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Lean Sourcing: Measure

Lean Sourcing: Measure
 
In the last newsletter, we covered the first step of Lean Sourcing, "Define", as based on the Lean Six Sigma methodology. This month, we will review the second step, "Measure", as part of the DMADV approach.

The methodology is based on the application of DMADV, one of the tools in Lean Six Sigma. DMADV allows companies to obtain drastic improvements in their business processes. The name DMADV derives from the initials of the phases in the application of the methodology: Define, Measure, Analysis, Develop and Verify.

The basic premise of the first step, Define, is to lay the groundwork for a successful programme. Before beginning the "measure" phase, we should have:
- Defined the key process or problem to be addressed
- Agreed upon the goals of the initiative
- Identified the key stakeholders involved in the project
- Gained consensus and approval to move forward with the project

The key objectives of the "Measure" phase include the following:
- An accurate measurement system, based on *stakeholder-approved* definitions
- Sufficient information to validate the need and quantify the potential benefit
- Specific objectives to be met by the remainder of the initiative
- Approval (or agreement not to move forward) with the remainder of the project

Many initiatives falter or even fail in the Measure phase because it is very easy to get bogged down in data collection activities. Often, information is not readily available, or is 'hidden' across different groups, teams and stakeholders. In cases where no previous data has been collected, it may take weeks, or even months for a new measurement system to start producing meaningful information. Further, in cases where there is a great deal of data, simply putting the means in place to collect information can be an entire project in itself!

A few things to keep in mind when conducting the "Measure" phase of a Lean Sourcing initiative:
- Don't ignore the standard measures, such as number of vendors (stratified by function/service), service quality, time to pay, number of transactions, and utilization of products/services... It doesn't have to be complicated!
- Be cognizant of spin-off projects, such as time tracking for services, or asset management for software and hardware products. Such projects are very helpful in squeezing waste out of the budget, but the absence of these tools shouldn't stall a lean sourcing initiative. Often, simply reducing unnecessary suppliers and tracking & enforcing basic performance metrics can provide an enormous benefit.
- In cases where the implementation of a new measurement system cannot be avoided, be sure to treat its implementation as a formal project. Done properly, this can be a big win by itself!
- Consult your steering committee and key stakeholders often. You' may well be burrowing deep into the details, so high-level reviews will help keep the big picture in focus.
- Data doesn't need to come from an IT system! Even subjective data, such as satisfaction surveys and focus group discussions can yield actionable information. At the very least, it will provide a good sanity check for other data you collect.
- Its OK if a large-scale programme isn't there. Although projects are typically kicked-off as a response to a seemingly obvious need, sometimes the data will say otherwise. Halting an expensive initiative for lack of clear benefits is as good as running a successful project!

At the end of the "Measure" phase, you will have a clear understanding of the problem at hand, the future target, and a discrete way of measuring your progress towards the goal. In our next installment, we will review the third phase, "Analyze", which covers the "how" improvements can be made.  
 

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