis are conducted in production cost and after
that logistics and foundry departments are important.
Based on the empirical findings in the study the following characteristics of an automotive supplier’s supply chain
have been identified: is characterized by a large extension of lead-time uncertainties in individual functions because
of the problem to predict the time of for example a surgical procedure.

1. The supply chain is organized in functions, with a lack of a systems view or strategy for the supply
chain as a whole.
2. There is not only a lack of an overall supply chain strategy but also a strategy for the sub processes
within each department and how they best contribute to the performance of the whole.
3. The volumes are relatively small and the variety high, which indicates that agile strategies are to
prefer before lean strategies.
4. There is a mix of highly standardized treatments and new experimental treatments, with a high
variation in the degree of standardization between different treatments.
5. All departments of company and suppliers didn’t share information and knowledge with each other, so
they work like isolated islands.
6. They didn’t use virtual networks and internet based facilities to do some jobs very quick and be an
agile network of partners.
7. Nowadays knowledge management is a very useful and very critical aspect of competitive market, but
they didn’t use and understand philosophy of that.
7. Analysis – supply chain management in the automotive supplier manufactures
Uncertainties are in lean theories considered to be wastes and should be eliminated. Eliminating internally
caused uncertainty is also important when using an agile strategy. For both strategies it is important to reduce
uncertainty created by the organizations themselves. The difference lies in how genuine uncertainty is handled. As
the example shows there is genuine uncertainty in customer demand as well as in activity lead-time. The sharing of
personnel can spread uncertainty between sub-processes and between supply chains making it difficult to foresee the
consequences of a delay for the organization as a whole.
Even if lean inspired approaches have been used in several of the manufactures in the study, it has mainly been in
order to create a platform from which a more proper production planning can be made. This could be called “lean
basics” with the overall purpose of reducing waste and to prepare the organization for a change towards a process
orientation according to the SCM-philosophy.
Considering the diversity of demands and needs for the supplying processes concerning availability and lead-times
and the complexity in production planning due to uncertainty – it can be concluded that different process strategies
are needed to fully describe and design a supplier supply chain. The traditional lean approach in industry is to
protect production from shifts in customer demands by keeping stocks. The agile approach is to work with flexible
capacity. Working with fixed (or planned) capacity as in a lean approach, is built on the logic of having high
utilization of resources in the processes, e.g. personnel and equipment.
Consequently, lead-times will vary over time, depending on volumes to be processed. Thus there must be a
warehouse or queue buffering one sub-process from the other, equal to the principle of “produce to stock”. The other
alternative, is to work with flexible capacity and fixed lead-time, according to the principle “produce to customer
order”. This step requires high availability of extra personnel or other resources needed to perform the process on-
time, independently the actual volume. The advantage with this approach is that the next sub-process receives
reliable deliveries in terms of on-time deliveries.
Instead the critical issue seems to be the variety in response times and lead-times. The variety is high and at the
same time there is variability in customer demand, representing the flow of patients. The first step to manage this is
to divide the supply chain process into sub-processes following the department boundaries and thus following the
formal organization. However, that does not mean that all sub-processes need to be agile. From a production
planning point of view there are sub-processes that are the same for all suppliers, the variety is thus small and the
volume large indicating lean strategies.
Thereby, we argue that it is not a question of lean or agile but about combining them in an intelligent way, and using
the right process strategy for the right part of the supply chain, according to its specific characteristics. From a
manufacturer perspective, a supply chain for one department passing through different departments can be designed
by combining an agile strategy in department 1, followed by a lean strategy in department 2 and so forth. The
combination of strategies can differ between different departments supply chains, which is often the case in
automotive industry were both acute manufacturer as well as scheduled suppliers are using the same resources.

