{"id":11259,"date":"2021-04-12T00:31:35","date_gmt":"2021-04-12T04:31:35","guid":{"rendered":"https:\/\/www.certitrek.com\/nlpa\/?page_id=11259"},"modified":"2021-09-28T10:23:18","modified_gmt":"2021-09-28T14:23:18","slug":"procurement-best-practice-execution","status":"publish","type":"page","link":"https:\/\/www.certitrek.com\/nlpa\/news\/purchasing-articles\/procurement-best-practice-execution\/","title":{"rendered":"Procurement Best Practice Execution"},"content":{"rendered":"

Procurement Best Practice Execution<\/h3><\/div><\/div><\/div>

PurchTips edition #433<\/p>\n<\/div>

Explore Procurement Best Practice Execution with DMAIC Best Practice Model<\/h4><\/div><\/div><\/div>

Procurement best practice execution is always a hot topic regardless of the industry. Procurement processes can be significantly improved by the leverage of best practice mechanisms. The key to operational and strategic transformation is the use of business improvement models. These models serve as roadmaps with specific criteria, tollgates, milestones, and phases, through which business optimization takes place.<\/p>\n

The DMAIC (Define, Measure, Analyze, Improve, and Control) Business Process Improvement Model is a scientifically proven best practice system that has yielded billions of dollars since its first use back in the 1980s. General Electric recorded a net saving of US$10 Billion during its first four years of using the DMAIC Model.<\/p>\n

For matters of context, we will note that the mandate of the Procurement Function is threefold:<\/strong><\/p>\n

    \n
  1. Control\u00a0Spend<\/strong><\/li>\n
  2. Support of\u00a0Operations<\/strong><\/li>\n
  3. Management of\u00a0Risks<\/strong><\/li>\n<\/ol>\n

    The DMAIC Best Practice Model can create value in procurement environments in the following ways:<\/strong><\/p>\n

    \u00a0<\/strong>Define Phase:\u00a0<\/strong>In this phase\u00a0procurement professionals<\/strong>\u00a0can identify problems in their procurement systems, such as over spend, supplier non-conformance, rising cost, late deliveries, the impact of risk factors, rising TOC (Total Cost of Ownership) and so on.<\/p>\n

    Once problems are identified a carefully drafted\u00a0Problem Statement<\/strong>\u00a0is formulated, which articulates which procurement process is compromised, how long the problem has been occurring, the degree of impact on the business and its customers, and the financial cost of the problem.<\/p>\n

    After the problem statement has been drafted, a carefully crafted\u00a0Business Case<\/strong>\u00a0is formulated. The goal of the business case is to justify why a problem should be urgently fixed, why resources should be spent on it, and what the ramifications of non-action will be. The business case is essentially an inspirational tool that creates a sense of urgency in fixing issues plaguing organizations and their customers.<\/p>\n

    A carefully designed\u00a0Scope Statement<\/strong>\u00a0which defines the boundaries of the procurement process improvement initiative is created. This guards against scope creep and laser focus the initiative so that SMART (Specific, Measurable, Achievable, Realistic and Timebound) goals are realized.<\/p>\n

    Tools in this phase:<\/strong>\u00a0Project Charter, VOC Matrix (Voice of the customer), SIPOC Charts<\/p>\n

    Measure Phase:-\u00a0<\/strong>In this phase, the parameters of the problem statement are measured to determine Current State performance relative to the desired performance. The goal is to calculate the performance gap. Data is collected on the pertinent metrics such as on-time delivery, TOC, product quality, price and degree of supplier responsiveness relative to specified targets. Operational definitions and data collective plans are used.<\/p>\n

    Tools in this phase:\u00a0<\/strong>VOC Matrix, Pareto Charts, Data Collection Plans, Spend Profiles, Delivery Logs, Histograms, Value Add \/ Non-Value Add Matrix, COPQ (Cost of Poor Quality) Matrix, SIPOC Charts, Value Stream Maps, Flow Charts.<\/p>\n

    Figure 1, COPQ Matrix<\/p>\n

    \"\"<\/p>\n

    Permission for use given by USA LEAN Engineering. www.usaleanengineering.com<\/em><\/p>\n

    Analyze Phase<\/strong><\/p>\n

    In this phase, the collected data on current state performance is analyzed to determine the root causes of poor performance. Root causes must be validated for robust solutions to be designed. The\u00a05 Whys methodology<\/strong>\u00a0is a powerful tool to determine root causation. Simply ask why a problem exist on average of 5 times and the root cause will be revealed. Procurement professionals using the DMAIC Model to improve their workspaces must resist the temptation to skip the analyze phase.<\/p>\n

    FMEA (Failure Mode and Effects Analysis is another powerful tool procurement professionals can leverage to analyze risks that exist in their processes.<\/p>\n

    Tools in this phase:<\/strong>\u00a0ANOVA Test, CHI Square, 5 Whys, Fishbone Diagram, FMEA<\/p>\n

    Figure 2, FMEA Matrix<\/p>\n

    \"\"<\/p>\n

    Permission for use given by USA LEAN Engineering. www.usaleanengineering.com<\/p>\n

    RPN = S x O x D<\/strong>\u00a0or Severity x Occurrence x Detection on a scale of 1 to 10<\/p>\n

    In the table above for \u201cInformation input into MRP System\u201d the RPN=1000<\/p>\n