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Question for this answer as below bold wording:

Lean procurement may have a lot of advantages but it could be difficult to implement. Procurement must be prepared for challenges and problems in the implementation process. Suggest any THREE (3) adjustments applying lean principles to purchasing in an organisation.

Answer:

Lean means the elimination of waste and that is exactly what the Lean Procurement strategy does to the procurement process. It utilizes innovative web technology and web solutions to streamline procurement process, reduce spending and provide measurable accountability and common sense solutions. Lean procurement methods help in eliminating waste in all procurement cycles, preventing shortages or stock outs, reducing inventory costs, improving customer satisfaction and reducing procurement lead time and costs. All these can lead to increasing companys performance, brand value and most importantly profits. However, it is difficult to implement lean procurement practices due to various reasons. Some of them are lack of clear responsibility in supply chain, lack of management and suppliers engagement in adopting the entire process or insufficient planning, monitoring and control of the processes.

Adjustments that can be made to ensure implementation of lean principles to purchasing successfully in an organization. One of the adjustments is doing Plan-Do-Check-Act (PDCA). The Plan-Do-Check-Act cycle is not only relevant to the shop-floors, but also in the purchasing department. The assessment of the current state is required and is to be compared with the target condition. Changes are experimented with and results are evaluated in a PDCA cycle. Adjustments are made and the improvements are repeated over and over again until they become the standard. We can identify the below-given adjustments applying lean principles to purchasing in an organization. PDCA cycle is a model for carrying out change. It is an essential part of the lean manufacturing philosophy and a key prerequisite for continuous improvement of people, processes, manufacturing, management, and other areas. It is a simple four-stage method that helps teams us to avoid recurring mistakes and improve processes. It became an integral part of what is known today as Lean management. Focusing on the core strengths- a company may outsource the other activities and gain more resources, expertise, and capabilities to stress and focus on the critical and important activities. Better value is often realized in the long-term as well when a specialized third-party provider is engaged.

The next is maintaining good buyer-supplier relationship. Number of suppliers for each material or component should be one ideally, so that the relationship between buyers and supplier is maintained. This will also mean that educating the supplier, maintain a clear communication regarding increasing value and reducing waste is also easier. However, this can also mean non-competitive pricing from supplier side and total dependency which can run into risks sometimes. Keep supplier regularly informed and up to date, on organization strategy and plans so that they know where they fit in and how they can help, plan for and benefit from those plans. Make suppliers feel like they are a part of your business. A stronger, deeper relationship with clear and frequent communication allows this communication to become more organic. Sometimes its better to pay a little more as the supplier is provide a better service which pays for itself because you need to provide less time to manage them, or because they can be trusted to deliver directly to your user. Choose the most efficient services for business, and realize that efficiency is a product of value not just the cost.

Last suggestion is close geographic proximity to suppliers. This is required to achieve the desired performance levels. The exchange of information, quality levels, change in design levels (when necessary) is easy when the distance is lesser between the buyer and supplier. Long distance increases the complexity of supply chain. For warehousing and distribution operations, transportation costs and proximity to markets are extremely important. With a warehouse nearby, organization can hold inventory closer to the customer, thus reducing delivery time promoting sales and purchasing department can do cost saving in this part. Location is a key factor in determining how conveniently customers can carry on business with a firm. For example, some of the people would like to go to laundry or supermarket if another is more convenient. Thus the influence of location on revenues tends to be the dominant factor. Another example will be like supplier delivery of groceries items. Stock may be running out during weekend, supplier will perform stock replenishment in short period of time. Even there are rejection happened in warehouse, new batch of stock will be deliver as short period of time as well due to short distance from supplier warehouse to outlet. Purchasers are not required to do quick sourcing for this item.