Purchasing for Lean Production: The New Strategic Agenda

Peter Hines is a Senior Research Fellow at theCardiff Business School in Wales, where he isthe Deputy Director of the Lean EnterpriseResearch Centre. He earned his Ph.D. degree atthe University of Wales. Dr. Hines is an activeresearcher in purchasing and supply chainmanagement.

2

Purchasing for Lean Production:The New Strategic Agenda

BY

Peter Hines

IN BRIEF

International Journal of Purchasing and MaterialsManagement © Copyright January 1996, by theNational Association of Purchasing Management, Inc.

The success of Japanese manufacturing firms over a wide range ofprodu c t categories is well established; however, one can argue that thesuccess of an individual manufacturing system (such as the excellentToyota Production System) has not been the causal factor. Rather, it isthe thorough and speedy implementation of these systems throughoutthe complete supplier network that is crucial to manufacturing success.

In this and other areas, purchasing has played a pivotal role in thedeployment of what may be termed lean production. This articlereviews the new strategic agenda set by lean production and exploreshow this affects the purchasing operation. Additionally, lean produc-tion attempts to build a new paradigm based on the integration of thedifferent value-adding organizations within the value stream to ensureexcellence in final products and services. The term concurrent purchas -i n g is used to describe this new paradigm. In moving to concurrent pur-chasing, purchasing is repositioned as a key strategic and operationalprocess rather than an internal stand-alone f u n c t i o n.

The achievement of intercompany value stream effectiveness is dis-cussed in terms of improvements within the quality, cost, delivery, anddesign processes. The key role of purchasing in these processes isexplored together with the implications this has for the strategic agendawithin the subject at practitioner, education, and academic levels.

P urchasing has until recently occupied a relatively obscure positionin most companies, and has been perceived primarily as a stand-alone function dealing at an operational level with the ordering

and delivery cycle of materials from suppliers. Fortunately, this is not thecase with a small but growing minority of companies where purchasing isnow becoming the new architect of value stream excellence.

It is no coincidence that these organizations see their individual sup-plier networks (of both direct and indirect firms) as a key source of com-petitive advantage, having already successfully implemented a TotalQuality Management (TQM) approach internally. It would also be trueto say that while these firms come from a variety of industrial sectors

An earlier version of this research work was presented at the First Worldwide Research Symposiumon Purchasing and Supply Management, Tempe, Arizona, March 1995.

and national origins, they are most commonlyfound in the Japanese discrete parts manufacturingindustries, such as automotive and electronics.

The success of such Japanese firms is now welle s t a b l i s h e d .1 However, their success has usuallybeen attributed to their internal manufacturingsystems such as the Toyota Production System(TPS) and the Canon Production System (CPS). Itis, however, the author’s belief that while this wasundoubtedly the case at first, a large part of theircontinued long-term success can be traced to theintegration of their key internal processes withthose of their suppliers, and the rapid develop-ment of the latter community of firms.

The purpose of this article is to discuss not onlyhow these lean producers integrated their suppliersinto their activities, but also how the purchasingfunction played a pivotal role in this process. A sub-sequent discussion defines a new strategic agendafor purchasing within the lean production system—and as a result extends the lean production philoso-phy to include the many-tiered supplier network.

STRATEGIC PURCHASING—A RAPID EVOLUTION

It is only in the last decade that purchasing hasgained a place within the strategic direction ofleading Western companies. Indeed, it was notuntil the 1960s that the first text devoted specifi-cally to purchasing appeared in Europe.2 This bookand its contemporaries in the United States repre-sented the first serious attempt to put purchasingon the map as a key function within organizations.At this point in time, the strategic importance ofthe buyer and supplier working together in anongoing relationship went largely unnoticed, withthe exception of the classic article “Vertical Quasi-Integration,” written by Blois in 1972.3

