10 Ways To Improve Your Purchasing Department

Who am I: Keith Taylor My background: 22 years of “hands on” purchasing and materials management experience with a Cleveland, OH area manufacturer and distributor of municipal and industrial truck mounted sewer cleaning equipment, parts, and supplies. 16 plus years experience implementing business systems and helping companies improve their efficiencies and bottom line through Business Process Improvements. Certified SAP Consultant all versions since 2004Slide 2 SAP Partner since 2004. Copyright 2011 * Keith Taylor presentation for: SAP Business One Summit Lake Lanier, GA * 10/26/2011 – 10/28/2011

Ten Ways to Improve Your Purchasing Department Agenda 1. Establish, monitor and follow Department Goals 2. CRM and now VRM 3. Requisitions / Purchase Request for Quotes 4. Purchase Orders 5. Purchase Order AcknowledgementsSlide 3 Copyright 2011 * Keith Taylor presentation for: SAP Business One Summit Lake Lanier, GA * 10/26/2011 – 10/28/2011

Ten Ways to Improve Your Purchasing Department Agenda 6. Expediting of Past Due Purchase Orders 7. Vendor Managed Inventory (VMI) 8. Vendor Performance Reviews 9. Vendor Purchase History Analysis 10. Networking and Continued EducationSlide 4 Copyright 2011 * Keith Taylor presentation for: SAP Business One Summit Lake Lanier, GA * 10/26/2011 – 10/28/2011

Establish Department Goals Some examples: Cost Savings by buyer / product line or other measurement. Establish measurable cost savings goals. Monitor and report on progress monthly. Vendor Reductions. The more vendors you maintain and use the higher your costs. Vendor on time delivery improvements.Slide 5 Vendor quality improvements Copyright 2011 * Keith Taylor presentation for: SAP Business One Summit Lake Lanier, GA * 10/26/2011 – 10/28/2011

Establish Department Goals (continued) Measure and track the goals: If you are not utilizing a business software or your business software does not provide tools to help you monitor and measure your goals you probably will not meet your goals. Manual or antiquated methods of tracking goals: Excel or other spreadsheet tools Word Processor Many Software packages include methods and tools to allow you toSlide 6 easily monitor and track your department goals. Copyright 2011 * Keith Taylor presentation for: SAP Business One Summit Lake Lanier, GA * 10/26/2011 – 10/28/2011

CRM and Now VRM Are you utilizing VRM to run your purchasing and materials management departments? CRM (Customer Relationship Management) has been around for several years. Many organizations utilize this to manage their prospect and customer relationships but surprisingly we find that few organizations incorporate methods to manage their relationships with their vendors. VRM (Vendor Relationship Management) can be used to effectively keep track of vendor quality issues, expediting of purchase orders, request for quotes and other every day purchasing functions.Slide 7 Copyright 2011 * Keith Taylor presentation for: SAP Business One Summit Lake Lanier, GA * 10/26/2011 – 10/28/2011

VRM (Vendor Relationship Management) Examples of manual methods: Hand written notes on purchase orders pertaining to expediting and other issues. Keeping track of purchase order receipts by hand on the purchase order. Manual vendor correspondence concerning quality issues.Slide 8 Copyright 2011 * Keith Taylor presentation for: SAP Business One Summit Lake Lanier, GA * 10/26/2011 – 10/28/2011

VRM (Vendor Relationship Management) Methods to manage using a software solution: Notes, documents, drawings, etc that can be attached directly to purchase orders or vendor records so that they are visible to all personnel. Manual vendor correspondence concerning quality issues. The benefits of including VRM in your business system are huge as you have one source for all information that can be viewed by all departments and users.Slide 9 Examples of some of the above in SAP Business One Copyright 2011 * Keith Taylor presentation for: SAP Business One Summit Lake Lanier, GA * 10/26/2011 – 10/28/2011

Requisitions Does your company utilize requisitions in their day to day operations? Requisitions are used by many companies to control and limit purchases. Sometimes used in conjunction with dollar amount restrictions: Maximum per requestor Approval limits by approver Be consistent. What ever the polices and procedures say follow them always.Slide 10 Copyright 2011 * Keith Taylor presentation for: SAP Business One Summit Lake Lanier, GA * 10/26/2011 – 10/28/2011

Requisitions (continued) When to use requisitions: All materials, capital expenditures, expenses, and supplies Only capital expenditures, expenses and supplies Manual vendor correspondence concerning quality issues. Again, be consistent and follow the company’s policies in all casesSlide 11 Copyright 2011 * Keith Taylor presentation for: SAP Business One Summit Lake Lanier, GA * 10/26/2011 – 10/28/2011

