C. J. Brohas, C.P.M.
C. J. Brohas, C.P.M., Manager of Purchasing, 513/331-4688.
Karen Riegert, C.P.M.
Karen Riegert, C.P.M., Senior Buyer Dayton Power and Light Company, Dayton, OH 45401, 513/331-4694.
The environment. The role of the Purchasing Department has changed significantly in the last few years. Members of the Purchasing profession are now highly involved in more value-added activities, such as cost reduction, negotiations, supplier evaluations, cycle time improvements and the development of alliances. In all industries today, the environment is extremely volatile and the supplier bases are decreasing rapidly. It is now, more than ever, that Purchasing must assure its internal customers that they are aligning themselves with suppliers that will be there in the long run to supply the company's requirements. A strategy that incorporates a contingency plan, management of the supply chain and the development of best practice buying strategies can accomplish this by reducing costs, assuring on-time delivery, improving quality, preparing for emergencies, assuring sources of supply, reducing inventories, and increasing standardization. The strategy that we have developed to accomplish this is our Managed Acquisition Procurement Plan.
In 1994 Dayton Power and Light (DP&L) was named Utility of the Year by Electric Light and Power. While we take pride in the efficient operations that earned us the award, we also recognize the changing market conditions and its affect on our ability to do business in the future. We all have access to the same customers, technologies, suppliers, labor forces, and capital markets as our competitors. Consequently, the only way we can gain the competitive advantage we are all seeking is to continuously improve the way in which we execute our activities.
What is a competitive advantage? It is making timely changes in the processes to keep improving your product or service. Competitive advantage cannot be determined by looking at a firm as a whole. Instead, it stems from the processes and the many discreet activities a firm performs in designing, producing, marketing, delivering and supporting its product or service. To improve the process, you must first analyze the activities involved to determine which activities should be improved or eliminated. Then, even after analyzing the activities, you still must have an idea of where you are headed. It has been said, "If you don't know where you are going, any road will get you there." That's why at DP&L we developed a strategic plan, or a map (M.A.P.P.)to help guide us, so that we get to where we want to go.
The need. At DP&L, we are ready for the changes that are occurring, we are not satisfied with status quo conditions. Therefore, the development of a strategic procurement plan was designed to keep us ahead of those that are not prepared to change. We believe if you are not ready to change, then you should be prepared to step aside or be run over by those changing around you. Our plan is designed to help us increase our knowledge of suppliers, identify our critical needs, and the rapidly changing markets in which we deal. We also want to maximize our customer service level while minimizing risk to the company. With our M.A.P.P. program, we are identifying, and continually improving processes and identifying the most effective methods of acquiring goods and/or services in the right quantity, at the right price, at the right time, and from the right source.
According to Webster, strategy is defined as "the operations or movements previous to a battle, positioning oneself for an advantage." Doesn't that sound familiar? Today, we are all facing a need in our respective industries to position ourselves for a competitive advantage. One way to accomplish this is to optimize the supply chain. To do this, Purchasing will play a critical role in that its task will be to manage its external resources more effectively. For this reason, our Managed Acquisition Procurement Plan (M.A.P.P.) was developed to provide a tool to aid us in managing new information about markets and assist us in providing viable procurement options to management and the end users.
The Goals. The goals of the M.A.P.P. program are as follows:
The Plan. The Managed Acquisition Procurement Plan (M.A.P.P.) is made up of three phases.
Supplier Profile. We acknowledged that to remain competitive in this changing marketplace we must align ourselves with suppliers that share our business philosophy and will be here to service us in the long run. We must develop mutually beneficial relationships with suppliers that are willing to share information and resources and work together for the good of both companies.
To reach the "destination" that we want our M.A.P.P. to take us, we believe, it is also necessary for us to acquire more detailed information from our suppliers.
To acquire this information, we issued very detailed supplier profile questionnaires to our key suppliers and asked for specific information regarding factors such as organization and history, materials management, current technology, inventory control, facilities and equipment, financial data, delivery and scheduling, supply management, and overall quality. The profiles were evaluated and used to assist in the strategic planning process.
In addition to providing the information on the supplier profile, we asked our suppliers to document any process improvements or cost savings ideas that they have developed. In an effort to foster an environment of continuous improvement, it is important to recognize those suppliers that are making an extra effort to continuously improve. These documented suggestions are considered "Points of Interest", similar to an area highlighted on a road map that indicates a site worth stopping and observing. These extra "points of interest" help each supplier reach higher levels in the supplier qualification process.
The combined efforts of DP&L and its suppliers are expected to continually improve quality awareness, expose various cost savings options, and develop more productive and beneficial long term relationships.
Contingency Buying Plan. Our strategy is to develop an emergency plan of action for any foreseeable situations which may jeopardize the supply of this critical item/service following these steps:
If there appears to be a possible shortage of supply or of suppliers (sole sourced, limited number of suppliers, long term shortage of suppliers):
If there appears to be a possible work stoppage (at the manufacturer or from the raw material supplier):
If there appears to be a possible weather related problem (high risk area, difficult access, or all suppliers centrally located):
If there have been any lawsuits, EPA violations or OSHA violations in the past three years:
The contingency buying plan that you have developed should be used as a tool to assist you in handling any situations that should arise and also as a method to help prevent and foreseeable emergency situation.
Supply Chain Management. Following these step can provide a good starting point for improving supply chain management - but keep in mind that no standard formula for improving supply chain management exists - successful supply chain management is implementing the philosophy tailored to the needs and requirements of the particular situation. Rather than looking only at the functioning of its own organization, a Supply Chain Management approach looks up the supply chain toward suppliers and down the supply chain toward customers, to try to optimize the entire system.
Some of the improvements offered by an effective Supply Chain Management plan are:
"Best Practices" Buying Strategy. The plan is to develop a documented history of buying practices and trends for each item/service and identify opportunities to improve current buying practices.
1. First you must assess your current situation and identify your current practices by answering questions such as the following:
2. To develop your buying strategy, you must put together a team of people to develop your own "Best Practices" Buying Strategy. On this cross-functional team you might want to include members of engineering, the end users, inventory control, computer services, and possibly representatives from your suppliers? Get your team together and working as a group, brainstorm on ways to improve your current process. Utilize the following checklist as a guideline to get started:
This checklist should be used as a guideline and does not necessarily contain all relevant considerations for identifying "Best Practices".
Lessons learned / Opportunities for Improvement. Throughout the implementation of this plan it is important to always document any lessons learned or opportunities for improvement that are identified.
Summary. A survey taken recently of major corporation executives revealed that 68% believed that Purchasing made its biggest contribution in cost control, 39% in control of supplier quality, and 28% in development of overall supply strategies. But forty-eight percent (48%) also felt that there was a lack of comprehensive supply strategies developed by Purchasing. If you are to be recognized as doing different things, then you must have a strategy or a Managed Acquisition Procurement Plan to make it happen.
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