Lean Purchasing, inspired by Lean Management, is not a new concept. You’ve probably been hearing about it for a few years now but have you grasped the essence of it? Let’s take a look at the foundations, definition and benefits of this well-known method in infographics.
The foundations of Lean Purchasing
Lean Purchasing has its roots in a method developed in Japan in the 1950s to boost the economy in the difficult post-war period. The idea was to produce enough to meet the country’s needs, while using a minimum of resources. This is how the first foundations of industrial methods were laid, the principles and tools of which are still used today (visual management, etc.).
In the 1980s, the Massachusetts Institute of Technology (MIT) reworked and refined these concepts into the internationally renowned methods we know today.
Today, Lean Purchasing is synonymous with operational excellence. Initially applied to physical flow management, this concept has now been transposed to all areas, even procurement departments.
Definition and philosophy of Lean Purchasing
Ordiges defines Lean Purchasing as “[a method that] consists of identifying sources of unnecessary expenditure by revisiting the value chain and concentrating all resources on actions with high added value for the procurement department”.
This philosophy is based on two main principles:
- Buying less: refined and optimised monitoring of consumption, consistency with the actual needs of the company and internal clients, etc.
- Buying better: simplification and standardisation of processes, optimisation of productivity and services (deadlines, punctuality, etc.).
What are the results of Lean Purchasing?
Overall, this method improves the productivity and performance of procurement departments. But Lean Purchasing also offers qualitative benefits and makes it possible to:
- Create more value for the end customer;
- Improve the quality of products and services;
- Build synergies between the departments within the company;
- Take advantage of supplier innovations more easily;
- Detect company vulnerabilities more quickly.
Ultimately, this means strengthening the legitimacy and recognition of the procurement function within the company.
How can you implement Lean Purchasing?
Introducing a Lean Management approach in procurement involves taking action in 5 areas.
The first step is to build an in-depth understanding of the needs of the procurement department, as well as those of the organisation’s end customers.
Then it’s about simplifying, automating and streamlining processes to meet these needs as efficiently as possible.
Next, it’s necessary to develop the skills and structures that procurement needs to achieve these objectives, including a clear separation between strategic and operational supplying roles.
Using the right indicators
The procurement function should then strengthen its performance management by using indicators focused on actual value creation (for example, the overall contribution of the function in terms of cash flow and profits and losses).
Finally, and most importantly, the company must systematically change the mindsets and behaviour of its employees, creating a culture of continuous improvement in meeting customer needs and eliminating waste.
Ultimately, customers are always the starting point for Lean Management. Companies need to take a systematic approach to understanding their needs, with structured interactions, business collaboration portals and interviews. Strategic sourcing boards, for example, enable representatives from different sales departments and their counterparts in procurement to come together to optimise current performance and future plans.
Are you ready for operational excellence?