How Lean Procurement Can Lower Costs and Add Value
By Hugo Britt | May 11, 2021
In this article, we define lean procurement, explore some of its key benefits, show you how to do more with less, and demonstrate how even the leanest procurement function can add value to their organization with the support of a GPO.
What is lean procurement?
Depending on who you ask, there are several definitions of the term lean procurement.
Here are the top five:
- Doing more with less in procurement
- Running a procurement function with a very small team or with only one person
- Running a procurement function on a tight budget
- Eliminating waste in procurement
- Applying the principles of the lean work methodology to procurement
What are the benefits of lean procurement?
Some of the benefits of running a lean procurement function include:
- Reduce time-to-source. Lean sourcing methodologies can compress months-long RFP processes into less than a week by replacing complex RFP processes with one-day design-style workshops.
- Cut waste. Lean procurement forces practitioners to actively seek out and focus on the elimination of waste. In lean methodology, waste is defined as any activity that does not add value to the end customer.
- Create strategic focus. Running a lean operation means you will not be able to achieve everything. Lean procurement teams pick their goals and targets with care when building their lean procurement strategies, focusing on achievable and high-impact activities such as tackling tail spend.
- Jumpstart procurement on a shoestring. Budgets are often limited for small to medium-sized businesses that are establishing a new procurement function. It provides a way to get started while keeping costs low.
Examples of lean procurement
For some organizations, lean procurement simply involves doing things faster. For example, you may choose to replace time-consuming and complex procurement processes with a compressed approach wherein preparation time is slashed, partners are all evaluated together in a single-day workshop, and documentation is limited to a plan-on-a-page approach.
For other companies, “lean” may mean reducing the costs involved in procurement. After all, procurement teams are supposed to be the cost-cutting experts, so an unnecessarily expensive and wasteful function goes against procurement’s central mission. Getting lean may therefore mean finding ways to reduce cost-to-source, or reducing the team headcount and doing more with less.
Doing more with less
If you choose to reduce your headcount to run a leaner procurement team, you’ll need to find other ways to pick up the slack and maintain the same level of productivity.
Two routes to consider are automation and outsourcing.
- Procurement process automation can involve anything from automated supplier discovery, payment processing, spend analytics, and contract approval.
- Outsourcing to a GPO. Going lean doesn’t necessarily mean going it alone. Utilizing a GPO as an extension of your procurement team can help streamline the purchasing process, save costs, and save time by eliminating indirect spend contract negotiations.
These two strategies for doing more with less are not mutually exclusive. Taken together, they can give your lean team more time to focus on strategic activities that add value, such as supplier relationship management and strategic planning.
Contact Una today to learn more about how we can boost your lean procurement strategy and help you save time, money, and effort.