Requisitions (continued) Manual Methods: Hand written forms Excel or Word Forms Emails Notes Verbal None – “we don’t have any controls in place and do not need them”Slide 12 Copyright 2011 * Keith Taylor presentation for: SAP Business One Summit Lake Lanier, GA * 10/26/2011 – 10/28/2011

Requisitions (continued) When incorporated within a Software solution: Many software business systems include requisition capabilities with functionality such as the following: Users create their own requisitions Ability to track and monitor open, in process, closed and converted requisitions.Slide 13 Copyright 2011 * Keith Taylor presentation for: SAP Business One Summit Lake Lanier, GA * 10/26/2011 – 10/28/2011

Requisitions (continued) When incorporated within a Software solution: Functionality (continued) Easily convert requisitions to purchase orders Ability to send requests for quotations to multiple vendors Examples of requisition capabilities utilizing SAP BusinessSlide 14 One Copyright 2011 * Keith Taylor presentation for: SAP Business One Summit Lake Lanier, GA * 10/26/2011 – 10/28/2011

Purchase Request for Quotations Manual Methods: Hand written forms Excel or Word Forms Emails Notes Verbal None – “I placed the order with the vendor I last purchasedSlide 15 from” Copyright 2011 * Keith Taylor presentation for: SAP Business One Summit Lake Lanier, GA * 10/26/2011 – 10/28/2011

Purchase Request For Quotations When incorporated within a Software solution: Many software business systems include purchase request for quotation capabilities with functionality such as the following: Users can create their own Request for Quotations Ability to track, monitor, and convert Request for Quotations to purchase orders Ability to send Requests for Quotations to Multiple vendors Example of Request for Quote generated by SAP Business OneSlide 16 Copyright 2011 * Keith Taylor presentation for: SAP Business One Summit Lake Lanier, GA * 10/26/2011 – 10/28/2011

Purchase Orders Purchase Orders are legal contracts with your vendors. Should always be placed in writing. Verbal purchase orders lead to errors or disputes as to what is being purchased and the terms and conditions that apply. Email FaxSlide 17 Snail mail Copyright 2011 * Keith Taylor presentation for: SAP Business One Summit Lake Lanier, GA * 10/26/2011 – 10/28/2011

Purchase Orders (continued) Must be complete including: Complete descriptive information for all items, supplies and services requested including your company’s part numbers, vendor part numbers, etc. Include prices Required delivery dates Terms and conditionsSlide 18 Examples in SAP Business One Copyright 2011 * Keith Taylor presentation for: SAP Business One Summit Lake Lanier, GA * 10/26/2011 – 10/28/2011

Purchase Order Acknowledgements Require your vendors to acknowledge receipt of your purchase orders Track acknowledgements either manually or within your software solution. Manually this can be time consuming and is usually done by just making notations on printed purchase orders Utilizing a software solution to track acknowledgementsSlide 19 Examples of purchase order acknowledgement capabilities in SAP Business One Copyright 2011 * Keith Taylor presentation for: SAP Business One Summit Lake Lanier, GA * 10/26/2011 – 10/28/2011

Expediting of Past Due Purchase Orders Throughout my purchasing and materials management career this was one of the most inefficient tasks to be conducted by purchasing and sourcing departments. Many companies still struggle with this area on a daily basis. Many companies employ several “expeditors” whose sole jobs are to verbally phone suppliers to check on the status of shipments that are late or due to arrive.Slide 20 Copyright 2011 * Keith Taylor presentation for: SAP Business One Summit Lake Lanier, GA * 10/26/2011 – 10/28/2011

Expediting of Past Due Purchase Orders (continued) The Hard Way: Run the open purchase order report and highlight vendors to call. Pull the “old hard copy” of the purchase order out of the file drawer and call the vendor. While we have the hard copy on our desk let’s make notes on it and then re-file the purchase order back in the file drawer. Great concept but only the expeditor knows the details of the call and only if he or she pulls the purchase order back out of the old file drawer. Do nothing and wait until the shop floor, warehouse, customer serviceSlide 21 personnel, owner or your boss calls you to ask where the material is. Copyright 2011 * Keith Taylor presentation for: SAP Business One Summit Lake Lanier, GA * 10/26/2011 – 10/28/2011

