analyzing the causes of delays in procurement lead time using value stream mapping a case study of bosch vietnam co ltd

MINISTRY OF EDUCATION AND TRAINING HO CHI MINH CITY UNIVERSITY OF TECHNOLOGY AND EDUCATION ANALYZING THE CAUSES OF DELAYS IN PROCUREMENT LEAD TIME USING VALUE STREAM MAPPING: A CASE STU

Reasons for choosing the topic

In today's fast-paced and highly competitive manufacturing landscape, the efficiency of the procurement process plays a vital role in establishing a strong and resilient supply chain It directly impacts a company's ability to meet customer demands, maintain optimal inventory levels, and effectively manage costs One crucial aspect of this process is the lead time from Purchase Requisition (PR) to Purchase Order (PO) issuance For companies like Bosch Vietnam Co., Ltd., operating in the dynamic manufacturing sector, the agility of this process is paramount It determines their ability to adapt swiftly to market dynamics and customer preferences, which in turn influences their operational success and strategic positioning.

Insights from the industry reveal significant variations in procurement lead times across different sectors, ranging from a few weeks to several months This underscores a considerable area for improvement In the manufacturing context, where the speed of supply chain operations is a crucial factor in market competitiveness, delays in procurement can result in increased holding costs, diminished customer satisfaction, and compromised operational flexibility.

To enhance supply chain efficiency, implementing value stream mapping as part of Lean Manufacturing principles promises to be a strategic approach for streamlining the procurement timeline from PR to PO Thus, the objective of the thesis is to delve deep into the procurement lead time at Bosch Vietnam, assess the current lead time, and identify any bottlenecks that hinder efficiency Recognizing the critical role of procurement within the supply chain and its significant impact on a company's operational framework, coupled with the urgent need to enhance supply chain agility in response to evolving market demands and competitive pressures, the motivation for this topic becomes evident.

The author's choice to embark on this research is driven by the understanding of these challenges and the potential for substantial operational improvements Therefore, the chosen topic for in-depth exploration is: "Analyzing the causes of delays in procurement lead time inquiry with the aim of achieving tangible improvements in procurement efficiency and overall supply chain performance.

Research objective

The research objective of the thesis is to identify opportunities for improving the procurement process at DCVN - Bosch Vietnam by applying VSM, a part of Lean Manufacturing principles The specific objectives are as follows:

Assess the current lead times in the procurement: The research aims to analyze the duration from Purchase Requisition (PR) to Purchase Order (PO) issuance and identify the existing lead times within the procurement process at Bosch Rexroth Vietnam This assessment will provide a baseline understanding of the current state of the procurement.

Identify bottlenecks and areas of improvement: Through the utilization of VSM analysis, the research seeks to identify bottlenecks and areas of waste within the procurement process By visualizing the current state of the process and mapping out the flow of activities, inefficiencies and opportunities for improvement can be identified.

Provide recommendations for implementation: Based on the analysis and evaluation, the research will provide practical recommendations for implementing the identified strategies to optimize the procurement lead time at Bosch Rexroth Vietnam These recommendations will consider the specific context and challenges faced by the company, aiming to guide management in implementing effective changes and achieving tangible improvements in procurement efficiency.

By achieving these research objectives, the thesis aims to contribute to both theoretical knowledge and practical application in the field of supply chain optimization, specifically in the context of procurement.

Research focus and scope

Research focus: This research aims to analyze the causes of delays in procurement lead time using value stream mapping at Bosch Vietnam Co., Ltd.

- In terms of space: The research is conducted at DCVN - Bosch Vietnam Co., Ltd.

- In term of time: The thesis researches the procurement lead time of DCVN at BoschCo., Ltd in the period of 2022-2023.

Research method

The research methodology adopted in this study systematically tackles procurement process issues It entails identifying problems and collecting and processing data A value stream map (VSM) analysis is conducted to visualize and optimize the process A fishbone diagram explores potential causes of problems, while a Pareto diagram identifies those with the greatest impact The methodology allows for a comprehensive understanding of procurement challenges and facilitates targeted solutions.

During the data collection stage, multiple sources are utilized to gather information. These include direct observation, extraction of procurement history data from the SAP system, studying relevant literature, and conducting interviews or discussions with subject matter experts The collected data primarily consists of qualitative information, specifically the lead time in procurement The primary data is obtained directly from the SAP system.

Data processing employs three main methods: VSM, the fishbone diagram and the pareto diagram VSM is employed to identify areas of waste and inefficiency within the procurement process By mapping out the current state of the process, existing areas of waste can be pinpointed Additionally, a future state value stream mapping is created to visualize the anticipated condition of the procurement process after implementing improvements.

The fishbone diagram is utilized to identify causal factors that contribute to the failure in achieving the target procurement time These diagrams are constructed based on the outcomes of discussions and interviews conducted with knowledgeable employees who specialize in the procurement field.

The Pareto diagram, a valuable tool in procurement, prioritizes and graphically represents the main contributors to procurement delays By identifying the critical factors with the greatest impact on lead time, organizations can efficiently target improvement efforts to minimize delays and enhance the overall procurement process.

The structure of the topic

Chapter 1: The Introduction of Bosch Vietnam Company Limited

Chapter 3: The current status of procurement lead time and supply chain management at DCVN - Bosch Vietnam Co., Ltd

Chapter 4: Proposed improvement in procurement lead time at DCVN - BoschVietnam Co., Ltd

THE INTRODUCTION OF BOSCH VIETNAM COMPANY LIMITED

Summarizing about Bosch Vietnam Company Limited

1.1.1 General information about the Bosch Vietnam Co., Ltd

Bosch began its journey in Vietnam with the establishment of its first representative office in Ho Chi Minh City in 1994 Since 2007, the company has been represented by Robert Bosch (Vietnam) Co., Ltd Presently, Bosch Vietnam is active across all sectors, including sales, manufacturing, research, and global service centers.

With its main headquarters in Ho Chi Minh City and branches in Hanoi and Danang, Bosch also operates a transmission belt manufacturing plant in Dong Nai province, specializing in continuously variable transmission (CVT) belts for automobiles. Additionally, Bosch has 2 automotive technology research and development centers in Ho Chi Minh City In 2021, Bosch recorded revenue in Vietnam of approximately 192 million euros By December 31, 2023, the company had employed over 5,928 staff and engaged in diverse business activities throughout Vietnam.

Source: www.bosch.com.vn/our-company/bosch-in-vietnam

Figure 1.2: Brands of the Company

Source: www.bosch.com.vn/our-company/bosch-in-vietnam

1994: Opening of Representative Office in HCMC

2007: Establishment of Robert Bosch Vietnam Co.,Ltd Headquartered in HCMC 2008: Establishment of Gasoline Systems Plant in Long Thanh, Dong Nai.

2011: Inauguration of Robert Bosch Engineering and Business Solutions Vietnam Co.,Ltd

2012: Opening of branch office in Danang

2013: Foundation of Bosch Vietnam Co.,Ltd / Inauguration of a Technical Industrial Apprentice (TGA) Program in Vietnam

2014: Opening of branch office in Hanoi / Establishment of Bosch Automotive R&D Centre in HCMC

2017: 10 th year Anniversary in Vietnam

2018: 10 th year Anniversary of Bosch Powertrain Solutions Plant in Long Thanh, Dong Nai

2019: Bosch Automative R&D Center celebrates 5 th anniversary

2020: Robert Bosch Engineering and Business Solutions Vietnam Co.,Ltd 10 th year Anniversary

2022: Robert Bosch Engineering and Business Solutions Vietnam Co.,Ltd officialy changed to Bosch Global Software Technologies Co.,Ltd

2023: Official Opening of BSH Home Appliances’ subsidiary in HCMC

“Our mission statement explains what drives us, what we have in common, and what we stand for We want to leave a lasting trace in the world — achieved by a unique outstanding team.”

“Our actions are result-focused This allows us to secure our future It also creates a sound basis for the social initiatives of the company and the foundation.”

“We act prudently and responsibly for the benefit of society and the environment.”

“We act on our own initiative, take entrepreneurial responsibility, and pursue our goals with determination.”

“We communicate important company matters in a timely and open fashion This is the best foundation for a relationship built on trust.”

