Creating Value Through Lean Sourcing

Even though Lean principles are widely applied in manufacturing, the same principles can be beneficial to sourcing. Just like in manufacturing, the strategies assist in minimizing waste, reducing time lost, and ensuring processes are implemented correctly after the first execution.

Many businesses consider lean sourcing to involve mainly taking advantage of suppliers as often as possible, so that resources can be used more efficiently especially in the core areas of focus. However, there is a need to ensure that the right cord is struck between providing value-added services and the cost of goods and services without spending too much in terms of time or money.

Focus On Adding Value Instead of Reducing Costs

Like with most business processes, it is important to always try to accomplish more with less. That means you need to carry outsourcing with a few people. It is important to consider, what are the staff members doing? Is their strategy centered mainly on handling transactions or are they paying attention to strategic activities? Just as lean best practices are applied in inventory reduction in the manufacturing industry, it can be used intelligently to reduce headcount.

The focus needs to be on the workflow. You need to analyze it and review underlying assumptions. When sourcing, it is important to always consider how the approach will add value to the customer and bring new possibilities into the open.

The principles of lean sourcing and supply management can be used to:

• Enhance the sourcing processes and associated workflows to cut down the time taken and eliminate waste
• Reduce the costs associated with doing business while increasing the value of goods and services
• Shift the focus to the workflows and processes that are value-adding to the organization
• Shift the focus to strategic sourcing rather than focusing only on transaction processes
• Improve the relationship with suppliers and make these relationships more effective

Lean Enhances the Total Value of Sourcing

Organizations need to acknowledge that lean principles are not meant for manufacturing workflows only. This misconception comes from the fact that lean principles have been popularized by the manufacturing sector, but there are many advantages in supply sourcing and in establishing a supply base.

Lean principles, therefore, apply to all industries and even to businesses in the services sector. Even though the methodologies have yielded good results for manufacturers, they have the potential of helping businesses boost their operational and financial standing.

Some of the issues that need to be considered include: how to improve the total value of sourcing and how particular activities help in the achievement of this goal. The bottom line in the application of lean principles is to focus on adding value while eliminating waste and unnecessary costs.

Lean Principles Improve the Efficiency and Effectiveness of Sourcing

The main principles of Lean accounting – identifying value, mapping the value stream, pull, flow, and perfection,  – can be highly advantageous to sourcing. There are many tools proposed by the methodology that can be applied to sourcing such as: mapping the value stream, Kaizen 5s, standard work, etc. These principles can also be applied to the adoption of supply chain systems such as strategic sourcing and spend analysis applications. Using these principles to perform supply base rationalization leads to high performing suppliers. Failure to rationalize the supply base leads to more transactions and an increase in waste when it comes to the process of sourcing. The incorporation of supplier performance management with lean principles helps to reduce costs and provide more value by ensuring that the supply base is more efficient in meeting its goals. This is a more cost-effective sourcing approach for organizations.

Conclusion

Lean sourcing gives organizations the capacity to discern between sourcing tasks that lead to waste and those that can add value to the processes. This way, organizations are in a better position to pinpoint wasteful activities and eliminate them. It boosts the company’s bottom line by increasing cash flow and profitability. Organizations should, however, stay focused on leadership, staff, overall company’s strategy, as well as the culture rather than focusing only on the tools.