Jul
20
Purchasing cards are a very simple way for an organisation to procure goods or services and they can certainly help to streamline an organisations payment system, even though it may seem like spending has been decentralised and taken away from the procurement section.
How Do Purchasing Cards Work?
Purchasing cards are used in the same way as credit or debit cards because they are set with a limit and the person using the card can only go up to a certain limit, but the transaction is immediate.
This means that the person paying for the item does not have to raise a purchase order, nor do they have to ask the supplier to raise an invoice and then wait until forever for the invoice to be paid. Instead the whole process of buying something can be done in a matter of a few minutes!
No Paperwork
One of the beauties of the purchasing card system is simply the fact that the payment is to the supplier is shortened (typically to 3-4 working days) whilst the payment from the buyer is set to a monthly schedule. Improved cash flow is of enormous benefit to the supplier whilst for the purchaser the administrative overhead is reduced on activities such as completing purchase orders which in some cases are no longer required.
Historically many agencies and organisations have been slightly nervous about the use of purchasing cards, simply because they fear that spending will get out of control. But in fact the limits that are set for the card alleviate this being a problem and the fact that each transaction is clearly marked on the statements for each card means that there is a clear audit trail that shows exactly when an item was purchased, how much it was for and who authorised the payment.
Handling purchase orders and paying invoices is actually a lengthy process that can sometimes become bureaucratic in the extreme. The use of purchasing cards means that the process is shortened and therefore saves time, because the admin time required is so much less. Saving time saves money and therefore the payment process is not only streamlined, but is also ruthlessly efficient.
One of the most common gripes that suppliers have is that no one pays their bills on time. In fact a few organisations seem to adopt a stance that they will wait 6 months before payment; if the company they owe money to is still there, they pay. If they have gone bankrupt, then they save some money…… although only a few adopt this approach, others seem to drag their feet and do not pay for three months or so, especially large bureaucratic organisations.
This can almost revolutionise the relationship that you have with your suppliers because they will be paid as soon as something is bought and they don’t even have to raise an invoice. It is like a dream come true for many suppliers!
So the benefits that purchasing cards in terms of streamlining payments cannot be over emphasised. Purchasing cards will almost certainly become the way that business is carried out in the future, since they make perfect sense, instead of having to rely on lengthy delays whilst a purchase order is raised, then goods are delivered and checked against a delivery note, then the invoice is sent in and the invoice and the delivery note have to be matched up (if one has not been lost!). Even describing this kind of system does seem slightly archaic in this day and age and the age of the purchasing card is definitely upon us, which is good news in terms of saving time and streamlining payments, but also good news for suppliers who will get paid on time, every time!
Jul
20
10 Tips When Benchmarking In The Supply Chain
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Benchmarking your supply chain is a great Supply chain optimization tool. Without benchmarking your supply chain you will be blissfully unaware of where there are deficiencies or poor performance, so you need to benchmark your supply chain and here are some top tips to help make the process as effective as possible!
1. The first thing that you need to do is to decide what you are going to use as the base for your benchmarking exercise. You need to decide how, in principle you are going to assess and evaluate each supplier; what is important to your company?
2. Once you have decided on the type of benchmarking exercise you are about to embark on then you will need to ensure that you decide on the right kind of metrics that will help to achieve the overall goals that you have set for this exercise. There are so many different types of benchmarking metrics out there, that it is impossible to say which is the best one for your company. But investigate the different options available and try to secure a package that really meets your own specific needs.
3. The third step on the road to a highly effective benchmarking process is to get the senior management involved. You need to have the highest level of both management support and participation for the exercise to be seen as being of any worth. After all once the exercise is complete, you will probably need to make changes and without management support, you will simply not be able to implement the changes that will bring about greater improvements.
4. Next you will need to inform your suppliers (all of the suppliers within the supply chain) that you are going to benchmark the supply chain. This should not be presented to them as a threat, simply a way that you can all work together to ensure that the supply chain is not just effective, but is also stable.
5. One way to ensure that you will be able to undertake a very effective benchmarking exercise is to look at comparing the characteristics of your suppliers, rather than the finished products they furnish you with. This makes sure that you do not get caught up in comparing products; what is important is the characteristics of the suppliers, not the appearance of their products.
6. You need to allocate roles and responsibilities within this exercise. Tell your suppliers what is expected of them but also what is expected of you. You will also need to tell them who they should contact, who will answer any queries and so on. This kind of communication is vital if you are to get the best out of this exercise.
7. Once you have completed the benchmarking exercise it is important that you fully analyse the findings and identify where improvements can be made. This should be done carefully so that you reap all the potential benefits possible from benchmarking.
8. Now you have identified where improvements should be made, it is necessary to turn them into reality. This is where the backing of senior management will come in. They will help you to make a real difference simply by giving you their full endorsement.
9. After the improvements have been implemented then they need to be monitored to see just how effective they were. After all, you are trying for quality here, so you need to make sure that what you thought would improve things, has actually resulted in this.
10. If you had assumed that the final exercise in the benchmarking process would be to simply sit back and congratulate yourself on a job well done, then you are right. However, after the self congratulation you need to embark on setting the timeframe for the next benchmarking exercise, to ensure that complacency does not set in……….