As someone who has expertise in both procurement and in lean, I’ve always been interested in what writers and pundits have to say about lean procurement. Mostly, they are saying that lean can help firms save on headcount in Procurement. But that’s only part of the story of what lean procurement can do. I was interested to read the April 1, 2012 article in IndustryWeek, Lean Procurement Processes Mean Fewer Employees by Becky Partida at APQC, which did a benchmarking study on the subject. The study focused on how many FTEs were needed per $1B in purchases. The results are what one would expect: those organization who were implementing lean in procurement needed fewer people. That metric is certainly telling and important. But it only tells part of the story in Procurement. The real story should be a lot more strategic. There are so many other important and strategic factors that can impact the effectiveness and efficiency of Procurement. For example, adoption of supply management and supply chain technologies such as strategic sourcing software and spend analysis, when implemented properly, can help make procurement more lean. Organizations that perform supply base rationalization (and perform it well, of course) will be dealing with fewer, higher performing suppliers. Supplier proliferation is a major reason for increased transactions and waste in Procurement. Or take supplier performance management, which can’t fall directly under the category of how many procurement folks does it take to manage purchases. It helps ensure a higher-performing supply base that requires less expediting results in higher quality and better responsiveness from suppliers – and less cost and more value. This readily translates into a more efficient and cost-effective procurement operation.
Procurement can add to the top line as well as the bottom line as in collaborative product development with suppliers. When new products are being planned, involving suppliers in the process can be a value-added, cost-effective approach to consider. If an organization looks at lean procurement as only increased efficiency in pushing or eliminating paper and the processes surrounding that function, so many more value-added activities will be missed.
Just as lean manufacturing needs to be viewed more strategically than optimizing flow and pull in individual cells, lean procurement needs to be seen more strategically than just buyer transactions. It is so much more strategic than a process flow to buy “stuff”. Looking at lean procurement only in terms of how many procurement FTEs are buying products and services is to miss some of the biggest opportunities for making procurement lean and for adding value to the organization. It also reinforces the traditional and outdated view of Procurement as low-level paper pushersSupplier Evaluation and Performance Excellence: A Guide to Meaningful Metrics and Successful Results CloudDVD: Supplier Evaluation and Performance Management