Jeremy Ferrer
Webinar :
Cross-border Purchases and VAT: Optimization Strategies
Tuesday Sept. 10, 2024 at 11 am (France)
As a business manager or manager of a department or department within a company, you have surely already heard of Lean Management. This method of managing and organizing work, which originated in the 1950s in Japan, does not only apply to the world of production today. It applies to the various key functions of the company, including the purchasing function. Hence the name lean purchasing, lean purchasing or Lean procurementt. This concept aims to optimize purchasing processes by eliminating all forms of waste. In this article, let's discover together the concept of lean procurement management or lean applied to procurement.
Lean Purchasing is a methodological approach aimed at optimizing and improving operations related to purchasing and inventory management within an organization. It is mainly inspired by the principles and tools of Lean Manufacturing and Six Sigma, two very common approaches in the field of operational optimization.
The term “Lean” is used more and more commonly in the business world today, and is causing some curious people to wonder.
Charles Dimitri, President of the BME Network association, recently interviewed Cyrille YNNO, President of the Lean Concept consulting firm, in order to demystify Lean and better understand its principles.
Charles Dimitri (C.D.): What exactly are the principles supported by Lean?
Cyrille Ynno (C.Y.): The principle is simple: Lean consists in eliminating all waste, in all its forms. Waste is defined as an activity that does not add any value perceived by the customer to the final product/service.
What we call Lean started with the Toyota production system that identified 7 wastes: overproduction, inventory, waiting, transport, ancillary processing tasks, movement and defects. Other systems have also identified additional wastes.
C.D.: How can Lean principles be applied to Purchasing and Supply Management? We also talk about lean purchasing or lean Purchasing management.
CY.: There are 3 types of flows within companies: material flows (product, materials, services), information flows and financial flows.
Information flows must flow very precisely through the supply chain to improve material flows. Thus, mapping a Purchasing process can make it possible to identify waste to be reduced or eliminated (for example: How long do you have to walk to reach the cabinet that contains a supplier's file? Are we collecting too much useless information? How long does an order wait before being validated by the designated validator? ...)
C.D.: The Lean of this decade is surprisingly similar to the “Business Process Reengineering” of the 90s. How is it different? Doesn't the enthusiasm around Lean Purchasing show a desire to improve processes?
C.Y.: “Reengineering” is about improving processes, Lean is about eliminating waste. However, to improve processes, waste must of course be eliminated.
C.D.: I saw a salesman who preached for Lean but whose business was suffering from the worst quality there was. Are there controls built into the methodology to avoid sacrificing quality for the sake of efficiency?
C.Y.: This supplier may have talked about Lean, but he obviously does not subscribe to it. Some companies are implementing a Lean purchasing tool, but don't understand the concept.
Poor quality is a defect that is a waste that must be eliminated, without affecting internal or external customers. Employees should be involved in finding and solving problems, for example by setting up a Poka-Yoke mechanism in order to avoid the repetition of past mistakes.
Before defining lean purchasing, let's first understand The concept of lean management. It is a work management and organization system that aims to improve business efficiency by reducing waste. This concept was invented in the Japanese factories of the Toyota group in the 1950s. We were then talking about Toyota Production System or Toyotism. Its objective has been to reduce tasks with no added value that can prevent the company from generating profits or increase the selling price to consumers. This involved revising the organization of work in order to reduce the waste of resources, such as unnecessary stocks and working time.
Another objective of lean management is customer satisfaction. This means optimizing processes to produce “just in time.” Thus, the concept was originally developed for the manufacturing industry. But since then, it has been declined for other areas, including the purchasing department.
In the term “lean purchasing” or lean purchasing, there is lean and purchasing. Lean, because it is inspired by Lean management. And purchasing, because it is applied to purchasing management. In a context where we are becoming more and more aware of the importance of optimizing purchases in business performance, lean purchasing is a concept that is more attractive to decision-makers.
The definition of lean purchasing is a management method that uses lean management principles to identify and eliminate sources of waste or superfluous expenses in purchasing processes. Its objective is to make it possible to buy less and to buy better. This happens through the automation or digitization of purchases and through the optimization of consumption or the limitation of losses.
The application of lean management to procurement thus makes it possible to improve purchasing or procurement processes by revisiting the value chain and by focusing all company or department resources on actions with greater added value. Since procurement departments still spend nearly three-quarters of their time on operational or transactional tasks, this approach allows them to focus on creating value.
In general, lean management focuses on reducing direct costs. However, these represent only 25% of total company expenses.
By adopting lean purchasing, businesses will be able to save more on costs, because the supply chain or supply chain alone accounts for 50% to 60% of company expenses. THE optimizing purchases through lean purchasing thus makes it possible to obtain a larger margin and to gain competitiveness in a context of tough competition between companies.
Lean procurement management aims to eliminate superfluous expenses in the purchasing process by acting on various key points, including the supplier portfolio, the selection and consumption of products, the digitalization of transactions, logistics, logistics, the deployment of the agreement and quality management.