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The theories on hybrid strategies are interesting if the main supplying process can be divided into a large number of
smaller parts or sub-processes, where each sub-process is standardized. Then, for each of the sub-processes either
lean or agile could be used as a main strategy, leading to a mix of lean and agile strategies for the process as a
whole. This is close to the other form of hybrid strategy, where a mixed portfolio of products and markets result in a
mix of lean and hybrid strategies depending on the characteristics in demand for those different products on those
different markets(Martin Christopher, 2000).
We suggest that the following issues are important to consider when developing a supply chain in an automotive
suppliers manufactures –however, not necessarily in the presented order:
1. To define the overall system and the supply chain that is to be redesigned.
2. Try to create main strategy for network of suppliers with main company.
3. To decide on the need for functional specialization. In industry it is often done on grounds of economy of
scale.
4. To decide how the supply chain should be divided into sub processes, depending on the services needed
from different departments.
5. To describe and define the interface between sub processes. Whether or not a lean or an agile strategy
should be used for a sub process depends on the interface.
6. Focus to final customers, for creating value for them.
7. To use knowledge management systems and technologies for acquiring, organizing, sharing and using
information and knowledge of staffs / customers and suppliers.
If a lean strategy is to be used, the sub process has to be protected from uncertainty by using patient-queue as a
buffer, so that the process can be planned and balanced in advance. Sources of genuine uncertainty in the cases are
caused by, varying customer demands, varying production lead-times, and uncertainties spread by the sharing of
personnel. If an agile strategy is to be used, the interface is defined in terms of delivery time between processes,
which is possible if there is flexibility in resources available.
8. Final discussion
There is significant evidence that the industry is in need of greater changes. From experience SCM works well
as an overall philosophy for a more efficient supplier manufacture. For the supply chain as a whole the goals for
each sub-process must be that it can be relied upon to deliver according to agreement, which is reached, from
combining a set of lean and agile sub-processes in a flexible supply chain setting. A prerequisite for SCM is that a
supply chain strategy exists for the system as a whole. If so, the study supports that SCM theories are useful for
suppliers network flows in an automotive industry. The case exhibits high complexity, and the balancing of the need
for functional specialization and efficient and high quality production processes is an important issue. Another
prerequisite is developing a supply chain orientation (SCO), which requires a shift from functional to process
thinking(Mentzer et al., 2001). We regard SCO as a first step (and a prerequisite) towards SCM and that all actors
involved in SCM must have a SCO, which is summarized by three main characteristics;
1 The supply chain actors should have a systems approach and regard the supply chain as a whole.
2 A strategic orientation where cooperative efforts by the supply chain members should synchronize and converge
operational as well as strategic capabilities into a unified whole.
3 A focus on customer value in order to create customer satisfaction.

The challenge of designing, integrating and implementing cost-effective and at the same time flexible
supplier manufacture systems is to apply an interdisciplinary systems approach, where the production processes and
flow of logistics and foundry are in focus. We believe that a prerequisite is to widen the system borders, allowing
the system in focus to include multiple sub-systems which are optimized by their own, in order to achieve a supply
chain orientation in the organization(Mentzer et al., 2001). This change will make it possible to consider the system
as actor-neutral, which allow us to define and design new interfaces and new sub-systems between existing and new
actors. All from the overall demands on the system as a whole, e.g. increased availability of the service and
reduction of waiting times for the suppliers.
Such a systems approach will then increase the possibility of:

1. Defining new targets, measures and driving forces for the system and for its sub-systems, from the
principle of optimizing the system as a whole.
2. Identifying new system roles and actors, e.g. a planning functions supporting and controlling the
production specialists and the sub-processes, according to the targets for the system as a whole.

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African Journal of Environmental Assessment and Management ISSN: 1436-7890
Volume 21 Issue 5 Year 2016

3. Defining new and more efficient interfaces and co-planning between the actors, in order to
improve the coordination of different specialists or treatments, e.g. preserver functions like screen
tests that are coordinated with surgery.
Our conclusion is that it is necessary to focus on two types of processes; one is the overall foundry and logistics
process and the other is the production process. Since there are a number of different production processes in an
automotive manufacture the key question is how to design an organization that can handle several unique processes
in a structured and standardized manner. The lean concept as used at the suppliers today is with the purpose to
improve the production planning and reduce waste. But the main problem in today’s manufactures is lack of
flexibility. Therefore, it has to be followed by a combination of lean and agile sub-processes, where SCM is the
overall philosophy and the glue keeping these processes together. Based on this discussion we suggest further
research on how to implement a systems approach and a supply chain orientation in an automotive industry. The
following areas have been found relevant for further research and are often mentioned in supply chain literature as
important:
1. Trust towards partner is perhaps one of the most commonly mentioned prerequisites and cornerstones of
the SCM philosophy within organizations and between.
2. How can a supply chain be designed to support trust?
3. Strategies for supply chain design, which are shared by all involved parties.
4. The role of top management in building supply chains in automotive manufactures.
5. How can information sharing support supply chains.
6. Methods for joint planning.
A prerequisite for this is a systems approach that will allow us to understand and deal with the systemic problems
and increase the possibility to apply flow-oriented concepts, with lean or agile process strategies into practice in all
suppliers manufactures.

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