Consolidation Centers in the Lean Supply Chain

This case describes the role of consolidation centers in the lean supply chain. The description here articulates the rules for designing a consolidation center, a supply chain middle man that makes the total chain more effective. Consolidation centers are playing an increased role in many supply chains, particularly as feeders to manufacturing operations that produce complex products with many components. Every supplier cannot or will not link its operations with its customers. The consolidation center enables this linkage — at least until better suppliers can be found. In some cases, consolidation centers are under the control of third-party logistics providers responsible for ordering material, its transportation, and its preparation for the manufacturing center. 

A consolidation center is a facility, located near a manufacturing plant, that receives components and parts from many suppliers and delivers them to the plant. Practitioners of lean production use these centers to insulate the factory from overseas suppliers with long lead-times and from 

The consolidation center is not used for every item. Indeed, suppliers deliver directly all the items other than those explicitly identifed for the consolidation center. Returnable containers with item-specific dunnage are used for local deliveries on milk runs because (1) they save assembler time and disposal costs, (2) their number caps the amount of parts in circulation, and (3) the trucks that ride back to the supplier plant would otherwise be empty. The economics of returnable containers become less favorable for distant suppliers, whose remote or overseas locations may provide opportunities for return freight. 

we define what a consolidation center is and examine the reasons for practitioners of lean production to resort to this structure rather than deal directly with their suppliers. Then we describe the work that can be profitably off-loaded to the consolidation center, the physical organization of how this work is or should be done, and where the consolidation center should be located. We also describe the type of work that is best not entrusted to the consolidation center but kept in the manufacturing operation. 

Moving up from brick, mortar, and equipment, we then discuss possible business structures for the consolidation center and its relationship with the manufacturing plant. Finally, we briefly present the consolidation center s information needs and how they can be met through the combination of visual control and computer systems. 

A consolidation center is a facility, located near a manufacturing plant, that receives components and parts from many suppliers and delivers them to the plant. Practitioners of lean production use these centers to insulate the factory from overseas suppliers with long lead times and from domestic suppliers who cannot or will not work with kanbans, returnable containers, and truck milk nms. In addition, in the automobile industry, consolidation centers allow materials handling work to be paid at its market rate rather than the high rate of car assembly. 

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In general, adding a middleman between suppliers and users does not enhance a supply chain, and it is therefore surprising to find leading, lean carmakers doing it. They have many different motivations. A consolidation center can shield the factory from dealing with overseas suppliers with lead times in months. The consolidation center is then a domestic supplier, working with the plant as if it made its own parts on a day-to-day basis. 

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