“We deal fairly with our colleagues and business partners, and view this fairness as a cornerstone of our corporate success.”

“We promise only what we can deliver, accept agreements as binding, and respect and observe the law in all our business transactions.”

“We appreciate and encourage diversity for the enrichment it brings, and see it as essential for our success.”

Bosch's mission is to enhance people's lives and protect future generations through responsible business practices They aim to make renewable energy more accessible, promote sustainable mobility solutions, and create eco-friendly products By embracing these values, they strive to build a cleaner, safer, and more efficient future for all.

Clear strategy for more sustainability

Bosch’s sustainability strategy is based on concrete objectives in all focus areas We have for many years now been consistently working to realize those objectives.

Figure 1.3: The target vision “New Dimensions — Sustainability 2025.”

Source: www.bosch.com/sustainability/responsibility

Bosch has a clear sustainability strategy that encompasses specific objectives in all focus areas We have been consistently working towards achieving these objectives for many years Sustainability is understood as a balance between economic, environmental, and social aspects It is also recognized as an important concept in capital markets, known as ESG (environmental, social, governance) Bosch’s holistic approach to sustainability guides our management practices, provides clear direction at all levels, and ensures the effectiveness of our actions.

Bosch's sustainability goals, outlined in its "New Dimensions - Sustainability 2025" vision, stem from meticulous analysis of industry trends and materiality These goals guide the company's initiatives, ensuring long-term sustainability efforts are aligned with societal and environmental needs.

As one of the leading global automotive suppliers, Bosch offers a wide range of hardware, electronic systems, software, and services for various types of vehicles and powertrains The objective is to enhance promote safe, sustainable, and exciting mobility experiences.

With a pioneering presence in the connected industry domain, Bosch emerges as a prominent supplier of software, systems, and components serving diverse manufacturing and logistics applications.

Bosch offers an extensive portfolio of connected, intelligent, efficiency-enhancing products, systems, and services for residential and commercial properties, along with comprehensive business management solutions.

Bosch provides intelligent and high-quality products for residential and commercial use, ensuring efficiency and convenience in everyday life Trust in Bosch for reliable consumer goods that enhance your daily experiences.

Bosch Rexroth - A Bosch Company

Bosch Rexroth, as the Drive and Control Division of the Bosch Group, brings extensive global expertise in various areas including Mobile Applications, Machinery Applications and Engineering, Factory Automation, and Industry 4.0 solutions With a focus on intelligent products, customized system solutions, and a wide range of services, Bosch Rexroth aims to create an environment that enables fully connected applications From hydraulic solutions to electric drives and controls, gear technology, linear motion technology, and assembly technology, including software and interfaces with the Internet of Things, Bosch Rexroth offers comprehensive solutions to meet the diverse needs of its customers.

Figure 1.4: Logo of Bosch Rexroth - A Bosch Company

Source: www.boschrexroth.com/vi/vn/company/our-history

Hydraulics: Bosch Rexroth offer a unique selection of hydraulic components,modules and solutions for driving, controlling and moving from one source – with global sector experience gathered over decades.

Source: www.boschrexroth.com/vi/vn/products/product-groups

Factory Automation: From start to finish, Bosch Rexroth does more to engineer and deliver the most complete, harmonized, and easy-to-use factory automation solutions today’s manufacturers want With a factory automation portfolio that offers the broadest selection, with solutions go beyond advanced components to include digital engineering tools and customized support that enables you to solve the most intricate engineering challenges.

Source: www.boschrexroth.com/vi/vn/products/product-groups

Service: Rexroth Service offers full maintenance and optimization for equipment across its entire life-cycle It guarantees the availability of replacement parts, repairs, and technical support according to standards for all current catalog products and for at least 10 years beyond the sales phase Subsequently, Bosch Rexroth's specialists provide support during the extended service stage, often extending equipment operation beyond 25 years, backed by service agreements With a service network covering 80 countries and over 200 locations, customers can easily access these services.

Figure 1.7: Summary of services provided by the company

Source: www.boschrexroth.com/vi/vn/products/product-groups

1795 – 1964: Transition from iron foundry to hydraulic solutions

Rexroth began its journey as an iron foundry in 1795 and eventually delved into the cast iron industry In the 1950s, the company made a strategic move by entering the hydraulic market, which proved to be a pivotal moment in its history This decision laid the groundwork for Rexroth's subsequent ascendance as a leading global force in the field of hydraulics.

1965 - 1995: Expansion into a multi-technology provider

During this period, Rexroth expanded its product portfolio to include electrical drives and controls, axial piston pumps and motors, as well as linear and assembly technologies.

This transformation allowed the company to evolve into a comprehensive provider of industrial and mobile hydraulics solutions.

1996 - 2000: Focus on integrated multi-technology solutions

Recognizing the limitations of single technologies, Rexroth developed integrated multi-technology solutions By harnessing the advancements in semiconductors and software across all technologies, the company aimed to enhance productivity and flexibility for its customers.

2001 - 2016: Consolidation under one brand for software-driven Drive and Control solutions

The merger of Mannesmann Rexroth with Bosch Automationstechnik established a global leader in Drive and Control solutions This integration marked a significant milestone in achieving seamless interconnectivity among various technologies, leading to improved energy efficiency and safety.

2017 - Present: Embracing the future of digital transformation

Bosch Rexroth is at the forefront of driving the digital transformation of the factory of the future Through innovations like Connected Hydraulics and the transformation of mobile machines, the company continues to push boundaries All of its products and solutions contribute to sustainable development in the realms of machines, manufacturing, and daily life.

1.2.4 Bosch Rexroth Vietnam’s organizational structure

Figure 1.8: Organization chart of Bosch Rexroth Vietnam

Source: Human Resources Department of the company

1.2.4.2 Functions and obligations of each department a) Head of Sales Vietnam

The Head of Sales in Vietnam undertakes the primary function of assuming complete responsibility for the performance of the sales department within the country This includes strategic planning and execution, as well as coordinating local strategies with global counterparts in collaboration with global heads Additionally, managing the department and providing regular reports to higher-level management are key obligations of the Head of Sales. b) Sales Team 1 (DCAZ/SLH)

Sales Team 1, known as VN01, is responsible for managing the sales of hydraulic products The primary focus is on developing and maintaining relationships with customers in this sector The team actively seek out new market opportunities specifically for hydraulic products and work towards meeting sales targets in the hydraulic segment. Additionally, Sales Team 1 provides product training and support to customers, ensuring they have the necessary knowledge and assistance By fulfilling these responsibilities, the Sales Team 1 contribute significantly to the success of the sales department and the Bosch company as a whole. c) Sales Team 2 (DCAZ/SLF)

Sales Team 2, known as VN02, is responsible for overseeing the sales of factory automation products The primary focus is on effectively promoting and distributing these products in the market The team work collaboratively to meet sales targets specifically designated for the factory automation segment They provide valuable technical support and consultation to customers, assisting them in making informed decisions regarding factory automation products Additionally, Sales Team 2 remains up-to-date with the latest trends and technologies in the field of factory automation, ensuring they can offer cutting-edge solutions Sales Team 2 plays a pivotal role in driving the success of the sales department and delivering advanced factory automation solutions to customers. d) Supply Chain Management

Supply Chain Management Department involves designing and managing the entire workflow to enhance productivity and efficiency It includes forecasting demand to ensure product availability and prevent stockouts or overstock situations Supply chain strategies are implemented to align with company goals, focusing on cost reduction and process optimization.

Within Supply Chain Management, there are specific functions and responsibilities:

The Procurement function plays a vital role in managing the acquisition of resources essential for a company's operations It entails meticulous research and vendor selection based on quality, cost-effectiveness, and timely delivery To secure optimal terms, skilled negotiations are conducted with suppliers Procurement professionals manage purchase orders and meticulously monitor incoming shipments to ensure that inventory adheres to stringent quality and quantity standards.

Logistics is responsible for planning and managing the distribution of products to customers in a timely manner This involves coordinating transportation methods and optimizing routes to reduce costs and improve delivery efficiency Customs clearance for international shipments is handled, ensuring compliance with regulations Warehouse management, including storage practices, inventory control, and order fulfillment, is also overseen.

