Jun
1
What Is The Role Of A Buyer?
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In a sense, this question may seem a little basic. After all, it could be summed up by simply asserting that the role of a buyer is to …..BUY! however, like so many issues, there is much more than meets the eye to this question…..
First of all there are different kinds of buyers. For example, a buyer in a retail industry will have a different role from a buyer for a manufacturing company. Then there are pharmaceutical buyers or healthcare buyers.
However, no matter what ‘kind’ of buyer is being discussed, there are some areas of common ground. So the roles may vary according to whichever industry the buyer is located in, but there are some similarities.
Buyers Do More Than Buy!
The first thing that any buyer will tell you is that they do more than buy. They need a real understanding of the markets in which they operate. They need to be aware of all the possible fluctuations that can occur and even how the foreign exchange rates may impact on what they are about to purchase or have purchased.
Buyers also need to be financially astute and aware of exactly what is on offer and at what price, so they do not make the mistake of falling into bed with one supplier, only to find out that they could have sourced the goods at a more favourable rate elsewhere.
Buyers and Suppliers
Buyers also need to build up strong and trusting relationships with suppliers. If they fail to do this, then the supply chain can become weak and the risks of the supply chain being unable to cope with sudden variances can become a real threat to the successful flow of supplies.
So buyers need to work with the suppliers to make sure that they can deliver the supplies on a continuous basis and that the price will be as per the price that was agreed.
The days of very adversarial approaches o buying have long since disappeared and instead the buyer attempts to work with the supplier to ensure that the supply chain is effective and stable. But at the same time, the buyer still has to keep a watchful eye on what the supplier’s competitors is offering, to ensure that the company they are working for are getting the best deal.
In a sense therefore they are trying to foster good and very positive relationships with suppliers, whilst being aware that this is a business arrangement and the contract may be ended at any point.
Quality Control
Buyers also have a role in ensuring that the items they purchase are of good quality and that the quality is consistent, within set parameters. There is no point in buying shoddy goods, but the items need to be of a fairly standard quality with little in the way of variations. This means that the buyers have to be aware of quality issues and not allow price to outweigh the demand to have good quality products available.
Innovative Approaches
Buyers also have to be mindful of how things can change in the market place, with new products coming on the market that can replace products or goods. For example, if there is a new man made fabric that comes onto the market, that can be as good as wool and is far cheaper, then if appropriate suppliers should be switched, so that the new product can be used to replace the more expensive wool.
The role of a buyer is therefore one that is relatively multi-faceted and one that is often quite challenging and can be at times, relatively stressful, but ultimately quite a rewarding career!
Jun
1
The ‘Bullwhip Effect’, also known as the Whiplash Effect within forecasting is a way of describing the effect of large swings within the supply chain.
Any supply chain is not stable, it will have variations and fluctuation that arise when customers increase demand, or conversely when they find that demand decreases. The closer a supplier is to the bottom of the supply chain (i.e. closer to the raw materials end of the supply chain) then the more they will find that they are vulnerable to large fluctuations in demands, which when looked at on a graph resembles a whip being cracked, hence the term ‘bullwhip’ effect.
The bullwhip is negative, because the increased fluctuation can result in panic buying of stock, resulting in shortages and customer service levels not being met, there is also an increase in costs, as the more demand is expressed, the higher the cost becomes, in line with the elasticity of demand.
Causes Of The Bullwhip In Detail
There are many causes of the bullwhip effect, with the main focus of the blame being apportioned to forecasting, but this is not strictly accurate. The whole issue of forecasting within the supply chain is one that will be inaccurate, such is the nature of forecasting. Instead there are some detailed and often very complex reasons why the bullwhip effect can become dominant.
An Unstable and Unmanaged Supply Chain:
Having a very unstable supply chain that is not properly managed will result in the bullwhip effect being quite pronounced. The unstable supply chain has poor communication and there is little done to co-ordinate the supply chain or ensure that it is protected against fluctuations.
This makes the supply chain volatile and the more volatile it is, the worse the bullwhip effect will be.
Keeping Stock Levels high:
If the company tries to keep stock levels high over a long period, it will eventually end up with a high level of safety or surplus stock. However there is then a tendency to start reducing stock levels. This means that no orders are placed to replenish stocks. Then stock levels start to dwindle and there is a sudden demand as the company starts to replenish its stock as soon as possible.
Batching Orders:
The more orders that are batched together by companies the more variances there will be in the supply chain. These variances skew the levels of demand which results in the whip effect again.
Hedge Betting:
When a product is in short supply some suppliers will panic buy, to preserve their stock levels. But others may seek to exact a profit and they will buy more of a product when it is in short supply, so that they hedge their bets and pass on the increased costs to the customer.
Lead Time Variances:
There can often be variances in lead times, which results in the demand levels fluctuating wildly.
Managing The Bullwhip Effect:
The bullwhip effect can be managed by the supply chain itself being kept stable. The orders should be placed constantly throughout the production process to counteract the effect of orders being batched. Safety stock levels also have to be properly managed if there is to be consistent ordering, which keeps the variations to a minimum.
Hedge betting will always be an issue, but if the stock demand is kept constant there is less incentive to ‘panic buy’.
Lead times will also vary, but if the other countermeasures are put into place, then there will be less of a bullwhip effect and more of a stable supply chain with less fluctuation or variances.