Expendables and consumables. The inglorious material that gives you a headache.
You know the feeling. You get a 100 part requirement. Or 200. Or 1,000. And your head wants to explode.
How To Stop Losing Money With Inefficient Expendable Purchases
As you scramble to fill your requirement, questions race through your mind:
• How am I supposed to get all of this done?
• Where do I start?
• How do I organize all the sourcing, processing, chasing and tracing I have to do?
• What if more material comes in and this list gets even bigger?
• Who's going to handle each stage of the procurement process? Me!?!?
• All the issues frustrate me. Why is this so complicated?
It's a lot of work and it keeps piling on.
And if that wasn't enough, the choices you make dictates how efficient you'll be. These choices will cost your operation something. Money, time, something.
But to ease your pain, here are 3 simple ways for you to be more efficient through your next high volume expendable and consumable purchasing project.
1) Decrease the complexity of how you source
Ahh, sourcing.
The 900lb gorilla sitting on your purchasing team’s shoulders.
When you need 100 parts. Blasting off 100 RFQs to 100 "suppliers" is a recipe for inefficiency. There are many reasons why this is, but that'll be in a future post.
It sounds so simple and harmless. But the effects are profound.
When you mass email your RFQs, you have to deal with all the data that's coming back at you. Some of this data may be good, but it's too much and highly inefficient. Do you plan on buying 100 parts from 100 people? Of course not!
This one small habit is causing you a ton of unproductive time but also costing your operation thousands of dollars every year. Maybe even hundreds of thousands.
There's a study that shows that when you get distracted (probably by email) it takes you 20 minutes to get back to what you were doing. When mass emailing, all these emails causes you to be highly unproductive.
So if you're looking to make your expendable purchasing more efficient, make your sourcing more efficient.
Work with a handful of trusted material advisors. Don't mass email to hundreds of people. If there's a deficiency in the material you need, then go source that in more detail. Lean more on your trusted material partners. It's scary, I get it, but if they deeply the care about your operation, you have nothing to worry about.
Another great strategy is to discuss putting all your high consumption expendables and consumables into a vendor managed inventory program. If you do that, you'll eliminate sourcing altogether. Winning!
2) Cut the complexity of processing orders
Processing POs sounds easy.
But it's not.
You’re having to enter POs, get them approved, resolve cancellations, coordinate shipping, answer questions, organizing payment, update POs because your information was wrong, send the POs, and the list goes on.
The most troubling part is this costs your operation between $150 and $350 for every PO you process. Count how many POs you process in a month and it gets costly...fast.
Just like sourcing, make processing POs simple. The less you do the more efficient you'll be, given you're still getting the material you need.
There are 2 huge strategies to take advantage of:
1. Consolidate your orders. Imagine if the 100 parts you needed could go on one PO. How awesome would that be? And if you were going to send it to 20 other people, you just saved your company $7,000 just by not cutting those additional POs. We call this $ave by Consolidating.
2. Take advantage of a vendor managed inventory. It sounds scary but it's not. It'll really help you and your operation to be more efficient. In terms of processing, you never have to process another PO. The savings and room for efficiency is huge.
3. Spend less time and money chasing and tracing material
Following-up with orders can often feel like you're running up a mountain. It's slow, painful, and by the time you're done, you're exhausted.
The more expendable POs you send, the more you have to follow-up with and also trace after they've been shipped.
In order to decrease the complexity of this activity, you'll need to be more strategic in how many POs you're sending. It's a lot easier to chase one PO than fifty. It's a lot easier to trace one shipment, than hundreds. Wouldn't you agree?
Cut less and chase less. Simple.
That still may leave you with the question, how am I going to cut less if I need more?
The answer is the same throughout this post. Consolidate your orders and utilize a vendor managed inventory to automate the delivery of your high consumption items.
We grossly overcomplicate this process in pursuit of the best per unit price and pay for it big in our total material costs.
Be more efficient and see your total material costs plummet.