Expediting of Past Due Purchase Orders The Pro-active (easy) way: Some software business systems provide you with tools, features and capabilities to easily perform this function without adding personnel to the staff. In fact if properly setup, you can actually reduce staff while maintaining better on time shipping performance and customer satisfaction. Think of how much more business you can realize from your customers if you improved your on time delivery performance from industry averages of 80% to more than 95% and above.Slide 22 Copyright 2011 * Keith Taylor presentation for: SAP Business One Summit Lake Lanier, GA * 10/26/2011 – 10/28/2011

Expediting of Past Due Purchase Orders The Pro-active (easy) way: Sound hard? Actually very easy by setting up alerts to notify buyers in advance that purchase orders are either due to arrive or are late. Send notices to vendors regarding their late shipments requesting responses via email Update purchase orders with new delivery datesSlide 23 Let’s look at a simple late purchase order alert in SAP Business One Copyright 2011 * Keith Taylor presentation for: SAP Business One Summit Lake Lanier, GA * 10/26/2011 – 10/28/2011

Vendor Managed Inventory (VMI) Once an unheard of concept Vendor Managed Inventory concepts are a great way of reducing your inventories and cost of doing business. Negotiate with your vendors to place their inventory in your facilities without cost to you until you use it. Benefits for you (the customer) include: Improved cash flow Lower cost of doing business – no need to constantly be checking withSlide 24 your vendor and placing purchase orders for the same materials over and over again Copyright 2011 * Keith Taylor presentation for: SAP Business One Summit Lake Lanier, GA * 10/26/2011 – 10/28/2011

Vendor Managed Inventory (VMI) Benefits for you (the customer) include (continued): No stock outages Benefits to your vendor include: a happy customer (You) Less chance of you constantly shopping for a better price or a different vendor. Maybe you use those Purchase request for Quotations youSlide 25 learned about less often. Copyright 2011 * Keith Taylor presentation for: SAP Business One Summit Lake Lanier, GA * 10/26/2011 – 10/28/2011

Vendor Performance Reviews Conduct periodic performance reviews with your top vendors: Areas should include: Ease of doing business Quality and Customer Service On time delivery CostSlide 26 Copyright 2011 * Keith Taylor presentation for: SAP Business One Summit Lake Lanier, GA * 10/26/2011 – 10/28/2011

Vendor Purchase History Analysis Ability to track: How many times an item or service is purchased over a period of time Dates Quantities CostsSlide 27 Detailed Purchase Information Copyright 2011 * Keith Taylor presentation for: SAP Business One Summit Lake Lanier, GA * 10/26/2011 – 10/28/2011

Vendor Purchase History Analysis Could you do a better job with vendor negotiations if you had the ability to easily track and retrieve information such as that listed above??Slide 28 Copyright 2011 * Keith Taylor presentation for: SAP Business One Summit Lake Lanier, GA * 10/26/2011 – 10/28/2011

Vendor Purchase History Analysis (continued) Many companies maintain this information in spreadsheets, manual cards, or files or not at all. The ability to easily track and retrieve this information from your software solution can in many cases pay for the software solution. The following are some examples of how information such as this is easily stored and maintained in SAP BusinessSlide 29 One. Copyright 2011 * Keith Taylor presentation for: SAP Business One Summit Lake Lanier, GA * 10/26/2011 – 10/28/2011

Network and Continued Education Network …. Network ….Network Attend conferences like this SAP Business One User Conference Participate in local SAP Business One User Groups Meet with your vendors and ask them for suggestions, solutions and recommendations for other vendors.Slide 30 Meet with your peers and other professionals Copyright 2011 * Keith Taylor presentation for: SAP Business One Summit Lake Lanier, GA * 10/26/2011 – 10/28/2011

Network and Continued Education (continued) Network …. Network ….Network Constantly be changing yourself. The way we are doing business today is very different then when I began my purchasing career back in 1973 Join local and national purchasing organizations such as: APICS (The association for Operations Management) American Purchasing SocietySlide 31 National Purchasing Association Copyright 2011 * Keith Taylor presentation for: SAP Business One Summit Lake Lanier, GA * 10/26/2011 – 10/28/2011

Long Business Systems, Inc. (LBSi) Helping businesses manage technology for success Questions or need assistance in using or implementing Business One? Keith Taylor, Vice President email: keith@lbsi.com Phone: 440-846-8500 ext 26 www.lbsi.com Connect with me on twitter: @keithtraylorLBSiSlide 32 Copyright 2011 * Keith Taylor presentation for: SAP Business One Summit Lake Lanier, GA * 10/26/2011 – 10/28/2011

10 Ways To Improve Your Purchasing Department

by Keith Taylor on Apr 05, 2010

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10 Ways To Improve Your Purchasing Department — Presentation Transcript