How to reduce procurement costs by fdjerue7eeu

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									How to reduce procurement costs



"Cost" is the heart of procurement staff "never
hurts," then because buyers are constantly faced with the costs.
The main objective of business operations to create the greatest
wealth for the shareholders interests, so the operators in the annual
performance review, the return on investment has become the best
reference point.

The impact of costs on businesses
Although the different ROI calculation, the most common representation
is as follows:
Return on investment (ROI) = profit margin (Profit Margin) x asset
turnover (Asset Turnover Rage)
Margin represents the relative income, corporate cost control ability.
The asset turnover reflected the management of enterprise assets,
effective use of available capacity. Therefore, managers can increase
three to achieve the return on investment: (1) reduce cost of sales;
(2) use existing assets to increase sales;, or (3) the above two.
According to statistics, in the manufacturing of raw materials, spare
parts. Purchase of equipment and the average amount of 50% of total
sales. In other words, any cost savings achieved through procurement
is a direct contribution to profit. Consider the following an example:
Suppose a company to spend 50% of total revenue in the procurement of
materials, its net profit before tax of 10%; each selling 100. Profit
of 10 yuan, but the material cost is 50 yuan, 40 per cent of other
costs. In addition, the assumption that all the costs are as sales of
changes in the profit and loss as follows:
Sales: £¤ 100
Production costs: Purchasing £¤ 50 / £¤ 40 other
Pre-tax profit: £¤ 10
If this company wanted to make a dollar, which is equivalent to 10%
margin, while sales have increased to 110 yuan can be achieved.
Procurement and all other expenses are relatively increase to 55 yuan
and 44 yuan. The new profit and loss is as follows:
Sales: £¤ 110
Production costs: Purchasing £¤ 55 / £¤ 44 others
Pre-tax profit: £¤ 11
If this company to the procurement cost of 50 yuan to 49 yuan per
reduced, then only 2% of the purchase cost savings can also reach the
purpose of profit margin increased by 10%. In this case reflects the
cost of procurement of 2% and sales growth of 10% on net profit before
tax effect is reciprocal. However, the increase in sales will have to
pay 5 times more than in efforts to reduce procurement costs and
procurement costs higher proportion of total sales, the ratio between
the more significant.
Sales: £¤ 100
Cost: Purchasing £¤ 49 / £¤ 40 other
Pre-tax profit: £¤ 11

How to calculate the cost reductions
Cost reduction include the analysis of the current in the product,
service, contracts, manufacturing procedures to determine whether
there is any possible changes to reduce costs. All payments less than
in the previous section can be considered as costs. Simple calculation
the following:
1. Price reduced amount = original unit - new unit
2. Cost reduction = (original unit - new unit price) x number of first
purchase (or year purchases)
3. Cost reduction targets and is expected to reduce the cost
difference = actual amount (per unit or per year) - is expected to
reduce the cost amount (per unit or per year)
If a company screws in the year for the purchase of a model unit was
only 5.8 yuan each and the total annual procurement volume is 10
million, but the previous year's procurement unit price per 1000 is
6.0 yuan, so that we can get the screws in this unit there are 0.2
yuan per 1,000 savings, while reducing the total cost for one year the
amount of 2,000 yuan (0.2 yuan / 1000 X10, 000 1000).
Cost reduction compared to the other easily confused with the concept
of cost avoidance (Cost Avoidance). In some cases, prices are not
beyond the control of procurement staff in order to avoid the company
or supplier of materials prices in the next hit, procurement can take
some measures, such as price protection contracts signed; more
preparation before the stock price rises and so on. As to whether this
approach include the scope of cost reduction, companies practices and
views vary.

Method of reducing procurement costs
Cost reduction can be implemented in many ways, but, during the same
time reduce the cost must be understood that the main purpose of cost
reduction is to identify and reduce unnecessary costs of parts, and
the premise does not affect product quality, will cost make the most
effective allocation and utilization. Run counter to this principle of
any decision, both for thought.