The Planner & Billing function manages schedules for product delivery and services. This includes overseeing billing, invoicing, and payment tracking processes Effective coordination between the sales and supply chain departments is maintained to ensure customer satisfaction throughout the supply chain operations. e) Sales Administration

Sales Administration plays a crucial role in supporting the sales team by providing essential administrative support The responsibilities include providing administrative support to the sales team, which involves tasks such as order processing, delivery scheduling, and managing sales documentation This role also includes customer service duties, focusing on resolving issues related to orders and ensuring customer satisfaction. The goal is to support smooth sales operations and maintain strong customer relationships. f) Business Development / FDI

LITERATURE REVIEW OF PROCUREMENT LEAD TIME AND

Basics of procurement

According to Hasibuan S Modul (2018), procurement refers to the process of acquiring materials through a tender or competitive bidding process with the aim of satisfying the buyer's requirements at the best possible price, taking into account factors such as quality, quantity, time, and distance It is a comprehensive activity within the purchasing process Purchasing, on the other hand, is a subset of procurement and focuses on obtaining materials to meet the company's specific needs The purchasing function involves adhering to certain provisions, including acquiring the right product that meets the required standards and specifications, obtaining the appropriate quantity based on needs or orders, ensuring timely delivery according to user requirements, and securing competitive prices (Hasibuan S Modul, 2018).

To understand the basics of procurement, it is necessary to grasp its position within the value chain or the overall framework Figure 2.1 below illustrates the primary and support activities within a typical value chain It is essential to recognize that procurement is categorized as a support activity in this chain The primary activities encompass the supply chain from the initial stages to the end user, while the support activities provide assistance to these stages.

The role of procurement in the supply chain

Procurement plays a pivotal strategic role in organizational success It strategically aligns with key performance areas to identify essential materials and services that meet business requirements (Supply Chain Resource Cooperative, 2011) By developing supply alternatives and emergency plans, procurement supports organizational objectives and contributes to overall value chain optimization.

Porter (1985) categorizes procurement as a support activity in the value chain, emphasizing its role in acquiring inputs such as raw materials, supplies, consumables, and assets like machinery These inputs are crucial for primary activities such as logistics, operations, and marketing, as well as other support functions like HR and technology development This highlights the significance of procurement in enhancing the organization's value proposition to end customers through effective collaboration across various departments and functions in the value chain.

Procurement's goal is to acquire and deliver products seamlessly It involves inventory management, logistics, quality assurance, and warranty considerations When selecting suppliers, businesses prioritize Total Cost of Ownership (TCO) over sole price focus In project environments, TCO guides purchasing decisions, as emphasized by Weele (2010).

Another perspective on procurement is its role in purchasing inputs within the value chain, which may include raw materials and other assets like machinery and equipment for office, laboratory, and structural purposes These purchased inputs directly impact both the primary and support activities depicted in Figure 2.1 (Weele, 2010).

In the current era of global market integration and the information age, an effective procurement process supported by a well-defined policy and decision-making framework can significantly enhance sales margins by achieving substantial cost savings.

In order for a company to achieve profitability, the value generated by the value chain must exceed the total costs incurred Figure 2.2 illustrates the tactical purchasing and order functions within the procurement process, providing a clear overview of each step and its significance (Weele, 2010).

Outsourcing Process

The make-or-buy decision is an initial procurement consideration for companies, where they evaluate whether to produce materials internally or purchase them from external sources Another option available to companies is outsourcing their procurement function, allowing them to focus on their core competencies (Investo, 2017).

Outsourcing is a cost-saving practice employed by various companies, involving the transfer of work to external suppliers instead of completing it internally When implemented effectively, outsourcing can be a successful strategy for reducing costs In certain cases, it is more cost-effective to procure goods or services from external companies rather than producing them internally (Investo, 2017) Manufacturing companies, particularly those producing large quantities of goods and emphasizing cost sensitivity, commonly engage in outsourcing as part of their supply chain strategy By outsourcing, companies can achieve cost reductions and allocate increased investments to other areas of their business.

While outsourcing offers numerous advantages in terms of cost efficiency and investment allocation, it also presents certain drawbacks Table 2.1 outlines the pros and cons of outsourcing, enabling companies to assess and differentiate the potential outcomes. When considering the implementation of an outsourcing model, companies should carefully analyze these pros and cons in relation to their specific business structure This evaluation can significantly impact the efficiency and profitability of their business activities.

Increase of cash flow: allows companies to allocate more funds towards their core activities, resulting in improved cash flow

Increased dependence on suppliers: reduced control and flexibility, as well as potential disruptions in the supply chain.

Optimal usage of knowledge, equipment, and experience: Third-party providers often possess specialized expertise and resources, enabling companies to leverage their knowledge and capabilities for improved outcomes.

Continuous monitoring required: Maintaining a strong supplier relationship necessitates ongoing follow-up and monitoring to ensure desired outcomes and mitigate potential issues.

Increased flexibility: Outsourcing provides the ability to adapt to fluctuations in workload more effectively, allowing companies to scale resources up or down as needed.

Communication and organizational challenges: Transferring activities to a third party can introduce risks of miscommunication and organizational difficulties during the transition.

Outsourcing certain functions can lead to a more focused approach to core processes within the organization, increasing

Risk of leakage of confidential information:Outsourcing involves sharing sensitive information with external parties,increasing the potential for data breaches or

Independent perspective: Input from an external party brings fresh perspectives and reduces the risks of introvert short- sightedness in the organisation.

Balance of power and contractual issues: Depending on the relative power dynamics between the parties, there may be challenges in executing performance incentives and penalties outlined in the contract.

Weele (2010) emphasizes three crucial questions that firms should consider when implementing the outsourcing process across its strategic, transitional, and operational phases:

1 What are the firm's specific goals regarding the outsourcing of certain activities?

2 What actions must the firm undertake to initiate and progress the outsourcing process?

3 What criteria and qualifications should a potential supplier meet to become a suitable partner?

These questions provide valuable guidance for firms embarking on the outsourcing journey Figure 2.3 in Weele's work illustrates the different phases of the process, offering a a clear and comprehensive understanding.

The strategic phase in outsourcing comprises three key steps: competence analysis, assessment, and approval Competence analysis involves examining different approaches to determine a firm's primary focus The transaction cost approach aims to identify the lowest expense for each transaction by comparing internal costs to potential outsourcing costs in the market Conversely, the core-competence approach advocates that companies concentrate resources on unique and advantageous core competencies, outsourcing non-essential activities This approach ensures that the firm maximizes its strengths and maintains a competitive edge.

After conducting the competence analysis, the strategic phase continues with the assessment, approval, and contract negotiation processes Once contracts are signed and approved, the project can proceed It may take time to establish a smooth operation, especially when working with a new supplier However, with efficient management, the process will gradually become more refined If the demand for the outsourced part diminishes and there is no longer a requirement to source it, the contract with the supplier is terminated until further demand arises In cases of continuous demand, the focus shifts to supplier management Key performance indicators (KPIs) play a crucial role in maintaining a smooth relationship.

Methods of Procurement

The procurement department plays a critical role in securing the necessary goods and services for a business's daily operations (Sponaugle, 2014) This responsibility encompasses tasks such as sourcing materials at competitive prices, supplier contracting, budgeting, and trend analysis to ensure optimal resource utilization However, it should be noted that meeting the criteria of offering the right quality product at a reasonable price does not guarantee approval for a new supplier To carefully select a new source of supply, the procurement analyst within a company employs various methods Generally, there are six primary procurement methods, which may have different names depending on the specific industry These methods include:

- Open Tendering: advertising locally or reaching out to potential vendors, providing unbiased technical specifications, establishing objective assessment criteria, and considering all qualified vendors Open tendering often emphasizes price as it encourages effective competition. However, it may not be suitable for complex procurement processes that require strict adherence to standards, as it focuses more on the output process (Sponaugle, 2014).

Open tendering often emphasizes price as it encourages effective competition. However, it may not be suitable for complex procurement processes that require strict adherence to standards, as it focuses more on the output process (Sponaugle, 2014).

Restricted tendering, or selective tendering, is a procurement method where competition is limited to a select group of suppliers who meet specific criteria set by the procuring company This criteria-based selection process helps identify and engage the most qualified suppliers, ensuring goods and services are obtained from optimal sources By limiting the pool of bidders, restricted tendering streamlines the procurement process, saving time and resources while ensuring that contracts are awarded to the most suitable suppliers.

