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Best Practices for Purchasing and Materials Management Presented at ASUG 2015
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Transcript of Best Practices for Purchasing and Materials Management Presented at ASUG 2015
Keith TaylorBest Practices for Purchasing and Materials
Management Session # 3673
Over 30 years of purchasing, materials management and operations
22 years with a large manufacturer of truck mounted sewer cleaning equipment
20 plus years experience implementing business systems and helping companies improve their efficiencies and bottom line through Business Process Improvements
Certified SAP Consultant on all versions since 2004. SAP Gold level partner since 2004
Background: Keith Taylor
What is Purchasing and materials management?
Make technology work for you
Establish, monitor and follow Department Goals
Data Integrity
Requisitions and Purchase Quotes
Purchase Orders and Purchase Order Acknowledgements
Expediting Purchase Orders
Key Discussion Points / Agenda
CRM and now VRM
Focus on TCO (Total cost of ownership) not just cost
Vendor Performance Reviews
Materials Management and using MRP
Managing Inventories – what reports to use?
Vendor Managed Inventory (VMI)
Key Discussion Points / Agenda
“If you think you are working hard to obtain information or something is hard to do in or out of B1 then there is probably a better way or there should be a better way.” Keith Taylor
Misconception is that just purchasing an ERP solution will solve all of your purchasing and materials management problems.
Your ERP solution is a “tool” that enables materials management to be successful.
Make Technology work for You
When working “hard” it is generally because you are working defensively instead of being proactive.
Examples:
Waiting for someone to tell you to order something instead of using data from the ERP system to do so.
Waiting for someone to tell you to expedite an item
“Bad” data in the ERP system
Make Technology work for You
What are the fundamental duties of Purchasing and Materials Management?
To supply quality material, products, and services at the right time and the right price.
Purchasing & Materials Management
Cost savings by buyer / product line or other metric
Vendor Reductions – the more vendors you maintain and use the higher your costs
Vendor on time delivery improvements
Vendor Quality improvements
Inventory reductions based on inventory turns, inventory aging, total value
Establish Department Goals
Many companies set department goals but surprisingly many of these same companies do not have a way to monitor and determine if the goals have been achieved.
We are going to explore some ways to measure and monitor that help you pro-actively manage the purchasing and materials departments
Measure / Monitor Department Goals
Clean up and use your data in SAP
All users of the ERP system share the information
Vendor information including contacts, phone numbers, email addresses, etc.
Accurate items and bill of material information
Accurate inventory data
Without accurate data you will work harder
Data Integrity – Best Practices
Now that SAP has them when do you use them?
Sometimes used in conjunction with dollar amount restrictions
When you need a record that someone wanted you to purchase materials or other items that you cannot justify in SAP by running MRP or other reports
If using MRP - recommend that you only create purchase requisitions for the special materials needed or for supplies and similar products.
Purchase Requisitions – Best Practices
Now that SAP has them when do you use them?
Sourcing New items
Sourcing new vendors
Use special prices for Business partners to record costs for your vendors and items
Fairly easy to use transaction notification in SAP to update special prices when you record the costs from a purchase quotation
Purchase Quotations – Best Practices
While negotiating with your vendors or proposed vendor convey your policies and procedures to your vendors.
Review your forms with the vendor and make sure they clearly know what each field means.
Use for all purchases
P-Cards
Purchase Orders – Best Practices
Contract to the vendor stating all terms and conditions.
Print buyer, phone number, extension, email, fax, etc. on all documents using the Document owner or buyer field on the PO screen
Show part numbers on the line items and include your item number and the vendor’s item number. Include due dates and all pertinent information.
Purchase Orders – Best Practices
Train your vendors to acknowledge receipt of your purchase order.
Verifies that the vendor received the PO AND that they agree to all of the terms and conditions of the order.
Notation on the purchase order “Please acknowledge receipt of this purchase order including all pricing, delivery, terms and conditions to the buyer below”.
Purchase Orders – Best Practices
Update PO with acknowledged date
Verbal purchase orders lead to errors and disputes.
