The term ‘lean’ was originally used within the manufacturing industry, but has since gone on to represent principles of streamlining and improving the entire procurement chain from initial sourcing to final delivery.
The key factors for success
Krish Vengat N is Vice President, Consulting at GEP’s automotive and industrial manufacturing practices, and advises leading companies on procurement strategy and performance transformation. He believes there are key factors that have to be in place for a successful lean procurement strategy, that are tied to efficiency enhancement, cost reduction and operations streamlining.
“First and foremost, the strategy should have clearly defined and measurable objectives aligned with overall business goals,” says Vengat. “Encouraging cross-functional coll1211aboration ensures a comprehensive approach that spans the entire supply chain and procurement processes.”
Alongside this, he says the integration of technology is critical in creating “a smart and robust system”, including e-procurement tools, supplier portals, to allow for valuable improvements in efficiency and automation that can’t always be achieved through more manual processes. When this is put in place, Vengat says it can work alongside a culture of continuous improvement, through standardised processes, optimising inventory, and having robust risk management strategies to minimise potential disruptions.
“Proactive cost-saving initiatives, focusing on negotiation and strategic sourcing, are vital, as is building flexibility and agility into procurement processes to navigate dynamic market conditions,” he says. “By integrating these factors, organisations can create a resilient, efficient and value-driven procurement function aligned with broader business objectives.”
Barriers to a lean procurement strategy
Although it can deliver many competitive advantages, a lean procurement strategy can be difficult to achieve? From his years of experience in advising businesses Vengat N says a number of common problems typically beset lean procurement initiatives.. One is resistance to change within an organisation. Often this stems from a fear of moving away from established processes or heritage systems – something that is incompatible with more progressive ways of working. Big tech-change projects require significant buy-in from all stakeholders at all levels if they are to be seen through to conclusion.
“Legacy systems and incompatible technology can impede the adoption of lean practices, exacerbated by integration challenges with existing enterprise resource planning (ERP) systems,” Vengat explains.
Existing weaknesses in procurement and supply chain management can also be exposed, he warns. The complex nature of global supply chains can manifest itself in poor-quality data and a lack of tech standardisation, both of which hinder efficient and consistent decision making.
He says that there are also challenges relating to:
- Supplier relationships
- Short-term cost pressures
- Regulatory compliance
- Ineffective performance measurement
- Cultural barriers
- Budget constraints
- Risk aversion
“These further complicate the lean procurement journey,” Vengat adds. “Successfully overcoming these demands a strategic and holistic approach that encompasses effective change management, technological investments, a culture of continuous improvement and alignment with overall business goals.”
How technology can help achieve lean procurement
Vengat describes technology as a “transformative force” in the pursuit of a lean procurement strategy.
He adds: ”Proper implementation can help address obstacles and lay the foundations for success. This can be through proper use of data analytics, which can provide critical insights from large datasets into trends for better operational efficiency and planning.
“With more procurement technology implementing artificial intelligence and machine learning, there are already opportunities to find a competitive advantage.
Vengat continues: “AI and ML employ advanced algorithms to analyse historical data, predict demand patterns, optimise inventory management and enhance decision-making, bringing automation and efficiency to procurement processes.”
Despite the challenges, at least there are low-code or no-code platforms available that allow greater customisation without coding. These are also collaborative platforms, designed to improve coordination and communication, and offer predictive analytics to identify potential risks in a supply chain.
Vengat also identifies the growing value of cloud-based procurement solutions. “They offer flexibility, scalability and real-time collaboration,” he says. “These platforms enhance procurement agility, accessibility and efficiency by providing a centralised and accessible digital environment for procurement activities.”
“Technology acts as an enabler for lean procurement by streamlining processes, enhancing collaboration, providing real-time insights and supporting data-driven decision-making. Organisations embracing innovative technologies can gain a competitive edge in achieving efficiency, reducing waste and optimising their procurement functions,” he continues.
How to implement the strategy
For a company looking to establish a lean procurement strategy, there has to be careful planning, commitment and collaboration across the business. This involves technological, cultural and leadership considerations to give it a realistic chance of a successful outcome. This begins with all teams understanding the core lean principles, such as waste reduction, optimising processes and finding opportunities to continuously improve and reflect on performance.
Vengat believes the key to success lies with leadership and cultural change. “Securing top leadership commitment to drive cultural change and set the tone for the organisation’s lean adoption,” he says, adding:“You also need to ensure collaboration with cross-functional teams to understand diverse needs and challenges recognizing procurement within the broader organisational context.”
Alongside this,, he says there must also be clarity in objectives, and a focus on continuous improvement. This, he stresses, involves “clearly articulating objectives, guiding the implementation of lean practices, whether that may be reducing lead times, minimising inventory or enhancing supplier relationships”.
This, he says, is reinforced by “a continuous improvement culture”, designed to encourage regular reviews of performance, as well as feedback and learning from successes and failures.
Vengat says such an approach needs to be adopted both inside a business and externally, in collaboration with suppliers. “Collaborate transparently with suppliers,” says Vengat. “Sharing forecasts and working jointly to identify areas for improvement is critical.”
His final advice is to maintain adaptability throughout the project. “Always be open to change,” he advises. “Dynamic business environments demand flexibility of procurement.
He adds:“By adhering to these guidelines, organisations can successfully implement lean procurement, driving efficiency, reducing costs and fortifying overall supply chain resilience.”
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