Evolution of concepts and technology and concepts in the field of procurement has transformed the procurement from a clerical function and routine function to strategic and challenging one. Lean procurement and procurement 4.0 are such evolving practices which are helping organizations enhancing the efficiency of their supply chains by eliminating unwanted inventory, processes, etc. and by introducing digitization of procurement processes respectively. Let us talk more about these practices in this blog post.
What is Lean Procurement?
A procurement strategy known as lean procurement, often referred to as lean purchasing or lean sourcing, focuses on maximizing value by increasing efficiency and reducing waste.
Lean procurement is defined by the Chartered Institute of Procurement and Supply as a supplier who has a single point of contact within a purchasing organization, one contract, and offers a single price for all locations.
An organized method known as lean procurement identifies the value-adding components of a manufacturing system.
Operational effectiveness and client happiness are the main priorities. The supply chain operations are being streamlined as part of a cycle of ongoing development. Waste, which can be defined as inventory, time, or expenditures, is eliminated as well as non-value-added operations.
Improving the procurement process and processes requires enhancing the quality of products or services while lowering prices, cutting back on time, and eliminating waste. It’s also essential to improve the efficiency and responsiveness of suppliers.
Technologies for Lean Procurement Practices
As one might anticipate, lean thinking has only grown in strength and potential as a result of technological advancement. Popular procurement technology and the lean thinking objective of eliminating manual or administrative tasks that don’t create value go hand in hand. For instance, workflow automation and reporting streamlining are all given top priority by RFP management software, expenditure management technology, and contract administration tools.
According to a McKinsey report, administrative work takes up about 40% of the time for procurement experts. These required but low-value phases in essential procedures prevent practitioners from devoting their time to work that is more valuable and strategic. Lean thinking combined with technology can significantly improve things in this situation.
What is Procurement 4.0?
Industry 4.0 features like Big Data, System integration, Cloud computing, and Cybersecurity are all utilized by Procurement 4.0. Unsurprisingly, a significant component of Procurement 4.0 is data analytics. Up until now, data analysis has mainly been employed to draw conclusions from the past. Nevertheless, creative procurement data use will lead the way because it uses predictive analytics to view the future.
Businesses will change what they buy as Industry 4.0 takes hold by automating data collection, but more crucially, they will change how they buy by utilizing data analytics. The freshly developed Procurement 4.0 utilizes creative supply chain digitalization strategies to open new growth potential.
The advantages of procurement 4.0
Almost all of the tasks that go into running a procurement department on a daily basis may be done digitally. There is technology for certain things, so an employee doesn’t even need to do them manually. To this end, industry 4.0 lets the purchaser of old concentrate on strategy, focusing on:
(a) Effectively reducing procurement cost time and efforts
(b) Continuous improvement in terms of safety and traceability
(c) Reducing procurement and supply chain risk in managing global supply chains
(d) Analyzing short and mid- and long-term resource and component requirements
(e) Assessing best time to procure certain products and raw material
(f) Ensuring continuous flow of materials and components for production
(g) Optimizing inventory and transportation needs
(h) Observing the market and the company’s position within it, while working on strategies to improve procurement process.
Procurement responsibilities now extend to market research, vendor evaluation, and integration. In manufacturing, lean techniques help reduce inventory wastage.
Regardless of whether a company’s main strategy is focused on prices, quality, or expansion, the lean procurement method strengthens it. The repetitive and manual processes that purchasers perform will be automated with the aid of procurement technology tools. They are able to concentrate on the purchase process, which is where the most value is produced. You can think of procurement 4.0 as a component of the industry 4.0 concept. It is valuable in and of itself as a means of procurement concept innovation.
Procurement 4.0 is defined by collaborative innovation between suppliers, customers, and rivals. Procurement should be capable of defining commercial partnerships, rules of engagement, and bringing the appropriate partners to the table in order to develop a strong competitive position in this complicated new environment.