What are some ways to align procurement strategies with production goals?

Understand Production Needs: Clearly understand production requirements to guide sourcing. Strategic Sourcing: Choose suppliers that meet your quality, quantity, and timing Supplier Collaboration: Work closely with suppliers to ensure they align with your production schedules and quality standards. Risk Management: Identify supply chain risks affecting production and develop contingency plans. Continuous Improvement: Regularly adjust procurement strategies based on production feedback. Performance Metrics: Use metrics to evaluate procurement’s effectiveness in supporting production. Cross-functional Teams: Form teams across departments to ensure cohesive strategy execution.

It all starts with accurate planing , or even near to accurate. Due diligence to assess your place and available options. Putting options and work arounds to mitigate any risk. Validate your plan periodically to make sure you are on the right track.

One thing I have found helpful is to talk to receiving section and issuing section in a factory setup on a regular basis. They touch all the products coming from all the suppliers and provide good information to buyers and planners. This information in most cases is a quick win and is left unnoticed by operational buyers as they are busy firefighting on other fronts They also seem to be the most resourceful in understanding the real urgency vs created urgency on a production shop.

1. Collaborative Planning: 2. Strategic Sourcing: 3. Supplier Relationship Management: 4. Just-in-Time (JIT) Inventory Management: 5. Demand Forecasting and Planning: 6. Risk Management: 7. Total Cost of Ownership (TCO) Analysis: 8. Lean Principles: 9. Technology Adoption: 10. Continuous Improvement:

Some additional examples of areas of consideration would be opportunity to regionalize, total cost of supply, opportunity to dual source, complexity of the material for both multi-tier source mapping as well as difficulty in replacing those sources should the need arise. You need to understand the suppliers business and how well they align with your own. The ownership of a company alone can determine your management strategy before you even make it to the onsite visit to assess people and operations firsthand. The assessment phase’s importance cannot be overstated and requires constant vigilance for updates. The right research in this area can be incredibly rewarding.

Defining procurement objectives is crucial for ensuring efficiency and effectiveness in supply chain management and this can be achieved by; 1. Understanding the production goals first 2. Ensure clarity and measurability. 3. Collaborate with production teams Just to mention a few.

It's all about collaborating with the production team, implementing strategic sourcing processes, using data and analytics, developing KPIs, investing in supplier relationships, collaborating on inventory management, and embracing technology

These objectives should be SMART: Specific: Drill down and target specific procurement areas for improvement. Measurable: Define what success looks like and how you’ll quantify it. Assignable: Specify who will take ownership of each goal. Realistic: Be ambitious yet realistic, considering time and resources. Time-based: Set clear timelines for achieving results. For instance, if your production goal is to increase output by 10% in the next quarter, your procurement objectives might include reducing material costs by 5%, enhancing supplier quality by 10%, and trimming delivery lead times by 15%. Remember that effective procurement strategies contribute significantly to overall organizational success when aligned with clear objectives.

In my view although collaboration is very very important between departments (production, marketing, after sales, quality, R&D etc.), but when defining procurement objectives emphasis should be to align with company's business objectives, if for some reason you align it to a particular department (eg. Production or Marketing), it is actually the other department objectives in procurement language.

In my experience, manufacturers often struggle with the disconnect between internal technical teams (such as production, maintenance, logistics) and the procurement department. The challenge arises from these areas being measured by different metrics. While technical teams focus on quality, ROI, and after-sales service, procurement leans towards price, payment terms, and delivery timelines. Aligning these areas with shared metrics is essential to prevent future technical gaps and secure the best deals for the industry.

In the development phase of a procurement plan we need to put everything on the table. Who are the suppliers in this space? How long is the supply chain? (Who supplies your supplier and so on) Do we need to localize supply? Are there regional risks? Where is the balance of power in the relationship or this category? Which suppliers are publicly versus privately owned? How complex are the parts we are sourcing and how critical are they in our build? What contracts do we already have in place? All stakeholders need to be present and actively participating. Procurement might own and manage the plan but the entire team’s knowledge and expertise is needed to create a comprehensive and effective strategy.

Overall, S&OP serves as a strategic framework for aligning procurement strategies with production goals by... 1) Demand Forecasting: By accurately forecasting demand, procurement teams can anticipate the quantity and types of materials needed for production, allowing them to align procurement strategies accordingly. 2) Capacity Planning: Procurement teams can use this information to ensure that the necessary materials are available to support planned production volumes, avoiding shortages or excess inventory. 3) Collaborative Planning: Procurement teams actively participate in these collaborative planning sessions, contributing insights into material availability, lead times, and supplier capabilities.