Centralized procurement (Centralized Purchasing) is a very effective
cost reduction methods. To the needs of various departments together,
procurement unit can be used as a weight larger purchases get a better
quantity discount prices. Standardized specifications, supplier of
standard available at discounted prices, inventory can be relatively
lower. So, administrative expenses will be reduced by purchasing
unified operations, purchasing department can have more time to use
the resources in the development of new suppliers.
However, the centralized procurement may have given a rigid,
inflexible feeling. Therefore, another of the more eclectic approach
is the use of the most number of units to integrate all procurement
and is responsible for leading the procurement negotiation. In
addition to centralized purchasing can have the same number with the
advantage, the better to promote purchasing and use of department work
closely with user departments to fully grasp the needs of the
situation. Others, such as by representatives of relevant departments
of the product committees; joint procurement; long-term contracts, and
procurement of the product life cycle, the total demand required for
the contract, are can be exchanged.
Using value analysis is one important way to reduce costs. Simplify
the product design to reduce production costs; the use of alternative
materials and the corresponding production processes. In addition, to
provide better payment terms with suppliers; purchasing pre-owned
machinery and equipment; using different negotiation skills; select a
price advantage of the transportation company or to consider changing
the mode of transport, also it can reduce the cost. Of course, the
delivery is, and so other factors must be identified in advance, and
make a comprehensive decision-making.
Job-oriented cost method (Activity Based Costing) is another method of
cost control. That in the United States Xerox and Hewlett-Packard has
long prevailed for many years. Indirect costs can be a product in
accordance with the time spent on the support it correctly to make a
configuration, different from traditional accounting practices will
cost the average share of indirect approach. It allows the management
of the first clear understanding of indirect cost allocation status,
and easy to analyze the cost allocation is reasonable. However,
detailed analysis may result in excessive long carriage, more they
want more grasp full control of focus. Therefore, the proper conduct
an analysis to find out where the key cost is essential.
In addition, high risk can also be used procurement strategy, such as
commodity futures operations, procurement of materials beyond the
current or future demand for inferior race speculative purchase price
advantage. Basically, anything that can be cost-saving measures should
be considered the object of procurement, but it must be reasonable,
rational, even to the legal, beneficial supplier partnerships. As to
the methods mentioned above should be given priority, which method is
better, you need to use their own procurement staff professional
skills and work experience to be comprehensive and flexible use of
judge.

How to make the correct inquiry
"RFQ (Request for Quotation)" is the process of procurement
staff on the operation of a necessary stage. Upon receipt of purchase
orders, inventory status and understanding of current procurement
budget, it is often a reflection that most directly contact the
supplier immediately. If this is the norm of procurement, demand
patterns they are standard parts, for more suppliers there is no
problem. But in the new product development, for those who are not
part of standard, when the inquiry must pay special attention to
whether there is sufficient information to provide suppliers, to
facilitate the operation of its offer. In order to avoid causing
future procurement and supplier speaking different languages, as well
as in the perceived quality differences, the inquiry should be
provided when the information can not be sloppy preparations. Because
the inquiry is complete and accurate documents are available to help
suppliers in the shortest possible time to correct and effective
offer. A complete inquiry documents should at least consider the
following main parts.
First, inquiry projects, "name" and "Part No."
First, the inquiry project "name" and "expected
number" is on the inquiry to be prepared than the most basic
information. Suppliers must know how to call the product offer, which
is called "name" and they represent the "expected
number", which is a follow-up buyers and sellers in the future
when a quick search of the basis for investigating and handling as
well. Expected number of customers because each has a unique
representation, special attention in the use of its correctness. Some
large companies expected to frequent as many as more than 10-digit
number, which also include the account numbers and letters. Expected a
median number of different versions may be different, and may even
become another product of the expected number. Name of the writing
should be taken literally can be seen from its characteristics and
types of products better.