However, it was not until the 1980s that the truestrategic value of buyer-supplier relationships wasdiscussed in any depth. One of the first to do this wasthe Industrial Marketing and Purchasing (IMP)G r o u p .4 Another key text in the development ofstrategic intercompany relationship literature isBeyond Negotiation by Carlisle and Parker.5 With thisbook, the focus on a traditional win-lose relationship,based on the location of power between the bargain-ing positions of the two parties, shifted to a scenarioin which a win-win relationship can be created. Theadvantages of creating a win-win scenario, or pur-chasing partnership, have been defined within man-agement, technology, and financial spheres, andhave been summarized by Ellram, as shown in TableI. This partnership is defined by Ellram as “an agree-ment between a buyer and a seller that involves acommitment over an extended time period, andincludes the sharing of information along with asharing of the risks and rewards of the relationship.”6

A further development of this theme is that ofsupply chain management7 and pipeline manage-m e n t .8 Both of these areas take the relationship

between end consumers and raw material sourcesfurther—and are concerned primarily with opti-mizing the complete value stream by creating thecorrect balances, work allocation, and relationshiptype at each company between raw material andend consumer.

A recent important work on purchasing strategiesis the lean supply model developed by Lamming inthe United Kingdom.9 The lean supply modeldraws heavily on recent Japanese experiences andis designed to capture the present position of theleading manufacturing and assembly companies inthe automotive industry. More recently, the n e t w o r ks o u r c i n g model has been developed by Hines.1 0

Within this model are the key elements of thebuyer-supplier relationship as exhibited by leadingmanufacturers such as Toyota and its suppliers. Asummary of the network sourcing model is pro-vided in Table II (see p. 4).

International Journal of Purchasing and Materials Management, Winter 1996

Purchasing for Lean Production: The New Strategic Agenda 3

TABLE IPOTENTIAL ADVANTAGES OF JAPANESE-

STYLE SUBCONTRACTING

Management1.Reduced supplier base is easier to manage.2.Increased mutual dependence lowers risk of losing supply

source and creates greater stability through increased supplierloyalty.

3.Reduced time looking for new suppliers/gathering competitivebids.

4.Allows for joint planning and information sharing based on mutual trust and benefit.

5.Loyalty may increase supplier attention and customer service inareas such as:• Lead time reliability• Priority in times of scarcity• Increased attention when problems arise

6.Greater cooperation from suppliers to support the firm’s strategy.

Technology1.Partners may be more willing to share/give access to

technology.2.Partners may be more willing and capable of participating in

product design based on knowledge and commitment to theother partner.

3.Supplier knowledge/involvement in design may:• Improve quality• Reduce time to market for new products/design changes

Financial1.May share business risks through:

• Joint investment• Joint research and development• Sharing of financial risks associated with market shifts

2.Information sharing/forecasting may reduce inventory levels.3.Long-term commitment of a partnership may lead to more stable

supply prices.

Source: Ellram (1991)

WHAT IS LEAN PRODUCTION?

Before discussing the new agenda for purchasingset by lean production, it is important to reviewthe lean production philosophy itself. The termlean has been used by Womack and his associatesto denote a system that uses less of all inputs tocreate outputs similar to the traditional mass pro-duction system, while offering increased choicesfor the end consumer.11 Detailed measurements ofthe best Japanese manufacturers, particularly inthe automotive industry, have shown that typi-cally they now use half the time and effort todesign the product, half the human effort to manu-facture the product, with half the defects, and con-siderably less than half the inventories than waspreviously the case.

The logic behind lean production is that compa-nies jointly identify the value stream for eachproduct from concept to consumption and opti-mize this value stream regardless of traditionalfunctional or corporate boundaries. This is accom-plished by teams organized between functions andbetween c o m p a n i e s, with the support of relevantfunctional specialists. Their role is to eliminate allactivities that do not add value or reduce the prod-uct throughput.

The essential characteristics of the lean produc-tion system have been summarized by oneresearcher as12:

1. It is customer driven—not driven by theneeds of manufacturing.

2. All activities are organized and focused on aproduct line basis led by a product champion,

with functional departments playing a sec-ondary, servicing role.

3. All activities are team based, and the organi-zation is horizontally rather than verticallyoriented.

4. The whole system involves fewer actors, allof whom are integrated with each other.

5. There is a high level of informationexchanged between all the actors, and thereis a transparent and real cost structure.