Having been in Manufacturing, I strongly emphasize the need to have a procurement plan especially in acquisition of materials. It is important to have a cross functional team that develops the plan. This has to include, Procurement, Finance, Production, Sales and Stores. This helps in ascertaining the quantities to be acquired vis-a-vis the available holding space (Stores). The daily average consumption, (Production). The available cash-flow to settle due invoices, (Finance). Which specific suppliers to engage, (Procurement). Average sales targets within a particular period, (Sales)

Here are key elements to include in your procurement plan: Scope of Purchases: Clearly define what falls within the scope of your procurement activities. Acquisition Methods: Specify how you’ll acquire goods or services. Budget for Purchases: Ensure alignment with overall financial goals. Purchase Timeline: Set deadlines for each procurement activity. Procurement Team: Identify the team responsible for executing the plan. Collaboration across departments is vital. Performance Metrics: Establish KPIs to measure procurement effectiveness. Monitor cost savings, supplier performance, and process efficiency. Risk Mitigation Strategies: Anticipate potential risks and outline strategies to mitigate them.

Procurement's role in production's success cannot be understated. In an FMCG environment, a well run inbound supply chain can allow production to focus on their goal : controllable cost and service! - Helping suppliers align their supply chains to service your production goals is key. - Procurement is not just about cost-savings, but also risk management and supplier value-adds. - Procurement can assist production to meet their goals on multiple fronts e.g. in-line vendors for critical production parts or services.

Any procurement strategy should serve business needs/goals, in this case production ; therefore production goals should be a part of the procurement strategy to ensure that synergy is achieved .

Procurement team plan: 1) Strategic Sourcing: --Strategically source materials and components from reliable suppliers. --Developing long-term partnerships with key suppliers can help secure stable supply chains and minimize production disruptions. 2) Supplier Performance Management: --Monitor supplier performance against key metrics such as delivery reliability, product quality, and responsiveness. --Ensures that suppliers meet production goals. 3) Inventory Management: --Optimize inventory levels to balance production needs with working capital requirements. --Just-in-time inventory practices. 4) Cost Reduction Initiatives: Cost-saving opportunities without compromising quality. --Negotiating favorable terms,consolidating purchases

Make sure buying stuff fits well with making stuff by working closely with suppliers, planning together, managing risks, being efficient, using tech smartly, always improving, being eco-friendly, and having clear goals.

Once the technical and procurement areas are aligned, it's time to delve deeper into procurement metrics. This includes focusing on indicators such as price reduction, lead time reduction, extended payment terms, and other key performance indicators (KPIs) that can further optimize the collaboration between these departments. By refining these metrics, manufacturers can not only ensure efficiency in the procurement process but also foster a more streamlined and cost-effective operation overall. This synergy contributes to a more agile and responsive manufacturing ecosystem, ultimately benefiting the industry as a whole.

Reviewing your procurement plan regularly is critical. What successes have we had? Can we extend those wins or replicate those successes? What challenges have we encountered and how can we overcome them? Have the business needs changed? A good procurement plan helps provide continuity on why decisions were made and how plans were executed so that during a refresh of that plan we understand how we have reached the point that we are at. Then we focus on the future and determine the goals and activities that will get us there. The procurement plan should also not only be a procurement document. Stakeholders need to be included in the review and active participation from everyone is a must! Remember plan, do, check, adjust!

Ensure that with your procurement plan you establish a review cadence and save past plans in a way that we can reflect back. What drove the decisions we made in the past and how did we get to where we are today? Can we dust up some old successes and reuse them now? Having continuity as the business and people change can be incredibly valuable. You already put in the time and energy to create this plan and it doesn’t take much to store it for the future. Don’t throw away your hard work!

When you are working on multiple projects at a time. On time material delivery becomes a key for a company to achieve success. A procurement specialist should consider machining waste, scrap or part failure, machine tolerance, etc before ordering for a project. He should project an average of the amount of waste the company creates over manufacturing, which he should add while placing an order. Because if you do not consider this then it creates a production problem near the end of that order creating some shortages. So in order to maintain a proper flow chuck in some extra quantity of material to save time in future. Which also contributes to On time Delivery.

In my experience, one of the basic things to consider in order to achieve alignment between Production and Procurement is communication. Regular meetings and a unified Data Management System or "source of thruth" is basic. Otherwise, you can be chasing tails and poorly delivering to Customer.