A revolution [began] about 10 years ago as procurement came into focus as a game-changer for companies with the potential to add direct value to the bottom line. “…when done well, procurement can transform the way an organization operates”.
And so we begin 2015 with some thoughts from Supply & Demand Chain Executive’s November, 2014 issue. The lead article is “Striving for Procurement Excellence”, and you can find a link to the entire article below.
A central theme of this article is that successful organizations have moved to a more long term and strategic procurement focus. “Once equipped with a high level of detail around where procurement dollars are going on a daily, monthly, quarterly, and annual basis, organizations can make significant strides toward procurement excellence. … As part of their quests to grow profits, organizations are focusing more intensely on procurement knowing the best and most effective way to limit costs—without massive operational impacts—is to improve the way you buy products and services.”
An excellent example of how this might work would be a company needing repeat purchases of similar items over a long period of time. Historically, the “3 bids and a buy” philosophy might characterize traditional tactical procurement. In other words, when a buying situation arises, the buyer issues RFQ’s and selects the best choice at that time.
A more strategic procurement method would examine historical buys and forecasts of future needs. This might involve “reviewing what was spent last year, assessing budgets and planning purchases out at least a year in advance.”
Armed with these data the organization might choose to schedule buys differently. For example, in order to take advantage of predictable factors (discounts or material price fluctuations) that occur at some time other than the exact time of need.
Proficient Sourcing exists to offer credible suppliers for your needs, especially custom plastic/metal items. Our network is full of candidates who would be more than happy to work with you to accomplish your strategic needs. To that end, we have recommended buyers consider some different buying tactics, such as these two. We’d be most interested in your blog comments:
In many cases, raw materials represent the single largest cost factor. It is possible the buying organization has far more experience monitoring their raw materials than does a company making parts/assemblies for that company. In such cases the buying company may be able to achieve savings by procuring the raw material and supplying it to the outsourcing manufacturer. You may enjoy savings both by more sophisticated buying techniques and also be eliminating the manufacturer’s mark-up. Your manufacturing suppliers may not be expert in material purchases and would rather focus on what their strength is—the manufacture of your parts.
Another possibility is working with your manufacturing supplier to schedule the work to optimize their operations. The manufacturer may have other customers with, for example, seasonal requirements that leave slow periods. If you can schedule your requirements during those periods there may be discount opportunities and the manufacturer may even be willing to inventory the parts for you. Keep in mind the supplier’s options when the workload is slow are all bad—layoffs or make-work among them. If you can offer a productive way to utilize the supplier’s capacity, you may find extraordinary cooperation available.
These are procurement alternatives to “3 bids and a buy”, but require a more comprehensive relationship with your suppliers. It seems to us they comply with the article’s focus on a more strategic approach to procurement. To view the entire article, here is the link.