How to Drive Manufacturing Capacity Improvements with Procurement

Written by Harry Adams, Senior Business Associate at Procurato 

In modern day industrial manufacturing, significant focus is placed on the implementation and execution of operational methodologies to ensure production capacity is both flexible and optimised. Often though, these operational methods are implemented through the manufacturing and maintenance teams with limited engagement or collaboration with the wider business, especially with procurement teams.

The disconnect between Procurement and Manufacturing often leads to inefficiencies that directly impact production capacity. Furthermore, procurement teams may not fully understand the specific needs or constraints of manufacturing. It's not enough for Manufacturing to adopt best-in-class operational methodologies if Procurement is not going to support the chosen approach to capacity improvement.  

Procurement and Supply Chain have a significant role to play in supporting the implementation of these activities, from minimising production disruption to enabling best in class practices through third party support.  

This report provides a critical examination of these methods and highlights how procurement and supply chain activities must be developed in parallel to achieve positive results. 

1. Kaizen Methodology: Leveraging Continuous Improvement Through Procurement 

The Kaizen methodology emphasizes continuous, practical improvements in all business processes and procedures. Its strength lies in fostering a culture of small, ongoing changes driven by employees at both the operational and strategic level.  

Kaizen implemented effectively on a shop floor or manufacturing line will significantly improve efficiency and throughput, however the overarching methodology must be expanded to supply chain and supplier activities to deliver the full scope of potential benefits.  

A practical approach to achieving this is to workshop value stream mapping analysis collaboratively with key suppliers, reviewing high value or underperforming logistics routes and manufacturing processes. 

The aim of these workshops is to jointly identify bottlenecks, waste areas, and opportunities for which improvements can then be rolled out as part of a cooperatively led initiative, with the benefits shared both between customer and supplier.  

This method is particularly useful for procurement teams looking to strengthen working relationships within suppliers while resolving persistent issues effecting supplier delivery or commercial performance.  

One real example of using the Kaizen principle is Toyota, who applies it along with other lean methodologies to maximise productivity at every worksite and to empower individual members to identify areas for improvement. 

2. Line Balancing Methodology: Achieving Flow Optimization with Procurement Synergy 

Line Balancing is about ensuring that production tasks are evenly distributed across all stages of the manufacturing process, reducing work in progress stock, decreasing takt time and improving overall capacity.  

To support Line Balancing, procurement must ensure the constant availability of materials at each stage of production to avoid idle times and the reduction of overall line capacity. This availability of materials must also be carefully managed to ensure that overall stock, and therefore capital tied up in stock is minimised.  

Procurement strategies like Just-in-Time (JIT) inventory management & Sequencing can be introduced with line balancing activities to support the availability of materials lineside. By ensuring that materials arrive exactly when they are needed, companies can minimize storage costs and reduce the risk of material shortages that might disrupt production. In cases where JIT or Sequencing are not practical due to supply chain or footprint limitations, internal part management practices such as KANBAN can be used to practically maintain minimum stock quantities effectively. Additionally, stock management costs can be reduced via the introduction of Vendor Consignment Stock Agreements, which are now commonplace in large companies such as Amazon.  

Zara is another big example of implementing the Just-in-Time (JIT) concept in its production, being a leader in fast fashion manufacturing. By ensuring that its supply chain is highly responsive, Zara aligns with JIT principles, receiving materials and producing garments based on real-time consumer demand. This enables the company to reduce inventory levels, minimize waste, and quickly adapt to changing fashion trends. 

Despite the advantages of JIT and other minimal stock manufacturing strategies, the increased destabilisation of supply chains due to geopolitical and macro-economic factors has heightened the risk of introducing lean methodologies. These issues reflected in real world examples such as the global chip shortage or sanctions resulting from the 2022 Ukraine War, require procurement teams to have more effective third-party risk management strategies. These strategies can identify risks within not only tier 1 suppliers, but also provide exceptional insight throughout the entire supply chain, including verified alternatives to key materials and services in case of disruption.  

