Adoption of Lean Six Sigma in Lenovo’s Supply Chain

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Table of Contents

Introduction
Analysis
Conclusion
List of References

Introduction

Lenovo Group Limited is a large Chinese multinational corporation that specialises in computer technology. It manufactures and distributes various electronic products in the global market. According to the study conducted by Zhijun (2013, p. 92), Lenovo was ranked the world’s leading vendor of personal computers in terms of unit sales.

The company currently has active offices in over 60 countries around the world. Its products circulate in over 160 countries according to the report by the Global Reporting Initiative (2011, p. 88). Currently, the management of this firm has been working on ways of improving its supply chain management strategies.

This has been done through the decentralisation of processing plants and management centres from Beijing in China to various locations around the world. The decision to decentralise production plants and management centres was influenced by the desire to shorten the distance between the manufacturing plants and the market.

The management of this firm realized the need to end-to-end supply chain visibility as a way of improving efficiency in its product delivery method. Lean Six Sigma may be very useful to this firm in its efforts to achieve this sustainability. Not only will this tool help the firm improve the quality of its products, but also help in reducing the cost of production (Kamauff 2010, p. 56).

In this study, the researcher will focus on determining how Lenovo can use Lean Six Sigma to achieve sustainability in its supply chain management. The first part of this report will be the introduction; the second part will be the analysis, while the last section will be a conclusion of the findings of the study.

In this study, Lean Six Sigma refers to a quality management tool that seeks to streamline the processes in order to achieve near perfect products (Brockett & Rezaee 2012, p. 77). The study will determine how adoption of this tool will help enhance sustainability of Lenovo’s supply chain.

Analysis

Lenovo’s Supply Chain

The management of Lenovo has been keen on streamlining its supply chain to not only eliminate costs but also improve the quality of the products they deliver to their customers. The firm has employed a number of strategies in its supply chain.

However, in this study, the focus will be on End-To-End Supply Chain Visibility Strategy that was employed in 2013 using E2open software to enable the management to monitor all the activities in its supply chain (Qiao & Conyers 2014, p. 59). According to this scholar, Lenovo had previously been using various strategies to manage its supply chain.

However, David Gillon, who is the current Executive Director of Lenovo’s Global Supply Chain, realized that besides having superior tools and equipments to improve supply chain at this firm, it was necessary to have a new system at the firm that will make it possible for the management to track down all the activities within the supply chain in real time.

This was necessary so that the management can detect any problems within the supply chain as soon as they occur. As Lan and Unhelka (2013, p. 74) say, End-To-End Supply Chain Visibility strategy has become popular in the recent past because it gives a firm control over the activities taking place within its supply chain.

End-To-End Supply Chain Visibility was meant to support a strategy employed by this firm the previous year that eliminated all the intermediaries when accessing most of the raw materials. The firm developed a new strategy that emphasised on dealing directly with the producers of the raw materials other than brokers.

In order to use this strategy, the management of Lenovo had to employ the use of E2open software that not only helped in monitoring the activities within the supply chain, but also integrated the communication system within the firm. This made it possible for all the stakeholders responsible for various activities to know when there is a problem within the supply chain so that they can know the best course of action.

For instance, the production manager at Lenovo’s plant in Beijing will know when there is a problem in the supply of a given raw material. With this knowledge coming as soon as this fact becomes a reality, the production manager is able to re-strategize its production activities to avoid serious negative consequences that may arise because of the unavailability of the needed materials.

According to the report by Qiao and Conyers (2014, p. 78), the management of Lenovo has been able to reduce losses within its supply chain that is always associated with lack of information and coordination between various departments because of this new technology-based strategy. According to Qiao and Conyers (2014, p. 81).

Lenovo’s top management committed HK$ 6.35 billion to help expand the Beijing’s 200,000-square feet production facility in early 2014 to help sustain its increased production due to improvement of its supply chain. This is a clear indication that this new approach to managing its supply chain has been a success.

Need for Sustainability and Factors Involved In Achieving It

According to Wisner, Tan and Leong (2011, p. 67), the issue of sustainability has gained relevance as firms struggle to secure their future in the turbulent market. In order to understand steps that have been taken to promote sustainability at Lenovo, it will be necessary to analyze various stages of supply chain where sustainability is necessary. Sourcing is one of the most sensitive areas of management in the supply chain.

As Shah (2009, p. 23) observes, a firm needs to ensure that there is a reliable source of raw materials to ensure that the production process is not interrupted due to shortage of inputs. According to Aras and Crowther, (2009, p. 280), the management of Lenovo has formed strategic partnerships with its suppliers, especially those who supply sensitive products such as rare earth metals through long-term contracts.

These long-term contracts bind these suppliers to this firm and reduce chances that the suppliers can suddenly stop their business transactions with this firm. The management has also been keen on fostering a close relationship with these suppliers. As Taylor (2003, p. 56) observes, in most of the cases they are considered integral part of this firm. These steps were taken to ensure that the suppliers remain loyal to this firm. It realised that it needed to do this in order to protect its sources of raw materials.