6. The activities are coordinated and evaluatedby the flow through the team or plant,rather than as a result of each departmentmeeting its plan targets in isolation.

7. The discipline necessary for the system tofunction and expose problems is providedby JIT and TQM in the plant and by supplierand dealer performance evaluation.

8. Wherever possible, responsibility isdevolved to the lowest level possible, in theplant or the suppliers’ operations.

9. The system is based on stable productionvolumes, but has a great deal of flexibility.

10. Relations with employees, suppliers, anddealers are based on reciprocal obligations.

As a result, all employees are highly valued fortheir ability to contribute to problem solving andimproved productivity. In the same way that theemployees are seen as a long-term asset, the suppliersare viewed as a source of competitive advantage.

Within a lean production system, there are threeoverriding imperatives:

1. The management of processes and the integrated logistics flow

2. The management of relationships with employees, teams, and suppliers

3. The management of the change from traditional mass production

The outcomes of lean production are felt both atthe assembler and the supplier level. Table IIIs u mmarizes comparative data from Japanese leanproducers and Western mass producers and suppli-e r s .1 3 As can be seen at both the assembler and sup-plier level, there are significant gaps between leanproducers and traditional mass producers. Thegaps are as large or larger at the supplier level asat the assembler level. However, when one takesinto account anecdotal evidence that the gapbetween lean assemblers and traditional massassemblers has closed considerably since 1990, dueto Western adoption of some lean practices, it maybe suggested that the gaps at the supplier level arefar greater than at assembler level. Indeed, it is theauthor’s belief that these gaps may widen furtherat the second supplier tier.

To understand the new strategic role for the pur-chaser within lean production, it will be useful toreview the key internal processes that have allowed


4 Purchasing for Lean Production: The New Strategic Agenda

TABLE IINETWORK SOURCING MODEL OVERVIEW

1.A tiered supply structure with a heavy reliance on small firms.2.A small number of direct suppliers with individual part numbers

sourced from one supplier but within a competitive dual sourcingenvironment.

3.High degrees of asset specificity among suppliers and risksharing between customer and supplier alike.

4.A maximum buy strategy by each company within the semi-permanent supplier network, but a maximum make strategywithin these trusted networks.

5.A high degree of bilateral design employing the skills andknowledge of both customers and supplier alike.

6.A high degree of supplier innovation in both new products andprocesses.

7.Close, long-term relations between network members involvinga high level of trust, openness, and profit sharing.

8.The use of rigorous supplier grading systems increasingly giving way to supplier self-certification.

9.A high level of supplier coordination by the customer companyat each level of the tiered supply structure.

10.A significant effort made by customers at each level individuallyto develop their suppliers.

the lean assemblers to gain their pre-eminent posi-tion. It will then be possible to see how these inter-nal processes can be externalized to the suppliernetwork—and to examine the resulting new role forp u r c h a s i n g .

MANAGING INTERNAL PROCESSES INLEAN PRODUCTION

Lean producers typically manage their business bypaying close attention to a number of keyprocesses running cross-functionally across theorganization, as illustrated in Figure 1. This man-agement style is in contrast to the traditional func-tional approach adopted in mass production. As aresult, staff from the different functions areencouraged to focus on the key goals of the c o m -pany rather than traditional narrow functional tar-gets. This allows for (1) the avoidance of functionaloptimization at the expense of company optimiza-tion, and (2) cross-functional buy-in to decisionmaking and implementation.

While the number and description of these cross-functional processes varies among companies, thethree most important qualities are invariably qual-ity, cost, and delivery, with the latter usuallydivided between new product delivery and exist-ing product delivery. As can be seen in Figure 1,each of the key functions within a company hassome impact on each of these processes. Althoughthe relative degree of involvement varies, purchas-ing is an important member of each of theseprocess groups, but of less importance to delivery

since this is controlled by kanban call-offs from theshop floor.

