Lean Principles in Purchasing

  • purchasing

We are hearing more and more about “re-shoring” of manufacturing. The Lean concept is becoming an accepted practice in progressive US manufacturing operations. It has helped to the make our domestic organizations competitive in the global marketplace.

“Lean” entails a complete change in philosophy from the traditional approach. It has proven to provide significant benefits in manufacturing operations. Can it be applied to purchasing operations?

Strategic purchasing is a critical operation. Purchasing budgets at many major corporations exceed the internal operating costs. Even with today’s low cost of financing, inventory carrying cost can exceed 1% monthly. As rates increase, this number will too.

The traditional purchasing approach is forecast driven. The ERP system utilizes sophisticated IT tools to generate a sales forecast in total and by product. This forecast creates purchasing requirements. With lead times on some components out as much as 3 to 5 months, the purchasing staff has to commit well in advance of order receipt. Unfortunately, forecasts have not proven to be highly accurate beyond current orders. The result is inventory that is not in balance with production requirements.

Our current forecast-based inventory management system is based on timing purchases to minimize costs including delivery and stock-outs. It is typically referred to as a “Push” process. Forecasting is a very difficult process. It is generally driven by historical results coupled with an estimate of future demand. Maintaining high forecast accuracy remains a challenge.

Did your system forecast the downturn that occurred in 2008-2009? Did it reflect the bounce back that began in late 2009? If it did, you were in the small minority of purchasing operations.

There is a better way. One of the basic concepts of Lean is—Create flow. If you can’t flow, “pull”, never push.

We will discuss the “pull” concept next time.

Learn More

Reliable Stock™ Lean VMI Solutions by Falcon

Falcon’s Reliable Stock™ lean VMI program delivers 100% production uptime efficiency, while lowering your overall inventory investment in class C production components and fastening supplies.
Learn More
2017-03-21T12:00:36-04:00March 24th, 2014|Categories: Lean Learning|Tags: |

About the Author:

Don joined Falcon in 1997 as an officer and minority partner. In 2008 Don purchased the company and became sole owner and President. Don has been involved in industrial fastener distribution for over 40 years and considers customer support his primary responsibility. He has been actively involved in numerous trade associations over his career including serving on the board of the NFDA, CBNSA and SEFA.

Fasteners and Class C Component Supply

Falcon supplies fasteners and inventory management services to manufacturers in North and South Carolina, Kentucky, and the surrounding areas.

Charlotte Office

10715 John Price Road
Charlotte, NC 28273

Phone: 800.438.0332

Mobile: 704.588.4740

Mailing Address

P.O. Box 7429 | Charlotte, NC 28241-7429

Phone: 704.588.4740

Fax: 704.588.5753

Kentucky Office

11536 Commonwealth Drive
Louisville, KY 40299

Phone: 502.266.6292

Fax: 502.526.5567