The reality of small and medium sized manufacturers is that you spend all your available time chasing deliveries and emergencies instead of working proactively to improve your company’s overall performance. This is the reality that most companies find themselves in because they do not have enough staff, time, or training to improve their situation.
After several decades working in the industrial manufacturing sector, I have learned a few tricks to help exhausted Materials Managers and Executive Management improve their situation. While my methods may not subscribe to methods taught in the classroom, if your company is resource restricted, you need to scratch and claw back time. These are practical solutions that have worked for me when your team appears to be running in circles fighting fires.
The first step is to write down everything that needs improvement with Purchasing, Planning, and Inventory. Just start by making a list. Costs, deliveries, supplier performance, scheduling, capacity, supplier relationships, processes, ERP, inventory…just keep writing. Don’t get overwhelmed! Look at the list. Find the one thing that will give everyone on your team more time. Time is money and especially in purchasing. Here are some ideas to get that time:
- Remove small tasks such as data entry and filing. Hire a temp or part-time person if need be. This will more than pay for itself if you can get a cost reduction project running.
- Correct ERP planning parameters to improve efficiency. Wasted time in going through the schedule to verify purchase and work orders can help significantly.
- Temporarily remove tasks from the team and get assistance from Operations or Accounting to verify labor entries, inventory, and receipts. While this seems short-sited, remember that the objective is to get a project done that gives your team more time permanently.
- Consolidate suppliers (especially in Maintenance, Repair, & Operating expense-MRO). More suppliers equal more management time for your buyers.
- From a Planning perspective, can you consolidate work orders or improve planning parameters to maximize production runs or purchases.
- If you are chronically stocking out, get your inventory person on the case to take a deep dive into history to resolve the problem. This can eliminate numerous people running around the plant trying to find material.
The objective here is to get 2-4 hours a week for each key member of the team. That’s it! Once you have that time you can start prioritizing the list. Pick one that now gives you the most return or something that helps the company meet one of its strategic goals. Ideally, it is something that brings increased profit and gives time back to your department. Here are some thoughts to think about:
- A letter to suppliers requesting improved payment terms can help reduce the need for loans. This is quick and easy to manage and should not consume all the time you have clawed back.
- Negotiate with an existing supplier based on an index to assure you are always getting the correct market price. Consider utilizing IMEC’s Indices & Negotiations Training to help organize the negotiations and locate the correct index. On a million dollars’ worth of spending, you can potentially save five or six figures. While your negotiating, can they stock for you and make order processing more efficient.
- Look at the data; it is not always easy to get, in a small company, so, keep it simple. Look at the spending figures and grab those top two or three expenditures. Then attack them with a team meeting to figure out what you can get from your supplier. Can you get an additional discount for increased spending, engineering services, improved quality, stocking services, or even vending.
- Look specifically at MRO expenditures. Can tooling be put into vending. Can you enlist your supplier to evaluate the tooling for tools that improve cycle times. MRO suppliers are notorious for making it easy to reorder by coming to your plant to check your inventory levels. This can be a real-time savings for your buyers. If you do this, make sure you get a discount for consolidating and committing to that supplier.
- Blanket order management. Negotiate annual orders with your supplier at the annual volume for additional discounts, stocking arrangements and/or scheduled deliveries.
Now that you have that first cost and time savings implemented, reassess your situation. It is time to think more strategically and do that project that takes more effort. Think about your suppliers, is there any that you should challenge with an RFQ or maybe negotiate an SSA with? Now is the time to think about your team as well. What training do they need? How can you power up your team and maximize your return? Sometimes, recognizing the opportunities can be challenging. Consider having a Supply Chain professional from IMEC come in and walk through the plant to assist with the identification of the best options.
Going forward, protect the project time you have made for your team. During the month of April’s Supply Chain Month, we will continue to post practical solutions for many of the problems discussed here along with strategies to manage the time to make money.