Second, inquiry projects, "quantity"
Suppliers usually offer, we need to know the buyer's demand, because
the amount of purchases will affect the calculation of the price.
Amount of information provided typically includes the "annual
demand," "quarter demand" or even "on
demand"; "the number of different levels of demand,"
such as the number for the 500K, 1M, 3M, etc.; each about orders
"Quantity"; or product "life cycle of the total
demand." In addition to vendors understand demand and purchasing
patterns, but also can also allow vendors to analyze their own
production capacity is enough to meet the needs of the buyer.
In the inquiry, the buyer usually has a common problem that can not be
less afraid of a good price, he gave the demand or the purchases shall
be "expansion." At this point, although the procurement of
short-term interests, even if the price to get the production,
procurement if true, you can not achieve the expected amount of
quotation, the supplier not to raise prices is reduced in other areas
of services to customers , or stop the supply, in the end not worth
the candle, or their own. Therefore, the demand for information to be
very honest communication with suppliers while also sourcing out the
market forecast to persuade suppliers to achieve long-term with such a
continuous supply purposes.
Third, inquiry projects, "specifications"
Procurement specification is a description of quality tools, should
include the most "new version" of the engineering drawings,
test specifications, material specifications, samples, palette and
other suppliers offer help to all the information. Engineering
drawings must have the latest version, if the surface can only be used
for evaluation should also be specified when the inquiry. The case of
international procurement, engineering drawings, as if the original
language other than English, such as German, French, Japanese, etc.
should also be accompanied by English translation of the international
common language, bilingual (Bilingual) to facilitate communication
between the form of presentation. If the project drawings can provide
electronic files, you must ask their suppliers to accept the extent of
the provision should pay attention to international common file
formats such as DWG, IGES, DXF, PRO / E, etc., to enable suppliers
convert image file. However, while e-mail file transfer, preferably
also be provided with a clearly drawn in the drawing on the work
surface to avoid file transfer may occur when the information missed.
4, inquiry projects, "quality" requirements
Inquiry project specifications express the way the quality of many
species, generally can use the following several ways. Procurement
officers can hardly alone a way to express a complete product or
service quality requirements, should follow the different
characteristics of the product or service, combined use of several
ways to carry out.
1 brand (Brand or Trade Names): In general, the use of procurement in
terms of brand products is the most easy one, not only to save
procurement time, reduce purchasing costs, but will also reduce the
quality inspection procedures, because only product labeling can be
identified. However, the price of brand products generally also
higher, the use of the brand to buy in small quantities would be more
beneficial for procurement.
2, or similar items ("Or Equal"): its significance refers to
achieve the same function with the product, decide whether to allow
the use of alternative products offer the same level should be
specified in the inquiry when, at the same level products confirmed
use of units used must be accepted.
3, Business Standard (Commercial Standard): commercial standards for
products, dimensions, materials, chemical composition, manufacturing
method, etc., have a common complete description. For the general
standard parts such as screws, nuts, Electronic Components, eliminates
the use of commercial standards for quality have misunderstood.
4, materials and manufacturing methods of specification (Material or
Method-of-Manufacture Specification): When the right materials or
manufacturing methods have specific requirements, must indicate the
applicable standards. If marked as DIN European regulatory
requirements, its corresponding CNS or JIS specifications also can be
the best indication.
5, performance or functional specifications (Performance or Function
Specification): This type of specification is more commonly used in
the procurement of high-tech products and suppliers early involvement
(Early Supplier Involvement, ESI) in the case. Suppliers need only to
be told the product to achieve the performance or functionality, as to
how the system can only do part of the required details are left to
vendors to solve.
6, technical drawing (Engineering Drawing): Engineering drawing is the
best way to describe the required quality, the content must be clear
in addition to, the accuracy of the tolerance also not be ignored.
