Lean is about providing value to our Customers and to do this we look at our Value Stream which is the sum of all activities which go into providing these goods and services to our Customers. The Value Stream extends all the way from our Suppliers right through to our Customers and include all the steps in between such as Planning, Distribution and Logistics. We know that in these value streams the value added time is very small often just a tiny fraction of the total lead time of the process.
If this is the case why do so many organizations work very hard at reducing piece price of purchased raw materials by bashing, threatening and coercing suppliers? While we all want the benefits of reduced piece price, we don’t want it at the cost of larger batch sizes, longer lead times and reduced reliability of our Suppliers. In fact we want smaller batch sizes, shorter lead times and improved reliability in addition to reduced piece price. Wouldn’t it make more sense to work together to examine all the waste in our Purchase to Pay systems and work in conjunction with our Suppliers to reduce the waste. Rather than fighting over a piece of a small pie, why not work together so we each get a larger piece of a larger pie. A true win-win for both parties.