Can the well-known principles of lean manufacturing deliver similar value when applied to procurement? And how can lean procurement benefit the supply chain management?
To answer these questions, consultancy group McKinsey has looked at the benefits of lean technologies often used in the manufacturing process, and applied these to procurement.
Following the above, lean procurement translates, by definition, into value-adding purchasing activities. The effective use of resources is key to lean processes, including procurement.
Real value can be driven by standardised activities, fewer but more efficient processes, better-qualified buyers, and continuous people development.
Furthermore, digitisation of the supply chain and new advanced technologies facilitate the case for lean procurement in organisations.
So why does the lean model fail to be implemented in more enterprises?
According to McKinsey, one reason why the lean model is overlooked in procurement is due to low staff and administration costs, which is often up to 1% of the spend in most industries.
The new release of Dynamics 365 for Operations is Microsoft’s new business solution for medium to large organisations. Dynamics 365 for Operations was previously known as AX7 and is a single software system that helps run businesses more effectively. It is a digitally transformed financial and operational ERP system.
Chief Procurement Officers (CPOs) think there is little opportunity to reduce these costs further. Therefore they tend to forgo further streamlining these processes. But there are various opportunities to be considered by CPOs.
Applying lean principles to procurement can drive real value in organisations where procurement managers and strategic buyers actively shift their attention to areas that bring innovation and performance.
Such core activities in procurement include understanding key customers and the markets, identifying and qualifying potential suppliers, or negotiating the best possible contracts.
In an enterprise case study conducted by McKinsey, it was discovered that strategic buyers often devoted less than 40% of their time to these core activities, and wasted otherwise productive time with admin, reports filling, or other tasks that could have been delegated to the operational procurement staff.
The case study concluded that the organisation could increase the buyers’ valuable time to 70% of the total spent effort when focused on core procurement activities, effectively improving the strategic procurement process without extra procurement personnel or costs.
Dynamics AX for Supply Chain can improve and optimise your supply chain by optimising your internal requisitions and management of stock internally.
Stores Requisition Management (SRM) for Dynamics AX, or otherwise known as internal requisitions, has been designed to improve the functioning of stores within an organisation.
The Stores Requisition Management (SRM) or internal stock requisition extension integrates with the inventory and warehousing management module within Dynamics AX to support and streamline your organisation’s internal stock requisition processes.
Microsoft Dynamics for Operations
Contact Resolve Immix and speak to one of our experienced Microsoft Dynamics ERP consultants to find out how our supply chain solutions can benefit your organisation.