7, the market level (Market Grade): commonly used in products such as
timber, agricultural products, tobacco, food and other aspects of
quality requirements, as the market level is a clear demarcation line
can not be generally the identification, procurement staff usually
requires how to identify purchased products are what level of ability
from time to time.
8 samples (Sample): This is a lazy approach, the sample provides
suppliers understand the needs of the buyer is very helpful,
especially for color printing, and grade requirements of the market
more widely used.
9, the Job Description (Statement Of Work, SOW): mainly used in class
such as the central procurement of security services, building
cleaning, waste disposal, contracting and other works, a complete job
description in addition to simple things should be, should be achieved
for the quality of work should also be quantified as far as possible
to regulate its performance evaluation. Job description of the content
must be to protect the buyer can get a better service, also to be able
to retain sufficient flexibility to allow suppliers to play to create
added value work.
5, inquiry projects "offer basis" requirements
"Quote foundation" typically include offer "value"
with the "terms of trade", the domestic trading of
relatively simple, usually in RMB transactions, trade conditions are
not the "ex-works" is to "to factory price (shipping is
included in a separate meeting) "to calculate. International
trade is more complex, most suppliers offer value terms U.S.
dollar-denominated basis, as to whether to purchase the local currency
pricing, exchange rate stability depends on whether or not there is
flexibility in approach.
Terms of trade, international trade, there is usually Ex-Work (ex
works), FOB (FOB), FAS (FAS) or CIF (including the delivery of premium
transportation) and so on, in different conditions, both buyers and
sellers The burden of responsibility for risk is different. FOB, the
seller's responsibility until the goods are loaded up. Therefore, the
seller must bear the risk of shipment, but buyer is responsible for
shipping Ze Xu, sea insurance and other expenses. In the CIF, the
seller must bear the shipment in addition to the risks, but also the
burden of goods to the named port of destination and insurance
required for shipping. Therefore, in the same trade of goods under the
terms of the offer with CIF to FOB terms natural to offer more high,
the buyer inquiry must specify Cheung added.
6, the buyer's "terms of payment"
The payment terms, although both parties have their own company
policy, the buyer wants the payment time for the later the better. On
the contrary, the seller of course is that the earlier the better. Let
the seller understand the buyer's obligation to the standard payment
terms within the company (in the procurement of the mold, usually a
"milestone payments" method, such as the deposit of 30%, 30%
of the first tryout, acceptance of 40%), the seller also offer made in
their different requirements, the final vendor payment terms Zexu set
by the agreement. In case a buyer's market in the competitive market
in the supply exceeds demand, exports and / or services can easily be
achieved, the business tends to lead to prices closer to the economic
strength of the estimated value of procurement, the buyer is usually
able to Alleged to require the seller to meet the payment terms, such
as the "account form (O / A)", T/T60 days or 90 days. But in
a seller's market, because demand exceeds supply of many, the
situation is quite the opposite. Sellers usually prefer a shorter
payment period to the buyer, such as the choice "a cash on
delivery (Cash on Delivery, COD)" or the "advance payment (T
/ T in advance)".
In addition, the payment terms still need to clearly specify its time
calculating the "starting date of payment", in international
trade is usually based on domestic suppliers generally ship date
(Shipping Date), Invoice Date (Invoice Date) or on board Day (On Board
Date) to the starting time of the payment due. Then if the foreign
buyer identified as arrival day (Arrival Date) or to plant on
(Receiving Date) as the starting date, there may be a month apart the
middle of the time, buyers and sellers are cautious.
Procurement specification is a description of quality tools, should
include the most "new version" of the engineering drawings,
test specifications, material specifications, samples, shade guide and
other help to all information providers offer. Engineering drawings
must have the latest version, if the surface can only be used for
evaluation should also be specified when the inquiry. The case of
international procurement, engineering drawings, as if the original
language other than English, such as German, French, Japanese, etc.
should also be accompanied by English translation of the international
common language, bilingual (Bilingual) to facilitate communication
between the form of presentation. If the project drawings can provide
electronic files, you have to ask their suppliers to accept the extent
of the provision should pay attention to the international common file
formats such as DWG, IGES, DXF, PRO / E, etc., to enable suppliers
Drawing conversion. However, while e-mail file transfer, preferably
also be provided with a clearly drawn in the drawing on the work
surface to avoid file transfer may occur when the information missed.
