| | | | |Strategic Procurement in SCM |
Q1. How to improve the purchasing process?
Answer: ) Following are some of the best practices that are being followed by some supply chain managers, regarding their purchasing process;
Improve your vendor relationships:
o Avoid cozy or adversarial relationships with suppliers. Ball tickets and free lunches are great as long as your supplier is bringing great cost improvement ideas along with them. o Is your door open to suppliers or are do you continue to shut them out. Sitting down with vendors once or twice a year to collaborate eliminates surprises from both you and them. o Order in a manner that keeps the vendor’s cost low. o Work with the best vendors, taking into account local, regional, national and global players for the goods and services you are purchasing. o Competitive pricing is key, focus on the overall best total cost. o Companies are working with too many vendors, find a great vendor or two and utilize your leverage by giving them all of your business. o Develop an annual cost reduction plan; the best vendors will understand this concept. o Vendors should enjoy working with you (payment policies, return policies, returning phone calls).
Develop a scorecard for keeping track of vendors’ service, quality, delivery and pricing ♦ Track the quality, service and price performance of your vendors. ♦ Communicate the results of your scorecard to the vendors. ♦ Understand what is important to your vendors and make sure they understand what is important to your company. ♦ Involve the vendor in the design of your product from the beginning.
Obtaining the right information = right sizing your vendor list and vendor costs ♦ Leverage your volume with your vendors. ♦ Purchasing and finance should form a team to identify current spending and where the greatest opportunities for improvement exist. ♦ Engineering, manufacturing and sales should be included to brainstorm ideas for product improvements.
Create a purchasing staff with the following characteristics ♦ Analytical – great purchasing is based on the ability to roll your sleeves up and get into the details of the items you are looking to buy. ♦ Great negotiation skills – very few purchasing managers and buyers have had the benefit of negotiation training. ♦ Business knowledge – Understanding your business goals and the focus of your suppliers business is critical to making sure you reach your companies goals while providing what is necessary to help your supplier reach their goals. ♦ Compliance to policies – Creating purchase orders after the invoice has been generated is a waste of both your time and accounting’s time. How many rogue buyers do you have in your organization that are buying from non-preferred vendors. ♦ Legal knowledge – creating contracts that benefit the company, not solely the vendor, is not an easy process and requires training and understanding of the terms that must be met for a vendor to work with your company. You also have to monitor your vendors to make sure they comply with the agreements put in place. ♦ Ability to work in other parts of the organization (Sales, operations, finance)....
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