Lean Purchasing to optimise the purchasing process

Do you want to optimise your profitability? If so, it’s in your interest to improve your company‘s purchasing management.

You need to fine-tune your purchasing protocol. That way, you can avoid the risk of waste and unnecessary outgoings.

This is where lean purchasing comes into its own. It’s not a new concept, as it was inspired by the Lean concept created by the famous Taiichi Ono in the 1950s. So, what should you know about this methodology?

What is lean purchasing?

In the 1950s, Toyota was in a difficult economic situation. Taiichi Ono invented the lean method, an approach to optimising the production mechanism. His aim was to meet buyers’ needs using fewer assets.

The Japanese engineer wanted to improve production management to avoid waste. Even today, the principles of Lean are applied in a variety of sectors. They are also at the origin of various quality management concepts , including lean purchasing.

What is lean? First of all, we need to understand the meaning of the term “purchasing”. It is the present participle of the verb ” to purchase ” . The term is therefore linked to purchasing management. Purchasing involves managing the supply of raw materials or finished products to be marketed.

Applying lean purchasing simply means applying the lean method to the purchasing process. Every company supply chain manager needs to master this approach .

How lean purchasing works

In reality, this approach uses lean management methods . The objective remains the same: to eliminate waste. Note that the purchasing department is a very large item of expenditure. To increase the company’s profitability, it needs to improve its operational efficiency.

But purchasing also means storage. So you need to think about logistics, particularly stock management. Excessive storage of goods or products for sale could generate additional costs. For all these reasons, lean purchasing is based on two basic principles:

• Buy less by controlling consumption and adapting it to the real needs of the company and its customers in order to limit losses.
• Buy better by making the process simpler and faster, and by optimising productivity and service quality.

Inother words, this lean methodology encourages you to revisit your company‘s value chain. The aim is not to change everything, but to set up a management system to ensure continuous optimisation of the purchasing cycle .

You will concentrate on actions or tasks with high added value and neglect the others. This is the principle of “doing more with less“. Obviously, the application of lean purchasing requires the involvement of the entire supply-chain department team .

Sources of waste according to the lean purchasing concept

To achieve the objectives of this lean methodology, you must first identify the problems and the solutions.

Overstocking

This is one ofthe main sources of unnecessary expenditure. In general, overstocking is caused by :

• incorrect forecasting of purchases or sales,
• overproduction.

Eliminating excessive stocks avoids unnecessary costs. In this context ,optimising supply processes is a preferred solution. This means applying an effective strategy such as lean logistics. At the same time, it is equally essential to improve the production process, for example by applying the Kanban method.

Wasting time

If you want to improve the efficiency of the purchasing process, identify all the factors that waste time:

• inefficient working methods
• poor distribution of tasks
• incidents
• a lack of worker skills.

Methods need to be put in place to correct these problems. For example, you can :

• invest in the use of modern tools,
• improving operators’ skills through training,
• allocating tasks appropriately.

Order errors and unnecessary journeys

There’s nothing more costly than ordering errors. Such an incident will force you to manage customer returns. What’s more, you’ll lose time and money preparing the parcel again.

But a problem with warehousing could also cause delays, generating additional operational costs. If you want to eliminate excesses, you need to optimise your ordering and supply processes. To do this, you can use Weproc’s purchasing management module.

How do you apply Lean Purchasing?

To apply Lean methods in purchasing, you need to take a few steps internally:

Identify the value

The aim of any business is to create a product or service that appeals to consumers. It also means satisfying the expectations of end customers. To achieve this, you need to identify and understand their needs and adjust production accordingly. This is the principle oflean manufacturing: producing according to demand.

But you also need to understand the needs of your company’s purchasing department. This whole approach guarantees optimum operational performance and reduced costs.

Creating value

Creating value is another measure to be taken when applying lean purchasing. It’s a process of excellence based on the identification of important workflows. In simple terms, you need to define the important actions to be carried out and the human resources to be mobilised. The use of good indicators is necessary to continuously improve the management of the purchasing department.

Creating a fluid workflow

Distributing tasks between operators is another measure that needs to be taken. The lean manager must ensure that work in his department flows smoothly. Thereshould be no interruptions, so good organisation is essential.

Ideally, the process should be segmented. This will enable you to identify any obstacles and eliminate them. Using a continuous improvement tool such as the kaizen method will help you achieve this .Processes also need to be simplified and automated.

Create a value-for-money system

At this stage, you need to strike the right balance between continuous workflow and just-in-time production. To achieve this, you need to create a resource optimisation system called a pull system.

You need to ensure that resources are only mobilised in line with actual customer expectations. In other words,the operational processes within your supply chain need to be well thought through .

Create a continuous progress system

Implementingthe lean purchasing management technique is the final step in the process. You need to remember that it is based on the principle of continuous improvement. In other words, you don’t have to replace everything. You need to revise the existing approach and make it more dynamic.

The contribution of your employees to your continuous improvement projects is therefore of vital importance. You need to give them a sense of responsibility by encouraging them to identify the causes of excess and to make suggestions for resolving problems. Their involvement will influence the success of theongoing refinement of purchasing management .

The various lean purchasing tools

If you want to apply lean purchasing within your company, you have access to various tools. They will make the process of optimising the procurement system simpler :

• Value Stream Mapping(VSM), a programme that provides a global view of the purchasing process
• The 5S technique for improving the working environment
• The 6 sigma lean manager, which enables work to be steered by taking account of consumer feedback
• The kaizen technique, a continuous improvement tool that will enable you to improve operational mechanisms

The benefits of lean purchasing

Lean purchasing is a way of achieving operational performance and customer satisfaction. This agile approach makes it possible to optimise :

• Value creation
• Productivity
• Optimising the performance of supply-chain teams
• The quality of the products and services to be supplied
• Synergies between the company’s various departments
• The company’s competitiveness in the marketplace
• The efficiency and reputation of the purchasing department
• The company’s success
• Supplier portfolio management

This methodology also reduces unnecessary costs by eliminating repetitive and unproductive tasks .

To implement this agile approach, you can also rely on the use ofpurchasing software such as Weproc. This is a complete solution designed to facilitate the smooth running of purchasing and improve expenditure control, as well as supplier relations.

Want to learn more about our procurement management software Weproc? Contact us or request your free 15-minutes demo below!

Team Weproc

Weproc is a SaaS software specialized in digitizing the procurement process of companies. From purchase requests to supplier invoicing, through the validation process, Weproc is designed to simplify the purchase management of SMEs and mid-sized companies by centralizing all purchase-related activities.