The term “lean” as it applies to our subject was coined to describe Toyota’s business during the late 1980s by a research team headed by Jim Womack, Ph.D., at MIT’s International Motor Vehicle Program. According to lean.org; the idea behind lean organizations is to maximize customer value while minimizing waste. Simply, lean means creating more value for customers with fewer resources.
In Lean Thinking, by Jim Womack and Dan Jones, the authors suggest that companies or organizations think about three fundamental business issues.
1. Purpose: What customer problems will the enterprise solve to achieve its own purpose of prospering?
2. Process: How will the organization assess each major value stream to make sure each step is valuable, capable, available, adequate, flexible, and that all the steps are linked by flow, pull, and leveling?
3. People: How can the organization insure that every important process has someone responsible for continually evaluating that value stream in terms of business purpose and lean process? How can everyone touching the value stream be actively engaged in operating it correctly and continually improving it?
So, how does this apply to the procurement process? A typical misconception is that lean is suited only for the manufacturing process. This is not true. Lean applies in any and all businesses for any and all processes. Some areas you might consider relative to a lean procurement process would certainly include but not be limited to the following.
1. How many internal resources are dedicated and at what cost to procuring products and services for resale or internal use?
2. How much time do these resources spend to review and renew contracts?
3. How many new sources of supply are vetted regularly to insure you are receiving the best possible product at the best possible price?
4. How long have you been doing businesses with existing suppliers in every category?
5. What are your Procurement Key Performance Indicators and how often do you review them?
6. Do your Procurement KPI’s link directly with your corporate KPI’s?
Ultimately a lean organization understands both internal and external customer value and focuses its key processes to continuously improve both. Your solutions provider should have tools to help you evaluate your current process and suggestions as to how to reduce cost and infrastructure to support a lean procurement organization.
We look forward to and appreciate your comments.