Purchase Intelligently with an ERP System
One of the major tasks of the purchasing department in the manufacturing landscape is to buy raw materials according to the bill of materials (BOM) and ensure all these parts are in the right quantity, right place, at the right time.
Other than keeping on top of purchasing requests, managing inventory levels, and trying to negotiate with vendors, the purchasers had to do all the things manually such as the paperwork involving quotes, purchase orders, and invoices, not to mention keeping the communication with other departments. These can make even the best purchase manager feel like they live in a constant state of havoc.
Purchasing is a crucial department in the company regardless of the size or industry. Without purchasing, all manufacturers would come to a halt. As the concept of the smart factory continues to change the manufacturing landscape, digital transformation has become a top priority for manufacturers to build resilience into the supply chain.
There is no excuse for a manufacturer’s purchasing team to not adopt digital transformation. With high labor cost, companies should look at everything they can do to create value of the time spent by their purchasing team. By turning paper invoices into digital documents and shedding manual practices, ending paper-based processes, adding visibility across the business, reducing risk, companies have the most to gain to stay cost-effective, optimize production and growth-oriented.
Many companies have started to implement ERP system and Purchasing department is one of the key areas for creating more powerful decisions. ERP system introduction in a company made it more flexible and accurate for the purchasers. All the data is saved in one system, providing single source of truth of the entire purchasing process within a few clicks. In this article, we will shed some light on the key areas your Purchasing department can gain advantage from an ERP system implementation.
Supplier relations are important for a business. Coordinating and managing daily tasks with suppliers can quickly get out of hand with a myriad of different documents such as quotations, purchase orders, invoices etc. that need to be generated and followed-up on.
A modern ERP System can easily digitize all the different documents in the purchasing process, which not only helps with physical clutter, it also greatly enhances productivity as the system makes sure information received by everyone is consistent thus reducing human errors.
Most importantly, an SRM will make sure the right people receive the right information at the right time, all while keeping your list of suppliers meticulously organized.
One of the key responsibilities of purchasers is forecasting the right amount of raw materials that is needed to fulfill customer orders as well as manage buffer stocks. Forecasting requires accurate order information, existing stock data, production capacity and expected delivery dates. If there are any discrepancies in any of the afore-mentioned information, then you can be sure that the resulting forecast will not be of any use.
Therefore, it is of the utmost importance that all requirements information is not only accurate but also managed and communicated well in a timely manner.
A modern ERP System such as MONITOR G5 greatly improves requirements planning by providing purchasers with purchase suggestions based on order, forecast and buffer stock data. You can be sure that you only purchase what you need and not overbuy or under purchase raw materials that end up taking-up valuable storage space.
Purchasers are often faced with the difficult decision of choosing the correct supplier to purchase from. Unless you are very familiar with all the suppliers in your list, you may make the wrong decision and end up with slow arrival of raw materials, which leads to a domino effect that ultimately causes missed delivery dates.
Wouldn’t it be good if there was a system that not only digitized your important documents, kept your supplier lists well managed and also provide suggestions on suppliers you should be purchasing from based on lead time and delivery dates?
A fully integrated ERP system such as MONITOR G5 makes it possible for you to make pricing inquiries for multiple items to multiple suppliers at the same time. This saves you a significant amount of time in picking out the best supplier for specific jobs.
In-house manufacturing work itself is already a challenge, imagine having to manage subcontractors. Organizing subcontractor lead time to match your production plan can become a nightmare if you do not have your basic processes and documentation down right from the start.
Digitizing all relevant subcontractor documents such as purchase orders, delivery orders, etc. will make sure that everyone involved receives timely updates that are accurate.
Other than managing documentation properly, there are other numerous tasks involved to make sure that the subcontractor performs optimally such as sending them the right materials and receiving purchase orders on time. With a proper system, you will have a 360 overview of the status of all your subcontractors.
There are numerous raw materials involved in manufacturing a product and sometimes product defects may be due to a bad batch of raw materials.
However, without a proper system in place, it would be impossible to trace the root cause of specific defects. Modern ERP systems such as MONITOR G5 allows you to trace raw material via batch or even down to serial numbers of each individual part. You can easily trace a defect to a specific serial number that came from a bad batch of raw material throughout the manufacturing process.
This is important as it allows you to fine-tune certain manufacturing processes or re-evaluate raw materials and replace them with better quality materials or more cost-effective materials. By being able to trace raw materials down to individual part numbers, it may also be possible for you to study your product costs from a different angle and perhaps identify more cost-effective materials to use instead.
We have explored the major areas involved in the purchasing process above, and we can see that it can be greatly improved by digitizing important documents, streamlining data deliverability and accuracy. Once you have accurate data in your database, you can do wonders with it.
Data is at the heart of an ERP system implementation. Having an ERP system in place gives purchasers peace of mind, not only does it improve the purchasing process, it helps reduce the cost of resource management, especially, when the Purchase module is integrated with other related modules such as Manufacturing, Sales, Stock, Accounting, and Time Recording. When a purchase is performed, it will automatically create entries to respective modules which improve resource planning on the purchaser’s end and offer less time consumption on communication to every department.
Purchasers can enhance buying productivity by leveraging powerful data from the factory floor right through to the purchasing office, this means that they have more time to focus on suppliers networking, vendor evaluation, buying strategy, and predict future trends of raw materials that may impact the production line, optimizing the entire supply cycle process to on-time delivery to the customer’s doorstep.
The right ERP system will give purchasers a basis for more open communications, allowing them to offer suppliers or customers better lead times, earlier warnings for quantity adjustments, and more reliable predictive modelling. It will transform the way you look at your purchasing process and transactions. The value generated from an ERP implementation will set businesses in a strong position to streamline operations, strengthen customer loyalty and, crucially, find new areas for business growth.