Within this cross-functional managementapproach, a top level committee or council is set upto review each of the key processes running acrossthe company. Each committee meets periodically toset policy and check progress for the process underconsideration. This policy is then implemented



TABLE IIICOMPARATIVE PROCESS CONTROL ABILITIES IN

THE AUTOMOTIVE INDUSTRY

Western WesternJapan Assembler1 Supplier2

QualityEnd of Life Defect Rates 1 2.00 100.00

Cost /ProductivityTime per Unit Produced 1 1.82 1.76Space per Unit Produced 1 1.37 1.39Rework Percentage 1 3.333 2.73

DesignTime to Market 1 1.27 1.614

DeliveryInventory Level 1 10.00 12.25Delivery Frequency 1 6.76 6.71

1Compared with Japanese Assembler2Compared with Japanese Supplier3Space for Rework Activities4Number of New Products as Percentages in Last Two Years

Sources: Womack et al. (1990), Andersen (1993)

FIGURE 1CROSS-FUNCTION MANAGEMENT STRUCTURE

Function Product Design Purchasing Production Sales MarketingProcess planning

Quality

Cost

Deliverya) New products

b) Existing products

Intrafunctional management

Little relation Relation Strong relation••

• • • • •

• • •

• • • •

•

•

•

•

••

either by the individual departments involved or byan operational cross-functional team appointed bythe council.1 4

THE STRATEGIC AGENDA WITHIN LEAN PRODUCTION

The strategic agenda for companies wishing toadopt lean production involves making majorchanges that lead to improvement, as well as contin-uing their ongoing kaizen (constant improvement)activities. The important point is that this necessity isnot simply confined to an individual company. Thisis because end-product producers are competingincreasingly on the basis of the competencies andskills of all the firms involved in their respective sup-plier networks that add value to the final product.For example, for a company such as Toyota, only 15-25 percent of the value of the product is added inter-nally. Thus, they must ensure that not only are theylean, but also that their supplier network is lean.

It is in this context that one researcher set thestrategic agenda for lean production:

• For firms to double their own productivity• To help their suppliers do the same• To integrate the value steam (supplier network)

As was discussed earlier, purchasing plays animportant role in the effective conduct of some ofthe key processes inside a company—e.g., quality,cost and delivery. As such, it therefore has a role toplay in the achievement of the first of these objec-tives. However, it is fair to say that purchasing hasthe potential to be the leader of change within thesecond and third parts of the strategic agenda.

There is already some support for this approach.Writing in 1990, Hahn and his colleagues noted:

In the final analysis, a firm’s ability to produce aquality product at a reasonable cost, and in atimely manner, is heavily influenced by its suppli -ers’ capabilities...without a competent suppliernetwork, a firm’s ability to compete effectively inthe market can be hampered significantly.15

In addition, Peter Drucker commented on thepotential advantage to be gained by workingclosely with suppliers:

Nowhere in business is there greater potential forbenefiting from...interdependence than betweencustomer firms and their suppliers. This is thelargest remaining frontier for gaining competitiveadvantage—and nowhere has such a frontier beenmore neglected.16

The aims, and to some degree the methods, forachieving a doubling of supplier productivity andintegrating the value stream may be the same. Thefirst goal is concerned with the removal of intra-company waste or waste due to the inability of

suppliers to be more efficient in their own internalprocesses. This is described in the network sourc-ing model (Table 2) as individual supplier develop -ment. The second is concerned with the removal o fintercompany waste, or waste due to the inability ofthe different value steam members to share strate-gies and integrate their key internal processes. Thisis described in the network sourcing model as sup-plier coordination. The mechanisms for individualsupplier development and supplier coordination willbe summarized shortly after a view of what thisvalue stream integration may look like.

