In today’s increasingly competitive business environment, supply chain management is emerging as an opportunity for improvement. All businesses in virtually every sector of the industry heavily rely upon effective sourcing practices in order to maintain output and deliver consistent performance. Driving down costs for these processes and increasing profitability is the need of the hour.
One way to address this need is through lean sourcing which has emerged as a winning strategy for transforming procurement practices. Based on Kaizen methods of lean management, lean sourcing promotes principles of improving in-house practices at companies to boost productivity. It also includes a focus on improved customer service and building collaborative relationships with suppliers and other business partners.
One way to address this need is through lean sourcing which has emerged as a winning strategy for transforming procurement practices. Based on Kaizen methods of lean management, lean sourcing promotes principles of improving in-house practices at companies to boost productivity. It also includes a focus on improved customer service and building collaborative relationships with suppliers and other business partners.
Just like other managerial practices, the true success of lean sourcing lies in developing a proactive strategy that is built upon common core principles. Here are 5 of the principles that can help make lean sourcing more effective for an organization:
1. Accurately Tracking Expenses
The first step in getting started with lean sourcing is being able to accurately track expenses. While this practice is traditionally done by tracking supplier expenses, the lean strategy calls on the grouping or categorization of products and services. This makes it easier to track expenses and delivers more accurate pricing figures too. It also gives managers the added ability to track expenses over time and predict future growth trends for each category.
2. Performance Measurement
It is essential that consistent performance measurement is carried out in order to understand the cost of quality. This can help in “seeing the bigger picture” as it is and negotiating improved terms with suppliers. The result is often a much lower purchase price than anticipated and consequently, a decreased total cost of ownership. Furthermore, this also serves in driving up customer satisfaction rates and greatly reduces product replacements or servicing due to defects.
3. Mapping and Communicating with All Persons Involved
One of the basic parts of lean sourcing strategy is to create a process that can clearly be mapped and to define functional areas. This roadmap, along with the perceived benefits, must be communicated to all team members involved – not just managers. The greater cross functional view of company strategy can help develop creative new solutions to address problems.
4. Developing an Accountability Based Schedule
One way of ensuring lean sourcing principles are followed and implemented on time is by developing an accountability based schedule. This can be done by defining target dates for operational readiness, minor and major project milestones, and deadlines for completing various stages of, or the entire process.
5. Outcome Based Compensation for Team Members
Sourcing strategies may often overlook incentive based compensation for competent team members. The human element behind lean sourcing is the most important, and should be given an incentive based structure. This will help retain top talent, maintain quality, and lower costs for the company in the long run.
1. Accurately Tracking Expenses
The first step in getting started with lean sourcing is being able to accurately track expenses. While this practice is traditionally done by tracking supplier expenses, the lean strategy calls on the grouping or categorization of products and services. This makes it easier to track expenses and delivers more accurate pricing figures too. It also gives managers the added ability to track expenses over time and predict future growth trends for each category.
2. Performance Measurement
It is essential that consistent performance measurement is carried out in order to understand the cost of quality. This can help in “seeing the bigger picture” as it is and negotiating improved terms with suppliers. The result is often a much lower purchase price than anticipated and consequently, a decreased total cost of ownership. Furthermore, this also serves in driving up customer satisfaction rates and greatly reduces product replacements or servicing due to defects.
3. Mapping and Communicating with All Persons Involved
One of the basic parts of lean sourcing strategy is to create a process that can clearly be mapped and to define functional areas. This roadmap, along with the perceived benefits, must be communicated to all team members involved – not just managers. The greater cross functional view of company strategy can help develop creative new solutions to address problems.
4. Developing an Accountability Based Schedule
One way of ensuring lean sourcing principles are followed and implemented on time is by developing an accountability based schedule. This can be done by defining target dates for operational readiness, minor and major project milestones, and deadlines for completing various stages of, or the entire process.
5. Outcome Based Compensation for Team Members
Sourcing strategies may often overlook incentive based compensation for competent team members. The human element behind lean sourcing is the most important, and should be given an incentive based structure. This will help retain top talent, maintain quality, and lower costs for the company in the long run.
