Going Lean: Eliminate Vendor POs
PowerShift's supply chain feature replaces the purchase order with a release schedule that summarizes requirements for items from a vendor for the foreseeable future. Developing a supply chain relationship with your biggest suppliers results in better prices, reduced inventory, shorter processing times and less paperwork.
The release schedule is formatted like a spreadsheet: a row for each item required and columns that show how many you'll need and when you'll need them. For each vendor, you determine the amount of time covered by each quantity, with close-in quantities covering a much shorter period of time than those scheduled in the future.
Early on you negotiate how the material will be scheduled and what the scheduled quantities mean in terms of your contract with the supplier. The release schedule might show required quantities by day for the next week and as you go into the future, requirements could be by week, month, or even quarter.
In the short term, the release schedule is the same as a purchase order: a contract to purchase a specified quantity at an agreed upon price. Future quantities may be for planning only: you’re giving the vendor a heads-up about your anticipated requirements. For each of your suppliers, you determine how often you generate a new release schedule. If you are lean and running just-in-time, daily release schedules may be the way to go.
Sales orders can revise your requirements with the vendor. Let’s say you sell something that has a paint color. You forecast 50% red, 30% white and 20% blue, but when the sales order comes in, it’s all for blue. The volume is the same, but the color is different. Similar things can happen when dimensions are involved: you need the amount you forecast, but the mix of sizes the customer ordered is different. The release schedule adjusts accordingly so what you receive from your vendor is what you actually need.
This sample vendor release schedule is set up with daily then weekly periods; color coding highlights past due releases and those that increase your commitment to the vendor.
The supply chain feature enables buyers and planners to spend less time cranking out purchase orders and more time sourcing, negotiating prices and expediting product. Once the infrastructure is in place for your supplier to work from the emailed release schedule, the ongoing cost is extremely low.