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Improving Procurement Process

A typical manufacturing company has supply chain as shown below:

Raw material could be procured from multiple suppliers. The lead time for procuring the item could vary based on supplier. Depending on the availability of raw material and demand requirement, production is initiated which goes through sequence of operations in the shop floor. The output from production is the end item which is dispatched to the customer. The three main departments which are involved in the supply chain process are procurement, production and marketing. Typical issues faced by the manufacturing are:

  1. Unable to commit a feasible date to customer and stick to the date
  2. Knows an order will be delayed very late and so unable to take corrective action
  3. No visibility of how orders will get affected due to problems like change in customer schedule, resource breakdown, supplier delay and so on
  4. Most of time is spent on interacting with other department
  5. Unable to make a plan taking into account all material and capacity constraints
  6. Multi-products and multi-process is making the planning a cumbersome activity
The objective of any supply chain initiative should be to come up with one single plan which integrates all these three departments with one common view. If there is any problem in one department like delay from supplier, the plan should change automatically so that capacity plan for this item is pushed to a later date and affect of this to final customer order should reach the marketing department.

Some of the benefits a procurement team can derive from this common plan are:

  1. Optimized sourcing decision on when to order and in what to quantity
  2. Generate consolidated procurement order based on demand and production plan
  3. Vendor fair share rule so that multiple suppliers are maintained for same item
  4. Production drives what needs to be procured and not in other way
  5. Know the demand and production plan in advance for raw material planning of long lead time item
  6. Get expedite / de-expedite / cancel suggestion on day to day basis so that action on procurement can be taken
Planvisage helps to achieve this supply chain planning as their core strength has been in this area. Through Planvisage planning solution, work orders and procurement orders are automatically generated taking into account real time material and capacity constraints. The planning algorithm can be run frequently so that all the problems in factory are visible. Preventive measure can be taken before the problem goes out of proportion. Since Planvisage solutions are targeted to medium scale companies, primary focus has been not only to keep the cost low but also to make the product easy to use.

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