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The LEAN Sourcing Approach Briefing

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Title: The LEAN Sourcing Approach Briefing


1
The LEAN Sourcing ApproachBriefing
self-starter pack for procurement staff
  • Version 1.0

2
The Procurement Reform Agenda
  • The Coalition Government has set out the
    requirement to support the implementation of the
    Growth Agenda and to ensure that more Small
    Medium Sized Enterprises (SMEs) /Voluntary,
    Community Social Enterprises (VCSEs) win
    government contracts.  The requirement includes a
    new approach to the way central government
    departments carry out procurement.
  • This requires departments to think very
    differently about how procurements are planned
    and delivered.
  • Subsequently, this requires a much closer working
    relationship between procurement staff and
    colleagues from policy areas and project
    management functions than has previously been the
    case.
  • The new approach has been endorsed by Francis
    Maude, the Minister for the Cabinet Office and
    all central government departments and their ALBs
    are required to adopt it.

3
The new policy requirements
  • The new approach comprises the following new
    government policy requirements
  • Adoption of a LEAN sourcing approach that strips
    out waste and reduces costs
  • A requirement to carry out significant levels of
    pre-procurement market engagement with diverse
    range of prospective suppliers, including SMEs in
    order to warm-up the market, test our thinking
    and generate ideas for innovation as part of the
    development of outcome-based specifications.
  • Contracts should be broken down into lots where
    appropriate, and requirements that are below the
    value of 100K should be rapidly sourced through
    the new Government Dynamic Market place.
  • All Government procurements are strongly
    encouraged to use the Open Procedure.
  • There is now a presumption against the use of the
    Competitive Dialogue procedure which has often
    resulted in slowing things up unnecessarily and
    typically incurs huge costs on both sides.
  • There is an expectation that all but the most
    complex procurements are completed within 120
    working days (publication of the advert to the
    contract award decision date).

4
What this means for our department
  • Collectively, we need to develop
  • A detailed understanding of what the pipeline of
    potential procurements is so that these can be
    planned and resourced effectively
  • Strong recognition within business areas that
    early engagement and joint working with the
    procurement function (as part of a
    multi-disciplined procurement team) is a critical
    success factor
  • A full understanding of the key principles of the
    LEAN sourcing process and how engagement with
    suppliers in the market before establishing a
    formal procurement process has to become standard
    practice (we can no longer rush out with an
    advert)
  • Strong acceptance that large complex contracts
    with large suppliers are no longer going to be
    permitted (in the vast majority of cases) and
    that increasing the number of contracts awarded
    to SMEs/VCSEs (through breaking down requirements
    into lots) is the new way forward (where
    appropriate).
  • Strong recognition that departmental performance
    in delivering procurements within 120 days will
    be subject to ongoing scrutiny by ERG and No10
    and that we can only achieve this by working
    together.
  • More efficient and effective approaches to taking
    business decisions to ensure that we do not incur
    any unnecessary delays.

