With a renewed focus on "doing more with less," many organizations are looking at how the adoption of lean processes can increase efficiency and thus grow their bottom line. Lean programs within manufacturing companies are often focused on the production side of the business. This can offer substantial benefits for the organization, but the adoption of lean does not have to stop there. Lean programs within more administrative functions of an enterprise, such as procurement, can result in benefits as well.
APQC's Open Standards Benchmarking in procurement asks respondents to indicate whether their organizations have initiated lean process development in their procurement functions. To analyze how adopting these types of processes affects procurement performance, APQC looked at the number of full-time equivalent (FTE) employees needed to order materials and services per $1 billion in purchases for organizations that have adopted lean processes in procurement and for organizations that have not adopted these processes. The results provide insight into how lean processes can affect the efficiency of procurement functions.
The graphic shows the number of FTEs needed to order materials and services for the two groups. At the median, organizations that do not have lean processes within their procurement functions need 21 more employees to order materials and services than organizations that have initiated lean process development.
The difference between the two groups is even more apparent among bottom performing organizations, with organizations that do not have lean procurement processes needing more than twice as many FTEs to order materials as organizations that have initiated lean procurement processes. This difference highlights the primary appeal of lean processes: By eliminating waste, they can increase efficiency.
In this example, it means fewer procurement employees are needed to complete the same task. This, of course, also means that staffing costs are lower for organizations that have initiated lean process development within the procurement function because these organizations need fewer staff members.
Adopting lean in the procurement function can involve eliminating unnecessary paperwork from the purchasing process, as well as eliminating staff activities that provide no value to the procurement function and the enterprise as a whole. For example, streamlining purchasing procedures can reduce the number of mistakes made in the process, which means more time that the procurement staff can devote to their primary purpose: purchasing materials. In light of this, it's easy to see how organizations that have adopted lean in the procurement function can order materials and services using fewer employees.
Make the Commitment
The ultimate goal of establishing lean processes is the ability to do more with less by eliminating waste. As with any process change, there may be some initial reluctance among staff to adopt lean processes. However, the challenge to adopting lean may lie not only in getting initial commitment to the implementation of lean processes, but also in making that commitment last so that the benefits will endure.
Anyone who has read articles about lean processes has seen stories of organizations that have realized great results from an initial push for lean only to return to former processes (and performance) over time. Lean only works over the long term if there is buy-in from leadership as well as staff. Leadership should demonstrate the importance of lean to the company, or staff will not believe it is important for them to adhere to lean processes. This is especially applicable for more administrative functions like procurement, where the results of increased efficiency are not seen in tangible products.
A true focus on identifying and improving areas of inefficiency must be maintained for lean process adoption to result in full benefits for a company. Companies adopting lean within their procurement functions should make sure that all stakeholders are prepared to make the change to lean for good so that the benefits last.
Becky Partida is a knowledge specialist, supply chain management, with APQC, a member-based nonprofit and one of the leading proponents of benchmarking and best practice business research.