What is lean procurement?

Every procurement operation aims to do ‘more with less’ but what is lean procurement and how can you go about achieving it?

There are many different ways for organisations to attempt to achieve lean procurement, which can be reducing headcount, to running with a lower inventory.  The ultimate goal is to have a strategy that allows the function to ‘do more with less’, by identifying what adds value to the process and removing anything that does not add value. 

Implementing modern procurement technologies can add huge value to businesses in these efforts as can it can automate elements of the process and reduce the chances of manual error, and provide real-time visibility of the whole process.

What are the key factors in successful lean procurement?

In an online blog, software giant GEP breaks the key factors down into four key categories.

Segregate

Split up the different functions linked with procurement –supply, procurement, tactical purchasing and strategic purchasing. Lean approaches particularly prove to be efficient for downstream activities. It can streamline third-party risks and reduce related exhaustion.

Focus

Stay focused on the resources that add more value. Adopting procurement technology tools will help automate the repetitive and manual tasks of buyers. It allows them to focus on the purchasing process, where the greatest value is created.

Differentiate

Depending upon the type of products involved, from essential and risky to commodities or productive investments, the sourcing process needs to be adjusted.

Motivate

Motivate all departments for taking up these changes with attractive incentive systems. They can also be encouraged by the execution of new, directed solutions.

Implementing a lean approach to procurement

McKinsey outline five key steps in how to implement lean procurement practices in their paper ‘Purchasing power: Lean management creates new value in procurement’.

  1. Gain an understanding of the organisation’s needs: evaluate the procurement function as it relates to the organisation’s internal teams, as well as the organisation’s end customers. 
  2. Simplify, automate, and streamline processes: design a procurement function that uses technology to meet those needs in the most efficient way possible. 
  3. Build the skills of your procurement team: split the procurement responsibilities clearly between strategic and operational priorities, and ensure structures and training are in place to help meet those priorities.
  4. Measure performance: use indicators and metrics that relate specifically to value-creation (for instance, “the function’s overall cash and profit-and-loss contributions”). 
  5. Create a culture of continuous improvement: change the mindset of those in the organisation toward meeting consumer needs and eliminating waste.

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For more insights into Procurement & Supply Chain - check out the latest edition of Procurement Magazine and be sure to follow us on LinkedIn & Twitter

Other magazines that may be of interest - Supply Chain Magazine | Sustainability Magazine

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