When materials are not supplied in the right quantities or at the right time, production slowdowns are inevitable, leading to stoppages and reduced capacity. Therefore, manufacturing teams looking to introduce line balancing methodologies should work collaboratively with their procurement teams to examine how these methods can support the overall result.  

3. Decentralised Manufacturing: Enhancing Flexibility with Procurement Networks 

Decentralized Manufacturing is a strategy where production is spread across multiple locations to increase flexibility and scalability. This approach helps businesses respond more effectively to regional market demands and legislation, while also reducing the risk associated with overburdening a single facility.  

However, this method is significantly more expensive in both internal and external investment costs and can be more complicated when managing material flows across multiple decentralized sites presents challenges for supply chain teams.  

For these reasons, decentralised manufacturing is best employed for products lines and supply chains which require minimal costs to establish. By sourcing materials from local suppliers, businesses can minimize lead times and transportation costs, while also mitigating the risks associated with long-distance logistics. Initiatives such as reusing equipment and part designs can reduce the investment burden related to new supply chain development, while partnering with global tier 1 suppliers can ensure global volumes can still be leveraged for commercial advantage.  

Without an effective procurement strategy, decentralized manufacturing can quickly become inefficient. Issues like inconsistent material quality, delays in material deliveries, costs and complexity in importing materials, & increased logistical costs can erode the overall benefits.

4. Overall Equipment Effectiveness (OEE) Methodology: Ensuring Equipment Efficiency Through Predictive Procurement

OEE is a framework that measures equipment performance by evaluating availability, performance, and quality. While OEE focuses on optimizing machine utilization, the role of procurement in this methodology cannot be underestimated.  

The main factors which negatively impact OEE are equipment stops, slow cycling or idling, startup times, and process defects. Procurement can play a significant role in supporting a OEE optimisation via supporting machine maintenance activities and minimising sub-component or material defects.  

Predictive maintenance, when combined with pre-emptive procurement stock management can have a significant impact on OEE performance. By using data to forecast when parts will be needed for repairs or maintenance, procurement teams can ensure that necessary materials are available before breakdowns occur, preventing unplanned downtime.  

Furthermore, establishing strong contractual agreements with equipment suppliers can ensure that externally executed machine servicing and specialist preventative maintenance are available and scheduled from the initial point of procurement.  

Procurement can also minimise process defects by tracking supplier quality performance and ensuring supplier corrective action planning is included in supplier reviews, particularly when linked to the sourcing of new business. In that way it is critical that procurement have visibility of macro level supplier quality data, and the more specific root cause analysis created via tools such as 8D analysis, using this the procurement team can highlight the overall impact of part quality issues and outline specific corrections which the supplier must implement moving forward 

To maximize the benefits of OEE, procurement and manufacturing teams can jointly develop OEE performance targets, minimum standards for equipment supplier servicing, and supplier performance data flows to ensure both teams are aligned and informed in tackling OEE optimisation  

Conclusion: An Integrated Approach to Capacity Growth and Procurement 

Manufacturing capacity can be enhanced through methodologies such as Kaizen, Line Balancing, Decentralized Manufacturing, and OEE. However, the strategic integration of procurement into these methodologies unlocks even greater potential by ensuring that materials and components are available in the right quantities, at the right time, and at the right price. 

For businesses seeking rapid capacity growth, a combination of advanced procurement strategies and operational improvements, such as automation and flexible manufacturing systems, offers the most effective path forward. Sustainable, long-term growth can be achieved by integrating procurement into continuous improvement efforts, ensuring that operational efficiencies are supported by an optimized supply chain. 

By adopting a holistic approach—one that aligns both operational and procurement strategies—manufacturers can not only increase capacity but also build resilience, reduce costs, and improve overall supply chain efficiency. This alignment is essential for achieving sustained success in today’s competitive manufacturing environment.