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• Lean procurement or lean purchase is seen as a principle in the procurement of achieving more with less. Lean procurement seeks to acquire the least number of inputs to achieve the desired outcomes or results.
• In lean procurement, procurement teams may reduce inventories, look for ways to cut supply costs, or reduce the total overhead costs associated with procurement and supply chains.
What is Lean Procurement?
The term lean procurement or lean purchasing has truly gained popularity in procurement. And like many emerging concepts, many companies want it, but not all understand it. What hinders the understanding and adoption of lean manufacturing is the lack of a standard, agreed-upon definition.
The term ‘lean production’ was first detailed by Womack and Jones in their research on how production automation transforms and streamlines workflow processes. Jones and Womack termed lean manufacturing as an efficient production system leading to efficient workflows by eliminating waste.
The early research on Lean Manufacturing envisioned an efficient workflow that achieves operational and production efficiency by eliminating non-value-adding activities.
The theory around lean manufacturing was later explored and extrapolated by researchers. Mirko Kleiner postulated Lean-Agile Procurement from the earlier foundational works on lean production.
The researcher saw ‘lean procurement’ as a way of streamlining process workflows through waste reduction. Essentially, Kleiner’s lean procurement methodology can cut sourcing significantly, reducing sourcing time by:
- Improving the time to market productively
- Reducing preparation efforts
- Reducing lengthy documentation and proposals
- Reducing procurement team members involved in procurement
There are various outlooks and perspectives on lean manufacturing. Different organizations view and approach lean manufacturing from different viewpoints including cost, growth, opportunity, and workflow efficiencies.
Let’s take a closer look.
The Key Definitions and Outlooks of Lean Purchasing
1. Lean procurement and lean production
In this view, lean purchasing is similar to lean production because it focuses on operational efficiency. Lean procurement streamlines processes by eliminating waste and continuously improving the supply chain.
For instance, when one supplier has only one contact and sells his or her services and products at the same price across all locations, s/he can be termed a lean supplier. Lean supply offers standard products and services at standard prices and costs regardless of location.
2. Lean procurement is an effort to optimize suppliers
This outlook sees lean procurement as utilizing as much as possible of your suppliers so that you can free up your internal resources to focus on other areas of your business. Matching your products’ value with value-adding activities achieves cost savings.
3. Lean procurement as an inventory reduction method
This notion of lean procurement sees lean procurement as an inventory cutting method whereby customers receive goods just in time. Another way to achieve lean procurement is arbitrarily reducing inventory levels in the supply chain while maintaining optimum production levels. Those who adopt this concept of lean manufacturing see lean procurement as using procurement automation software to automate sourcing and supply activities.
4. Lean purchasing as a process workflow improvement
According to this view, lean purchasing involves improving procurement workflows. This outlook sees lean procurement as a strategy of eliminating waste, reducing time, and improving supplier responsiveness. This outlook sees lean manufacturing as a process of improving the focus of core activities. This view seeks to improve procurement’s strategic focus, helping optimize procurement workflows.
Factors for Successful Lean Procurement
You must follow tested-and-proven factors to design and implement a lean procurement process. Several factors determine the success and sustainability of your lean procurement model.
- Segregation. It’s advisable to break down different tasks involved in the procurement process. Segregated tasks may include strategic purchasing, supply, procurement, and tactical purchasing. Lean approaches work best with downstream activities. Downstream activities are responsible for moving finished products from the shop floor to the end customers – distribution, delivery, and order fulfillment. Segregation ensures the proper and efficient flow of downstream activities.
- Focus. Focus in lean procurement relates to being focused on the factors that add value to the supply chain. Your procurement function must remain focused on value-adding activities. Adopting procurement automation helps to automate repetitive buying and sourcing processes, helping procurement teams and organizations focus on activities that add the most value.
- Differentiation. Your sourcing and procurement process needs to be adjusted to accommodate risky and essential processes. In addition, this process needs to be adjusted to respond to productive and commodity investments involved in the procurement processes. Differentiation is a key attribute of a successful lean procurement model.
- Motivation. Another factor for a successful lean procurement process is motivation. You must motivate all teams to take up automation changes with attractive incentive schemes. They need to be compensated and appreciated for executing new directed changes. The lean procurement model adds value to an organization’s health, whether based on cost, growth, or quality. Lean procurement principles must be adopted to achieve lean supply chain workflows.
The Benefits of Lean Procurement
Lean procurement is associated with many qualitative benefits:
- Improves supply quality
- Improves customer value
- Build synergies among departments
- Optimizes supplier innovations and creativity
- Identifies risks and detects vulnerabilities
- Ensures protection in case of supply chain risks
- Preparedness in case of vulnerabilities
The lean procurement model ensures that organizations not only optimize quality, growth, and cost; but take advantage of evolving supply chain trends. For instance, the emergence of procurement and supply chain automation has helped cut costs and reduce overheads associated with procurement.
ProcurePort – Achieving Lean Procurement through Supply Chain Automation
The automation of procurement activities remains a pillar for lean procurement processes, helping organizations free up internal resources and focus on other key business areas.
Contact ProcurePort to create and maintain a lean procurement system.