As we all know, manufacturing is constantly evolving, and each year brings new risks and opportunities for business owners. Recent years have seen seismic changes in the sector wrought by global pandemics, financial crises, unprecedented political upheaval, and many other factors.
All of these factors have huge impacts on supply chains and costs. As things settle (or rather as we adjust to the new normal of continuous disruption!), it is a good time to review your suppliers and take a fresh look at your options. This can help you unlock new opportunities and potentially strengthen your profits for the remainder of the year.
Manufacturing Procurement, in its most basic form, involves acquiring goods and services necessary for the production of a product. However, strategic procurement is a more complex science that involves thorough analysis of purchasing data, including pricing, deliverability, and potentially other factors such as sustainability measures, etc; as well as negotiation and ongoing monitoring and reporting.
By developing more effective manufacturing procurement strategies, your organisation can build a stronger future.
The Basics of the Procurement Process in the Manufacturing Industry
The procurement process is critical to success in manufacturing, and as an SME business, the margin for error is that much smaller and the risk that much greater! Making the right, data-driven decisions is all the more important.
Working within niche sectors (as many high-tech device and equipment manufacturers do) means a sometimes narrower list of potential suppliers, potentially more rigorous quality standards and potentially a greater risk of over-reliance on specific supply routes.
Thorough analysis and a fresh look at options therefore has never been more important.
Manufacturing Procurement Strategies for 2024
For effective manufacturing procurement, organisations need to arm themselves with the tools and resources necessary to capture data and information on a global scale. That’s critical to manufacturing with reliability as well as ensuring cost-effective strategies. Consider the following core strategies for manufacturing procurement.
Strategic Sourcing
Procurement is not just a matter of knowing who supplies the various materials or components that you require for your product—strategic sourcing starts with a thorough evaluation of each supplier’s capability, capacity, and reliability.
Data is critical, and not always simple to obtain. To strategically source critical materials, manufacturing companies must take into consideration which products meet not just the promises of the supplier but the reality of supply based on stock levels and on-time delivery.
One way to do this is to look at your own data. Many MRP software packages (like Flowlens) will include detailed data on stock, suppliers, quality and lead times. This element of our MRP solution is essentially a manufacturing-specific procurement software package and allows for comprehensive evaluation of procurement information in real-time.
Flowlens supplier evaluation tools allow you to quickly uncover underperforming suppliers and late deliveries and highlight purchasing priorities to minimise downtime and keep your production workflows running smoothly.
Cost Reduction Methods
In a very delicate economy, minimising overspend is absolutely critical. Cost reduction should always be a core component of the work of manufacturing procurement managers. How can you make better decisions in 2024 about cost?
- Vendor consolidation: In some situations, cost reduction is best done by consolidating vendors. Working with fewer vendors may be beneficial if you have data to support their overall ability to meet your needs across all aspects of material sourcing.
- Supplier negotiations: Strategic negotiations are beneficial. With data available to guide you, including past performance and stock availability factors, you have more leverage in those negotiation efforts.
- Supply chain analysis: The most effective cost reduction strategies for manufacturing procurement go further by providing a full evaluation of the supply chain to find opportunities for potential savings at every point in the process.
Cost reduction strategies are critical for today’s manufacturing industry, but they are not simplistic. Manufacturing software designed specifically to offer insight into the various ways to reduce costs, though, can empower organisations to make better decisions overall.
The Importance of Updating and Modernising Procurement Technology
Procurement technology is the backbone of success in manufacturing now and well into the future. With more data, smarter tools, and the use of automation features, manufacturing organisations gain the knowledge and resources they need to make informed decisions.
Software considerations
Consider what today’s best-in-class manufacturing procurement software can offer your organisation. If what you are using does not offer these features and resources, it may be limiting your ability to achieve your long-term objectives and goals.
- Real-time stock levels: Seeing real-time stock levels influences your buying decisions, especially when you monitor these factors over time. With live stock data and visibility of stock assigned to production, you do not risk over-ordering or missing key opportunities to save money.
- Supplier negotiation tools: The best solutions provide opportunities to streamline negotiations with suppliers by offering better data on supplier performance
- Batch tracking: Some of the best solutions also offer material and component batch tracking, which has become critical to meet compliance requirements and ensure quality at every stage of the industry.
- Supplier delivery tracking: Procurement delays can halt business activities, especially when operating in an agile business. With supplier delivery tracking in real-time, you can monitor the entire supply chain for your products in a simple-to-use dashboard.
- Diversification of suppliers: Relying on a single supplier for all of your needs is a risky strategy. With the right software, it’s easier to diversify your supplier base to mitigate risks and ensure better, more streamlined information.
Efficiency Strategies within the Procurement Process
From the top down, your organisation can see significantly enhanced outcomes when you have access to valuable, accurate data. These tools can help with most of the critical factors that cause delays and higher costs in the procurement industry:
- Order integration with the production team minimises oversights
- Subcontractor integration into your manufacturing software creates critical oversight
- Optimisation opportunities exist with better insight into inventory, allowing you to make better decisions overall on when to order
- Shortage reports and alerts help organisations to ensure better risk mitigation faster, providing opportunities to locate backup suppliers.
- Invoicing and management of finances is also a big part of ensuring efficiency as it builds relationships, minimises cost oversights, and avoids fees
Flowlens Provides the Responsive Solution You Need
The procurement process in the manufacturing industry is, at the core, an information-based system. The better you can capture information, transform it into usable insights, and apply it to where you are within your business and manufacturing, the better.
Flowlens provides an opportunity to achieve these goals. It helps you avoid shortages, monitor performance, track costs, negotiate excellent deals with top suppliers, and ensure your team is always on target, no matter the changes in demand and product pricing. Learn more about how Flowlens works to meet your needs.