Figure 2 represents a simple depiction of the inte-gration of the key processes across company bound-aries. The Integrated Materials Value Pipeline isdesigned to show how these intracompanyprocesses can be effectively spread along the supplypipeline to involve the suppliers. As Newman andRhee comment on the NUMMI Toyota/ GM factoryin California:

A supplier becomes part of the team and, in turn,is responsible for structuring its operation to meetteam requirements. Crossing traditional organiza -tional boundaries is acceptable because theseboundaries really do not exist. Traditional func -tional responsibility has given way to responsibil -ity for improvement and information flow.17

This situation is in stark contrast to the familiarPorter Value Chain/System which, although captur-ing the Western manufacturing push p h i l o s o p h y ,does little to point the way for companies seekinge x c e l l e n c e .1 8 In contrast, the Integrated MaterialsValue Pipeline is a pull model designed to signpostthe way for companies, linked by the common sup-ply of the end customer, in their search of excellence.The first feature of the new model that is noteworthyis that it positions the consumer as the starting pointfor all intra- and intercompany activities. Indeed,under the pull philosophy the consumer is responsi-ble for defining the type of product, the quality of aproduct, the cost he or she is prepared to pay, andthe timing of an appearance on the market.

This value and volume is translated or deployedthroughout the Integrated Materials ValuePipeline through the use of teams to cut across tra-ditional functional and company boundaries.Thus, the building into the product of quality, theoptimization of cost, the incorporation of correctfeatures, and the delivery when required is theresponsibility of all members of the companies inthe network of supply. The key team members inthe four processes are defined in the model as mar-keting, purchasing, engineering, quality, R&D, anddesign because all have a significant part to play.

Intercompany integration can easily be facilitatedbecause the Integrated Materials Value Pipelineinvolves a number of secondary activities that areconcerned with value steam cohesion. The first ofthese mechanisms is a transparent costing system



designed so that costing information is readilyavailable across the supply network. This facilitatessound decisions in the areas of value analysis andindustrial engineering that can maximize the poten-tial competitive advantage of the whole network.

The second intercompany integration mecha-nism is the area of human resource policies, train-ing, and education. For companies that purchase60 to 70 percent of the value of their final productsto pay no attention to the knowledge and skill lev-els of their major suppliers obviously is nonsensi-cal. Thus, a coordinated approach to developingthese abilities in their suppliers is only logical,given the necessity for the long-term relationshipsinherent in any stable system. Coupled with thisapproach is a shared view of the importance of theend customers—and, hence, a translation of theTQM and kaizen philosophies down the pipeline.

To reduce the paperwork and control the cost ofintercompany communication, meetings with suppli-ers can be carried out en masse. Meetings between abuyer and a supplier on an individual basis can beconfined to major unique issues—the resolution ofindividual problems or the exploration of continuousimprovement possibilities. In addition, ElectronicData Interchange (EDI) can be used to reduce costlypaperwork associated with purchase orders, produc-tion schedule releases, invoices, and so on.

The last secondary activity that runs along thesupply pipeline is that of profit. Obviously it isessential for all firms to make a reasonable profitas the source of future investment funds. How-ever, with open book accounting practices theprofitability of each firm in the supply pipelinebecomes readily apparent. As a result, excessive

profits can be controlled, and a safety net can beprovided when profit levels fall too low.

MECHANISMS FOR SUPPLIERDEVELOPMENT AND COORDINATION

The first and most important mechanism is theKyoryoku Kai, or Supplier Association, as its West-ern counterparts are called. The Supplier Associa-tion is a mutually benefiting group of a company’smost important suppliers. The group is broughttogether on a regular basis to coordinate activitiesand develop cooperative attitudes, as well as toassist all the members who can benefit from anexploration of concepts and techniques such as just-in-time (JIT), statistical process control (SPC), con-tinuous improvement, and kanban usage. It is pri-marily through this mechanism that leadingcompanies have integrated their supplier networks.While doing this, they share strategies within thesefirms and start to adopt common approaches toproblem analysis, solution development, and so on.

In addition, supplier associations are crucial inbuilding trust so that two other important mecha-nisms can function effectively. The first of these isthe two-way exchange of staff, and the second isone-to-one supplier development on the supplier’spremises.