Manufacturing is another sensitive process in the supply chain management. In the current competitive market, it is very critical to have sustainable manufacturing strategies that can help a firm secure its future in the market (Timans et al. 2013, p. 340).

The management has embraced technology in its manufacturing processes as one of the main steps towards achieving efficiency in its supply chain. As mentioned above, the firm is putting up a 200,000-square meter production complex in Beijing that has state-of-the-art machines to help in running its production processes. The society has become so sensitive about environmental conservation.

If this firm fails to embrace environmental-friendly manufacturing strategies, it may have a bleak future due to the regulations that are expected in the near future. Similarly, the issue about packaging will need to be re-evaluated. Many firms are now considering using bio-degradable materials to package their products in order to protect the environment.

Lenovo will need to take a similar path in order to remain relevant in the market that has become very dynamic. The distribution centre management that has been embraced by Lenovo is in line with the changing environmental factors (Liu 2009, p. 574). Devolving the management and setting up various offices across the global market is needed so that this firm can act locally based on the prevailing market forces in different regions around the world.

According to Mahadevan (2009, p. 37), waste management is a factor that firms can no longer ignore, especially at the production plant. Lenovo will need to find proper ways of managing wastes according to the international standards given that it is operating in the global market. This will mean recycling its wastes or finding better waste disposal methods for the products that cannot be recycled.

Another sensitive issue is the emissions control. According to Gorman (2011, p. 570), many countries around the world are reducing the limit of emissions of greenhouse gases per given time. With these new developments, Lenovo will need to find a way of reducing its emission rates despite its increasing levels of output in order to remain sustainable.

Tools and Techniques Associated With Lean Six Sigma

Lean Six Sigma is one of the management tools that many firms are using to improve their operations and enhance sustainability. At this stage, it will be important to critically analyse what can be achieved through Lean Six Sigma and to determine how it applies to Lenovo.

According to Tompkins and Harmelink (2004, p. 45), Lean Six Sigma refers to “A methodology that relies on a collaborative team effort to improve performance by systematically removing waste.” The term lean in production context means maximum elimination of wastes and unnecessary processes.

The current environmental forces may require Lenovo to employ lean manufacturing in order to improve quality and eliminate wastes as much as possible. The following are some of the tools and techniques associated with Lean Six Sigma at Lenovo.

According to Bolstorff and Rosenbaum (2012, p. 56), when using Lean Six Sigma there are eight kinds of waste that must be eliminated in order to manage the costs of production, and each requires different tools and techniques. The first kind of waste is the problem of defects.

The study by Qiao and Conyers (2014, p. 112) reveals that Lenovo has embraced the use of modern technologies as means of reducing defects at its production plants. These defective products always have very little value because they cannot be sold and some cannot be recycled (Sarkar 2005, p. 427). The management of Lenovo emphasises on the zero-defect production techniques using the standardised modern equipment and quality management tools. The aim is to ensure that defects are eliminated completely in the manufacturing process.

Overproduction is another form of waste that Lean Six Sigma seeks to eliminate. Several stages are involved in the production of electronic products. Products at each stage go to the next stage of production till that time when the finished product is produced.

At Lenovo, there is a coordinated approach to the production process where only the needed amount of products are processed and delivered to the next stage to eliminate the problem of overproduction (Lan & Unhelka 2013, p. 125). When using Lean Six Sigma, emphasis is laid on ratios to ensure that only the needed amount of products comes from one stage to the next (Antkiewicz & Whalley 2007, p. 210). This involves close coordination of various units of production within the manufacturing plant.

According to Ivanov and Sokolov (2010, p. 78), the third type of wastage is the waiting time. There are cases when a stage in the supply chain is kept on hold because what is needed at that stage is not available. This is commonly seen when the needed raw materials are not available.

The integrated communication system at Lenovo’s production plant and other stages in its supply chain has helped reduce waiting time. Waiting time can be very costly when all the needed resources- including human resource- are available, but the process is kept on hold because of the absence of a given component.

When using Lean Six Sigma, a firm will be required to align all the stages in the production process with the capacity of the firm (Coyle & Coyle 2009, p. 121). This will ensure that what is produced at stage A is exactly what is needed at stage B. This way, cases where stage B is forced to wait for A to produce enough materials needed for stage B processes are eliminated.

This has been evident at Lenovo following the implementation of End-To-End Supply Chain Visibility strategy with the help of E2open software. The strategy is meant to ensure that there is a smooth flow of production without any wastage. It also requires a reliable source of supply.

The fourth kind of wastage is the non-utilised talent within the firm. Balmer (2012, p. 30) says that the cost of labour forms one of the leading costs of production. According to Qiao and Conyers (2014, p. 118), the management of Lenovo always insists on having a lean workforce. It is illogical to pay this cost if the talent is not put into use.

For this reason, it may be necessary to eliminate the excess workforce at all the stages in the supply chain in order to remain with a lean workforce. The fifth form of wastage occurs during transportation (Panneerselvam 2012, p. 57). At this stage, issues such as breakage and pilferage are very common. Using the modern means of transportation such as containerisation may help solve this problem.