VII, inquiry projects, "delivery" requirements
Delivery requirements, including the buyer purchases products on the
time required, and the seller how much time to prepare samples, the
first small production, single production under normal time, the time
required. Although Ke Yi suppliers to meet the requirements of the
buyer, but relations between the length of delivery of products with
purchase price, the buyer should be requested depending on actual
needs, rather than blindly pursue "timely supply (Just in Time,
JIT).
8, inquiry projects, "packaging" requirements
Package price in the supplier account for a large estimate of a
proportion, in addition to the shape of special or bulky products its
customers, the suppliers have their use for the standard packaging
cartons, boxes and pallets and other packaging materials. If there are
no other proposed special packaging requirements, suppliers will be
their standard way of packaging the valuation. Sometimes the
quotations will not specify the standard package detailed way, when
the procuring If they failed to detect the recurrence of additional
packing requirements, not only time is delayed, the parity of the
operation will be adversely affected. In addition, suppliers to
understand the buyer's packaging requirements, can also provide advice
to consider whether the standard package, or to fight the way cargo
container fight to reduce shipping cost.
9, "delivery locations" and "delivery approach"
State transportation location, city, address, and telephone and fax
must be clearly told suppliers. Manner of delivery of domestic trading
often rail, highway-based, international procurement, delivery
location and delivery method determines the price calculation. If you
ask the seller to come to CIF quotation, whether by sea or air, of
course, transport costs and insurance premiums borne by the seller.
With the distance of transportation have different billing methods,
except the designated airline of the buyer, the supplier usually based
shipping offer, because the ocean is the most economical way of a
delivery.
10, inquiry projects, "service" with the "guarantee
period" requirement
In the procurement of some equipment such as punching, plastic
injection machines, test equipment, semiconductor packaging equipment,
suppliers typically provide basic after-sale service and warranty
period. If this time has special requirements, such as the requirement
to extend the warranty period, or change the contents of after-sales
service, etc., involved in the procurement of their "total cost
of ownership (Total Cost of Ownership, TCO)".
11, the supplier of the "offer due date"
To facilitate the procurement of parity operation schedule, quote
expiration date so that suppliers should be understood that the more
complex products, suppliers should be given sufficient time to carry
out the valuation.
12, "confidentiality agreement" and sign documents
New product development in inquiry, due to business confidentiality
reasons involved in the external inquiry to prevent competitors to
know when the missed opportunities, will further enable suppliers to
sign a "Confidentiality Agreement (Non Disclosure Agreement, NDA
) "document, available on request in a standard number of years
companies are not going to name the new product planning, purchasing
volume forecast, inquiry technical requirements, specifications,
Tumian more information disclosed.
13, "procurement officer" and "technical staff" of
the name and contact
To "procurement officer" and "technical staff" of
the name and contact suppliers told not to take the initiative to
suggest what dark disk supplier need, then, because if purchased item
is complex and technical, is best accompanied by technical personnel,
the names and contact telephone companies for their advice, to clarify
the specification problems. Contact phone number for the company's
telephone is appropriate to avoid the procurement staff or technical
personnel to home or personal phone number in order to prevent
suppliers may give and accept each other in private, there are highly
suspicious of the suspects. However, due to advances in technology,
mobile phone, e-mail use has become increasingly common, buyers and
suppliers in hard to avoid contact individual cases, procurement is
also the moral integrity should always be alert attention.