RFP is a document utilized by companies to solicit proposals from suppliers or service providers for their goods or services Suppliers are expected to demonstrate a solid understanding of quality service management to enhance their chances of winning the bid. During the preparation of an RFP, suppliers include a quotation proposal that undergoes thorough review by the procuring company, encompassing the financial aspect It is essential to prioritize the quality of the proposal over price when selecting a supplier or service provider (Sponaugle, 2014).

Two-stage tendering is a procurement method comprising two distinct processes, each consisting of two stages This approach offers flexibility by allowing discussions and negotiations to achieve mutually agreeable terms However, it can pose challenges for the procurement team when time is limited In the first process, suppliers submit a technical proposal that meets the specified requirements set by the procurement department The highest-scoring bid is chosen for further discussions and negotiations Once the technical proposal is approved, the supplier presents a financial estimate, leading to contract negotiations In the second process, a partial technical proposal is initially provided, allowing for modifications and discussions The most qualified supplier is selected and invited to submit a comprehensive technical specification, including the financial estimate. The final selection of the bidder is determined based on the overall score of both the financial and technical proposals (Sponaugle, 2014).

RFQ is a procurement method that is commonly used for low-cost goods or services It is a relatively simple and efficient process that involves minimal paperwork In RFQ, the procurement team identifies and selects a minimum of three preferred vendors or suppliers. These selected vendors are then requested to submit their quotations or price proposals for the desired goods or services The procurement team analyzes the quotes received, considering factors such as price, quality, delivery terms, and any other relevant criteria. Based on this analysis, the team chooses the most qualified vendor that best meets the requirements and offers the most favorable terms RFQ is particularly suitable for straightforward procurement needs where the emphasis is primarily on price and relatively less complexity is involved (Sponaugle, 2014).

The single-source procurement method is a non-competitive approach that involves procuring goods or services from a sole provider This method is commonly used in situations such as emergencies or when there is only one supplier capable of fulfilling the requirements (Sponaugle, 2014).

In conclusion, the success of any procurement method relies on the dedication and effort put into the process, as well as the quality of the goods or services obtained It is essential for procurement teams to diligently follow a rigorous legal framework to ensure compliance with applicable standards and regulations Adhering to this framework helps maintain transparency, fairness, and accountability throughout the selection process By relevant laws, policies, and industry best practices to continuously improve their procurement processes and achieve successful outcomes (Sponaugle, 2014).

Rajaniemi (2012) defines lead time as the duration between the initiation and completion of a process In the manufacturing context, companies strive to minimize lead time in order to facilitate the timely delivery of products to the market Lead time comprises three key components: preprocessing, processing, and post-processing Preprocessing involves assessing resource requirements and initiating the necessary steps to fulfill an order. Processing entails the actual manufacturing or creation of the order, while post-processing involves the delivery of the products to the market Manufacturing sectors conduct an analysis of each component and compare them against established benchmarks in order to identify areas of slowdown.

Several factors contribute to increased lead time and decreased procurement lead-time performance Common factors include delays in order processing at both the buyer's and suppliers' ends, short-term and long-term capacity issues at the supplier's end, and poor communication between the buyer and supplier (McLean, 2014) In today's global market, time sensitivity is crucial, and meeting deadlines is more important than ever The time required for raw materials is vital as it indicates the forecast for the finished product. Prolonged lead times often lead to higher stock inventory levels Reducing lead time can lower a company's overall costs and make it more competitive by minimizing the required inventory of finished goods (Kader, 2014).

One effective method to enhance profitability is by reducing the lead time for inventory,which refers to the duration between a customer placing an order and receiving the product.The satisfaction of customers is essential for the success of a business, and in a competitive market, customers can easily find alternative businesses that meet their expectations regarding delivery, quality, and cost Having a shorter lead time for inventory can provide a competitive edge Recent trends have demonstrated that customer values often prioritize quality and delivery over costs On the other hand, a lengthy lead time results in excessive inventory, increased expedited costs, higher overtime expenses, and inefficient utilization of resources Additionally, a longer lead time means that inventory remains in the warehouse or storeroom for an extended period, incurring costs without generating value Excessive inventory does not contribute value and accrues costs even before it is stored (Sweeney,2009).

Factors that influence Procurement Lead-time

Procurement lead time is influenced by various factors, which can be categorized as internal or external (Thai, 2001).

Internal factors pertain to the organizational framework within which procurement activities are conducted Numerous sources, as cited by Kagiri (2005), identify several key contributors to delays and cost overruns, including inadequate communication, lack of procurement manager expertise, procurement delays, insufficient planning, subpar infrastructure, limited resources, low motivation, tendering methods, variations, project environment, poor project definition, inflation, project complexity, inaccurate estimates, change orders, design changes, late submission of drawings, inadequate specifications, incorrect site information, and ineffective project management Delays in the procurement department, as highlighted by Lynch (2013), often stem from inadequate planning, late submission of RFQ, delayed preparation of tender documents, receipt of incomplete bid documents, failure to promptly form evaluation panels, delays in completing the evaluation process by the panel, protracted contract negotiations, underestimation of procurement lead times, and prolonged review and approval of tenders by the approving authority. Furthermore, legislation sometimes fails to consider the procurement system adequately, leading to instances such as preference tendering, which can result in the selection of an unsuitable supplier and subsequent retendering.

External factors, including the market environment, legal framework, and competitive dynamics, have a substantial impact on the duration of procurement processes In monopolistic markets where only one supplier exists, tenders are processed and evaluated more quickly Conversely, in competitive markets with multiple tender respondents, the evaluation process tends to be more time-consuming This understanding is supported by external factors and adapt their procurement strategies accordingly to ensure efficient and effective procurement outcomes.

Lean Manufacturing for Procurement

Lean manufacturing for procurement is a production practice that focuses on optimizing resource utilization and eliminating waste in the procurement process to create economic value The concept of waste in lean manufacturing refers to any activity or resource that does not contribute to the customer's perceived value and satisfaction (Luciana

Implementing lean manufacturing principles indicates a company's commitment to customer satisfaction and achieving desirable product outcomes (Nugroho MZP, 2020). Lean manufacturing approaches the value of a product from the customer's perspective, defining value as something the customer is willing to pay for To avoid excessive costs, companies must identify and eliminate various forms of waste.

Waste in procurement manifests in various forms, including inefficiencies in time and energy utilization These inefficiencies may stem from unnecessary delays, redundant processes, or poor stakeholder coordination Additionally, waste arises when excessive or non-essential equipment or resources are utilized during the procurement or production process.

By adopting lean manufacturing principles for procurement, companies can identify and address waste to streamline processes, enhance efficiency, and optimize resource allocation This approach involves continuous improvement efforts, such as value stream mapping, standardized work procedures, and the implementation of lean tools and techniques By eliminating waste and focusing on value creation, companies can enhance their competitiveness, improve customer satisfaction, and achieve better overall outcomes in the procurement process.

Value Stream Mapping for Procurement

Value stream mapping is a technique used to analyze and visualize the procurement process It allows for the identification of waste and inefficiencies in the current state, enabling the development of a future state that is leaner and more efficient Value stream mapping helps guide the improvement of the process by focusing on value-adding activities and eliminating non-value-adding ones, thereby streamlining the flow and enhancing overall performance.

The value stream mapping process involves creating two main maps: the current state map and the future state map The current state map depicts the existing material and information flow in the procurement process It provides a visual representation of the process, allowing stakeholders to identify waste and areas for improvement By analyzing the current state map, organizations can systematically eliminate or minimize non-value- adding activities, also known as waste The future state map, on the other hand, represents the desired lean flow of the procurement process It outlines the improvements and changes that will be implemented to eliminate waste and optimize the value stream The purpose of the future state map is to provide a clear vision and direction for process improvement efforts It encourages organizations to take a holistic approach to improvement rather than focusing on isolated areas or activities.

VSM is a valuable tool that can lead to significant improvements for a company. When implementing VSM for product-related business activities, it is important to define three categories within the company, as Seyed Mojib Zahraee (2020) discussed These categories are value-adding activities, non-value-adding activities, and necessary non-value- adding activities.