5
7 key principles of the new approach
1. Establish a clear understanding of required
business outcomes
Strong focus on preparing to go to market This
is a key activity that takes time and careful
planning
2. Engage with the market in order to shape and
confirm that the business requirement is
attractive to a diverse range of suppliers
3. Use LEAN thinking and visual tools to set up
and run a well planned and efficient process
4. Do not commence formal procurement until
thorough engagement with suppliers has taken
place.
Strong focus on running a fast procurement
process This is a key activity that requires
collective effort and is dependant on effective
preparation
5. Streamline any engagement with suppliers and
stakeholders by using a boot camp approach to
make best use of limited time
6. Use e-sourcing tools to support the
procurement and follow the LEAN Standard
Operating Procedures (SOPs)
7. Measure and manage performance through
continued focus on turnaround times and costs.
Advert to contract award decision date should be
completed within120 working days
6
Key principles from a Procurement perspective
ctc
1. Establish a clear understanding of required
business outcomes
2. Engage with the market in order to shape and
confirm that the business requirement is
attractive to a diverse range of suppliers
3. Use LEAN thinking and visual tools to set up
and run a well planned and efficient process
4. Do not commence formal procurement until
thorough engagement with suppliers has taken
place.
5. Streamline any engagement with suppliers and
stakeholders by using a boot camp approach to
make best use of limited time
6. Use e-sourcing tools to support the
procurement and follow the LEAN Standard
Operating Procedures (SOPs)
7. Measure and manage performance through
continued focus on turnaround times and costs.
Advert to contact award decision date should be
completed within 120 working days
7
Procurement routes our choice has become
limited
Route Key Features Use
Open All interested suppliers may respond to the advertisement in the OJEU by tendering for the contract. Well defined, outcome-based requirements will help ensure a manageable number of bid responses from good quality and capable suppliers. There is a government commitment towards greater use of the Open procedure.
Restricted A two stage process where a selection of suppliers who respond to the advert is made and only they are invited to submit a tender for the contract. The selection (pre-qualification) questionnaire (PQQ) must only contain proportionate and relevant criteria. Use in limited circumstances where pre qualification is essential. The use of a standardised , stripped back core PQQ is mandatory across central Government, and not used at all for sub 100k work.
Competitive Dialogue Following an advert and a selection process potential suppliers are invited to enter into dialogue to develop one or more suitable solutions before chosen suppliers are invited to tender. The Government has set a presumption against the use of competitive dialogue.
Negotiated One or more potential suppliers are selected to negotiate the terms of the contract. An advert is usually required. Only to be used in extremely limited circumstances described in the Regulations, for example, where a previous procurement was discontinued because of unacceptable/irregular tenders.
8
Setting expectations
  • LEAN sourcing - the procurement process has not
    changed
  • Wasteful practices have been removed and highly
    efficient best practice (government industry)
    has been built into it
  • Strong consideration has been given to the supply
    side in the design of the process in particular
    SMEs/VCSEs
  • You should recognise the good practice that is
    set out within the process
  • Applying your professional judgement when
    following the LEAN process is a critical success
    factor

9
What you should get from this briefing...
  • Good awareness of the LEAN sourcing process and
    how the Governments SME policy requirements fit
    into it
  • An insight into the components of the LEAN
    standard solution and the benefits of applying it
  • Sufficient knowledge and confidence to start to
    apply the standard solution on forthcoming
    procurements

10
Procurement Route Decision Tree
  • Analyse the requirement to ensure that you have a
    sound understanding of business outcomes
    required, and consult the marketplace early

You have been approached with a new requirement
OR you have an operational imperative e.g. an
expiring contract
Start
Is your requirement covered by Government's
Central Procurement Programme?
Refer to the Government Procurement Service.
  • Engage the market to sound out ideas on the best
    way to shape, and where possible, simplify and
    breakdown the requirement

Is your requirement covered by an existing
departmental or cross government contract?
Use pre-existing departmental or cross government
arrangement
  • Now that you have completed pre procurement
    market engagement (including publication o f a
    project specific PIN and Industry Bootcamp) you
    should now be able to define and specify (in
    accordance with the appropriate EU Regulations)
    Can you define and specify in accordance with
    regulations the following
  • How the project outcome will be delivered, and
  • How the contract and commercial deal will be
    structured

Yes but there is strong evidence the market is
very large and that pre-qualification is the only
option
YES
OPEN PROCEDURE
COMPETITIVE DIALOGUE PROCEDURE Government
presumption against its use Use of Competitive
Dialogue may be challenged by ERG. Follow the
Competitive Dialogue LEAN sourcing Standard
Operating Procedures.
RESTRICTED PROCEDURE Confirmed by Commercial
Director / Head of Procurement Follow the
Restricted Procedure LEAN sourcing Standard
Operating Procedures. Use mandatory standardised
PQQ and ensure it contains proportionate and
relevant criteria.
Use the Open Procedure following the LEAN
sourcing Standard Operating procedures
There is a government commitment to move towards
greater use of the Open Procedure
11
The new LEAN sourcing process the 5 Stage
Process
The new approach requires more work to be carried
out before going to market
12
Pre-procurement market engagement
  • The LEAN sourcing process has a strong focus on
    pre-procurement market engagement
  • Market analysis - engaging early with the market
  • Encourages innovation buyers get to hear what
    potential solutions suppliers can offer and
    suppliers are aware of the requirements.
  • Enables buyers to test the markets response to
    their high level requirements, (including any
    socio economic factors)
  • Saves time and cost when the procurement process
    begins suppliers can deselect themselves for
    opportunities they know they are not suitable for
  • Allows for consortia formation
  • Questions we need to ask ourselves
  • Have we consulted with a broad range of suppliers
    through interactive supplier days?
  • What is the supplier makeup of the market?
    Particularly those markets where there is a high
    SME prevalence?

