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It All Starts with Buyers: Supplier Performance and Inventory Optimization

Standardizing Supply Chain Workflows for True Inventory Optimization

How to Systematize Buyer and Supplier Performance to Improve Efficiency?

Of the thousands of moving parts and hundreds of different roles across the supply chain, few are more directly impactful to the bottom line than that of the buyer. If buyers are successful, on-time delivery improves and inventory capital is reduced. If they fail, the company can experience enormous financial losses due to shortages, work stoppage, and days of “firefighting.” And like many critical business roles, buyers’ days are so full that work often bleeds into evenings and weekends.

The long hours and overwhelming workload can easily lead to human bias and error, which can potentially cost the company millions. Often far too much is expected of buyers, but many people many not fully understand just how challenging their work is. Let’s take a look at the morning of a typical buyer in a global supply chain. Remember, this is just a morning – we’re not even getting past lunch!

Meet Blair Buyerson. Blair works for a global trucking manufacturer. Her responsibilities are hands-on and don’t allow her to step back and see overarching trends in the company. Her focus is on completing the high number of tasks in front of her so she can go home at a decent time every night.

Blair gets a high number of emails and phone calls, and at many times fields requests from two or three different superiors. Very little guidance is given in the form of priorities; she’s simply told to do everything and do it now.  Due to the Bullwhip Effect, even the slightest shift in demand causes Blair’s workload and stress level to increase significantly. ERP exception messages fill her workload with no clear prioritization. The only way to complete all of her tasks is to work longer hours in the evening or on weekends.

Needless to say, Blair is not happy about any of this.

8:00am – ERP Exception Message Overload

Blair’s day starts around 8am with a cup of coffee and about two hours of cutting POs. This process is quite labor-intensive. It involves using Planned PO reports from the ERP, contacting suppliers directly, and then manually cutting POs in the ERP. Confused yet? Not surprising.

Blair follows a different set of steps for each part of her workload, and none of those processes are standardized across suppliers, item groups, or even individual parts. Her fellow buyers have created their own set of steps for each task and there is little collaboration.

The company depends on Blair to make smart buying decisions fast enough to be profitable. She needs a deep understanding of demand and how it informs her buying decisions. But it’s not hard to see how a long, manual process with this many steps can easily lead to mistakes.

Blair is able to cut between 25 and 40 POs every day. Pretty good, right? But the problem for Blair is that every day she receives between 150 and 200 ERP exception messages identifying parts to buy. Yikes! With these time constraints and a limited ability to prioritize action messages, how can Blair order the most critical parts at the right times? How can she be sure to avoid excesses or shortages? Her backlog is so large that she works eight hours many Sundays doing nothing but cutting POs.

ERP exception messages consume much of Blair’s work life. She remains inundated and overwhelmed by their volume and lack of prioritization. She wants to make decisions that improve the company’s profitability, but she is left grasping in the dark as she attempts to prioritize and streamline her work.

10:00am – Supplier Performance Challenges

Now that Blair has cut as many random POs as she can, she shifts her focus to managing Push/Pull exception messages. Again, her time is consumed with manual spreadsheet manipulation that take weeks to complete. There is always a backlog of PO cancellation messages, many going back at least six or seven days. Blair sends cancellation requests to suppliers via email or sometimes by phone. The suppliers then process these spreadsheets over the course of a week. From 10:30 to 11:00, Blair begins manually entering PO changes into the ERP system, one-by-one.

Like other ERP exception messages, Blair has no effective method for prioritization. She’s mostly guessing at which are the most valuable. She needs a better tool – one that uses ERP data and prioritizes exception messages according to dollar value. She needs better collaboration with her suppliers so that PO changes don’t require a two week turnaround. And she needs tools that enable her to make decisions quickly and accurately in the midst of changing demand.

11:00am – Meeting Time: ERP Exception Messages & What to Do With Them

Blair heads to a staff meeting with her managers and other buyers in her company. Their focus is on reducing the total number of exception messages. Unsurprisingly, the meeting revolves around more spreadsheets, used by her managers to show how many open exception messages each buyer has. With thousands regularly left open, her manager’s main strategy is to simply focus on reducing the total number of messages across the company. Unfortunately for them, even if they could reduce the number to zero, it would be too late.