Negotiations should be based on cost rather than price as the center
Cost-based negotiation can produce the good agreement. Pre-negotiation
preparation is the key to victory. Price negotiation and supplier not
only to reach a consensus on costs, profits depend on whether both
sides are satisfied. If you want to cost-based negotiations, an
agreement must be about several aspects: First, a thorough
understanding of the composition of supplier costs. Second, there is
sincerity and desire to share these costs. Third, the understanding of
the industry norm. Fourth, set the target price.
Understand and explore the key elements
To understand the supplier's cost structure, should make the cost
classification and cost analysis, which can help supply management
staff to set fair prices. Costs include direct costs, indirect costs,
and general administrative expenses. Direct cost and direct labor
hours and direct material costs; indirect costs can be divided into
project running costs, the daily cost of materials, production running
costs. Sometimes the cost can be divided into two kinds of fixed and
variable costs.
Trust and loyalty is very important
Full trust and cooperation of supplier costs and prices of the second
important factor. If able to do this, suppliers are often willing to
show it to the Purchaser the accounts of view, of course, sign a
confidentiality agreement in advance. Another advantage of mutual
trust on both sides to discuss the possibility of cost reduction, cost
reduction through the transformation of products or processes to
achieve, which is also known as value engineering.
Development of target price
Lastly it is important that the purchaser must understand where the
industry suppliers and related products and services, cost
information, so before negotiations can be estimated in each other's
costs and possible price. The supplier industry is also critical
understanding of the degree of competition, how many businesses offer
similar products? Whether a product is only a very small number of
suppliers? Which directly affect the supplier's profit margins.
Adequate preparation is the key to successful negotiations
All of the above factors help supply management staff in the
pre-negotiation to establish a target price. If the relationship is
open, then, that the target price will soon be bringing the two sides
reached a win-win agreement, as soon as the buyer can estimate the
expenses. Be noted that the target price must have data support,
supply management personnel preparatory stage in the negotiations
would end collection.
The actual negotiations
To pre-determined time and place, venue arrangements should not be
hostile, to remember both sides should be the winner. Negotiations
started first set of guidelines that help establish the boundaries of
the negotiations. Such as "In the beginning I would like to
review before the current situation, and we aim to give an overview
of" opening, help both sides understand each other in the very
beginning. Once done the above points, your negotiations have been
half the battle. Level of understanding of cost factors and
information critical to the success of the negotiations mining,
preparation will make each step of a percent more chance of success.



Reduce procurement costs
Purchase of raw materials or services is a complex multi-step process.
First of all, buyers are looking for suppliers of production of the
product and decide whether they can meet the volume, delivery, quality
and price requirements. Once finding potential suppliers, they are
bound to carry out a detailed and supplier information exchange to
ensure that the product can really meet the customer's technical
requirements. Assume that product samples have been confirmed, the
supplier of production lines have been well prepared, buyers need to
purchase a certain number of items in the order given. At the same
time, the purchaser obtained from the supplier sent a reply letter,
order confirmation has been received and asked to meet. When the
product shipment, the invoice with the delivery of goods, the
purchaser will be notified. Purchaser's accounting department to
verify orders and invoices, and payments. If the majority of the
company's day to day procurement activities of the frequent changes,
then this process will be very complicated. Companies get discounts
through bulk purchase, develop relationships with key suppliers to
reduce procurement costs, so you can benefit from volume discounts.
Meanwhile, manufacturers continue to weave a network of low-cost
supplier to reduce costs.
Internet have the potential to reduce procurement costs. Through
dedicated networks of large companies has been lower communication
costs. For new suppliers and small suppliers, the Internet, there are
many business opportunities, these companies used to only communicate
by fax or telephone. Internet reduces the cost of the retained
business from potential purchasers the opportunity to say that small
companies to benefit.