13
Considering different ways of going to market
  • Sourcing strategy
  • Use this engagement to consider whether there is
    opportunity to break requirements into smaller
    lots whilst maintaining a focus on the
    requirements of the business
  • Questions we need to ask ourselves
  • Have we considered what size of contract is most
    suitable for the requirement?
  • What is optimum contract duration, size and
    value?(contract value is a key determinant for
    SME and Voluntary, Community Social Enterprises
    (VCSEs) engagement)
  • Have we made it clear that we are willing to
    consider bids from consortia arrangements and
    allowed appropriate time for consortia to form
    and bid?
  • The Procurement Process itself removing
    barriers for SMEs

Ways to remove barriers for SMEs Ways to remove barriers for SMEs
1. Use the standard PQQ 3. Minimise financial and other selection criteria
2. Enable consortia time to form 4. Remove financial scoring
14
Planning for project approvals
  • Approvals can be time consuming and can in
    extreme circumstances cause significant delays
  • There are various Cabinet Office spending control
    mechanisms and processes in place which need to
    be understood. See http//www.cabinetoffice.gov.u
    k/resource-library/cabinet-office-controls-guidanc
    e-actions-and-processes-document
  • Key message be prepared, build these activities
    into the plan and minimise the delays by having
    all of the documentation ready.

Brings a sharper focus to planning. In
particular, mapping out what approvals and
assurance are required and the preparations
required to be made by the team
15
LEAN Sourcing Process General Overview
Issue of OJEU Notice
To be completed within 120 working days
16
In summary......
Pre-OJEU
Procurement OJEU to Award
  • Setting up for success - readiness
  • Developing a clear understanding of requirement
    business outcomes
  • Engaging with suppliers in the market and
    identifying opportunities for innovation and/ or
    breaking requirements into more attractive lots
  • Developing a detailed understanding of the
    business requirement and constructing it in a way
    that will be clear and attractive to the market
  • Getting a team in place with the right
    capabilities and a clear delivery plan (that
    takes into account approval and assurance points)
  • Execution
  • Operating a highly efficient process in line with
    the plan, which focuses on reducing turnaround
    times and costs to both the client and the
    suppliers within the competition but maintains
    quality

Pipeline of known procurements
  • Key points
  • The more quality time that is spent on pre-OJEU
    activities the more efficient the procurement is
    likely to be.
  • Reduced turnaround times (OJEU to award)
    reduced costs and improved resource utilisation
  • LEAN sourcing is not about cutting corners it is
    about improving efficiency, and quality as part
    of a repeatable approach that is subject to
    continuous improvement

The pool of scarce resources
  • Risk
  • Failure to complete the pre-OJEU activities is
    likely to result in three things occurring
  • A protracted procurement incurring significant
    costs
  • A business outcome that is sub-optimal
  • Dissatisfaction of key business stakeholders

17
The LEAN standard solution set
  • Components comprise of
  • Value Stream Map (a route map)
  • Standard operating procedures (SOPs) - (what to
    do instructions)
  • Standard implementation plan (activities based on
    SOPs)
  • Visual management (tools and templates to drive
    progress and performance as part of a hub)
  • A set of key performance indicators to help drive
    continuous improvement
  • One core process with three variants Open,
    Restricted Competitive Dialogue

18
LEAN Sourcing Standard Solution
  • The Standard Solution enables the execution of
    the LEAN sourcing process. It provides a suite of
    tools that you can use to execute the sourcing
    process from business need identification and
    baselining through to contract award signature.

Standard Operating Procedures (SOPs) A set of
high level desk instructions describing the best
known method for carrying out the activities
described in the value stream map
  • Procurement Route Decision Tree
  • A tool to assist procurement
  • professionals to think through and identify the
    most appropriate procurement route for their
    requirement.

