A Lean Supply Chain Starts on Your Desk: More Paper = Less Profit

Spend Matters welcomes a guest post from Bill Ryan, Director of Sales at b-pack, a purchase-to-pay solutions provider. Prior to that role, Bill spent seven years at MFG.com where he ran sourcing services group and helped create leaner supply chains for companies like Wrigley, Kimberly Clarke, General Dynamics, and Siemens. Founded in 2000, b-pack positions itself as "a global industry leader providing cutting edge technology in business optimization and purchase-to-pay solutions".

How much of your time is spent leaning out your supply chain? If your company survived 2009, my guess would be a lot. I am also willing to bet that the pressure is on your team to deliver even more in 2011. What is a manager to do when all the obvious fat has been cut out? Your customers and management expect you to make another diving catch. Such is the life of a modern supply chain leader.

Don't panic. It can be done. There is always room for improvement. If you step back for a second, you might see waste on your own desk. The telltale sign of waste is paper. That stack of paper is like a shark fin popping out of the water and it's coming right at you. Under that paper is a big, hungry, inefficient eating machine. It feeds on the productivity gains that you have worked so hard to achieve. It's hungry for profit and efficiency.

Paper around the office indicates a lack of process control, no accountability, and most of all, waste. Do you think there might be some rogue spend in that stack of paper? If so, how would you find it? Sometimes the cost of buying things is higher than the prices of the things themselves. How much does it cost to process and approve a requisition, cut a PO, receive a product, and match the invoice? There is a lot of time and money wrapped up in this process and I guarantee that your customers wouldn't pay for it. This process adds little value.

If you don't see any paper you might be safe. On the other hand, you may have duplicated your old process in your fancy new ERP system. You could very well have the same manual workflow and redundant approvals that you had in the paper days couched in a multimillion dollar ERP system. If it doesn't speed things up, reduce cost, add visibility and accountability, it's worthless. An ERP is a good start, but business logic and a sound process need to be driving it. After all, software does exactly what we tell it to.

The evaluation of your purchase-to-pay process is an important step on your lean journey. Sure, it's more fun to map out supply chains and reduce waste on factory floors, but there may be tons of waste in your own building. It's time to start evaluating ourselves like we score suppliers. In doing so, we might just find that sometimes the waste is right in front of us. I would encourage everyone reading this to count the pieces of paper on their desks (sticky notes count too). If you have more than 15 you may have a problem. If you have more than 50 you may need an intervention!

- Bill Ryan, Director of Sales, b-pack

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