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