● Value Adding Activity: These activities and actions create value for the customer, making the product or service more valuable and desirable for which customers are willing to pay.

● Non-Value Adding Activity (Type One Muda): These activities are considered pure waste as customers are not willing to pay for them It is important to identify and minimize or eliminate these wasteful activities promptly.

● Necessary Non-value Adding Activity (Type Two Muda): These activities do not directly add value from the customer's perspective, but they are necessary for the current supply process Although customers do not pay for them, these activities are essential to maintain the overall process Eliminating or minimizing this type of waste can be more

1 Making Current State Map: This step involves mapping the current procurement conditions and process flow to identify any waste that occurs It serves as a starting point by examining the existing process flow before making any improvements.

2 Developing Future State Map: The Future State Map represents a proposed design for improving the current state It describes the desired process and information flow after implementing the recommended improvements.

Fishborn Diagram

The Fishbone diagram, also known as the Ishikawa diagram, is a valuable tool used to determine the root causes of quality issues It was developed by Kaoru Ishikawa, a Japanese quality control statistician, in the 1960s (Juran, 1999) This diagram provides a structured approach for analyzing the causes and effects of a particular situation, earning it the nickname "cause-and-effect diagram" (Watson, 2004).

The Fishbone diagram serves as a visual model to illustrate the relationships between an event (effect) and its multiple causes It encourages a systematic thought process among team members Constructing a Fishbone diagram offers several advantages, including the identification of root causes using a structured approach, promoting group participation and leveraging collective process knowledge, and pinpointing areas where data should be collected for further analysis (Basic Tools for Process Improvement, 2009).

The design of the Fishbone diagram resembles a fish skeleton, with slanting lines extending from a horizontal axis to represent various causes and sub-causes It can be enhanced with qualitative and quantitative assessments, risk names and codes, sequential elements, and other risk management techniques The diagram can be utilized to evaluate the risks associated with causes and sub-causes, as well as the overall risk of the effect(Ciocoiu, 2008) Typically, the analysis following the Fishbone diagram involves additional representations and the establishment of treatment priorities Once the diagram is completed,further methods can be employed to prioritize and address the identified causes and sub- causes This comprehensive approach ensures a thorough examination of the situation and helps guide effective problem-solving and decision-making processes in quality improvement efforts.

Pareto Diagram

The Italian economist Vilfredo Pareto (1848-1923) made an interesting observation in 19th century Italy regarding the distribution of land ownership He found that 20% of the population owned 80% of the usable land (Pareto, 1935) This distribution, known as the Pareto Principle or the 80/20-law, was later found to apply to various economical and natural processes as well Pareto formulated this finding as a general rule stating that in any given set of elements attempting to achieve something, a small subset will have the greatest impact (Sombart, 1967).

In contemporary times, many projects exhibit the same 80/20 distribution, where 80% of the yield is attributed to 20% of the costs This phenomenon is often referred to as Pareto's 80/20-law or the law of the trivial many and the critical few It is frequently observed in economic activities, particularly in marketing and quality management (Kimber et al, 1997) The Pareto Principle serves as a useful guideline for understanding and optimizing resource allocation and focusing efforts on the most influential factors or elements within a system.

Interview

In the semi-structured interview, the interviewer utilizes a framework of themes to guide the discussion According to Rubin (2005), an effective interview involves a balance between main questions, follow-ups, and probes However, it is important for the interviewer to have specific topics prepared in advance that they wish to explore Many researchers recommend the use of an interview guide, which is a flexible collection of topics and questions that can be adapted to suit different participants and interview contexts (Lindlof, 2002).

The semi-structured interview possesses certain characteristic features, as identified by Mason (2002) It is a form of internal dialogue exchange, taking the form of one-on-one interactions, large group interviews, or focus groups The interview can occur face-to-face or through various online platforms such as WhatsApp, Instagram, Twitter, or Facebook.Secondly, the semi-structured interview adopts an informal style Instead of rigidly adhering discussion with a specific purpose in mind, creating a more natural and dynamic interaction (Burges, 1984).

2.11.2 The Result of the Interview

In the analysis phase of a semi-structured interview, the interviewer engages in categorizing and reorganizing the collected data to identify patterns related to the research questions This involves activities such as categorizing, coding, and counting the data based on the specific research questions being addressed It is important to separate and organize the data according to its properties, ensuring that responses from different groups or perspectives are treated separately For example, grading responses from students should be categorized and analyzed separately from those of teachers or principals By matching the data to the research questions and coding or categorizing it accordingly, the researcher can easily trace the origin of the materials, including the respondent and the specific interview question.

To summarize the results, the interviewer or researcher utilizes the identified patterns to draw conclusions The semi-structured interview allows for flexibility in the summarization process, and various approaches can be employed The summary can be based on the original structure of the interview in relation to the research questions initially addressed However, as the analysis progresses, the researcher may adapt the original structure to gain different perspectives and insights The summary patterns can encompass the entire sample or focus on specific groups or individuals within it When summarizing, the researcher may choose to quantify the data using numbers, ensuring clear categorization and making judgments in cases where there are mixed responses or conflicting viewpoints on a particular topic, such as grading.

THE CURRENT STATUS OF PROCUREMENT LEAD TIME AND

Supply Chain Management at Bosch Rexroth Company

Bosch Rexroth's supply chain involves the procurement of raw materials, components, and subassemblies from a global network of suppliers, the manufacturing and assembly of these items at its production facilities, and the distribution of the finished products to customers through a logistics network The company's supply chain is characterized by the following key elements:

Supplier Relationships: Bosch Rexroth maintains long-term partnerships with a diverse range of suppliers, both local and international, to ensure a reliable and flexible supply of materials and components The company works closely with its suppliers to optimize delivery times, quality, and cost.

Manufacturing Footprint: Bosch Rexroth operates manufacturing plants and assembly facilities in multiple countries, allowing it to be responsive to regional market demands and minimize transportation costs.

Logistics and Distribution: The company utilizes a combination of in-house and third- party logistics providers to transport its products from manufacturing sites to customer locations around the world This includes the use of various modes of transportation, such as road, rail, and air freight, to ensure timely and efficient delivery.

Information Technology: Bosch Rexroth leverages advanced information technology systems, such as enterprise resource planning (ERP) and supply chain management software, to integrate its operations, track inventory, and optimize the flow of materials and information throughout the supply chain.

Figure 3.1: Bosch Rexroth’s Supply Chain Management as per 2023

Source: www.boschrexroth.com/en/dc/top-tips-to-strengthen-your-supply-chain

Purchasing and Logistics secure success

Bosch Rexroth's global purchasing organization continuously improves its processes and ensures an efficient flow between the company and its suppliers By leveraging regional suppliers, the organization is able to implement local-for-local concepts that strengthen its position in the procurement market over the long-term and unlock potential cost savings and efficiency gains.

Bosch Rexroth's purchasing strategy involves centralized Material Field Purchasing for global demand bundling and supplier relationship management, presenting a unified front ("One-Face-to-the-Supplier") Project Purchasing is organized by product categories, fostering specialization and preventive quality assurance, supporting "Design-to-Cost" external procurement Quality responsibility is integrated within Purchasing, optimizing supplier performance to enhance quality and logistics.

By implementing these strategic initiatives, Bosch Rexroth is able to strengthen its global purchasing capabilities, foster closer collaboration with its suppliers, and drive greater efficiency and cost savings throughout its procurement and logistics operations.

Current State of Supply Chain Management at Bosch Rexroth Vietnam

The Supply Chain Management at DCVN - Bosch Vietnam encompasses critical roles and functions pivotal to orchestrating the efficient flow of goods, information, and finances across the entire supply network At the core, SCM is responsible for strategic sourcing and procurement, ensuring the company secures high-quality materials at competitive prices through meticulous supplier selection and management It also plays a crucial role in logistics and operations management, optimizing the transportation and warehousing of goods to meet demand while minimizing costs and lead times.

