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Procurement Role In Forecasting, Inventory Management And Lean Manufacturing Sample


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Procurement Role In Forecasting, Inventory Management And Lean Manufacturing Sample

  1. 1. Procurement’s Role in Forecasting, Inventory Management and Lean Manufacturing
  2. 2. Contact Details <ul><li>For more information on how to receive this full training course or other PMMS portfolio offerings, contact: </li></ul><ul><li>Julie Brignac, Principal </li></ul><ul><li>+1 305 890 9078 </li></ul><ul><li>[email_address] </li></ul>
  3. 3. <ul><li>Describe the roles and responsibilities of Procurement in the forecasting, inventory management, and lean processes </li></ul><ul><li>Identify the key forecasting principles and the role Procurement plays in a successful forecasting model </li></ul><ul><li>Articulate the vital link between forecasting and inventory management, and how Procurement contributes to a successful process </li></ul><ul><li>Define the elements required to execute a successful interface between Procurement, planning and manufacturing </li></ul>Objectives
  4. 4. Tactical Buying & Strategic Procurement What’ s the difference? <ul><li>Tactical Buying </li></ul><ul><ul><li>Driven by specifications/requisitions </li></ul></ul><ul><ul><li>Often buying a solution </li></ul></ul><ul><ul><li>Buying what the market offers and sells </li></ul></ul><ul><ul><li>A function </li></ul></ul><ul><ul><li>Not part of strategic planning </li></ul></ul><ul><ul><li>Contract Managers </li></ul></ul><ul><li>Strategic Sourcing </li></ul><ul><ul><li>Driven by business needs </li></ul></ul><ul><ul><li>Solving a business need </li></ul></ul><ul><ul><li>Influencing and developing the market to meet the needs </li></ul></ul><ul><ul><li>A cross-functional business process </li></ul></ul><ul><ul><li>Part of strategic planning </li></ul></ul><ul><ul><li>Market & Relationship managers </li></ul></ul>
  5. 5. Role Definitions <ul><li>Strategic and tactical purchasing </li></ul><ul><li>Influence over all areas of expenditure </li></ul><ul><li>Involvement in corporate strategy and stakeholder consensus on Procurement strategy </li></ul><ul><li>Cost, quality, availability and sustainable performance measurement </li></ul><ul><li>Prediction of some future event or condition to reduce risk </li></ul><ul><li>Requires data and development of some preliminary hypotheses </li></ul><ul><li>Use the past to tell a good story for the future </li></ul><ul><li>Provide the business with scenarios for proper planning </li></ul>How are these linked? <ul><li>Balance the needs of manufacturing by providing parts just in time </li></ul><ul><li>Understand financial impact of inventory balances and mitigate additional cost and risk of obsolete inventory </li></ul><ul><li>Coordinate with Procurement and manufacturing on appropriate buying levels </li></ul><ul><li>Meet customer demands by providing goods at highest quality and on time delivery </li></ul><ul><li>Manufacture goods in most productive timeframe </li></ul><ul><li>Eliminate waste in operations to improve throughput </li></ul>PROCUREMENT INVENTORY MANAGEMENT FORECASTING LEAN MANUFACTURING
  6. 6. <ul><li>An easy life - minimum processing </li></ul><ul><li>Choice </li></ul><ul><li>User friendly transactions </li></ul><ul><li>Reliable transactions </li></ul><ul><li>A fast service </li></ul><ul><li>Accountability </li></ul><ul><li>The absence of Procurement presence </li></ul><ul><ul><li>no overt enforcement </li></ul></ul>Challenges: Internal customers will seek
  7. 7. <ul><li>There are five basic principles of forecasting that Procurement, inventory managers, and manufacturing personnel must remember </li></ul><ul><ul><li>Forecasts are always wrong </li></ul></ul><ul><ul><li>Forecasts must be measured and improved </li></ul></ul><ul><ul><li>Forecasts are more accurate for groups of products, rather than for individual components </li></ul></ul><ul><ul><li>Forecasts are more accurate closer in </li></ul></ul><ul><ul><li>Low-volume or erratic forecasts are most difficult </li></ul></ul>Five Principles of Forecasting
  8. 8. <ul><li>Many companies fail to link vital operational functions to their overall business strategy </li></ul><ul><ul><li>Resulting in siloed functions and redundant activities </li></ul></ul><ul><li>For Procurement, primary strategic challenges are </li></ul><ul><ul><li>Linking the Procurement strategy tightly to the business objectives </li></ul></ul><ul><ul><li>Developing strategic relationships with suppliers, but ensuring flexibility in the relationship </li></ul></ul><ul><ul><li>Acting as the focal point for the operational process </li></ul></ul><ul><ul><li>Defining Procurement as focusing on four key elements </li></ul></ul><ul><ul><ul><li>Availability Quality </li></ul></ul></ul><ul><ul><ul><li>Cost Sustainability </li></ul></ul></ul>Linking to the Business Strategy
  9. 9. <ul><li>Supplier Alliances </li></ul><ul><ul><li>Traditional long-term buyer/seller relationships </li></ul></ul><ul><ul><li>Cross company supplier partnering </li></ul></ul><ul><li>On Site Supplier Programs and Representatives </li></ul><ul><ul><li>Facilitates constant communication with key suppliers for high volume or critical parts </li></ul></ul><ul><ul><li>Part management by supplier representative, not company rep </li></ul></ul><ul><li>Kanban/JIT Philosophy Implementation </li></ul><ul><ul><li>Positive inventory impact </li></ul></ul><ul><ul><li>Frequent repetitive orders </li></ul></ul><ul><ul><li>Multiple deliveries just prior to floor use </li></ul></ul>Supplier Involvement
  10. 10. JIT / Kanban / Pull System Benefits <ul><li>Prevents manufacturing overproduction of end product </li></ul><ul><li>Provides visual controls so processes are managed efficiently </li></ul><ul><li>Improvements in all processes are imminent </li></ul><ul><li>Reduces lead times </li></ul><ul><li>Conveys production instructions between work centers </li></ul><ul><li>Eliminates waste </li></ul><ul><li>Reduces or eliminates some parts in inventory </li></ul><ul><li>Best when material is supplier owned until placed into WIP (work in progress on production floor) </li></ul>
  11. 11. <ul><li>Business treats the forecast as reality – not a potential scenario </li></ul><ul><li>Procurement establishes supplier alliances that drive cost reduction through volume, but does not confer with planning </li></ul><ul><li>Procurement does not consider the forecast when negotiating volume commitments </li></ul><ul><li>Manufacturing does not consistently evaluate the use of lean tools in its processes </li></ul><ul><li>Inventory managers do not consult purchasing or manufacturing when planning inventory levels </li></ul>Potential Failure Modes
  12. 12. <ul><li> website. : 2008. </li></ul><ul><li>Cavinato, Joseph L., Flynn, Anna E., Kauffman, Ralph G., The Supply Management Handbook . McGraw-Hill, Seventh Edition: 2006. </li></ul><ul><li>Lean Procurement ™. Website of Consumers Interstate Corporation. : 2008. </li></ul>Resources