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Characteristics of non-productive material procurement management
Compared with productive materials, non-productive material procurement management has the following characteristics:
Variety of categories: As long as it is a manufacturing enterprise, it will basically involve: fixed asset production equipment, infrastructure facilities, spare parts, tooling, chemical oil products, PPE, office supplies, various services …
The frequency of repeated demand is low: According to the statistical analysis results of non-productive materials purchase data [ERP] of many manufacturing enterprises: the types of non-productive materials required by manufacturing enterprises above designated size can reach as many as 20,000 to 100,000.
However, more than 90% of the demand frequency is once / year, and the annual demand frequency of about 6% of materials is between 3 and 5 times, and only about 3% of materials are recurring demand;
The purchase amount of individual projects is huge: especially fixed asset production, testing equipment, infrastructure facilities, etc., the amount of these equipment can be over 100 million …
The general attention is not high: most local companies do not even have a professional non-productive material procurement team, which involves the purchase of large amounts of equipment and facilities. Basically, the company's senior management is responsible for the small amount of demand. Or purchasing by productive material buyers;
Lack of professional procurement process guidance documents or reference production machinery procurement process for procurement process machinery:
Due to factors such as cognitive problems and the low level of attention in the company, many companies' procurement management of non-productive materials lacks targeted procurement guidance process documents, and some even directly copy the production process procurement process documents, which is serious in actual operation. Violating the concept of lean, generating a lot of waste and non-value-added activities, affecting normal production activities …
Let's share a consulting project for purchasing management of non-productive materials by Hay Think. Due to the wide scope of the consulting project, we only list a case of process improvement here:
Client Enterprise: Jiangsu Automobile Precision Parts Co., Ltd.
Main business: Processing and manufacturing of automotive precision aluminum parts
Main production equipment: more than 200 sets of American Haas and Japanese brother machining centers
Annual output value: 1.2 billion RMB [2018]
The main material categories for non-productive material procurement: machining tools, diamond tools, machine spare parts, cutting fluid …
Hay Think conducted professional evaluation on the procurement team of client companies according to the ProMA Procurement Management Maturity Professional Evaluation System, and their procurement management maturity is only 28%;
The following are the evaluation results and corresponding solutions provided:
SITUATION
The procurement team lacks professional non-productive materials procurement staff
The non-productive material procurement management process directly follows the productive material procurement management process
The PR approval system uses the company's independently developed OA system;
The PO system uses Oracle's custom ERP system;
When converting PR to PO, you need to manually copy the PR information one by one to the ERP order system, which causes a lot of time waste, especially in serious cases, it will cause errors in purchasing information;
For any non-productive materials, a 10-digit material code must be created in the system. Because there are tens of thousands of material codes in the system, it is impossible for a purchase applicant to query the tens of thousands of material codes whether the most recently applied material already has a material code The materials have been purchased, so their approach is: all newly applied materials are applied as new materials;
Due to the excessive number of approvers involved and the need to create a material code for each item, it takes an average of 21 working days from the triggering of a purchase request PR to the release of an order PO;
The time from PR to PO is very long. Due to the lack of a normal price comparison process in many procurement data in the emergency procurement system, the temporary price is high, the quality of the temporary supplier is low, and the procurement data is maintained in the ERP system. Legalized, hiding huge procurement risks …
Frequent purchase information errors;
The cost of failure to purchase quality is too high;
High inventory of tools and machine spare parts;
No key requirements such as service life were defined when the tool was purchased;
High procurement costs;
The products urgently delivered by the supplier cannot be stored in time [the order cannot be generated in time];
Internal customers often complain about complaints;
In emergency procurement, there is no key tracking number such as PR / PO, and the supplier rushes the goods overnight. The buyer cannot be quickly identified, the storage location … cause the product is lost, the payment cannot be made, and the supplier complains;
Machine tool procurement is directly purchased by senior leaders. There is no TCO concept, no after-sales spare parts, manual service price lists, no response time constraints …
Downtime caused by lack of spare parts;
…
TASK
Rewrite the non-productive material procurement management process
Dramatically reduce the work cycle from PR to PO
Introduce the concept of lean management, identify and actively identify wasteful links in procurement
Reduce or even eliminate waste
Eliminate purchasing error messages
Identifying procurement risks
Discover purchasing opportunities
Improve procurement quality
Reduce procurement costs
…
ACTION / SOLUTION
The Hay Think management consulting team communicated the evaluation results and solutions with the company's senior management and reached the following action plans:
Hay Think's management consulting team and the client's enterprise ERP department found the Oracle's ERP team together, communicated the requirements, and built the PR approval process module into the ERP system. PR information can be directly transferred to the PO
The PR approval process has undergone a major reform. It used to require three levels of approval regardless of the amount of money. Now, the approval authority is set according to the amount of the purchase order.
Over 95% of non-productive material purchase orders no longer require material codes [only those materials with duplicate requirements around 5% will retain material codes];
The principle of purchase price comparison sets gradient price comparison according to the order amount;
For emergency procurement, set up a green channel for emergency procurement [The basic premise is to have a PR number and an internal email, which needs to be confirmed by the buyer ’s leader]
All the price data in the original ERP system are invalid, and are for reference only;
Classify the top 100 materials according to their importance according to their importance, and classify them into A, B, C and Kraljic Model or Kraljic Matrix. Different types of materials use different procurement strategies;
Introduced strategic supply management concepts
Supplier Management Introduced the supplier pyramid management model of Bosch in Germany, different strategic positioning and implementation of different supplier strategies for different suppliers
The procurement team strengthened the clarification of TS in PR;
The inquiry form uses a unified structure inquiry form;
The machining tool introduces a modular design concept, and key factors such as service life are added during the purchase inquiry stage;
For exclusive supply of diamond knives, a highly competitive supplier is recommended;
Machine tool spare parts introduced the concept of TPM, and started strategic cooperation negotiations with manufacturers;
…
RESULT
The direct time from purchasing PR to PO has been reduced from an average of 21 days to 3 hours;
Reduce the frequency of emergency procurement from 80% to 5%;
30% reduction in procurement costs [average savings of 70 million];
60% reduction in procurement quality costs;
Reduced tool inventory by 80%;
Equipment OEE increased by more than 40%;
Procurement compliance rate increased to 98%;
Customer satisfaction increased by 60%;
Significant improvement in supplier relationships;
The maturity of the purchasing team has increased by more than 50%
…