Lean Procurement for Contract Manufacturers

Posted by Keith Gansberg

Mar 20, 2015 7:07:03 PM

KeithG2Contract manufacturing companies expect their procurement departments to provide purchased materials and components on time, with the lowest costs and the highest quality. Instead of shying away from the challenge of accomplishing all three, embrace the opportunity. The solution to realizing these goals is applying lean practices.  Designing and implementing lean procurement best practices can dramatically change the way your contract manufacturing (CM) company does business. 

Applying these lean principles involves eliminating waste and making processes and communications simple, clear and direct. It makes it easier for customers and suppliers to do business with your CM company. Additionally, getting rid of this waste will lead to increased productivity and freeing up more time for procurement staff to focus on value-added activities, rather than administration. Examine the list below to determine which wastes are slowing down the efficiency of your procurement department:

  • Over-processing. Are there too many approvals required to issue Purchase Orders? This is a common area of waste for procurement – don’t require three signoffs when one will do.Motion.
  • Movement. Is your inventory being tracked manually or are there systems in place to view the status electronically? At Fusion OEM, procurement orders directly from the Bill of Material, rather than sorting through numerous pages of drawings. Bills of Material are issued following our Engineering Release Meetings.

  • Waiting. How long does it take to process your Purchase Orders? Is there important information stalled because the supplier doesn’t communicate well? Evaluate your supplier relationships and assess whether the flow of data – order confirmations, delivery dates, etc. - is a bottleneck.
  • Defects. How many errors are discovered in paperwork? Are there recurring quality issues with particular suppliers? Being forced to make frequent changes to ordering decisions already made and reissue paperwork only adds to long lead times and wasted efforts.

  • Motion. How much time is spent looking for paperwork? Are filing systems inefficient? Is there an over-reliance on using hard copies over electronic documentation? Sorting through piles of paper day in and day out can contribute to a major backlog of Purchase Orders.
  • Inventory. Is inventory being ordered too early (leading to excess stock) or too late (so there's not enough inventory when your customer needs it)? A solution to benefit CMs and Original Equipment Manufacturers may be implementing a Vendor Managed Inventory System (VMI).

Procurement processes can become convoluted, tedious and full of waste over time. Using lean thinking to inspect every step of the purchasing process and eliminating these wastes can lead to reduced costs, shorter lead times, and improved quality. Simplifying ordering and inventory management will give your manufacturing company the required edge to remain competitive and improve your bottom line.

Topics: lean manufacturing, lean office

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