Visual Management A way of displaying information
to drive the performance of the process
specific parts of the process
Value Stream Map The route map which sets out the
LEAN sourcing process.
Team Implementation Plan (TIP) An action plan
showing who will do what and when in specific
functions and processes
KPIs Performance indicators to measure turnaround
times and cost of running procurements.
19
Open Simplified Routemap
7. Overview Open
20
Open Standard Operating Procedures (SOPs)
Key specific differences in practice Key specific differences in practice
Typical as-is New approach
Used rarely, and only when requirements are so specific and the target supply base is known to be small More efficient requirements capture through stakeholder bootcamp, followed by full and comprehensive pre-procurement market engagement
Used rarely, and only when requirements are so specific and the target supply base is known to be small Publish OJEU, Bidders pack (ITT including Ts Cs) at same time, with a clear statement of requirement and evaluation criteria
Problems with this Inevitable tendency to avoid using the Open route because of the lack of control over the number of bidders. Benefits Provides full clarity to market and opportunity for supplier self de-selection Helps to ensure the widest possible market is aware of and understands the opportunity to compete pre-OJEU
21
What a Standard Operating Procedure looks
like.....
  • The Standard Operating Procedures (SOPs) are a
    set of high level desk instructions. They
    describe the best known method for carrying out
    the activities in the value stream map for each
    stage of the procurement process.
  • The left hand column describes the operation or
    activity step, the centre column provides the
    detail and the right hand column contains
    examples or relevant links to other materials
    available on the internet, for example, the HMT
    green book templates for business cases.

Signifies a key risk of not carrying out the
activity appropriately. Identifies a point of
built in quality within the activity.
Illustrates an ease point, for example where
there is an existing template for completing the
activity.
22
Restricted Simplified Routemap
22-36 days
23
Restricted Standard Operating Procedures (SOPs)
Key specific differences in practice Key specific differences in practice
Typical as-is New approach
1. Publish OJEU PQQ 1. Publish OJEU, PQQ Bidders pack (including Ts Cs) at same time
2. Evaluate PQQ 1. Publish OJEU, PQQ Bidders pack (including Ts Cs) at same time
3. Use time between 1 2 to develop ITT (full bidders pack) 1. Publish OJEU, PQQ Bidders pack (including Ts Cs) at same time
4. Issue ITT to those who get through pre- qualification 1. Publish OJEU, PQQ Bidders pack (including Ts Cs) at same time
5. Evaluate responses to ITT 1. Publish OJEU, PQQ Bidders pack (including Ts Cs) at same time
Problems with this Benefits
Suppliers may get through PQQ and not like Ts Cs and then cause delays in timescales - waste Inefficient supplier self de-selection - they may not have entered the competition if they had seen full pack Provides full clarity to market and opportunity for supplier self de-selection Helps to ensure that requirement are crystal clear before going to market. Helps to ensure the widest possible market is aware of and understands the opportunity to compete pre-OJEU Helps consortia and other partnerships to form
24
Formal training
  • GPS is rolling out training across central
    government which will comprise
  • 1 day LEAN Sourcing Awareness course
  • 3 day LEAN Sourcing Simulation workshop
  • Initially the both course types will be classroom
    based but an e - learning package is being
    developed to replace the 1 day course. This
    should be available by June 2012.
  • Further information will be available from GPS by
    phoning the service desk on 0345 4102222 or by
    emailing training_at_gps.gsi.gov.uk

25
Access to the LEAN sourcing materials
http//procurement.cabinetoffice.gov.uk/
http//gps.cabinetoffice.gov.uk/node/1109
UNCLASSIFIED 23
26
Next steps
  • Gain access to the LEAN sourcing materials
  • Download and read the Standard Operating
    Procedures your starting point should be the
    set that covers the Open procedure
  • Consider how these procedures and the key LEAN
    principles can be applied to forthcoming
    procurements
  • Apply the principles to your procurement using
    the Standard Operating Procedures as a mechanism
    to ensure that you are following the LEAN process
  • Note It will be important to capture turnaround
    times (the time taken in working days from the
    publication of the Advert to Contract Award) as
    our departments performance against the 120 day
    target will be subject to ongoing scrutiny from
    the department, ERG No10.
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