EXTERNALIZING KEY INTERNALPROCESSES

To understand how key internal processes an beintegrated with those of suppliers, it is helpful firstto revisit the processes shown in Figure 1. Thisreview reveals the pivotal role purchasing can play



Raw Supplier Inbound Outbound Customer Materials Chain Logistics Operations logistics Chain Consumer

FIGURE 2THE INTEGRATED MATERIALS VALUE PIPELINE

Jointly Marketing teamdefined Purchasing team Definedvalue Engineering team productat each Quality team value andstage R & team volume

Design team

{ { {Transparent costing system

HRM / Training / Education

TQM / Kaizen

EDI

Profit

SecondaryActivities

PrimaryActivity

in this process, as is detailed in Figure 3. This fig-ure describes more fully the four key internalprocesses. For example, the quality process may besubdivided into customer satisfaction, reliability,economy in use, after sales service, and qualityfunction deployment. The relative role of purchas-ing in the integration process can be seen to varyfrom medium for new product delivery to high foreach of the other processes. As a result, purchasingmay be not only a part of the cross-functional teamfor the integration of each of these processes butalso the probable leader in three of the four. Figure3 also defines the other functions that are likely toplay a key role in the various process integrationareas. As expected, this process will vary, but willhave at least two other internal functions involvedin the externalization of each internal process.

For this integration and supplier developmentprocess to occur, the purchasing operation needs totake on an entirely new complexion. The first major

point is that its orientation must move away from thatof an operational or tactical function to one of a strategicp r o c e s s. As a result, the purely operational tasksundertaken within purchasing such as order plac-ing, expediting, receiving, invoice checking and soon, must be:

1. Gradually eliminated through the use of toolssuch as EDI,

2. Systematized so that human involvement isrequired only by exception,

3. Largely removed as a result of supplier coor-dination and development,

4. Repositioned at a more appropriate level(e.g., kanban call-offs from the shop floor), or

5. Moved to the control of suppliers, using toolslike Supplier Managed Inventory.

An analysis of a typical mass production com-pany would show that in excess of 80 percent of



FIGURE 3THE EXTERNALIZATION OF KEY INTERNAL PROCESSES TO SUPPLIERS

Importance of Purchasing Other Functions with Process in Externalization Major RoleQuality

Customer Satisfaction ManufacturingReliability QualityEconomy in Use DesignAfter Sales Service SalesQuality Function Deployment Engineering

CostTarget Costing (open book) AccountingCapital Investment ManufacturingCost Maintenance DesignCost Improvement (kaizen costing) R&DCommon Costing Systems (e.g. ABC) EngineeringLong Term Contracts

New Product DeliveryApplication of VA/VE DesignEarly Supplier Involvement R&DHierarchical Design ManufacturingEarly Resource Peak EngineeringOff Line R&DConcurrent Engineering

Existing Product DeliveryJust in Time Production DesignStockless Production R&DPreventing Waste ManufacturingFlow Production EngineeringPull SystemFlow ProductionDynamic ResponsibilityMake or Buy

Key: Probable Team LeaderProbable Team Member

•

•

•

•

the purchasing function’s time is devoted to thesepurely operational and tactical tasks. In a lean pro-ducer, the level is significantly below 50 percent.Hence, purchasing personnel are free to undertakemore strategic activities. Thus, lean producersview purchasing as less of a function and more of ap r o c e s s, somewhat like the four described in Figure 1.Consequently, purchasing is no longer seen assomething that should be done by one function,but as the joint responsibility of many functions inthe firm. This new process-based strategic agendafor purchasing is defined in Figure 4.

Within this new agenda there are eight key rolesfor purchasing, all of which could be led by pur-chasing staff but all requiring the skills, knowledge,and involvement of various functional specialistswithin the firm. These eight subprocesses aredefined as:

• Supplier coordination• Individual supplier development• Supplier market research• Cost analysis• Sourcing strategy formulation• Supplier capability analysis• Benchmarking• Make or buy decision making

While not all of these roles are unknown to exist-ing purchasing functions, it is their combinationand degree of importance that is unique, as well asthe amount of resources that must be allocated tothese strategic processes.

