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Procurement Excellence in Manufacturing: How to Maximize Profit While Driving Increased Quality
Building strong relationships with key suppliers helps to ensure consistent supply and quality of inputs.
Improvements to the quality of materials acquired that better meet the demands of the manufacturing processes will drive enhanced product manufacturing as the production lines are less likely to stop or produce poor quality product due to less-than-optimal materials. This translates into lower inventories of both raw materials and sub-assemblies, less scrap and re-work, and fewer returns and allowances due to the quality of the production materials, all of which enhance profitability and efficiencies. Fewer quality issues also lessen issues with vendors, as there are fewer vendor returns and claims.
Building strong relationships with key suppliers helps to ensure consistent supply and quality of inputs. Consolidating the supplier base allows for increased leverage with the suppliers, and lessens the administrative burden of managing purchases and payments from and to the suppliers. Developing these key suppliers is particularly helpful when inputs are in short supply or spot purchases are needed.
Additionally, these relationships help keep the procurement team at the forefront of innovation taking place in the industry and with the supplier base, and suppliers can often be a catalyst for improvement in the company’s own material requirements and production processes. More broadly, a roster of innovative suppliers can review the entire supply chain and can assist in identifying opportunities for improvement. Financially, suppliers are more apt to give longer payment terms to favored customers, thus lowering the investment in inventory and improving the company’s cash cycle.