Procurement Savings in Manufacturing: Tracing Root Cause Bottleneck Issues (Continued)

Please click here for Part 1: Transition Suppliers, Part 2: Culling Top Performers, Part 3: The Operational Perspective and Part 4: Tracing Root Cause Bottleneck Issues of this series

This series of posts is based on content, ideas and recommendations from the following Spend Matters Perspective: Making Sourcing Savings Stick: New (and Not-so-New) Strategies to Drive Savings Implementation. In fact, some of this paper's content was first published 10 years ago by Jason Busch, David Jungling, and Jay Odell, who were with FreeMarkets (at the time). While adapted for today's manufacturing environment, the ideas represent a timeless look at a topic that few companies are fully addressing through their procurement practices today.

Continuing on with our list of root cause bottleneck issues in savings implementation, we often observe that manufacturers often:

  • Lack tools to facilitate data management and document collaboration--organizations often? lack the processes and systems to coordinate internally across global sites, let alone externally. Compiling all of the information needed for implementation from varied sources (file drawers, plant computers, etc.) can be a daunting task. What are some of the causes of these issues that make implementation difficult? First, in a time of increased outsourcing and greater resourcing activities in general, steady-state implementation resources are often fully applied on traditional operations work. With increased cycle times of many individual implementation efforts being driven by increased product complexity and shorter product lifecycles, internal resources are often deployed on other assignments as well.
  • Face process issues--the staff issues mentioned above are compounded by process issues (e.g. many organizations lack a standard supplier transition process throughout the organization). Most important of all, many organizations do not have a multi-functional implementation program? in place, nor the tools to manage it, making it difficult to prioritize implementation decisions, and even more difficult to provide management with visibility and reporting to measure implementation results. As a first step, developing a savings implementation plan on a category- specific basis can help. In addition to the event-driven tactical implementation approach, it's also necessary to introduce a broader corporate approach--including the systems and people--to tackle the implementation challenge on an enterprise-wide scale.
  • Have insufficient stakeholder interaction--new supplier adoption is also challenging because the process itself requires careful, shop-floor level interaction and document exchanges between different internal and external stakeholders. Implementation is not just difficult--it's a "dirty" process that produces issues that many procurement managers do not expect. In an ideal world, parts would match drawings specifically (but this is often the exception and not the rule). Ideally, documentation would all reside in one centralized system and not be scattered far and wide as is more common; e.g. material specs in a file drawer, process specs on a plant computer, aperture cards with some drawings in a far-flung facility, hand-drawn tooling specs at a plant, and so on. As a result, the implementation bottleneck is not easy to untangle without a deep understanding of the people, processes, and systems that drive successful supplier adoption efforts. ?

To be continued in another series, as we provide specific recommendations to overcome these bottlenecks. Curious to learn more in the meantime? Download the full Spend Matters Compass research brief here: Making Sourcing Savings Stick: New (and Not-so-New) Strategies to Drive Savings Implementation.

- Jason Busch

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