According to a recent study by McKinsey consultants, employing the well-known lean thinking process can drive important benefits to procurement and improve both supply chain capacity and efficiency.
Making the transition to lean procurement requires activity in five key areas, according to the observations included in the research:
1. Understand the Customer
The purchasing component in the supply chain can be significantly improved when enterprises implement a systematic approach to understanding customer needs.
Leaders recognise the role of procurement as a ‘demand shaper,’ and they value its input on topics such as specification management or purchase volumes that can often unlock savings, the study says.
2. Standardise Processes
Procurement drives business value for the organisation, but it is important to unlock that value and make the process more efficient.
Standardisation of processes such as store requisition management and order fulfilment is critical to both strategic and operational aspects of lean procurement.
Understanding the supply chain management process with all its encompassing activities can lead to rapid standardisation, optimisation, and significant time and cost savings.
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3. Build the Organisation/People
According to McKinsey, becoming lean in procurement usually means redefining the organisation from the ground up.
It starts with a clearer distinction between strategic and operational purchasing roles. This way, strategic buyers spend more of their time on high-value work such as category strategies, demand management, and negotiations.
Organisations should look at developing buyers’ competence to produce a more decisive difference to procurement’s overall performance. Capturing and sharing knowledge by centralising databases on supplier interactions and creating digital platforms for sharing insights also helps.
4. Manage Performance
Procurement must be effectively measured at the individual supplier level, the individual buyer level, and the function as a whole, according to McKinsey.
Performance management supports lean purchasing departments through enabling the monitoring and review of the metrics and targets required and showcase opportunities for improvement.
Further automatisation and standardisation of the monitoring and reporting process can free more time for value-adding activities.
5. Encourage the Right Mindset and Continuously Improve
Continuous improvement is critical in lean procurement, and it becomes the responsibility of each purchaser to question activities and to propose better ways of doing them.
Organisations can start implementing basic steps to facilitate communication and collaboration among procurement teams and discuss best practices and value-driven insights for the benefit of the supply chain.
Procurement functions that embrace lean management achieve rapid, significant impact, ultimately allowing more time for important strategic decisions.
Dynamics AX for Supply Chain can improve and optimise your supply chain.
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 which can support in better managing your internal customers and stock.
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.