LEAN PURCHASING

Ahmad Musa
April.2011
 Outline
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 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.
 The History of Lean
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 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.
 The philosophy of lean
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It is a continuous improvement of activities in

which non-value-adding activities (or wastes)
are identified and removed.
How ..?
By reversing traditional thinking:
 Seven forms of waste
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 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.
 Five major steps for Lean
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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.
 Lean Targets
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 Purchasing Importance.
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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.
 Traditional Purchasing
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 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.
 What is Lean purchasing?
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 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.
 Key Features of Lean purchasing
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 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.
 Tactics of Lean Purchasing
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 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.
 Successful cases
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 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.
 Some advantages and disadvantages of Lean purchasing
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Adv. Disadv.

 Reduce Inventory levels and  No space for mistakes as

space, minimal stock is available,
 Keep on high level of equality,  Production is very reliant on
and eliminate time for check suppliers,
and reorder,
 Low response to handle
 Reduce product cycle time,
unexpected needs and orders,
 Remove unnecessary cost  Difficult and expensive to
factors,
introduce.
 As result, Improve purchasing
efficiency .
 References
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 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