Send or confirm the PO in writing using email. It is free and now easier then ever to do using the auto send email features of SAP B1 version 9.1
Purchase Order Form
Purchase Orders – Best Practices
Never place a purchase order without a cost. There is no reason to do this. A PO without a cost or terms basically tells the vendor charge me what you want, delivery it whenever and don’t worry about meeting any specifications.
Purchase Orders – Best Practices
User defined field on Purchase Order “Acknowledged” (date type)
When vendor confirms go to the purchase order and enter the date – change any other requirements on the purchase order that the vendor modified such as cost, dates.
Create an alert for each buyer based on the doc owner field showing all purchase orders that have not been acknowledged.
Buyer to follow up daily – goal is the alert is not received meaning all PO’s have been confirmed and acknowledged
Purchase Orders – Best Practices
Most companies do not expedite pro-actively. Why wait to have someone like the BOSS tell you it is not here. You know this already!!
Create an alert to run automatically and send to each respective buyer showing PO’s that are late based on the PO Line Due Date
Can also use similar logic to send a list of purchase orders that are due next week to make sure that everything is still on target.
Purchase Expediting – Best Practices
PO’s placed and sent daily
PO receipts performed in the warehouse using warehouse personnel
PO Receipts performed daily – you do not know what is late if these are processed the next day, once a week, etc.
AP Invoices – costs and information should match what your vendor acknowledged. If not call the vendor return the invoice, etc.
Transactions – Best Practices
CRM is commonly used to keep track of important events on the sales side of the house.
Use VRM to keep track of important events in purchasing.
Create Activities and use for areas such as Expediting, quality issues, Performance, etc.
If you use activities for purchasing it is fairly easy to conduct vendor performance reviews
VRM – Best Practices
How do you determine what to purchase now? Surprisingly, many buyers still run an inventory report to determine what they need to purchase.
Min/Max, Safety Stock, Forecasts, sales orders –which one(s) should I use to tell me what to purchase?
Depends on the type of company you are, for example:
M2O (make to order or job) - MRP using many of the item master fields such as min, SS, Sales orders, Production orders, forecasts
M2S (make to stock) – forecast, min/max
Materials Management – Best Practices
Often Buyers say my vendors are stocking material for us. VMI is a perfect candidate for these vendors and others.
Material is in your warehouse. The vendor owns it not you. No cash flow or taxes issues.
Have seen examples of the vendor supplying their own personnel to distribute the material
Eliminates excessive freight costs for rush service.
No cost until material is used
Vendor Managed Inventory – Best Practices
If standard report does not exist for you develop the reports and / or queries to tell you what you need to know when you need to know it.
Inventory Audit Report
Inventory Audit Query
Inventory Aging Report
Inventory Tools – Best Practices
ABC Analysis
Query / Alert of Items below minimum or safety stock
Excess inventory on hand – often returnable to vendors if it is caught quickly. Run queries, reports periodically at least every 6 months to catch these items.
Inventory Tools – Best Practices
New vendors
New Items
PO receipts for the previous day
Open Purchase Quotations
Other Queries / alerts – Best Practices
Cost Reductions – fairly easy to monitor by creating a price list at year end with your last purchase cost and then you can compare purchases for a particular year against the saved price list.
Sourcing – Is your purchasing department placing purchase orders or truly sourcing products?
Measure / Monitor Department Goals
Inventory Reductions – using reports such as:
Item Usage / Sales by Month
Inventory Turnover Analysis
Measure / Monitor Department Goals
Supply your vendor with a report of all purchases for the last year or measurable period of time. Easy to supply the data with a query or Purchase Order Analysis report
Review late shipments. Easy query of receipts showing the date the material was supposed to be here compared to the actual PO receipt date.
Review quality issues using the activities you created.
Review forecast if any for next period.
Vendor Performance Reviews
Best Practices for Purchasing and
Materials Management
STAY INFORMED
Follow the ASUGNews team:
Tom Wailgum: @twailgum
Chris Kanaracus: @chriskanaracus
Craig Powers: @Powers_ASUG
Presenter: Keith Taylor @KeithTaylorLBSi
Please provide feedback by completing a short survey at the end of
the session.
SID# 3673For ongoing education in this area of focus, visit www.ASUG.com.
Follow us #ASUGB1
My contact information: Keith Taylor, [email protected]
Follow me on twitter @KeithTaylorLBSi