With sound purchasing management, manufacturing industries reduce their costs and maximize their return on investment. But many managers wonder what steps they should take to achieve this goal.
Regardless of your industry, developing good practices and being able to rely on competent resources are vital factors in better purchasing management.
Dominique Ouellet, consultant director with J2, lets you in on 5 fundamental keys that will help you control the costs of your supply chain. Always bear in mind that a dollar saved is a dollar more profit!
1. Know your purchasing portfolio
Supply chain management depends primarily on data – accurate, tangible, measurable data. A thorough knowledge of the nature and value of your purchases and your suppliers will serve as the foundations of a sound procurement strategy.
2. Group your purchases
Whether you use an MRP system, an ERP system or purchase requisitions, you must centralize data and purchase orders. This will give you an overview of your portfolio and quickly allow you to group purchases by product family or similarities. By doing so:
- You will reduce the number of orders placed, shipping costs and stock shortages.
- You will increase your volume of business with key suppliers
- You will negotiate bigger discounts
3. Control your inventory
Procurement management is more than just the cost of goods purchased. Warehousing costs must also be taken into account. Estimates of the storage costs of an asset vary between 20% and 40% of its value annually. Many options for reducing these costs are open to you, including consignment and staggered delivery.
4. Involve the procurement function in product development
When procurement specialists are involved in the development of your products right from the start, they can for example suggest various strategic suppliers who can support development.
This synergy between purchasing, engineering and supplier will result in the creation of a product that both meets technical requirements and can be produced on time and a favourable cost. This method also engages the supplier’s responsibility in terms of quality and cost control.
5. Manage risks and introduce performance indicators
Identifying potential risks from the outset allows you to formulate a contingency plan to eliminate or minimize production risks. This will prevent such problems as
- Raw material cost fluctuations
- Single-source products
- Delivery delays
- Uneven quality
Performance indicators – tracking on-time delivery, quality and costs, for example – provide a means of rapidly correcting non-compliance by a supplier.
Optimize your purchasing management: a question of strategies and added value
Keep your expenses under control and maximize your return on investment to reach new heights of performance and profitability!
Contact J2’s experts and benefit from new strategies for optimizing your purchasing management.