QUESTION ONE $[40]$Purchasing power: Lean management creates new value in procurementIn most organizations, lean management runs into an important wall: the one by which thepurchasing department sits. In our experience, to the extent most procurement functionshave thought about lean management at all, they have viewed it primarily as a way tostreamline and automate procure$-$to$-$pay $($P$2$P$)$ activities. Lean managements capacity todeliver significant value in strategic procurement has largely been ignored.The reason may be obvious. Despite procurements influence, its operating costs are usuallyvery low: on average, between $0\mathrm{.}3$ and $1$ percent of spend in most industries. Forprocurement leaders who see lean as a tool for wringing out efficiency improvements, thosenumbers hardly seem to promise much potential.That mind$-$set should change. Properly applied, the disciplines and systemic thinking of leanmanagement can become a strategic weapon: aligning purchasing more tightly to internalcustomers real interests, helping leaders rethink the end$-$to$-$end procurement process $($fromsuppliers through to manufacturing and ultimately to external customers$),$ and transformingthe effectiveness of strategic procurement activities.Think of what procurement people do each day. How much time do strategic buyers spendon truly value$-$adding activities, such as building a deeper market understanding in keycategories, identifying and qualifying new potential suppliers, or negotiating the best possiblecontracts? In all likelihood, much less than you think.A broader and more thoughtful lean$-$management perspective doesnt just help companiesmaximize the effectiveness of their current processes. It also allows companies to take amore integrated view of the value each individual buyer creates. It helps them answerimportant strategic questions, such as which activities should be kept in$-$house and whichshould be automated, allocated to near or offshore shared$-$service centers, outsourced, orstopped altogether. Standardized activities, fewer processes, better$-$qualified buyers,continual people development, and resources sharply focused on activities that add realvaluethis is what we understand as lean procurement.The advent of lean discipline in purchasing is timely for another reason: digital is set to havehuge impact on the function, with many new solutions that extend beyond todays P$2$Pautomation and could transform the end$-$to$-$end procurement process. Tools such asstandardized should$-$cost analyses, work$-$flow portals to manage the full strategic$-$sourcingprocess, and access to huge external supplier databases for market research will allowstrategic buyers to spend even more of their time focusing on the right things. And theefficient, structured processes enabled by lean management provide the perfect frameworkfor integrating these new tools.Applying a lean lensBringing lean$-$management discipline to purchasing requires action in five areas $($seesidebar$,$ How one leader brought lean management to procurement$).$ The first step is todevelop a deep understanding of the needs of procurement customers: not only thebusiness units that work directly with the procurement department, but also theorganizations end customers. Next is to simplify, automate, and streamline processes tomeet those needs as efficiently and effectively as possible, both in strategic procurement$($such as with standardized request$-$for$-$quotationor RFQsystems$)$ and in operationalprocurement $($such as with no$-$touch order processing$).$ Third is to build the skills andstructures procurement needs to achieve those goals, including a clear split betweenstrategic and operational procurement roles. Fourth, the function must tighten itsperformance management, using indicators that focus on real value creation $($for example,the functions overall cash and profit$-$and$-$loss contributions$).$ Finally, and most importantly,the organization must systematically change the mind$-$sets and behaviors of its people,creating a culture that focuses on continuous improvement in meeting customer needs andeliminating waste.Standardize processesOnce a company understands how procurements activities generate value for the business,it can explore new paths to deliver the value more efficiently. Value$-$stream mappinga tooladapted from manufacturingcan be a powerful way to separate the worthwhile steps in aprocess from the wasteful ones, so that the process can be simplified and redesigned.The approach applies equally well to strategic and operational procurement processes, butwith a few important differences in execution.Procurement functions that have embracedlean management have achieved rapid, significant impact. $($Source: McKinsey & Company, $2017)1\mathrm{.}1$ With reference to the case study, discuss the primary purchasing objectives $(30)$