LEAN
PROCUREMENT
Compiled by Dr Irvine
Conceptualisation of the concept
What is lean thinking or concept?
An approach that consists of providing a way to do more and more with less and less
human effort, less equipment, less time, and less space while coming closer and closer to
providing customers with exactly what they want.
The concept of lean is a new way of looking at the optimal production of goods and or
services by removing waste and improving the flow of activities through the entire value-
stream.
Lean procurement
Refers to the process of improving the procurement process and workflows, reducing time
and eliminating waste; reduce/lower costs
while improving the quality of products and services; improving the performance and
responsiveness of suppliers.
Lean sourcing or procurement also involves a greater use of partnerships and alliances as
well as a greater need for coordination and collaboration.
Conceptualisation of the concept
(continues)
Waste can be classified into the following categories:
1. Transportation or movement
2. Inventory
3. Motion (slowness of a process or procedure)
4. Waiting
5. Overproduction
6. Over-processing
7. Defects
Lean procurement strategy
Comprise the following aspects:
1. Lean culture
2. IT systems
3. Data
5. Communication
6. Automated process
7. Measure and control
8. Waste elimination
Lean procurement strategy
(continues)
1. LEAN CULTURE
Lean culture is the base of any Lean strategy.
The success of the strategy lies in its foundation.
The foundation of the Lean strategy is to ensure that everyone in an organisation is
involved in the process of adopting a Lean culture;
otherwise, the Lean strategy implementation will become a waste of valuable
resources to the organisation.
Adopting a Lean culture translates into everyone committing to identifying and
eliminating waste in the process.
Once the strategy gets the commitment from the highest direction, it is necessary to
convey the message and the cultural shift to the employees and mid-level managers.
To do so, training programs are the best alternative to ensure effective adoption of
lean culture across the organisation’s value chain
Lean procurement strategy
(continues)
Activities to ensure effective implementation of lean culture in an
organisation:
1. • Training programs for managers and workers,
2. • Improvements in socialisation and results,
3. • Lessons learned cases (from poor performance derived from a
lack of adoption of lean approach),
4. • Lean team creation.
Lean procurement strategy
(continues)
2. IT SYSTEMS
IT systems include all the technological resources that the organisation currently
has or will implement during the project.
In this aspect, the IT systems refer to systems such as the ERP and further
developments related to the effective use of ICT processes to facilitate
procurement processes and procedures.
Most of the waste taking place through IT systems is caused by the repetition of
simple tasks or information flow breakdown.
The IT systems is one of the strategic foundations to organisation’s performance
objectives,
because they are the best alternative to achieve an automated process and
improve data management and process control.
Lean procurement strategy
(continues)
The activities in the Lean strategy related to the IT systems
include:
1. • Database implementation,
2. • Estimation Department expansion into ERP or compatible
systems, and
3. • Supply strategies expansion and sustainability.
Lean procurement strategy
(continues)
3. DATA
Decision-making within the Lean strategy is driven by data.
Accurate data provides management with a process description and allows it to put
red flags into a critical situation.
Data is also relevant because it provides improvement results to the Lean team.
Having optimal data is a permanent activity and is part of the Lean strategy. It must
include the following activities:
1. • Determine the data required to measure and control the process,
2. • Identify the IT systems that will provide data,
3. • Stratify the data,
4. • Determine who is responsible for data management, and
5. • Periodically revise the data quality.
Lean procurement strategy
(continues)
4. COMMUNICATION
Communication is one of the Lean strategy pillars because every process
with more than one person involved requires excellent communication.
Effective communication is regarded as the glue that connects and links
parties to ensure an efficient value chain addition across a firm’s SC
networks.
In addition to the IT systems and Lean culture activities that facilitate
communication along the procurement process, some activities included
in the Lean strategy are:
1. • Determining clarity on the information required by the internal
customers,
2. • Replacing emails with IT solutions
Lean procurement strategy
(continues)
5. AUTOMATED PROCESS
The automated process reduces quality waste.
With reliable and practical IT systems, automation of the process can
reduce waste at every stage.
The automated process takes advantage of the IT systems, thereby
reducing the time spent by workers to perform everyday activities and
increasing time available to add value along the process.
Implementing an automated process requires the following activities:
1. • Brainstorming sessions,
2. • IT consultants, and
3. • Simulations.
Lean procurement strategy
(continues)
6. MEASURE AND CONTROL
Measure and control in the strategy which means to set up a
baseline and keep tracking the benefits of the strategy as well as
measuring further decisions or improvements.
Measuring and controlling activities after an adequate Lean
implementation include:
Periodic reports with and control over the areas that implemented
waste elimination strategies.
7. WASTE ELIMINATION
Core aspects of lean
procurement
1. LEAN SUPPLIER SELECTION
Consists of the following aspects such as:
Lean supply
1. Effectiveness of lean suppliers (through their supplies) in terms of meeting all requirements
concerning costs, quality and reliability.
2. Lean supply is associated with high degree of information sharing, single sourcing and long-term
contracts.
Rationalisation of component and supplier
1. Buying companies should focus on few suppliers that are reliable and able to provide a large range
of different components.
2. Buyer should evaluate how many products the supplier deliver that is important for own production
in lean selection.
3. Furthermore, it is important that the organisation identified all non-value adding components used
in production.
4. This will enable them to streamline its supplier base (removing non-critical ones)
Core aspects of lean
procurement (continues)
2. LEAN RELATIONSHIP MANAGEMENT
It is important for a company to evaluate how many supplier relationships that
should be managed as partnership or arm’s length relationships.
Hence, suppliers generating for a large share of the value creation should be
managed with close relationships.
It is important for the buyer to acknowledge the importance of a supplier in order
to exploit all benefits possible in a buyer-supplier relationship. This, therefore,
refers to
1. The determination of critical suppliers for key partnerships or alliance
relationships.
2. The criticality of supplies should determined the firm’s rationalisation of its supply
base; in the process, streamlining its buyer-supplier relationships.
In lean, a combination between arm’s length relationships and close cooperation
Core aspects of lean
procurement (continues)
3. LEAN SUPPLIER DEVELOPMENT
Plays a critical role in ensuring adequate competitive advantage,
It allows an organisation to be able to optimise its development
strategy by focusing on key and strategic units, partners (suppliers)
and stakeholders (employees).
It also comprises the adoption continuous improvement strategies.
This, through aspects such as
1. Value stream mapping (identifying process and operations that add
significant or no value within the SC network)
2. Joint improvement activities
BEST PRACTICE TO ENSURE
SOUND LEAN PROCUREMENT
1. Customer focus (maximising customers’ satisfaction)
2. Top management support (endorsement of lean culture as a core strategy)
3. Performer-level commitment
4. Training and development
5. Understanding of the organisation’s value stream and ability to identify
waste
6. Lean tools and techniques (JIT, six sigma, value stream mapping, Kaizen,
5Why=why do we need to define, measure, analyse, improve and control;
Brainstorming, etc..)
7. Measurement and improvement (measures should be both customer-and
process-based)
8. Communication and awareness
BARRIERS TO LEAN
PROCUREMENT
1. Lack of system thinking
a way of helping a person to view systems from a broad perspective
that includes seeing overall structures, patterns and cycles in systems,
rather than seeing only specific events in the system
2. Resistance to change,
3. Poor planning,
4. Lack of adequate resources,
5. Lack of skills and expertise and
6. Lack of clarity on supply chain waste.
END OF PRESENTATION
THANK YOU