In the past, Ministry of General Electric Lighting Company of all
plant materials sector to be submitted every day hundreds of low-value
goods requisition. Each collar material, warehousing sector require
photo paper, these drawings from the library to find information out
to people in need, copy, folded, attached to the requisition, the load
envelopes sent. This process would take at least 7 days, and this
process is very complex and time-consuming, the information sector is
usually one can only give two or three suppliers to send these
materials.
In 1996, General Electric Lighting Division at the company first set
up an online procurement system, TPN Post - a kind of General Electric
Information Services by the Department of Development Extranet. Now,
the information sector came through the network to receive the
company's requisition, and then to more information through the
INTERNET package sent to the supplier all over the world the hands of
producers. Automatically receive matching drawings and electronic
materials table. Within two hours, can suppliers around the world via
e-mail, fax or EDI received instructions to be material. General
Electric Company are suppliers bid in the day, General Electric may
have to make decisions.
Previously, there is a need for four invoices issued by side with the
nuclear inspections, but also check with the orders and invoices. Now,
the transaction from start to finish is handled electronically,
electronic invoices and orders will be automatically checked, and the
whole process is given prompt any changes.
According to the report of General Electric, sector procurement of
labor costs fell by 30%. 60% of the procurement staff have made
adjustments accordingly. Information department at least eight days a
month can increase the time for strategic issues rather than copying,
stuffing envelopes and the like work.
Being able to access through the network to more suppliers, increased
competition and lower prices to supply, and this material cost
declined by 20%.
First, reduce inventory
A company to arrange for delivery of the longer, the more it needs to
inventory, customer response to changes in demand more slowly. The
more a company's stock, the higher operating expenses, profits are
lower. Meanwhile, a large number of stocks does not necessarily
achieve the purpose of customer satisfaction. Shoe rack filled with 42
yards on the shoes, in any case can not meet customer needs 40 yards
shoes. A furniture showroom in the green-white striped deck chair
looking customers were told must wait three months, he had better turn
to other options must be firm and not Shadeng home. Effective
management of inventory can not only improve customer satisfaction and
reduce operating costs.
Increase the inventory turnover rate can be reduced and
inventory-related interest, handling and storage charges. Reduce
inventory levels also show that the existing capacity can be more
effectively utilized. Effective capacity utilization can reduce or
even abolish the need to expand production capacity due to the plant
and equipment investment.
IBM Personal Systems Division of the examples of the company,
effectively illustrates the Internet network or special network, how
will the company reduce inventory and better meet customer needs. Each
month, the department should they envisaged the number of personal
computer information to report the sale and production departments to
determine each plant's manufacturing and material reserves. On
company-wide demand and supply of inputs to understand clearly, the
production plan will be next to each plant. Purchasing the same
information and supplier negotiations. As new information every week,
repeat the process, the production plan just right.
Factory, marketing and purchasing departments of electronic
communications makes it possible to respond quickly to each other. If
demand suddenly increases, or a plant's capacity can not meet the
production plan required, IBM will be able to realize immediately is
to increase the production of another plant time.
Personal Systems Division since 1996, began the establishment of the
Advanced Planning System (APS), and scored good results. APS first
year of implementation, inventory turns increased by 40%, sales
increased by 30%. The department forecast, inventory turnover in 1997
will increase by 50%, sales will increase by 20%. Through more
effective use of existing capacity, IBM will need to invest to meet
increased production requirements. By reducing investment and increase
cash flow, has saved 50 million U.S. dollars.
With CPFR, retailers and suppliers are given the list of its latest
product demand forecasts. Connected to the Internet server to this
demand and to compare the usual inventory to see if more than 5%. Over
in part by the planner is responsible for the retail and supplier
coordination between. To make this process as simple, software
companies are actively developing an automated processes ¡¼45¡½.
Financial consulting firm Ernst & Young believe that CPFR can to
reduce the economy's stocks about from 2.5 to 3.5 trillion U.S.
dollars between. By reducing inventory, companies can in material
costs, warehouse costs and general administrative expenses occupy
significant savings on

								
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