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How Purchasers Can Increase Productivity

Procurement professionals, like engineers, are being asked to do more with less. (See Improving Efficiency in the Supply Chain.) As companies examine every expense with an eye toward improving the bottom line, buyers have to account for every cent they spend and where they spend it, and determine whether they are getting the best value for the expenditure. Procurement plays a significant part in a company's overall cost strategy.

“What we have found is that e-procurement, in particular, has become a strategic initiative for a lot of organizations,” says Dianne Kibbey, global head of community and e-procurement for catalogue distributor {complink 12800|Newark}, in a phone interview.

“The issue is to drive down costs, get better visibility into component spend, better linkage with suppliers, and visibility into supplier performance. [Buyers] also have to make sure every department that is affected by e-procurement has access to the data procurement has compiled,” Kibbey says.

Procurement tools and systems have made this process easier, but most require a significant investment on the part of an OEM. Small companies can't afford full-blown ERP systems, and small suppliers can't invest in proprietary links every time a customer wants an electronic (typically electronic data interchange or EDI) relationship. So the Internet and now the cloud are being used to cost-effectively link into these systems without proprietary links and firewalls.

“There's been a huge effort over the past five or six years to implement robust ERP systems that link several business units and different departments and put spend analysis data into a single system,” says Kibbey. “Those systems typically take two to three years to implement, and what you are seeing within the past couple of years, due to the economy, is customers saying, 'We don’t have millions of dollars to invest, and we don’t have two years to implement and integrate. We need a system that is easy to use and not put behind the firewall.' ” In other words, plug-and-play e-procurement.

Newark has developed its own e-procurement tool, iBuy, and offers it for free. The catalogue distributor, part of the {complink 12895|Premier Farnell plc} organization, engages with its customers in any and every way customers want to engage. The free tool, however, is bringing more business to Newark. Customers are consolidating their component spend under the Newark umbrella. Instead of buying components through supplier sites or one-on-one proprietary links, those purchases are being funneled through iBuy. Customers still buy from the same suppliers, only though a single site.

The tool allows users to set parameters such as approved vendors; part numbers; price; other users who can view purchase orders; the spend-approval process; and other data that can automate the purchasing flow. iBuy can also be programmed to reflect the customer's contract price with the supplier rather than Newark's catalogue price. “Because we represent so many different manufacturers, customers are saying, 'Where I used to buy this type of component from this supplier and Newark,' now they can quote that category of spend through one centralized tool,” explains Kibbey.

Newark has one customer, Crane Aerospace and Electronics, that has increased its business with Newark by more than 70 percent. “They used to buy through one source and then another source, and there is so much spend to track with those suppliers that it's hard to manage all that financial data. They can get the same components from Newark, and there is direct visibility into that spend.”

iBuy has 3,500 companies using it with multiple users within each organization. Users range from small labs and design firms to EMS companies.

Leveraging purchasing tools can help buyers automate their purchasing workflows and reduce the overall costs of procurement. Kibbey will host a Live Chat with EBN editors and readers on Tuesday, April 26, at 2:00 p.m. EDT, to discuss how companies are leveraging tools such as iBuy, at this link: Reduce Procurement Costs Without Spending a Cent.

5 comments on “How Purchasers Can Increase Productivity

  1. Jay_Bond
    April 21, 2011

    It sounds like Newark has found the right set up for any sized company. Their system sounds like it not only speeds up the process of ordering but also makes things a lot easier to track overall expenses. This tool helps Newark in sales and also helps the companies save time and reduce costs. I can see other companies trying to use this as a model to make an easier system for themselves.

  2. Tim Votapka
    April 21, 2011

    Great info on productivity. Let's keep in mind that every department plays a key role in driving productivity gains, and there are some very simple ways that mindset can be applied without a hammer. One such tool we've found highly successful is Management by Statistics, a software program that allows managers to measure and track key activities throughout the organization and determine by graph what the operating condition of each area is week to week.

    When done standardly, the program creates an objective view over the business and the guidelines that spell out what to do to promote further gains.

  3. t.alex
    April 22, 2011

    In fact e-procurement system like the one offer by Newark is a smart strategy. If the tool is appealling enough, small companies will start using it instead of purchasing a separate ERP system. Newark, with the reports from this tool, can capture the demand of the markets. Of course, certain things such as terms and conditions for customer information have to be put in place to avoid leaking of confidential stuff.

  4. Himanshugupta
    April 25, 2011

    I am also of the opinion that privacy can be of concern here. If a company does not want to disclose what it is buying and what price it is paying then using such a tool can be a risk. However, it is good tool for small, mid or large company to keep cost per part or device in check. This e-procurement can be made smarter by building a search engine which automatically updates the prices offered from different manufacturers.

  5. stochastic excursion
    April 25, 2011

    Large-scale purchasing by companies such as the big box retailers, Walmart, Costco, etc., have led them to standardize their supplier labeling and billing.  For a buyer with a significant portion of a vendor's market share, it can be worth automating shipment systems to comply with these buyer-specific standards.  This seems to be the trend in the industry and as it moves forward we will no doubt see refinements.

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