Jul
9
Does it matter which people from your organization chase parts from suppliers?
During the purchasing process one of the common tasks to be completed is the delivery schedule – typically this will be outlined during the quotation phase and confirmed at time of order placement. This is usually in the form of an agreed lead time – i.e. 3 weeks – or a specified date/time.
The expediting process refers to the procurement organization contacting the supplier for either updates on the delivery schedule or to reassess the schedule based on issues with the supply of parts.
The challenge for this process and one which is a common issue is who actually chases the supplier. In many cases this will typically be the buyer that raises the order – they may have a regular process where they reconfirm the order book or a specific order.
Where there are many stakeholders relying on delivery – in a manufacturing organization for example – there may be a temptation for everyone to get involved in this process where the part becomes critical – or is late enough to hold up production.
Where problems occur with delivery a supplier could find themselves hastened multiple times from buyers up to management. This does cause some issues – take for example a supplier that is supplying multiple products to different manufacturing cells and they are experiencing production problems impacting delivery– where they are expedited from different sources they are unable to prioritize which can result in further issues and delays and more frustration.
In many cases the buyer is divorced from the manufacturing line and therefore doesn’t have sufficient information to prioritize – this requires a formal communication method to mitigate the problem which the buyer must adhere to before agreeing to a revised delivery schedule.
Where problems continue and poor performance becomes an issue with a supplier then a suitable member of the management team should become involved (often the procurement functional lead). Ensuring this is adhered to can also alert management to the need to kick off formal supplier improvement initiatives.
Formal relationships between suppliers and buyers should be established to minimize the points of contacts – it’s understandable for dis-satisfied stakeholders to want to get involved but generally they may not be armed with all the information and skills to make the right decision.
Finally – ensure your organization has a policy/procedure for supplier escalation – ensure that it lays out when, how and who will be involved in the process and share this information with the supplier. Where suppliers do not achieve 100% on time delivery – expediting or rescheduling becomes a necessary evil – however a common sense approach can ensure that a bad situation doesn’t become worse!
Jul
9
Introduction to Strategic Procurement
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Common themes of strategic supplier management
Many organizations find themselves with large numbers of suppliers where there has been an absence of appropriate management or commoditization this is especially true where the procurement function is fragmented throughout an organization and the controls of which suppliers should be used are loose or absent.
Strategic supplier management is an important tool in getting to grips with this situation with it’s use delivering not only cost savings on products but also efficiencies for the procurement department.
One of the first steps of strategic supplier management is an assessment of the products it procures and the suppliers that it procures from. This requires data and one of the first problems’ you may come across is the lack of purchase order data for all transactions – this is often as a result of poor processes and fragmented purchasing. In most cases its best to get spend and supplier data from your finance team. You’ll want to take this data over a year or so depending on your business to give you adequate understanding of trends or buying cycles.
Once armed with your list of suppliers and spend you’ll need to group them – consider placing them into commodities (types of products) this might be over a number of levels e.g Raw material – Metals – Steel in order to give you appropriate granularity for decision making purposes.
Once’ you’ve grouped your suppliers you’ll have a view of spend by commodity – you’ll probably find significant numbers of suppliers in some categories – there may be appropriate rationale for this – but you’ll need to question this to ensure your not fragmenting your supplier base unnecessarily.
An important variable you’ll need to include in your analysis is the type of product and it’s availability – for example inexpensive COTS products (Commerically available off the shelf) may present a plethora of suppliers and provide a number of options – more complex high value parts may have a small number of providers where more attributes that price and lead-time come into play.
You may also want to include supplier performance data in your assessment – at this stage focus simply on QCD (Quality, Cost and Delivery) performance.
Once you’ve got your suppliers you’ll need a plan – your supplier strategy will probably fall into 1 of 3 options
1/ Exit – this strategy means you’ll stop using the supplier – this could be done immediately or over a period of time
2/ Maintain – This means that you’ll maintain your business with this supplier- you won’t look to exit – neither will you look to vastly increase the level of business you give them either
3/ Develop – These suppliers are often strategically important (partners) who require a close working relationship – the supplier may show the appetite and capacity for more business or supply complex and vital products bringing crucial value to your organization.
An optimum supplier base is a crucial step in business success – it isn’t a one off exercise but a continual process requiring appropriate resources to avoid failure – supplier rationalization is one part – but perhaps more important is the need to have the right supplier – that mix of price, lead-time and value that can not only provide products but enhance what you can offer to your own customer.