Enabling lean procurement: a consolidation model for small‐ and medium‐sized enterprises

Abstract

PurposeGaining access to the cost savings and production efficiencies derived from lowering inventories in the supply chain is as vital for small‐to medium‐sized enterprises (SMEs) as they are for larger manufacturing firms. Lean procurement as a concept has been advanced as a method for achieving this. The purpose of this paper is to discuss a method of addressing some of the critical barriers to implementing lean procurement methodologies in an SME environment through the application of procurement consolidation techniques.Design/methodology/approachFirst the relevant theoretical and practitioner literature is reviewed, a theoretical consolidation model is developed, and a worked example is presented.FindingsThe barriers face by SMEs trying to implement a lean procurement philosophy are significant. Low volumes, small lot sizes and high frequency purchases incur significant additional distribution costs. The paper argues that the use of a double freight consolidation model (DFCM) is useful to SMEs for maximising the trade‐offs between volume and frequency in an international supply chain.Research limitations/implicationsWhilst this research suggests that SMEs can indeed use the DFCM for lean procurement, the next step is to apply the model in practice.Originality/valueThis paper synthesises consolidation modelling and lean procurement principles. This synthesis is further enhanced by applying a simulated example to the challenging SME environment. The application of the categorisation of both buyers and vendors to the consolidation model is novel.