lean purchasing last

LEAN PURCHASING

Ahmad Musa

April.2011

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Outline History & philosophy of lean management, Major steps for lean management, Purchasing importance and traditional problems, Lean purchasing, Key Features of Lean purchasing, Tactics of Lean Purchasing, Successful cases, Advantages & disadvantages of lean purchasing, References.

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The History of Lean

It is a Japanese Management method developed in the 70's.  It was first adopted by Toyota manufacturing plants through a well known Just-in-Time management system.

It is technique was first used by Ford Motor Company by in the early years of 20th century.

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The philosophy of lean

It is a continuous improvement of activities in which non-value-adding activities (or wastes) are identified and removed.

How ..?

By reversing traditional thinking:

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Seven forms of waste

A number of academic studies have identified seven types of waste in a typical supply chain:1. Transporting,2. Defects,3. Inappropriate processing,4. Waiting,5. Unnecessary motion,6. Unnecessary inventory,7. Overproducing.

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Five major steps for Lean

1. Define value from the customer’s perspective.

2. Identify the value stream; determine waste in the current state, and eliminate it in the future state.

3. Make the remaining steps in the value stream flow.

4. Adapting “Pull” system.

5. Perfection; there is no end for improvement.

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Lean Targets

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Purchasing Importance.

A research by Waters-Fuller (1996) shows that

purchased materials and services account for 50-80% of the total cost of a manufacturing product.

Around 30% of the quality problems are related to supplies.

Around 80% of the product lead-time are related to supplier lead-time.

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Traditional Purchasing

A lot of defects; investigation is needed, Waiting time due to high lead time, Large lot sizes, Delivery delays, A lot of suppliers, Inventory problems

According to “The Supply Management Handbook;” the annual holding cost of inventory approximately 50-70% of original cost.

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What is Lean purchasing?

Lean purchasing means providing the required materials to the facility just as they are required for use, within acceptable level of quality, and reasonable cost.

Therefore; It is the most challenging process for a achieving lean management system.

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Key Features of Lean purchasing

Effective with Predictable demand, Long-term contracts with few suppliers, Consistent of high quality (no

inspection), Small lot sizes (zero inventory), On time Frequent deliveries, Short lead time,• Close supplier ties.

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Tactics of Lean Purchasing

Selects suppliers that have consistently exhibited high levels of quality and delivery reliability.

Regard suppliers as an extension of the internal manufacturing process and cultivate them as long term business partners.

Establish long term purchasing and supply commitments.

Improve communication with suppliers, and build high degree of mutual trust and openness.

Involve suppliers in early stages of planning, and use their expertise to improve design and reduce cost.

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Successful cases

Most successful applications of lean Purchasing have been in repetitive manufacturing organization,

Successful use of Lean Purchasing is rare in large, highly complex job shops where production planning and control is extremely complicated.

It is powerful in predictable environments.

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Some advantages and disadvantages of Lean purchasing

Reduce Inventory levels and space,

Keep on high level of equality, and eliminate time for check and reorder,

Reduce product cycle time, Remove unnecessary cost

factors, As result, Improve

purchasing efficiency .

No space for mistakes as minimal stock is available,

Production is very reliant on suppliers,

Low response to handle unexpected needs and orders,

Difficult and expensive to introduce.

Adv. Disadv.

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References

Richard Johns, Valerie Crute, Andrew Graves, “Lean supply: cost reduction or waste reduction?”, university of BATH, oct.2002.

Waters-Fuller, N., “The benefits and costs of JIT sourcing: a study of Scottish suppliers,” International Journal of Operations & Production Management, 26(4), (1996), 35-50

Vinod Kumar, Anh Dao, “The adoption of Just-In-Time Purchasing practice and it is impact on firm performance in a developing country”, Carleton University, 2005 .

The Supply Management Handbook, 7th ed., McGraw Hill, The Institute of Supply Management; and Profitable Purchasing, Leading Manufacturing Excellence, John Wiley & Sons.

http://www.unisa.edu.au/strategic/Education-programs/lean-mgt/ Documents/ JIT&KS%20workshop%20G%20email.pdf

http://kernow.curtin.edu.au/www/jit/jit10.htm http://www.stlwarehousing.com.au/info/Lean.pdf http://www.cips.org/documents/Lean_and_Agile.pdf

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Thank you