IMPLICATIONS FOR THE PLAYERS

The previous sections have attempted to outlinewhat the purchasing function needs to do to adaptto the new demands set by the lean productionphilosophy and to move to what is termed hereconcurrent purchasing. This allows for the real-timealignment of the buying and selling organizationsat both strategic and operational levels. The keyadvantage for companies moving to the new con-current purchasing paradigm is that they open upopportunities for competitive advantage by inte-grating their key internal processes with those oftheir value stream partners. An additional advan-tage can be gained through the active and contin-ual development of long term supply sources.

What are the implications of this course of actionfor companies, education providers, and academics?At the company level, the caliber of staff attracted topurchasing needs to be increased. However, as setout in Figure 4, the roles of the professional pur-chaser are quite varied—and as a result the skillsrequired are extensive. It is unlikely that the averageuniversity graduate would be able to cope with sucha role without extensive additional training. In fact,the type of personnel required are more likely tohave an MBA qualification. If this is the caliber ofstaff that is required, employers will have to change

their recruitment strategy and their payment andreward structures.

The second implication for purchasing is that itneeds to think of itself as a process designed to createcompetitive advantage, with the staff playing a rolecloser to that of an external consultant rather than anoperations-oriented order placer. This will require aradical overhaul of activities which will take time—and may well face opposition from other functionsand suppliers.

The implications for education providers, be they uni-versities or professional associations, revolvearound whether their courses provide students withthe relevant skills to prepare them for their newroles in purchasing. With the exception of a smallnumber of programs on both sides of the Atlantic,this probably is not the case at the present time. Fewuniversities have packaged the former and the newrequired courses into programs designed specifi-cally for careers in this emerging field. The otherside of this coin is, of course, what are the existingcourses teaching that is no longer required?

The last implication concerns the academic com -m u n i t y. This mainly involves the present researchagendas. There are two main points to be consid-ered. First, if purchasing is indeed to take up a key



FIGURE 4THE NEW STRATEGIC PURCHASING PROCESS

Purchasing Subprocesses Functional Involvement1. Supplier Coordination Individual Process Teams2. Individual Supplier Development All, as required3. Supplier Market Research R&D, Design, Manufacturing4. Cost Analysis Design, Accounting5. Sourcing Strategy Formulation Design, Manufacturing6. Supplier Capability Analysis Design, Manufacturing7. Benchmarking All, as required8. Make-or-Buy Decision Making Design, Manufacturing

Roles and Skills RequiredResource InvestigatorAccountantManagerProfit SharerAuditorImplementorKnowledge of development techniques (e.g., supplier associations, SPC, RMEA, SMED, TPM, 5S, VA, Kanban, JIT, U-Cell Production, Poke Yoke, DFM/DFA, Industrial Engineering)

Team Leader/Builder or PlayerTrainer/EducatorMarketerStrategistSupplier StrategistAnalystCommunicatorsProcess ManagementValue EngineeringTQM/KaizenRelationship BuildingFacilitatorConsultant

role as the new architect of the value stream, andthe profession is to be upgraded to the highestlevel, are sufficient resources being dedicated toresearch? S e c o n d, is the research that is presentlybeing conducted addressing the new purchasingagenda or merely revisiting the old? It is theauthor’s opinion that the following areas particu-larly require urgent academic attention:

• The feasibility of moving to the new agendain a Western setting, in a wider range ofindustrial sectors and in lower-tier organiza-tions

• The various pitfalls in implementation andmanagement of the change from a traditionalto a lean approach to purchasing

• The speed at which companies can adoptsuch an approach

• The detailed study of each of the eight newagenda points

A SUMMING UP

This article has been conceptual in nature. It hasbriefly reviewed past developments in the pur-chasing literature in order to provide a platformfor the present discussion. It has attempted to clarifywhat lean production is, as well as the new agendaset by it. In doing this, it demonstrates that pur-chasing has an important role to play in raisingstandards inside companies. However, it is in therapid improvement of suppliers’ abilities and invalue stream integration that purchasing poten-tially holds a pivotal position.

