Optimizing Your Supply Chain
The biggest concept in procurement today is The Supply Chain. Most efforts are focused on revising Purchasing practices and wringing more cost out of products by re-sourcing components from lower cost (often Pacific Rim) suppliers, Vendor Managed Inventory (VMI), or consignment. Certainly purchased items are a good place to look for cost savings when the typical manufacturing firm spends more than 50% (sometimes as high as 80%) on outside purchases of goods and services.
While significant savings have been achieved with these methods, this process is only as good as its inputs. Consider this: The American Production and Inventory Control Society (APICS) defines the supply chain as the processes from initial raw materials to the ultimate consumption of the finished product (italics, mine) linking across supplier-user companies. My point is that to truly optimize one's supply chain, a company must consider the end user's needs and demand patterns.
The flow of information in a properly constructed and efficient supply chain moves both ways. As a manufacturer, I need to get the best information about my customers' needs and desires before I can provide good information on my needs and desires to my suppliers. Of course, my internal processes must be tuned properly as well.
The process starts with an effective Sales & Operations Planning process that feeds the financial, production, and procurement plans. The MRP system needs good data and parameters that are continuously maintained for peak efficiency. Then Purchasing can work with their suppliers to optimize the characteristics of purchased goods and services. The characteristics include cost, quality, delivery (quantity & frequency), and service. In short the whole cost of ownership.
So don't try to optimize your supply chain without first making sure you are getting good information from your customers. You might be led to using an inappropriate solution that could cost your company in the long run!
Operations | admin | 22 August 2006 |