Inventory management is another key function, involving the careful balance of stock levels to prevent shortages or excesses, enabled by advanced forecasting and planning techniques Moreover, the SCM team is tasked with overseeing and improving supply chain processes through continuous assessment and the integration of innovative technologies, such as AI, IoT, and block-chain, to enhance efficiency, visibility, and responsiveness In

2024 and beyond, these functions will be increasingly aligned with sustainability goals and digital transformation initiatives, focusing on building a resilient, transparent, and agile supply chain that not only meets the current demands of the market but also anticipates future challenges and opportunities.

Figure 3.2: Illustration of the Supply Chain Management Process

Source: www.bosch.com/company/supply-chain

Current State of Procurement at Bosch Rexroth Vietnam

At Bosch Rexroth Vietnam, procurement plays a critical role in ensuring efficient sourcing of materials, components, and services The company's procurement activities are strategically designed to optimize costs, maintain high-quality standards, and align with the organization's objectives.

Through collaborative efforts with internal departments, such as plants and stakeholders, the procurement team gains insights into specific needs and ensures timely fulfillment This collaboration empowers the team to effectively support diverse requirements within the company, leveraging a deep understanding of each division's unique demands.

Strategic sourcing is a key aspect of Bosch Rexroth Vietnam's procurement strategy. The team evaluates and selects suppliers based on quality standards, cost objectives, and sustainability criteria Supplier evaluation and qualification processes consider factors such as capabilities, financial stability, and compliance with ethical and environmental standards.

In line with the company's commitment to continuously improving procurement operations, reducing lead time in procurement has become a priority Bosch Rexroth

Vietnam aims to optimize lead times and enhance the efficiency of the procurement process.

By streamlining processes, improving coordination with suppliers, and leveraging technology, the company seeks to minimize delays and ensure timely availability of resources.

Beside that, building strong and collaborative relationships with suppliers is another priority for Bosch Rexroth Vietnam The company fosters transparency, open communication, and long-term partnerships with its suppliers Regular performance evaluations and feedback mechanisms are in place to ensure continuous improvement and address any issues that arise This collaborative approach strengthens the overall supplier relationship and contributes to the success of procurement operations.

Looking ahead to 2024, Bosch Rexroth Vietnam aims to further enhance procurement operations The focus will be on optimizing cost structures, driving sustainability initiatives, and expanding supplier networks Digital technologies will continue to be leveraged to improve efficiency, enhance supply chain visibility, and strengthen collaboration with suppliers.

The process flow of Procurement lead time at the Bosch Rexroth Vietnam

Bosch Rexroth engages in external procurement from suppliers outside the company to fulfill urgent item requests and specific configurations beyond internal supplies from Bosch Rexroth Plants The primary focus of the thesis is the outsourcing procurement process implemented by the company.

Value stream mapping is an essential tool for analyzing current processes, identifying material and information flow, and visualizing process activities This technique provides a basis for identifying optimization opportunities VSM enables the creation of visual representations depicting the present state of processes, facilitating the identification of improvement areas and guiding long-term planning to achieve organizational objectives.

In the context of procurement at DCVN - Bosch Vietnam Co., Ltd., the current state value stream mapping would involve creating a visual representation of the procurement contribute to meeting customer needs, and non-value-added activities, which do not add value to the process.

By conducting a current state value stream mapping, the organization can gain insights into the existing procurement process, including the flow of materials, information, and activities involved This analysis can help identify bottlenecks, inefficiencies, and areas for improvement It serves as a foundation for developing strategies and action plans to optimize the procurement process, eliminate waste, and enhance overall performance.

Map the steps of processes Shipment

Figure 3.3: Legend of the map

Source: Extracted from the VSM

Figure 3.4 Current State Value Stream Mapping in procurement lead time

Source: Measuring instruments from procurement team of the company

DCVN - Bosch Vietnam Co.'s procurement process initiates when the sales team verifies the eligibility of MNRs' import and sale under RBVN Following confirmation, a Purchase Requisition (PR) is generated, accompanied by supporting documents like materials catalogs, bills of materials, and drawings The PR is subsequently forwarded to the Procurement department for further action.

In the Procurement department, the purchaser evaluates the completeness of the PR file If it meets the procurement requirements, the purchaser proceeds to run T-code YP_PR list on the SAP system and prepares a whitelist of suppliers A framework purchasing contract is established, followed by the creation of a purchase info record The purchaser selects competent vendors with a good performance record in supplying the required goods based on the commodity Subsequently, a Request for Quotation (RFQ) is initiated, requesting price quotes from the selected vendors.

The vendors respond to the RFQ by submitting quotations with their offered prices within the specified deadline The purchaser reviews the quotations with the team and creates a Comparison of Quotation (COQ) Negotiations are then conducted with the prospective tender winners until the negotiations are signed and endorsed by the Procurement Manager.

Upon supplier identification, the purchasing department generates a purchase order signifying the contractual agreement between Bosch and the supplier This purchase order is then acknowledged and approved by the supplier, solidifying the deal Consequently, based on the specified delivery schedule, the supplier dispatches the required materials to Bosch.

Upon receipt of the goods, the Inspector in the Warehouse Management Department performs a conformity inspection If the items meet the requirements, they are transferred to the Warehouse Management storage area However, if there is a discrepancy, the item is rejected and returned to the vendor for replacement or adjustment, depending on the requirements Once the goods are stored in the warehouse, the buyer who placed the order can reserve the goods for collection by making a reservation.

Table 3.1: Identification of value - added time and non-value added time in procurement

No Procurement Lead Time Flow Process at DCVN Time

The sales team check all new MNR is allowed to import and sell under RBVN business license 15 VA

The sales team prepares and submits an approved

Purchase Requisition (PR) that includes all the necessary supporting documents, such as materials catalogs

The purchaser receives the PR file from the sales department and assesses the PR documents for their completeness.

Purchaser consult the document to sales if it is not complete 240 NNVA

6 Purchaser run YP_PR list on SAP 20 VA

Purchaser creates vender code if it is not have on a white-list supplier , do SPL, frame work purchasing contract before create pur-info-record.

The purchaser selects a list of vendors based on their competence and track record of delivering goods required by the sales department.

To initiate the procurement process, the buyer formulates a Request for Quotation (RFQ) tailored to the technical specifications defined by the sales or service departments Prior to soliciting responses, the buyer diligently conducts a Supplier Prequalification (SPL) assessment to ascertain that potential vendors possess the requisite qualifications and capabilities to fulfill the project requirements.

The purchaser sends the RFQ to the list of tender participants via email 300 NNVA

11 Purchaser is waiting for an offer from the vendor 2880 NNVA

The purchaser compares the quotations from vendors, considering the offers submitted within the specified deadlines.

The purchaser makes, sends, and negotiates with the vendor identified as the potential winner until the minutes of Negotiation are signed and endorsed by the

Procurement Manager, finalizing the supplier selection process.

Source: Measuring instruments from procurement team of the company

Figure 3.5: The percentage comparison of VA and NVA value of procurement lead time

Source: Data from Current VSM in procurement leadtime

The procurement lead time at DCVN currently takes an average of 12,635 minutes, which is approximately equivalent to 26.3 days based on an 8-hour working day However, there is a delay of 9 days compared to the standard procurement lead time specified in the company's Work Instruction (WI) The lead time can be broken down into two components: value-added time and non-value-added time Currently, 42% of the lead time consists of value-added time, which refers to activities that directly contribute value to the company. The remaining 58% is non-value-added time, which includes activities that do not provide any additional value Within the non-value-added time, 50% is attributed to necessary but non-value-added activities These activities are required for the lead time to function but do not directly contribute value to the company's operations The remaining 8% of the non- value-added time is attributed to activities that do not provide any value.

In total, the value-added time in the procurement lead time amounts to 5,345 minutes,while the non-value-added time totals to 7,290 minutes These figures highlight the areas

Waste identification in the procurement lead time

Interviews with vendor management services employees and internal procurement experts reveal valuable information for identifying and addressing waste in the procurement lead time This collaborative approach provides comprehensive insights into wasteful activities, enabling targeted interventions to eliminate or minimize them By involving employees in waste identification, organizations gain a deeper understanding of inefficiencies and can implement effective measures to optimize the value stream and enhance overall performance.

