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Focusing on Strategic Procurement | Metal Production and Processing Magazine

Web-based supply chain solutions frees purchasing professionals from many administrative tasks that interfere with strategic procurement.

Have you recently analyzed how much time your purchasing department spends on strategic activities such as vendor comparisons and price negotiations rather than on processing purchase orders?

Studies reveal that in many purchasing departments personnel spend close to 80 percent of their time on administrative aspects of processing orders for new inventory and supplies, following-up to monitor delivery and resolving discrepancies between what was ordered and what arrived. Time spent on such activities can consume as much as 40 percent of a purchasing department’s overhead budget.

Even if the figures for your department are not as high, it is more than likely that your analysis would reveal that much could be gained through streamlining administrative activities.

To be competitive in today’s metals industry, companies must optimize performance of their entire supply chain to maximize both utilization and availability of assets. Strategic procurement supports maximum utilization of plant assets by assuring that the best materials are obtained at the best prices, and available precisely when and where they are needed. Strategic procurement maximizes availability of plant assets through optimized scheduling, and through timely, cost effective MRO (Maintenance Repair and Operating) purchases.

Strategic procurement requires two things that have not been readily available to metals industry purchasing professionals: timely information about what is needed in the mill, and more time to research, negotiate, and build relationships with vendors based on this information. Web-based supply chain solutions help in both of these areas, providing them with more timely and accurate data and tools that automate many manual administrative functions.

Most companies, for example, still rely on telephones, fax machines and e-mail – first to request needed production and MRO supplies internally, and then to communicate externally with suppliers regarding pricing and availability. Although these methods have been effective, they are not the always the most efficient.

In some cases, different people must enter the same information in different places, which consumes staff time and increases the chance of errors. Faxing can also be inefficient, since a form usually needs to be printed or queued-up before it is sent. During the time spent setting up and monitoring a fax, the purchasing agent might be able to call one or two more suppliers or compare various offers. Then there’s the issue of confirmation. You may end up playing phone tag – especially if a discrepancy exists that can only be worked out with direct communication. This is the type of non-value added activity that can easily consume up to that 80 percent of a purchasing department’s time.

It’s also the type of work that can be reduced easily so that the staff can spend more time on strategic initiatives.

One key to improving efficiency is migration to a Web-based supply chain management process. Until recently, this has been much easier said than done. Web-enabling your supply chain has traditionally required a large investment totaling well into six-figure levels.

Systems, such as Electronic Data Integration (EDI) or portals, often carry with them a significant level of complexity. Beyond the issue of cost, many purchasing departments have been sidetracked because of the technical strain such systems put on the IT department to ensure security and compatibility with your IT infrastructure.

Recent advances in Web-enabled asset management systems offer some relief. For instance, the Avantis unit of Invensys Process Systems has partnered with the software firm B2B Connex to provide an asset management supply chain collaboration module that is readily deployable, and easily links your business applications and processes to suppliers, customers, distributors, sister plants and any other desired location. The module enables secure, Web communication of your data for such documents as purchase orders, change orders, production forecasts, maintenance planning, and order acknowledgement. And, by operating through the Internet, this approach does not require complicated and expensive portals and EDI systems that could tie up your IT resources and eat into your budget. Your purchasing department simply interacts through a Web browser and e-mail, which requires nothing from your suppliers beyond their browser and e-mail.

Asset management systems with Web-enabled supply chain modules improve procurement accuracy by accommodating two-way communication with your vendors. This significantly increases the accuracy of supply chain interaction by eliminating manual tasks, repetitive input of data, miscommunication, paperwork, faxing, and multiple telephone calls.

This also improves communications with your customer. Sales order acknowledgement can be sent directly upon order entry and customers can log on to check their order status anytime. How many phone calls does that eliminate?

This solution increases your availability for value-added activities to contribute more effectively to corporate goals. You now have the time to negotiate with existing suppliers, find new suppliers that offer better pricing and products, or enhance your supply chain management system so that inventory, replacement parts and supplies arrive on-time and as-ordered. The bottom line is having the time to improve your company’s position to provide customers what they want, when they want it, at the best price available.

In the steel industry, where wear-and-tear on assets occurs more rapidly than other industries, fine-tuning your supply chain management is an absolute must for the success of your maintenance program. This improves product and resource availability, while minimizing the cost of buying high volumes of MRO inventory items.

MRO inventory management requires controlling a large number of low unit value items that are subject to unpredictable demand. A Web-enabled asset management system automates the reorder process by using calculated safety stock levels, replenishment lead-time and “available-to-promise” logic based on open purchase orders. This ensures that replacement parts arrive on time, so the maintenance team can proactively schedule preventive work on the assets that keep your production line running smoothly, as well as all the facility components and infrastructure that make it possible for your employees to perform their jobs in a comfortable environment.

From a cost standpoint, a Web-enabled supply chain solution makes even more sense, with a price tag significantly less than the full-blown EDI and portals systems. Rather than looking at an investment in the six figure range, companies can make their supply chain more efficient for somewhere in the low double digits: $20K to 50K depending on the scope of their operations. Most companies who invest in the solution recover their costs within the first year from the time they save on order placement and follow-up.

This type of solution does require some change in mind-set, since most purchasing departments have come to feel comfortable with their system of faxes and phones. After all, it is a system that works. But to remain competitive in the ever-consolidating metals industry, companies must look for opportunities that offer greater efficiencies and lower costs. Web-based supply chain management represents one of those opportunities and comes with a fast return-on-investment.

Call us now at 1-866-317-1951 / 1-470-819-3662 or contact B2B Connex to learn more. If you have any questions, please feel free to ask!

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