A “Lean” Approach to Indirect Materials Management

By David Kim – Vice President, Product Management and Service Delivery

With its origins in manufacturing, volumes have been written about the theory and application of Lean Management concepts.  Briefly, the original incarnation of Lean was the Toyota Production System, which took a radically new approach to manufacturing.  At its heart, it set a goal of perfect satisfaction of every customer order.  It rejected previous notions of batch production and economies of scale, as well as scrap and rework, and instead challenged manufacturers to design a process that could respond immediately and efficiently to individual customer demands.  This meant reorganizing production to work efficiently with a batch size of one, and a flow system for inventory that organized the entire supply chain to respond to the “pull” of an actual customer order.  The transition to Lean also involved scrutinizing every facet of the production process to identify only those components that add customer value, and then eliminating the remaining ‘waste’.

The application of Lean principles transformed the manufacturing sector and delivered a variety of benefits including significant cost savings, higher quality and greater responsiveness to demand changes.  Lean has the potential for a similar transformative impact in the area of indirect materials management as many of the concepts are directly applicable:

  • Eliminate Waste – Eliminating waste is a central tenet of lean initiatives and one that is directly applicable to indirect materials where waste is rampant due to lack of material controls and visibility.  Workers consume material with little to no accountability and very few controls on who has access to what material and for what purpose.  An initiative to eliminate waste will spur the implementation of better indirect material controls, greater visibility to usage and higher accountability for how, when, where and by whom material is being used.
  • Create Flow – In a lean materials environment, any excess material is removed from the system allowing the remaining material to “flow” quickly through the various processes that require them.  “Flow” more closely links supply with demand so that only material that is used is replenished in a pull-based system.  This addresses the challenges of determining indirect material requirements and determining what needs to be purchased when.  In an environment where indirect material is flowing in a natural rhythm, it is easy to see when an imbalance occurs and the flow is disrupted.
  • Continuous Improvement – “You can’t manage what you don’t measure!” – It is an old management adage that is certainly true of indirect materials management.  A core focus of continuous improvement will drive you to identify ways to measure and monitor all aspects of your indirect materials operation.  Only then will you be able to assess your indirect materials operation performance and identify opportunities for improvement.

Lean Management provides a tried and true framework for identifying and implementing indirect material process improvements that can yield significant cost savings and deliver a level of operational efficiency that can help you gain a competitive edge.

MarginPoint is a leading provider of cloud-based indirect material management solutions for the industrial market. More than 400 industrial companies currently rely on MarginPoint solutions daily to reduce their indirect material spending and streamline their indirect material management processes. MarginPoint is uniquely focused on integrating the end-to-end indirect material lifecycle to deliver the highest possible ROI for customers. MarginPoint’s SaaS delivery model enables customers to rapidly deploy the solution without any significant up-front IT investment.

Please visit  our website at www.marginpoint.com or call 888-229-3685 for more information.