The interviewees for this research consisted of individuals from the DCVN's procurement department, including procurement managers and assistant procurement managers While two of the interviewees preferred to remain anonymous due to confidential issues, it will not impact the results in any way The participants in the interviews were as follows:

All the interviewees possessed the necessary expertise and knowledge to provide valuable insights for this research The interviews were conducted through direct interviews during the months of January and February 2024 The detailed question list for the semi- structured interview is provided in Appendix 1.

The results obtained from the interviews (Appendix 2) will be thoroughly analyzed to gain insights into the existing procurement lead time and identify areas of waste and inefficiencies.

During the interviews, participants provided valuable information regarding activities in the procurement lead time that they believed did not add value or contribute to the transformation of inputs into outputs These non-value-adding activities will be carefully examined and categorized to determine their impact on the overall efficiency of the lead time.

Furthermore, participants highlighted specific instances where over-processing, negotiation process and waiting offers from vendor had led to delays or increased costs in the current procurement leadtime These instances will be closely examined to identify the root causes of waste and explore potential solutions to streamline these steps.

Interview responses illuminate the current handling of sales request replies, showcasing inefficiencies through unnecessary or redundant steps Analysis of these insights will pinpoint opportunities for process streamlining or elimination, ultimately enhancing efficiency.

Based on the participants' opinions, certain areas or steps in the procurement lead time were identified as prone to waste or inefficiencies These areas will be thoroughly investigated to understand the underlying causes and develop targeted strategies for improvement.

In addition, participants expressed their views on specific activities or tasks that they believe could be eliminated or streamlined to enhance the overall efficiency of the procurement lead time These suggestions will be carefully evaluated to identify opportunities for process optimization and waste reduction.

Overall, the results obtained from the interviews will provide a comprehensive understanding of the existing procurement lead time, highlight areas of waste and inefficiencies, and serve as a foundation for developing targeted improvement strategies.

Time observations, interviews, and lead time calculations revealed several inefficiencies in the current procurement process, resulting in delayed customer deliveries beyond the stipulated timelines These inefficiencies include wastages in the form of:

Over Processing: One identified waste is related to the procurement process's requirement to respond to sales requests via file-based communication This involves additional steps during the confirmation of the PR process, such as requesting supporting PR documents or seeking clarification on unclear PR specifications These extra activities contribute to over-processing and unnecessary delays in the procurement process.

Manual Negotiation Process: The second waste identified is associated with the manual negotiation process conducted by purchasers Face-to-face negotiations are still prevalent, leading to potential delays in scheduling negotiations due to the busy schedules of both the supplier and purchaser This manual negotiation process is considered a necessary non-value-added activity, introducing waste into the procurement process.

Waiting for Offers from Vendors: The third waste identified is the waiting time for offers from vendors The procurement lead time involves waiting for offers from vendors, which falls under the category of necessary non-value-added activity The current waiting time for offers is set at 6 days However, some vendors still send their offers manually via hard copies delivered to the procurement department This manual submission process adds unnecessary delays to the procurement lead time, contributing to waste.

The causes of waste in the procurement lead time can be analyzed using a fishbone diagram This diagram is a tool that helps identify potential causes that contribute to a problem and allows for in-depth analysis The fishbone diagram utilized in this context has been developed based on discussions and interviews conducted with the procurement team.

The fishbone diagram is an effective tool for analyzing the root causes of waste in procurement lead time It visually represents the different factors that contribute to inefficiencies and waste By identifying these potential causes, the procurement team gains a clear understanding of the underlying issues that impact lead time This knowledge empowers them to develop and implement effective solutions, thereby reducing waste and improving procurement efficiency.

3.5.2.1 Evaluation process of request documents conducted by Purchaser

Figure 3.6: Fishbone causes the length of document review

PROPOSED IMPROVEMENT IN PROCUREMENT LEAD TIME

Proposed Improvement

Identifying and addressing key waste factors in procurement lead time is crucial Using a Pareto diagram allows for prioritizing and addressing the most impactful causes, laying the groundwork for future state value stream mapping in procurement, ultimately reducing or eliminating waste to streamline processes and improve efficiency.

The proposed improvements aim to address the identified issues and enhance the efficiency of the procurement lead time By implementing these improvements, the procurement team can work towards achieving a more streamlined This includes streamlining the approval process, improving supplier communication and collaboration, enhancing data accuracy and integration, and implementing automation and digitization where applicable.

By optimizing procurement processes, organizations can significantly reduce lead times, minimize costs, and foster stronger supplier relationships These enhancements contribute to improved operational efficiency and streamline business operations To ensure ongoing success, it is crucial to regularly monitor and evaluate the implemented improvements, ensuring their effectiveness and sustainability over time By continuously assessing and adjusting these enhancements, organizations can maintain a high level of procurement performance and achieve ongoing value creation.

Comprehensive training is crucial for employees handling document completion, emphasizing accurate data entry and understanding relevant Key Performance Indicators (KPIs) for Procurement Process Lead Time These KPIs, such as purchase request processing time, serve as metrics for performance evaluation The training aims to provide employees with the skills and tools necessary to meet these objectives, ensuring data integrity and efficient document completion.

Furthermore, the training will ensure that employees have a clear understanding of lean manufacturing principles and how they can be applied to the procurement lead time to optimize lead time This includes ensuring employees understand lean manufacturing principles such as waste reduction, improved efficiency, and enhanced quality.

Firstly, identify the specific content that needs to be covered in the training program. This should include the necessary skills for accurate completion of purchase request documents and understanding of relevant key performance indicators (KPIs) The KPIs could include metrics such as processing time, accuracy rates, and adherence to procurement policies Additionally, the training content should cover lean manufacturing principles and their application in the procurement process This may involve waste reduction techniques, process optimization, and quality improvement strategies.

Categorize employees into groups based on their roles and responsibilities within the document completion process This categorization will help determine the specific training needs for each employee group For example, employees involved in data entry may require training on accurate and efficient data input techniques, while supervisors may need training on monitoring KPIs and identifying areas for improvement By tailoring the training to each group's requirements, it will be more effective in addressing their specific challenges and responsibilities.

Step 3: Design the Training Program

To enhance employee proficiency, a meticulous training program was meticulously crafted, incorporating essential training modules tailored to distinct employee groups Structured logically for sequential delivery, each session harbors specific learning objectives Key subjects encompass KPI theory, practical guidance for precise purchase request document completion, and the seamless integration of lean manufacturing principles within the procurement process Furthermore, the program fosters engagement through practical application and hands-on exercises, ensuring knowledge retention and skill development.

Plan and organize the training sessions according to the designed program Allocate appropriate resources, such as training facilities, materials, and trainers Consider the availability and schedules of the employees to ensure maximum participation Conduct the training sessions in a comprehensive and effective manner, employing various instructional methods such as presentations, case studies, interactive discussions, and simulations. Encourage active participation and provide opportunities for employees to ask questions and share their experiences.

After completing the training sessions, evaluate the effectiveness of the training program to ensure that the desired objectives have been achieved Use a combination of quantitative and qualitative evaluation methods This can include analyzing post-training assessments, conducting surveys or interviews with participants, and gathering feedback from supervisors or managers Additionally, track relevant performance metrics and compare them to the pre-training baseline to assess the impact of the training on employee performance and process efficiency Based on the evaluation results, identify strengths and areas for improvement in the training program.

Based on the evaluation results and feedback from employees and stakeholders,implement continuous improvement measures for the training program This may involve refining the training content, modifying teaching methods, or adjusting the organization of training sessions Incorporate lessons learned from the evaluation process to enhance the effectiveness and relevance of future training initiatives Regularly review and update the training program to align with evolving industry best practices and changing organizational needs.

Table 4.1: Summary of Training Program

Schedule Target Audience Training Content Training

All Employees Involved in Procurement Process

Introduction to Procurement Lead Time and KPIs

Accurate Data Entry Techniques and Document Completion

Lean Manufacturing Principles and Waste Reduction in

Interactive Discussions, Group Activities 2 hours

Monitoring and Analyzing KPIs for Process Optimization

All Employees Involved in Procurement Process

Open Forum, Knowledge Consolidation 1 hour

All Employees Involved in Procurement Process

Evaluation and Feedback Collection Surveys,

Source: Aggregated from proposed solution

By following these steps and implementing a comprehensive and continuously improving training program, the company can enhance the capabilities of its employees in completing purchase request documents accurately and efficiently This will contribute to increased performance, reduced waste, and optimized lead time in the procurement.

