Lean Procurement – Maximising Your Supply Chain
2017 is expected to be a year of tough economic conditions so Eden Scott Supply Chain Team thought we would take a look into the principles of ‘Lean Procurement’ in relation to Supply Chain Management.
As organisations face up to ever-tightening budgets they are desperate to find the small savings that could add up to the significant impact they need. Applying ‘Lean Procurement’ philosophies across the Supply Chain can help organisations and departments who are looking to cut costs, improve efficiency to help them continue to compete in a challenging marketplace.
Implementing Lean Procurement Principles
The term ‘Lean’ is generally associated with improvements in the manufacturing process. However as supply chains hold so much potential for lead time management, quality improvement and cost reductions, it presents an excellent opportunity for applying lean solutions to find even greater efficiencies that will have an impact much further down the line.
At Scotland’s ProcureEx Conference in Glasgow, Eddie Regan (Senior PASS Consultant, BiP Solutions) discussed in a Reforming Procurement Skills Training Zone how ‘Lean Procurement’ can alter the way an organisation procures. By developing clear processes on how to tender, what to consider, when to do it etc, it can greatly reduce the costs of procurement and help to achieve significant savings in contracts’.
Cutting Out Waste
For an organisation to be ‘lean’ it must remove all non-essential resources. Applying this approach to procurement and supply chain management will result in minimising waste across key areas. The Chartered Institute of Purchasing and Supply (CIPS) have identified the following types of waste within a typical supply chain.
- Transport between processes or organisations
- Defects – called ‘scrap and rework’ in assembly industries and ‘ waste and write-offs’ in continuous process industries
- Over-processing – doing work that does not provide value to the customer
- Waiting (or inactivity) – people or parts that are waiting for other activities to complete
- Unnecessary motion - Motion of people or parts within a process without adding value
- Inventory, raw material, work-in-progress or finished goods that are not being worked upon
- Overproducing – making products sooner or in greater quantities than customers require in order to reduce unit costs of production
- Excess production and distribution capacities
- Under-utilisation of the skills of the workforce
These areas of waste allow supply chain leadership to clearly see where they can become more efficient by focusing on reduction or removal. This process can seem simple - focusing on waste and understanding the critical success factors however the difficulty often lies with working with people. Getting team members ‘buy in’ and participation can be improved through the process by involving everyone in the change. Mistakes are generally made when leadership focus on lean improvement tools, rather than people.