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Purchasing e-book

Supply side techniques that really work

downloadpurchasing0You can purchase the 10 page, fully illustrated e-book on Purchasing detailed below for 4.95 (about US$8 or €7) by clicking the image on the right.

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Purchasing e-book details - an MRPII or ERP system provides you with the opportunity to provide better information to your suppliers and so enable them to both improve their performance and save costs, some of which you can reasonable expect to be passed back to you. Companies following this route typically save between 10% and 20% of the direct material spend, which for many companies is considerable.

Contents:

1. Introduction

2. Purchasing Opportunities

3. Single source Suppliers

4. Building Supplier Partnerships, sometimes called Logistics

5. Technical Links

6. Material Delivery Arrangements

7. Quality and Point of Use Delivery

8. Supplier Schedules

9. Kanban Delivery of Materials

10. Supplier Managed Inventory

11. Payment - The Final Act

12. Summary


Extract

2. Purchasing Opportunities
Whilst in a traditional purchasing function the poor delivery or quality performance of a supplier was seen as the problem of the supplier, it is now seen as the problem and responsibility of the purchasing function. It is very much a part of the purchasing function today to work with suppliers to improve their delivery and quality performance. It has been found, with almost monotonous regularity, that when a supplier does not perform well, a significant factor is the quality of the information the customer gives the supplier. Examples of this less than adequate communication are late notification of requirements, rapidly changing delivery schedules, bad specifications and an inadequate understanding of the suppliers products and processes. Improvements in the area of communication with suppliers are often quick and easy to achieve and result in a genuine win-win situation.

Another major change in thinking that can have a dramatic effect on the effectiveness of the purchasing function, is to move away from using purchase price variance as a measure, and frequently the only measure, of the performance of the purchasing function. When purchase price is the only performance measure, this pressurises the purchasing function to buy large quantities of the lowest quality parts that meets the specification. This frequently results in large numbers of remote suppliers. The challenge is to capture the cost of ownership rather than the purchase price to encourage the “soft” issues to be addressed.

The purchasing process starts with design. Up to 90% of the cost of a part is fixed at the point of design; this point will be followed up below but is mostly a design issues. Once the part is designed, purchasing then involves choosing supplier(s), negotiating the price and delivery arrangements, receiving the goods, storing them, paying for them and eventually using them. There are many opportunities in this sequence of activities to save cost. Traditionally almost all the effort to reduce costs focused on the price negotiation, as price was the most obvious cost. The purchase price is also the easiest cost to collect and monitor. Forcing down the price of supplies, however, not only undermines the supply chain fundamentals but seriously harms the customer’s ability to openly communicate with his suppliers.

After the direct cost of the product, all the other opportunities to reduce purchase costs rely on first building a good relationship with the suppliers. This is not something that happens by itself or overnight. The building of these relationships is primarily the responsibility of the buyer.

The building of good supplier relationships takes a considerable amount of time but is made easier if the number of suppliers is reduced. A strategic decision has to be taken at the start of a supplier partnership program to actively seek to reduce the number of suppliers. The reduction of the supplier base takes courage as companies derive a sense of security from having alternative suppliers. This security is often an illusion.


You can purchase this e-book by credit card for 4.95 (about US$8 or €7) by clicking the book image at the top right of this page.


This e-book plus 10 more like it can be purchased together in the compendium book "Business Excellence - the integrated solution to manufacturing planning and control" price 24.90, about 45US$ / €37. . . more details