This case study showcases procurement process improvement in a nursing home, based on the approaches of Lean Thinking and A3 project management.

One of the main problems the team faced was unnecessary delays in converting PR (purchase requisition) to PO (purchase order). This resulted in the staff often working late and overtime (OT), leading to poor morale.

Through value stream mapping and root cause analysis, the team not only achieved its planned outcome of reduction in Purchase Requisition lead time, but also succeeded in cultivating a sustainable lean thinking culture within the organisation for the long term.

Case Study: How it all began

One typical morning, as Procurement Officer, Alvin*, was walking towards his cubicle in the General Office, he ran into IT Manager, Charlie*.

Charlie* wanted to enquire about the purchase requisition (PR) that he had submitted to purchase equipment. With the Admission Team’s announcement about opening up new beds by the end of the month, he needed to ensure that the equipment would be able to arrive two weeks before. As such, he wanted to know what the current status of the equipment purchase was and when the purchase order (PO) would be sent to the vendor.

Alvin was puzzled as he did not recall receiving such a request in his in-tray, and hence, did not key it into the system. Looking desperate, Charlie appealed that they hunt down his PR submission. After 15 minutes of searching, they finally found the approved PR lying around in one of the offices. Charlie then requested Alvin to help him key the PR into the system to generate a PO.

Sensing the urgency in the voice, Alvin immediately acceded to his request despite being pressured by other deadlines. By the time the episode was over, he was staring blankly at his desk. He wondered if he could finish his important tasks by the end of the day.

Understanding the constant firefighting that the Procurement Team had to go through, the Head of Procurement, Bernard*, decided to form a project team to improve the process.

The pain points found in their analysis were:

• An estimated 20 per cent of PRs took more than 5 work days to convert into POs.



• Staff had to work overtime (OT) often, thus leading to poor morale.

Procurement Process Improvement Step 1: Analysing the Current Situation

A coach from the Lean Transformation Innovation Centre kickstarted the session by probing into the current situation regarding procurement. The team shared that on average, there was an estimated number of 200 POs per month. Lately, the procurement officers had been working overtime to clear the entering of PRs into the system to generate POs, as well as other backlog. However, their workflow was often interrupted by other colleagues who wanted to check on the status of their PRs.

As stated in the service level agreement (SLA), a period of 5 days was required for the PR to be processed. At the same time, there existed confusion regarding when the SLA kicked in. Without a clear definition of a start and end period, the team did not have a common understanding to assess processing performance.

Based on the voice of the customer, the timing should start the moment an individual submits the PR for approval. However, in principle, an individual would first submit his PR to the Head of Department (HOD) and management for approval. By the time the approved PR reached the Procurement Team, a few days would have passed. This is an issue that was not within the procurement team’s sphere of influence.

After much deliberation, the team agreed to refine the SLA for PRs to be within 5 days upon receipt by the procurement team.

The procurement officer, Alvin, showed the team where the PR in-tray was located, what a PR looked like, how he usually scanned a copy of every PR for easy retrieval and keyed the PR data into the system. He explained that any PO amount that was greater than $500 would need approval from the management. For any item which cost more than $2000, the Procurement Team would need to issue a request for quotation as per guidelines from the Finance Team.

He highlighted that the Procurement Team had no visibility of the open POs currently. He also mentioned that goods would be delivered directly to the individual that requested for them. These individuals would then route the goods receipt notes to him for entering into the system. Following that, paper records would be forwarded to the Finance Team for payment.

The coach suggested that the team create Value Stream Mapping (VSM) to capture the entire flow of information and materials.

Procurement Process Improvement Through Value Stream Mapping

Procurement Process Improvement Step 2: Root Cause Analysis (RCA)

After the team reached a consensus on the current process, the coach facilitated the team on Cause and Effect (C&E) brainstorming for delays in PR processing.

Cause and Effect Diagram for brainstorming the possible root causes (also known as fishbone diagram)

Some of the possible root causes are elaborated below to provide more clarity and context to the problem solving methodology:

• Management would approve the same PR twice, on the physical PR copy and on the system-generated PO.