The slightest change in demand can cause a cascade of ERP exception messages to hit a buyer’s inbox. The buying team is doing their best to manage inventory in a profitable way, but without smarter demand management capable of forecasting and predicting, it is not always clear what best next steps are. And even if good steps were implemented, the lengthy process means that demand has likely changed at least a few times before the effects of Blair’s work can be felt.

Blair’s team of buyers are dedicated, but they lack the tools needed to accurately forecast and address inventory challenges ahead of time. Focusing only on the volume and aging of messages rather than their value leaves her team guessing at which action items to address first. And it leaves them working dozens of hours of overtime on inefficient processes. Hours are long, stress is high, and the best information they have to work with is a graph showing past trends. This process is inefficient and leaves open many opportunities for error or bias. Blair’s hour-long meeting ends with more of the same frustration and overwhelming workload. And even worse, she knows that she’s going to have to skip lunch to continue processing exception messages. Then, maybe, she’ll be able to make it home in time for dinner.

8:00am Coffee and Exception Messages Prioritization Review

Blair enjoys a cup of coffee while looking over a list of exception messages that have been automatically prioritized according to real business value by LeanDNA’s artificial intelligence and analytics. She see predictions of future opportunities and a specific list of tasks that will provide the most savings. Instead of guessing, Blair ensures that high-value tasks are not missed or delayed.

9:00am Supplier Performance Focus: Ensuring Customer Demands Are Being Met

The suppliers Blair works with are able to communicate with her all from the same place, which allows them to collaboratively problem-solve issues like shortages while providing visibility to the entire team. Blair and her suppliers receive status updates via the same shortage report, which makes collaboration simple and streamlined. Since Blair has a forward-looking tool, she can make faster and smarter decisions that keep inventory levels low without causing shortages for the company.

Additionally, Blair uses automatically generated scorecards that evaluate the delivery performance of her suppliers. This allows Blair to better place purchase orders and ensure inventory arrives in time for production, while also keeping suppliers honest. The supplier scorecards also identify which POs are arriving early or late so she can work with suppliers to improve on-time delivery performance. She is able to accurately estimate delivery lead time and implement better SIOP processes.

Blair’s job now involves significantly less firefighting, which means she is free to focus her energy on finding ways to do her job better.

11:00am Inventory Optimization Across Suppliers, Across the Team

And it goes beyond Blair -her entire team has visibility and standard practices for the work they do. Everyone now uses the same reporting system, and reports are available in real-time in the cloud. Gone are the days of using a different report for each meeting or using outdated information to attempt to make forward-looking decisions. The most critical information is available to the right people at the right time, making their decisions smarter, faster, and more profitable. Blair can determine what inventory she needs and easily work across the entire buying team to avoid shortages and minimize inventory.

LeanDNA makes Blair’s work life less stressful, and it simplifies her processes in ways that BI tools and manual spreadsheets simply can’t. Instead of spending hours putting out fires every day, Blair is able to see shortages and excesses before they occur and implement steps to eliminate them. She can collaborate with fellow buyers to alleviate shortages at one site using excess inventory at another. LeanDNA doesn’t just show her past trends; it provides steps for improvement.

The Moral of this Supplier Performance Story

Blair Buyerson is like many buyers in complex supply chains. She’s overwhelmed by the work volume, yet is expected to deliver profitable results. She fields requests from multiple superiors and attempts to stay organized in the face of numerous manual and ad-hoc approaches to the buying process. LeanDNA gives her and her team a single standard of work with powerful tools that actually support her day-to-day efforts. AI-backed predictive analytics guide buying decisions and the platform makes it simple to collaborate with suppliers and team members. Instead of hours spent putting out fires, Blair is able to get ahead of changing demand.

Blair’s role is the tip of the spear. Buyers have the ability to directly impact the bottom line with every decision they make. Yet, like many supply chain buyers, Blair is not given the most effective tools for enacting improvement. She’s stuck in the past and overloaded with manual work that makes it impossible to think about the bigger picture. “Spend more hours” is not an effective improvement strategy.

Are your buyers equipped to make decisions that improve your company’s bottom line? Are they given the information they need to make forward-looking decisions? Or are do they spend their days putting out fires and their weekends catching up on exception messages? Can they collaborate with suppliers and other buyers? Are their reports up-to-date?

How to Achieve Inventory Optimization with Improved Supplier Performance

For more about how transforming the daily lives of your buyers and supplier performance can transform your entire organization, download our white paper “The War on Supply Chain Talent.”

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