Speed should be the focus and the forte of a good Procurement process. Why? Because timing is everything, especially for Procurement in Manufacturing. Timely deliveries of raw materials and other goods have an immediate impact on reducing companies’ costs and increasing their revenue. Here is how
Speed should be the focus and the forte of a good Procurement process. Why? Because timing is everything, especially for Procurement in Manufacturing. Timely deliveries of raw materials and other goods have an immediate impact on reducing companies’ costs and increasing their revenue. Here is how:
1. Fast Request-For-Quote Response Times Give You a Head Start
Manufacturing is a race. Waiting too long for a quote is like still tying your shoelaces when other runners have already started the marathon. You need quick RFQ response times from your suppliers so you can get going fast – decide whether their offer suits you or not, order, get your components, manufacture, sell the finished product.
Your business is a mechanism whose every component and function builds on previous tasks being executed on time. If one lags, the whole mechanism falls off track.
2. Just-in-Time Deliveries Allow for a Just-in-Time Kickoff
Now let’s say you received a quote, it suits you, you ordered your components. Now you need to receive them on time, and moreover, you want them at the moment they are needed in the production process. Why just-in-time?
Because if you receive them late, you risk downtime, which can cause huge expenses and can result in late deliveries of finished products. These can make clients cancel orders, resulting in drops in revenue for you, which you definitely don’t want.
And if you receive your components too early, you have rising inventory levels, which incur inventory carrying costs.
Just-in-time deliveries will enable you to not only keep your production schedule on track, but to also optimize inventory levels, thus reducing costs and improving cash flow.
Besides enabling a more efficient production, just-in-time deliveries allow for an optimal utilization of floor space and a reduction in damaged inventories. The longer a raw material or sub-assembly is sitting on the shop floor, the more likely it is to become damaged, obsolete or past expiration date. Good timing can avoid all of this.
3. Expedited Deliveries Provide a Solution in Emergency Situations
Anyone can trip when in a race. Even if you have optimized your Procurement process to the best of your ability and planned every step of the way, there can be emergency situations in which you might need hard-to-find items for next day delivery.
Find yourself a supplier who can provide you with expedited deliveries to help you reduce or completely avoid downtime. As mentioned before, late deliveries and other operational mishaps can cause huge expenses, reduced profitability and impaired cash flow, not to mention the implications on brand, your reputation among clients and Wall Street, and thus your share price as well.
In today’s competitive landscape, you can’t afford to have your profitability affected by such avoidable issues as late deliveries.
4. Quick Lead Times Enable a Flexible Production Process
Imagine running in a race, and the route changes. The road is long and it doesn’t depend only on you – the climate changes, other runners interfere. Adaptability and quick reactions will keep you going.
In Procurement, this means quick lead times, which can help companies operating in changing markets to get the right product to market at the right time. The ability to quickly execute an increase in production is an increasingly important differentiator in today’s competitive market, especially as competitors having shorter life cycles has become the norm.
Maintaining an agile Procurement process can also help you take advantage of growth spurts which may be seasonal while reducing the overhead costs associated with such seasonal fluctuations.
5. Expedited Procurement Increases Productivity and Competitiveness
If your Procurement process is expedited and all of its elements executed in a timely way (quick RFQ response times, just-in-time and expedited deliveries, quick lead times), this will massively boost your company’s productivity. You will enhance the productivity of your personnel as they will be able to complete projects faster. You will speed up manufacturing cycle times and enhance manufacturing capabilities, while the quicker fulfillment of customer orders will increase your sales revenue and save you from having to lower your sales price due to late deliveries.
Expedited Procurement will also make you more competitive. If your operations get bogged down due to bottlenecks in deliverables, you are at risk of losing market share to those companies who have the most efficient procurement operations. Simply, if you avoid Procurement bottlenecks, you boost your competitiveness.
6. Faster, Faster, Faster – The Advantages of an Expedited Procurement Process
In summary, an expedited Procurement process and timely deliveries can help your company by:
- Reducing surplus inventory and associated costs;
- Reducing the risk of downtime and/or line stoppages which can entail catastrophic costs;
- Speeding up manufacturing cycle times;
- Enhancing manufacturing capabilities;
- Reducing time to market;
- Enhancing productivity of personnel;
- Increasing sales revenue through the quicker fulfillment of customer orders;
- Avoiding the lowering of finished product sales prices due to late deliveries;
- Improving the overall perception of your company due to the faster distribution of your product.
7. How do You Expedite?
If you are looking to expedite your company’s Procurement process, you can either try to optimize internally, or outsource with a trusted partner (link to blog post 1 – Why Procurement Outsourcing Makes Good Business Sense) who can help you expedite. As internal optimization can be very expensive and complex and requires time that most companies don’t have, outsourcing has become an essential strategy for companies to speed up their Procurement process and remain competitive. It is important to note that Procurement outsourcing companies are better equipped to ensure that each order is followed through to be received accurately and on time.
LORANGO’s Procurement service offers a highly skilled and dedicated team to perform Procurement functions quickly and inexpensively, and with the flexibility needed to meet the changing needs of any Procurement department.
Find out how TRIDENTCIRCLE can help you optimize your Procurement process by contacting us or by submitting your RFQ.