ean Enterprise Lean Supply Chain Management Differs Value Sharply from Conventional Practices ILLUSTRATIVE CONVENTIONAL MODEL LEAN MODEL CHARACTERISTICS Number&structure I Many, vertical Fewer: clustered I Procurement personnel Large Outsourcing I Cost-based I Strategic Nature of interactions Adversarial: zero-sum Cooperative positive-sum Relationship focus Transaction-focused I Mutually-beneficial Selection criteria I Lowest price Performance I Contract length Short-term Long-term I Pricing practices I Competitive bids LTarget costing L Price changes Downward Quality Inspection-intensive Delivery Large quantities Smaller quantities JIT Inventory buffers Large I Minimized; eliminated Communication Limited: task-related Extensive;multi-level Information flow I Directive; one-wa Collaborative;two-way Role in development I Limited: build-to-print Substantial I Production flexibilit Low very limited; nonexistent Exte I Dedicated investments Minimal-to-some Mutual commitment very limited; nonexistent I High Governance I Market-driven Self-governing Future expectations No guarantee I Considerable 4-Bozdogan -Lean Supplier Networks, September 2002 @2002 Massachusetts Institute of Technology4 - Bozdogan -Lean Supplier Networks, September 2002 © 2002 Massachusetts Institute of Technology Lean Enterprise Enterprise Value Lean Supply Chain Management Differs Sharply from Conventional Practices ILLUSTRATIVE CHARACTERISTICS CONVENTIONAL MODEL LEAN MODEL Number & structure Many; vertical Fewer; clustered Procurement personnel Large Limited Outsourcing Cost-based Strategic Nature of interactions Adversarial; zero-sum Cooperative; positive-sum Relationship focus Transaction-focused Mutually-beneficial Selection criteria Lowest price Performance Contract length Short-term Long-term Pricing practices Competitive bids Target costing Price changes Upward Downward Quality Inspection-intensive Designed-in Delivery Large quantities Smaller quantities (JIT) Inventory buffers Large Minimized; eliminated Communication Limited; task-related Extensive; multi-level Information flow Directive; one-way Collaborative; two-way Role in development Limited; build-to-print Substantial Production flexibility Low High Technology sharing Very limited; nonexistent Extensive Dedicated investments Minimal-to-some Substantial Mutual commitment Very limited; nonexistent High Governance Market-driven Self-governing Future expectations No guarantee Considerable