The discussion has focused on these latter twoareas. In particular, the question of how the keyinternal processes of quality, cost, delivery, anddesign can be integrated with those within valuestream partner organizations. This integrationprocess has been discussed together with a num-ber of mechanisms used by the leanest firms, mostnotably the Kyoryoku Kai.

The culmination of this discussion is a blueprintfor a new paradigm for purchasing called c o n c u r -rent purchasing, as it evolves from a function to akey process. The various implications of this newagenda have been shown to affect companies, education providers, and academic researchers. Ifpurchasing can take up the challenge of lean pro-duction, the profession will be elevated to a farhigher level of strategic importance, employing thebest staff and providing companies and organiza-tions with the key to sustainable competitiveadvantage into the next century. Only time will tellwhether purchasing seizes this opportunity to bethe new architect of the value stream.

REFERENCES1. James Womack, D. Jones and D. Roos, The Machine That

Changed The World (New York: Rawson Associates,1990); R. Schonberger, World Class Manufacturing: The

Lessons of Simplicity Applied (New York: The Free Press,1986); J. Funk, The Teamwork Advantage: An Inside Look AtJapanese Product and Technology Development (Cambridge,MA: Productivity Press, 1992).

2. P. Baily, Purchasing and Supply Management, 1st ed. (London: Chapman & Hall, 1963).

3. K. J. Blois, “Vertical Quasi-Integration,” Journal of Indus -trial Economics, vol. 20 (1972), pp. 253-272.

4. I.D. Ford, “The Development of Buyer-Supplier Rela-tionships In Industrial Markets,” European Journal ofMarketing, vol. 14, no. 5/6 (1980), pp. 339-353.

5. J.A. Carlisle and R.C. Parker, Beyond Negotiation: Redeem -ing Customer-Supplier Relationships (Chichester: Wiley,1989).

6. L.M. Ellram, “A Managerial Guideline for the Develop-ment and Implementation of Purchasing Partnerships,”International Journal of Purchasing and Materials Manage -ment, vol. 27, no. 3 (Summer 1991), pp. 2-8.

7 . D.K. Macbeth, D.K. Baxter, N. Ferguson and G.C. Neil,“Not Purchasing But Supply Chain Management,” P u r -chasing and Supply Management, November 1989, pp. 30-32.

8. D.H. Farmer and P. van Amstel, Effective Pipeline Man -agement: How To Manage Integrated Logistics ( A l d e r s h o t :Gower, 1990).

9. R. Lamming, Beyond Partnership: Strategies for Innovationand Lean Supply (Hemel Hempstead: Prentice Hall, 1993).

10. P. Hines, Creating World Class Suppliers: Unlocking M u t u a lCompetitive Advantage (London: Pitman Publishing, 1994).

11. Ibid.12. D.T. Jones, “Beyond the Toyota Production System: The

Era of Lean Production,” 5th International OperationsManagement Association Conference on ManufacturingStrategy, Warwick, 26-27 June 1990, pp. 1-13.

13. Ibid; Andersen Consulting, The Lean Enterprise Bench -marking Project (London: Andersen Consulting, 1993).

14. D. Dimancescu, The Seamless Enterprise: Making CrossFunctional Management Work (New York: Harper Busi-ness, 1992); Y. Monden, Toyota Production System: AnIntegrated Approach to Just-In-Time, 2nd ed. (Norcross,GA: Industrial Engineering and Management Press,1993).

15. C. Hahn, C. Watts, and K. Kim, “The Supplier Develop-ment Program: A Conceptual Model,” International Jour -nal of Purchasing and Materials Management, vol. 26, no. 2(Spring 1990), pp. 2-7.

16. P. Drucker, The Changing Face of The Executive (London:Heinemann, 1982).

1 7 R. Newman and K. Rhee, “A Case Study of NUMMI andIts Suppliers,” International Journal of Purchasing and Mate -rials Management, vol. 26, no. 4, (Fall 1990), pp. 15-20.

18. M. Porter, Competitive Advantage: Creating and SustainingSuperior Performance (New York: Free Press, 1985).



Purchasing for Lean Production: The New Strategic Agenda

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