Lean Sourcing Maturity: Stage Two

In the first post in this series, we outlined what we'd term "Basic" or "Level 1" maturity for procurement and supply chain organizations embarking on a lean sourcing Initiative. In today's post, we'll explore the "Intermediate" or "Level 2" practices most common as companies begin to move up the lean sourcing curve. It's important to note that at Level 2, we begin to see the origins of a joint coordination of efforts between sourcing and operations teams, occasionally even aimed at the same outcome such as a standardized supplier auditing and development process.

Still, what really categorizes organizations at the Level 2 stage of maturity are the procurement execution elements where "pull"-based initiatives have already started. In other words, companies at the Level 2 stage really begin to focus on the tactical execution of lean through sourcing rather than simply united two disparate practices. This may include supplier development and initial score-carding programs. At Level 2, we may also see a focus on inventory reduction and the benefits quantification and continued measurement of such programs. Last, Level 2 organizations also tend to focus on improving their overall cost structures associated with contracting, operations management and tactical buying (e.g., applying a shared services approach in certain areas in the case of larger organizations with previously decentralized silos).

We begin to see a more project-based and programmatic approach to strategic sourcing programs at this intermediate maturity phase. This often includes some supplier rationalization initiatives (perhaps even demand aggregation on a multi-tier basis for base materials), process standardization and the regular use of electronic negotiation formats. For negotiation mechanisms, the more advanced users at the intermediate phase become, the less likely they are to apply reverse auctions broadly across their spend (opting instead to segment their negotiation format according to spend type). This may include the occasional use of advanced sourcing and optimization formats, involving work tied to broader supplier outreach and development factoring into account the desires of different functions (e.g., product development).

- Jason Busch