How Collaboration Improves The Manufacturing Procurement Process

Posted in Inventory Management on November 28, 2012

manufacturing-procurement-process | Photo Courtesy of mdgovpics http://www.flickr.com/photos/mdgovpics/7593072312/sizes/q/

When you change your manufacturing procurement process, the biggest impact will be on your bottom line, right? Not necessarily: Suggest a new supplier and your operational manager will likely cringe. Too often, bringing on a new supplier disrupts the supply chain by altering product supply, which can in turn affect quality control, mar customer relationships and hurt manufacturing excellence.

There’s a lot more to consider than price when changing your manufacturing procurement process, according to a recent article on the Spend Matters website. In fact, a new supplier could actually increase a company’s costs in a number of ways: by increasing scrap and defects; by slowing production; or by requiring additional resources to solve these and other implementation problems.

The Spend Matters article suggests companies use the “timeless tool” of supplier implementation strategies. Organizations can accelerate successful supplier adoption by choosing the right resources, using a commodity-specific standardized process and utilizing appropriate technology.

“The good news” according the article, “is that global organizations that successfully bridge the implementation gap stand to reap a potentially huge windfall. That said, throwing headcount or software alone at the problem is not the solution.”

What is the solution, then? Look for a plan that provides for collaboration between organizations, suppliers and customer business functions.

For starters, companies need to have a good understanding of their existing issues before they spend time or money buying a tool in efforts to solve an internal problem, improve procurement practices or achieve a goal. They need to ask themselves: “Is this a project management problem? Is it a software problem? Or a systems problem?”

This front-end analysis is key — and it usually requires an internal discussion. Granted, it’s true that for whatever reason, manufacturers don’t have a lot of time for these talks. But these discussions are imperative to improving the manufacturing procurement process. The process needs to be considered and analyzed. And, sometimes, technology is the enabler for solving the problem.

Reducing purchase price alone should not be the center of procurement initiatives. Companies need to look at the overall economic impact of changing suppliers, and must understand the total cost of adoption for all parties. A great resource is your operational manager, who will most likely be keenly aware of such line cost increases for your company.

Source: Spend Matters, November 2012

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