• Approved PR was returned to the individual instead of submission to the Procurement Team for generation of the PO.



• The individual would hold on to the approved PR for internal recording and scanning.



• Procurement Team was sometimes distracted from its daily PR-PO generation task.



• Increase in ad-hoc purchases due to expansion.



• Unclear Standard Operating Procedures: Some individuals scanned their PRs, while others did not. Some of the approved PRs were routed back to the individuals while some went straight to procurement. Some individuals did not complete the required data fields, thus causing multiple iterations in the workflow.

Procurement Process Improvement Step 3: Countermeasures and Implementation Strategy

The team was slightly shocked that so many possible reasons contributed to the long lead time. Nevertheless, leveraging the newfound knowledge, they started to plan and devise countermeasures, and prioritised implementation based on the Eisenhower Matrix (effort vs. impact).

As resources are finite, effort (manpower) must be allocated to high impact areas for the project to be successful while at the same time, being able to meet the timeline.

Implementation strategy that matches effort to impact, based on Eisenhower Model

Some of the countermeasures and lessons learnt can be applied to other transactional environments and will be elaborated in detail to provide further insights:

1. Relocation of the Procurement Team from level 12 to level 11 to stop stakeholders from distracting them from their scheduled work. This change provided a stable environment for staff to concentrate on the work they had on hand. Previously, they were constantly pressured into processing urgent purchase requisitions (PR) and purchase orders (PO), thus causing other non-urgent PRs to eventually turn into urgent PRs.

2. Publishing a spreadsheet for everyone to have visibility of the PRs and POs that had already been processed by the Procurement Team. It was also used to track the number of daily calls and emails to enquire about PR/PO status. Prior to this arrangement, the procurement team attended to an estimated number of 30 enquiries per day. With the spreadsheet, the number of enquiries reduced to less than 10.

3. Reorganise Work in Progress (WIP) into different stages and/or processes based on the Procurement Team’s Value Stream Mapping. After the implementation of this countermeasure, it became easier to identify bottlenecks visually. Bernard*, Head of Procurement, was then able to swiftly allocate resources to help his staff mitigate these choke points. Also, it allowed the team to track the status of processed PRs at a glance.

4. Reorganise the in-tray of PRs by collection cut-off time – 9.00am, 1.00pm, 4.00pm. This change provided stability in the demand of work. Previously, there was no specified cut-off time, therefore allowing individuals to drop off PRs at 5.00pm and expecting it to be processed within the same working day. Now, they are aware that after the 4.00pm cut-off time, all PRs would be processed the following day. This greatly helped to manage everyone’s expectations.

5. Implementation of blanket orders for diapers and other repeated buys. As highlighted by the Procurement Team’s newly established “Repeated Buys” Pareto chart, adult diapers were one of the top repeated buys. The Director of Nursing commented that she had to sign many PRs and POs every month to approve these repeated buys. This new measure helped to free up time for her to work on more value-added tasks.

Procurement Process Improvement Step 4: Outcome and Follow Up

The project team was happy to announce that they had managed to reduce the number of PRs processed over five working days from an estimated 20 per cent to nearly zero per cent.

Based on their new knowledge in Lean Thinking, they also started to work enthusiastically on envisioning how they could better improve the process. They are looking to automate it so that less manual tracking of the PRs would be needed.

If more users were to be provided access to the system, it would help to eliminate or minimise paper-based PRs. Individuals could key the PR directly into the system, with the designated managers approving the PR in the system. The system will then automatically generate the PO. As such, automation would be the way forward to bring the team to the next level of excellence.

These were the project team’s top three takeaways from the project and training:

  1. The A3 project management methodology helped to logically summarise the entire Plan-Do-Check-Act cycle.

  2. Value Stream Mapping allowed stakeholders to quickly gain consensus on the process and its current performance and move on from there.

  3. Root Cause Analysis is an effective technique to derive lasting and impactful countermeasures.

*Names and identifying details have been changed to protect the privacy of individuals.

This article has been edited for clarity, brevity and for the relevance of this website.

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