While the overall objective of lean purchasing is to improve the productivity and performance of the purchasing function, this strategy also brings specific benefits. In particular, it will promote the creation of value for the end customer, the improvement of the quality of products and services, the creation of synergy between the various departments of the company, the management of supplier innovation and the early detection of possible flaws in the purchasing processes.
By relying on lean purchasing, a company can make considerable savings on its various projects. Indeed, by buying only the products she needs, she reduces unnecessary expenses. It will therefore be able to generate more profit.
In addition, by being freed from repetitive, time-consuming and unproductive tasks, the firm will be able to improve the quality of the products or services it offers to its customers. Not only will it therefore improve their satisfaction. But it will also become more competitive on the market.
Finally, thanks to lean purchasing management, it will be able to make constant progress, because it will be in a position to detect the various faults early and correct them quickly.
Ultimately, lean procurement will allow the purchasing department to gain legitimacy and recognition at the company level.
In business management, two methods are used by managers in particular to break with the usual modes of operation and stand out from the crowd. It's about lean vs agile management.
While the purpose of both methods is to improve production and organizational conditions within the company, they are completely different in their implementation. So which of these two methods is best suited to the procurement function?
In lean procurement management, the focus is especially on the elimination of waste, continuous improvement and collaborative work. All the actions implemented aim to achieve three objectives: zero delays, zero stocks, zero defects. Why lean management? It is a method more suitable for teams with little experience. Indeed, it seeks to capitalize on experience and pushes teams to improve continuously thanks to the many tools at their disposal.
In agile management, it is more a question of strengthening the purchasing department's ability to adapt to change. This method focuses on the definition of goals to be achieved in the short term. She does not recommend detailed and precise planning of a project before it is developed, as it is counterproductive. Agile management is more suited to a creative approach. It is suitable for a multidisciplinary team.
The objective of Lean Purchasing is to increase the productivity and added value of purchasing processes by eliminating waste and by continuously improving the methods and practices used. Management plays a key role in this approach, by leading the establishment of a culture of operational excellence and by setting up performance indicators to measure the progress made. to achieve operational excellence, Lean Purchasing focuses on several key aspects. First of all, it aims to reduce waste such as overstocks, waiting times, unnecessary movements, or overproduction. Problem solving is also central, using methodologies such as Kaizen or Lean Management to identify and solve problems on an ongoing basis.
As with lean management, the implementation of lean procurement is structured around five phases:
The goal of any business is to offer a product or service that a customer is willing to pay for. Depending on the value it contains, that is, its ability to solve the customer's problems, the customer is willing to buy it or not. The first step in lean procurement management is therefore to identify this value that will make all the difference. Any process or activity that doesn't add value to your offering is considered wasteful.
It's about identifying the different workflows that are needed to create the value in question. This approach makes it possible to define the various actions as well as the people involved in the process. The goal is to determine which steps produce value and which don't in order to eliminate them.
Once the value chain has been mapped, tasks must be distributed between employees and ensure that the workflow remains fluid. There should be no interruptions or stoppages in production due to poor organization. The way to do this is to segment the process into smaller batches. Through its various tools, lean procurement management makes it possible to do this.
This step involves finding a balance between a continuous workflow and on-demand production to avoid any risk of waste. This involves the creation of a so-called traction system whose objective is to optimize resources so that they are only mobilized when there is a real need from the customer.
Once all these steps have been completed, The lean purchasing management system is set up. There is still this last step to take. This consists in making the system dynamic. This involves the involvement of employees at various levels in the continuous improvement of the process. They must be empowered by encouraging them to identify problems on the ground and to solve them. Each employee will therefore be an actor in the process. He will be responsible for the smooth flow of work and the continuous improvement of the workflow.
Various tools can be used in the context of lean procurement management:
Six Sigma and Kaizen methods: lean 6 sigma is a working method that aims to manage work based on customer feedback. Kaizen, for its part, is an approach that is part of a continuous improvement process in order to best optimize the purchasing process...
Lean Purchasing also promotes a just-in-time approach, where products are delivered exactly when they are needed, thus reducing storage costs while maximizing customer satisfaction. It highlights value chain management and the standardization of production processes, while ensuring the flexibility and agility needed to adapt to changing market demands. To implement a continuous improvement process in procurement, several tools and lean methodologies can be used. Among the most commonly used are Kanban, which allows you to visualize and manage production flows, as well as the black belts and green belts that are experts in the Six Sigma methodology.
Lean Purchasing is an approach that aims to continuously improve purchasing processes by identifying possible improvements, reducing waste, optimizing processes and promoting customer satisfaction. It is a visual management system based on standards and performance indicators, and requires a strong involvement of managers and managers.
Digitalization also plays an important role in allowing better industrial performance and more efficient management of the supply chain. By implementing a continuous improvement process, businesses can improve their competitiveness, reduce costs and achieve operational excellence.
.svg){kind=small}