The issue of inventory wastage is affecting various companies, and Lenovo is not an exception. When the inventory is not properly managed, they may expire or be damaged before they can be utilised, and this will be costly to the firm. Constant motion within the production plant and extra-processing are other factors that lead to waste. When using Lean Six Sigma, it is possible to develop effective plans that may help eliminate these wastes.

Steps that Have Been Taken To Promote Sustainability at Lenovo

Based on the above analysis, it is important to note that the management of Lenovo Group Limited has a lot to do in order to ensure that its operations in the market are sustainable. The management has done a lot to improve its supply chain. However, it will need to ensure that its operations remain sustainable in the market.

The analysis done above reveals that the electronic market has remained very dynamic over the past few decades. The market needs keep changing and the technology used in the production process is also changing. One of the parts of Lenovo’s operation that is vulnerable to the current market forces is the manufacturing process. According to Liang, Marler and Cui (2013, p. 56), China is currently the leading nation in the emission of greenhouse gases.

The effect of this pollution is already evident in the major cities such as Beijing and Shanghai where the air has become harmful to human health. This country hosts most of Lenovo’s production plants. The government of China is already developing policies to help reduce the level of emission of greenhouse gases from manufacturing companies (Lan & Unhelka 2013, p. 57).

This initiative is going to affect mega manufacturing companies in this country such as Lenovo. The management of Lenovo has been focused on finding effective ways of production that are in line with new policies about environmental conservation. As Qiao and Conyers (2014, 74) say, the current manufacturing processes at Lenovo are not sustainable.

The processes involve massive emission of greenhouse gases. Some of the by-products from this manufacturing plant also pose serious environmental threats. Using Lean Six Sigma, the management of this firm is currently redefining its production processes in an attempt to reduce the rate of its greenhouse emissions.

In order to minimise this vulnerability, Lenovo should develop a strategy that will help it achieve sustainability in its operations. Based on the environmental factors, the researcher proposes that this firm should employ green-production strategy.

In this new strategy, the firm will commit itself to protecting nature not only through using better techniques of production, but also helping in environmental conservation programs in its corporate social responsibilities. According to Reverte (2009, p. 355), this firm will need to use a theoretical model that will help support the change in its production strategies.

Using change theories such as freeze-change-unfreeze models may be very beneficial when introducing these new systems. This model will help reduce any form of resistance to change among the employees. According to Wieriks (2013, p. 46), employees may resist change for fear of the unknown. When the employees resist change, it may not be possible to implement new approaches which are in line with the new sustainable policies.

It is a justification as to why the proposed change model above would be necessary. The model will help in implementing various changes in the supply chain processes that will be necessary when using Lean Six Sigma to enhance sustainability at Lenovo (Spulbe 2012, p. 34).

From the above analysis, it is clear that Lean Six Sigma will help this firm address most of challenges it is currently facing. However, it is important to note that Lean Six Sigma has a number of limitations that make it necessary for the firm to look for other solutions to enhance sustainability. According to Jeffery (2010, p. 67), sustainability has three main pillars which are all equally important.

They include planet, people, and profits. However, Lean Six Sigma overemphasises on planet and profits while giving less emphasis on people. It gives a clear explanation about the relevance of and how to protect the environment in the production process. It also explains how a firm can eliminate wastes in the manufacturing process in order to lower the costs and increase profits.

However, it lays little significance on how to manage the workforce to ensure that they remain highly productive (Chary 2004, p. 56). This practical limitation may need to be addressed in order to develop a comprehensive solution for this firm. Using Theory of Transformational Leadership may help address this limitation.

The management can use this theory, alongside Lean Six Sigma, to ensure that its employees remain motivated and ready to manage the changes that will be proposed when trying to enhance sustainability of the firm (Kumar & Labib, 2008, p. 485). This will help the firm achieve sustainability in its supply chain.

Conclusion

Lenovo is currently one of the leading electronic firms in the global market. The management unit has made an effort to ensure that its supply chain remains efficient in order to lower the costs of production. One of the ways of improving efficiency at this firm introduced by the top management is the decentralisation of power from the headquarters to various offices in the global market.

Despite this initiative, the management still finds it challenging to improve some of the areas in its supply chain. Waste has been one of the major areas that this firm has been struggling with in the recent past. This problem can be addressed using Lean Six Sigma. The discussion above reveals that Lean Six Sigma is one of the widely used tools in managing supply chain.

It helps an organisation to identify and eliminate wastes such as defects, waiting time, overproduction, underused or unused talents, and breakage among other forms of wastes. In order to enhance sustainability in its supply chain, Lenovo will need to develop new strategies that will not only lower the cost, but also reduce environmental degradation.

This means that the firm will need to embrace production and transport strategies that minimises the amount of waste products released into the environment. To achieve this in practical context, it is recommended that the management of this firm should embrace the emerging technologies in its production process. The management should involve its employees in its change management strategies.

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