Procurement’s core responsibilities have traditionally provided purchased materials and services on time, at the lowest costs, and highest quality to meet their customer demands. However its role has expanded to play a critical part in improving the flow of information and materials throughout the entire supply chain.
Best practice procurement functions move far beyond contract negotiation by establishing fundamental operational requirements, engaging in strategic sourcing activities such as market research, vendor evaluation and integration.
Inventory management and sourcing supply chain decisions are critical components of a company’s financial performance. In fact, most organizations manufacturing activities add less than 25% of the total product value. Because supply chains hold so much potential for lead time, quality improvement and cost reductions, they are excellent candidates for Lean Solutions.
A disproportionate amount of waste in a value chain is directly linked to procurement processes not working properly. Companies often lack clarity over their supply chain and therefore struggle to localize and differentiate value from waste.
Balancing procurement related activities that are “necessary waste” with those that create value presents an ongoing struggle for companies of all sizes. The benefits of applying Lean Principles to procurement functions and purchasing activities can dramatically affect a company’s cash flow and it’s bottomline.
Waste in procurement processes can be identified, classified and minimized in the same way as waste in manufacturing as well as create tremendous savings potential. Lean principles, kaizen methods, and reengineering approaches can be applied in every phase of the supply chain. The right Lean Solutions can improve product quality, reduce lead-time and reduce working capital.
Designing and implementing a Lean procurement process can dramatically change the way a company does business. A clear and standardized process to source materials or parts and just-in-time inventory policies reduces the burden on the balance sheet as well as stabilizes the entire value chain.
Suppliers selected and assessed the same way will have the same purchasing structure and can be more easily integrated into flexible production processes. Being reliable and flexible means a competitive edge.
We implement Lean Solutions in procurement functions in a similar way to other functions. The solutions must fit the challenges without sacrificing quality, increasing lead time and costs.
|Implementing inventory reporting and accuracy standards allowed for faster decision making and ordering reducing lead time for non-standard items by 4 hours - 50%|
|Optimizing an insurances claims process decreased average throughput time from 9 business days to just under 4 business days (-56%)|
|Optimizing and standardizing B2B data exchange process decreased supplier caused defects 98% over the entire process|
|Lean MRP solutions helped inventory reconciliation to be minimized to an annual activity increasing inventory data qualityOptimizing an insurances claims process decreased errors by 98% over the entire process|
|Inventory accuracy improvements from Lean MRP solution reduced inventory by 2.5 Million Euro|
To learn more about Lean Administration, contact Four Principles today.