Implementing a checklist form is crucial to ensure uniformity and organization in preparing Purchase Requisitions This form acts as a comprehensive guide, guaranteeing the inclusion of all vital information and supporting documentation By utilizing the checklist, errors are minimized, waste is reduced, and decision-making becomes more efficient, streamlining the requisition process.

4.1.2.2.1 Development of the Checklist Form

To streamline collaboration, a cross-functional team will create a collaborative checklist form that captures key information, supports documentation, and ensures approvals The form will embody inputs from the sales team, responsible for initiating Purchase Requisitions, and the purchasing team, who assess the completeness of the requisition documents This joint effort aims to align the form with the needs of both teams, enhancing collaboration and shared accountability.

The collaborative checklist form will include the following sections:

- Requester Information: This section will capture details about the requester from the sales team, such as name, department, contact information, and any additional identification required for tracking purposes.

- Purchase Requisition Details: This section will include fields for the item description, quantity, estimated cost, and any special instructions or requirements provided by the sales team It will serve as the core information for the purchase requisition.

Future State Value Stream Mapping 75 4.3 Comparison between Current Sate VSM and Future State VSM in the procurement

Table 4.2: Identification of value-added time and non-value added time in procurement

No Procurement Lead Time Flow at DCVN Time

The sales team check all new MNR is allowed to import and sell under RBVN business license 15 VA

The sales team prepares and submits an approved

Purchase Requisition (PR) that includes all the necessary supporting documents, such as materials catalogs

The purchaser receives the PR file from the sales department and assesses the PR documents for their completeness.

Purchaser consult the document to sales if it is not complete - NNVA

6 Purchaser run YP_PR list on SAP 20 VA

7Purchaser creates vender code if it is not have on a 480 VA contract before create pur-info-record.

The purchaser selects a list of vendors based on their competence and track record of delivering goods required by the sales department.

The purchaser prepares a RFQ that aligns with the sales or service department's technical inquiries Before obtaining quotations, the purchaser conducts a SPL check to ensure that the vendors meet the necessary criteria.

The purchaser sends the RFQ to the list of tender participants via email 300 NNVA

11 Purchaser is waiting for an offer from the vendor 1200 NNVA

The purchaser compares the quotations from vendors, considering the offers submitted within the specified deadlines.

The purchaser makes, sends, and negotiates with the vendor identified as the potential winner until the

Minutes of Negotiation are signed and endorsed by the

Procurement Manager, finalizing the supplier selection process.

Source: Measuring instruments from procurement team of the company

The Future State VSM is a proposed improvement approach to minimize or eliminate waste in the current state VSM It is based on identified enhancements that have been made.The procurement lead time, from sales generating a PR to issuing a PO, is the focus of this proposal Waste reduction in the Future State VSM primarily occurs at the evaluation stage of sales documents By eliminating time spent on document evaluation, including reviewing, evaluating, and returning documents, we can save up to 1320 minutes This can be achieved by providing sales with information about the necessary supporting files that must be submitted to the procurement department.

Another waste elimination opportunity lies in the waiting time for vendor offers, which can be reduced from the initial 2880 minutes to 1200 minutes This can be accomplished by implementing reminders and actively following up with vendors participating in offer pricing Furthermore, waste can be reduced in the negotiation phase, originally taking 2500 minutes, to 960 minutes by providing vendors with timely notifications as the negotiation deadline approaches, conducting effectively managing supplier relationships via vendor relationship management.

The total time indicated in Table 4.1 for the Future State VSM is 8045 minutes or approximately 16.7 days, meeting the company's target of 17 days This represents a faster timeline compared to the total time in the Current State VSM, which is 26.3 days.

Figure 4.2: Percentage of VA and NVA values in future state value stream mapping

Source: Data from future VSM in procurement leadtime

Analysis of the Future State VSM demonstrates that the procurement lead time is distributed between value-added and non-value-added activities Notably, value-added activities constitute 66% of the total time, while non-value-added activities encompass 34% Within the non-value-added category, unnecessary non-value-added time accounts for 0%, while necessary non-value-added time represents 34% Quantitatively, the value-added time accumulates to 5345 minutes, and the non-value-added time amounts to 2700 minutes.

Value-added time refers to activities that contribute tangible value to the company, whereas non-value-added time refers to activities that do not add any significant value. Necessary non-value-added time refers to activities that, although not directly adding value, are deemed necessary for the functioning of the procurement lead time.

Figure 4.3: Future state value stream mapping of Procurement lead time

Source: Measuring instruments from procurement team of the company

4.3 Comparison between Current Sate VSM and Future State VSM in Procurement Lead time

The procurement lead time exhibits significant differences between the current state VSM and the future state VSM These differences can be observed in terms of the proportion of time dedicated to value-added and non-value-added activities, as well as the total duration of both types of tasks.

Table 4.3: Comparisons between Current State Value Stream Mapping and Future State

Value Stream Mapping in terms of procurement lead time

Current State VSM Future State VSM

Percentage of value added-time 42% 66%

Percentage of non-value added time 58% 34%

Total value added-time 5345 minutes 5345 minutes

Total non-value added-time 7290 minutes 2700 minutes

Source: Data from VSM in procurement lead time

In the future state VSM, there has been a significant increase in the percentage of value-added time compared to the current state VSM The value-added time has risen from 42% to 66%, representing a 24% increase The total duration allocated to value-added activities remains consistent at 5345 minutes, indicating that these activities have remained unchanged and continue to contribute significant value to the overall process Therefore, no adjustments were necessary in terms of the time allocation for value-added activities.

Conversely, the percentage of non-value-added time in the future state VSM has decreased in comparison to the current state VSM It has decreased from 58% to 34%,reflecting a 24% reduction The total duration dedicated to non-value-added activities has decreased from 7290 minutes in the current state VSM to 2700 minutes in the future state VSM, resulting in a reduction of 4590 minutes.

These discrepancies highlight the improvements achieved in the future state VSM The increased percentage of value-added time signifies a stronger emphasis on activities that directly contribute value to the company Simultaneously, the decreased percentage of non- value-added time indicates a reduction in activities that do not provide additional value.These enhancements aim to enhance the efficiency and effectiveness of the procurement lead time by minimizing wasteful practices and optimizing the utilization of resources.

The thesis “Analyzing the causes of delays in procurement lead time using value stream mapping: A case study of Bosch Vietnam Co., Ltd" aimed to analyze the procurement lead time at DCVN - Bosch Vietnam, leveraging the potent methodologies of VSM The outcome was impressive, with the procurement lead time experiencing a remarkable reduction from 26 to 17 days, a reduction of 36.4% This significant improvement underscores the efficacy of Lean principles in streamlining procurement, which is crucial for boosting a company's efficiency and agility.

Initially, analysis revealed excessive time spent on non-value-added activities comprising 58% of the process These activities, primarily centered around the evaluation of

PR documents, the waiting period for vendor offers, and the negotiation process, represented the chaff of the procurement process - necessary but in efficacious in their current state The intervention strategies - comprising targeted training, the introduction of checklist forms, the establishment of a vendor management system, proactive vendor communication and follow up These measures were not just fixes but pivotal steps toward a more streamlined and effective procurement lead time.

After improving, the landscape dramatically transformed The reduction of non-value- added activities to 34 percent and the concurrent increase in value-added activities to 66 percent is not merely a numerical victory but a qualitative leap forward This evolution reflects a profound shift towards a procurement lead time that is more streamlined, more strategic, and ultimately, more sustainable.

The benefits of adopting Lean Manufacturing principles reach beyond DCVN-Bosch Vietnam, making a compelling case for their implementation across industries aiming to enhance their procurement processes The tangible results achieved through Lean Manufacturing, such as reduced waste, improved efficiency, and lowered costs, have proven its effectiveness in optimizing operations.

- enhanced efficiency, reduced lead times, and a rebalancing towards value-added activities

This blueprint for operational excellence emphasizes the need for operational vigilance and continuous improvement to combat non-value-added activities Ongoing vigilance against non-productive activities ensures that resources are allocated effectively, while continuous improvement drives innovation and sustains progress This combination optimizes processes, reduces waste, and enhances productivity in the pursuit of operational excellence.