Optimization is one of those catchy words that is bantered about but what is Optimization? In simple terms, Optimization is finding the best possible solution to a problem, usually under a set of constraints. Think of optimization like fine-tuning something until it is just right—whether it’s minimizing costs, maximizing efficiency or achieving the perfect recipe blend. Optimization can be applied to a myriad of issues, but this article focuses on procurement. Optimization is a mindset, a process and a skill.
What is Efficiency? Efficiency is all about doing more with less. It means getting the maximum output from the least amount of input be it cash, labour or material.
Combining the two, Process Optimization, reduces workflow, eliminates repetitive tasks, speeds up the procurement cycle and creates the capacity to do more. More does not necessarily mean doing more of the same but rather the capacity to focus on work that creates long term value such as supplier development and detailed market analysis which are essential elements of category management.
Methodology
Lean Six Sigma is the primary process optimization methodology.
Lean focuses on eliminating waste and improving process flow. Its origins are the Toyota Production System [1] which emphasizes eliminating non-value-added activities, referred to as wastes, streamlining workflows and empowering employees to solve problems.
Six Sigma aims to reduce variation and improve quality by using statistical tools and the Define, Measure, Analyze, Improve, Control (DMAIC) problem-solving approach. It was popularized by Motorola and GE.
The two streams morphed into Lean Six Sigma. Lean brings speed and efficiency, and Six Sigma brings precision and optimization resulting in faster cycle time, fewer errors (defects), lower costs and higher customer satisfaction. Sounds ideal!
A Guide to Process Optimization
- Establish a clear problem statement about what you would like to achieve such as “Reduce Procurement Cycle Time by X”. A Process Optimization project does not have to be complicated. Start with a small, relatively easy problem to gain confidence.
- Map your current procurement lifecycle. Document each step of your process and who is involved. The findings will generally be illuminating as one will see how much time is spent waiting versus working on a procurement. It is also a good way to identify bottlenecks
- Identify priorities and determine the savings. Not all processes will have the same potential for improvement nor yield the same benefit. Prioritize areas where inefficiencies are most impactful, whether it’s long cycle times, high error rates or the amount of rework. This low hanging fruit is a good starting point. Some ideas may include delegating approval levels to speed up contract signing or automating all or some of the evaluation process by using autoscoring closed ended questions.
- Develop a Roadmap: Create a plan outlining short-term wins and long-term initiatives. Determine how technology such as cloud-based SaaS or AI generated data can eliminate manual processes. This is not always an easy step.
- Pilot and Refine: Before a full-scale rollout, start small and pilot the new processes using both early adopters and resisters. This allows one to identify and resolve unexpected challenges and to generate a higher rate of success when fully implemented.
- Measure and Improve. Once changes are implemented, continuously monitor KPIs and collect feedback. Process optimization is ongoing, so be prepared to refine and improve continuously. KPIs can be measured in terms of time / labour savings, reduced error rate, increased internal customer satisfaction and improved supplier relationships.
- Maintain Momentum: Once the change has been implemented it should generate other project ideas as people become familiar with Process Optimization. Encouraging new ideas, communicating project successes and key learnings will help to instill a Lean Six Sigma mindset. Some may prefer the fact based statistical Six Sigma process and others gravitate to Lean’s more holistic approach.
Challenges
Resistance to Change: This is the classic issue in many change management projects. Many people are comfortable doing the same thing as change forces people out of their comfort zone. It can also be a perceived or actual threat to job security or status.
To overcome resistance, invest in training, start with incremental changes, communicate the timeline to fully implement the changes and highlighting the value of and benefits of the changes. (ie) What’s in it for them?
Data Quality: Clean, accurate, consistent and complete date is always a challenge given data is used to make fact-based decisions. Outdated or inconsistent data can lead to misinformed decisions. Sometimes the data is suspect which requires procurements to be run under the current process to establish a correct baseline or to confirm the existing data.
Unintended Consequences: Sometimes process changes can negatively affect internal and external clients. Be aware of unintended consequences. Communicate changes often so that people are aware of your plans. As part of mapping the current process consider who is involved in each step.
Productivity Decrease: Be prepared for a short-term decrease in productivity when the redesigned workflow is implemented. If key staff have been involved in all steps of the process optimization you will have a core of ‘super users’ who can champion the changes and provide ‘hands on’ advice. Understand it takes time to learn a new process. Be open to feedback and be prepared to adapt if changes are needed.
Lean Six Sigma or LSS has something for everyone. Lean appeals to those who can look at a complete procurement process, determine the problem and then start to solve. Six Sigma’s statistical approach appeals to the analytical who make fact-based decisions. Embedding process optimization in a work unit will pay long term dividends and is foundational to a continuous improvement culture.
Public Procurement In Canada:
Procurement professionals play a pivotal role in the public procurement world. These experts are well-equipped with the knowledge and skills needed to navigate the intricacies of procurement processes. Whether you’re looking to enhance your procurement acumen through procurement management courses or seeking valuable insights through procurement webinars, the landscape for public procurement offers many opportunities to explore.
The Procurement School encompasses a wide range of activities aimed at achieving the best value for taxpayer money. Procurement service providers work closely with public sector procurement consultants to streamline processes, maintain transparency, and uphold ethical standards. This collaborative effort ensures that the procurement landscape remains fair, competitive, and cost-effective.
Obtaining a procurement certification or a purchasing certificate can be a wise decision for those aspiring to excel in public procurement. These certifications validate your expertise and demonstrate your commitment to professionalism in the procurement arena. Procurement professionals are highly regarded for their ability to make informed decisions that benefit both the public and the government agencies they serve.
Public procurement is not just about acquiring goods and services; it’s about contributing to the well-being of communities and the country. The individuals in this field understand the significance of their roles and strive to uphold the highest standards of ethics and accountability.
Whether you’re a seasoned procurement professional or just starting your journey, the public procurement landscape offers a wealth of opportunities for growth and development. From procurement management courses to ongoing procurement webinars, resources are available to help you stay informed and up-to-date with the ever-evolving world of procurement.
Written by: Graham Allen