Improving Process Efficiency and Effectiveness

Improving Process Efficiency and Effectiveness

 

Once the basic information flows and communication techniques that comprise the supply management process are understood, then one should map the process out using tools such as a flowchart.  Before making a flowchart for a supply process or for any process for that matter, we want to answer some basic questions:  (1) What processes will be most effective to support the buyer-supplier exchange?  (2) What information systems might be used to automate and support making the process more efficient and effective?

  • A Supply Process Flowchart – uses standard symbols to illustrate points of a process, document used and decision points in the process.
  • Strategic Spend – Processes need to make strategic purchases more efficient and effective.
    • Early Supply and Supplier Involvement – As mentioned earlier, a cross functional sourcing fosters communication throughout the process during the critical stages of need recognition and description.  All sourcing decisions are to assure continuous supply at the lowest total cost of ownership
  • Non-Strategic Spend – Processes need to be efficient (cost-effective) regarding non-strategic spend a purchases of small value items
    • Small Value offers – one should simplify or automate the process, or consolidate purchases to reduce the acquisition cycle (time from need recognition to payment), reduce administrative costs, and free the buyer’s time for higher-value or more critical processes. 
    • Reducing the Number of Requisitions Marked Rush or Emergency – Eliminate rush or emergency requisitions entirely or as much as possible.  Look at the process and refine it if necessary to eliminate or greatly reduce these types of shipments.
    • Corporate Purchasing Cards (P-Cards) – are credit cards issued to internal customers (users) in the buying organization to purchase low dollar value, high volume goods and services.  P-Cards reduce admin costs by reducing the number of purchase orders generated and processed and by shortening the process cycle time for authorizing, tracking, purchasing, reconciling and reporting purchases.
    • Supplier- or Vendor-Managed Inventory (SMI/VMI), Stockless Buying, or System Contracting – are more sophisticated merging of the ordering and inventory function than blanket contracts.
      • System Contracting – Systems contracts rely on periodic billing procedures, allow nonsupply personnel to issue order releases, employ special catalogs, and require suppliers to maintain minimum inventory levels.  This technique is used most frequently in buying repetitive items such as office supplies and maintenance, repair, and operating supplies (MRO).  Firms use systems contracting in service organizations, manufacturing, for procuring high dollar commodities as well as MRO supplies.  System contracting gives a shorter cycle time from requisition to delivery, which reduces inventory stocks and achieves greater compliance with the supply process.
      • Vendor- or Supplier-Managed Inventory (VMI or SMI) – In VMI systems, the supplier maintains and manages the buyer’s inventory level, usually at the buyer’s site.  This is similar to consignment (Consignment is the process of a supplier placing goods at a customer location without receiving payment until after the goods are used or sold.  The inventory is in the possession of the customer but is owned by the supplier.) but the big difference in consignment and VMI is that with consignment the supplier owns the inventory but does not manage the inventory.  With VMI, client still owns the inventory on the premises (client’s site) but the vendor manages and replenishes the inventory based on agreed upon replenish models and communication.  In VMI, the supplier pulls stock for the client, packs, ships, and invoices the client.  VMI reduces process by taking steps out of the process for the buyer (client).  VMI can be used for small orders as well as for consignment inventory.