For companies across the nation and around the world, e-business has become the 'next big thing'. And manufacturers are quickly learning that regardless of whether they have one facility or 300, they must understand the fundamentals of e-business - namely, the value it brings to the efficiencies of a total supply chain
Despite all the talk surrounding e-business, the electronic management of maintenance, repair and operations (MRO) supplies has been minimally discussed in the industry. In many organisations, MRO procurement has traditionally been viewed as dominated by tactical purchasing policies, including involved decision making, budget-limited procurement authority, and a complex and large supply base. Consequently, MRO procurement is often a poorly managed and nonvalue-add activity - yet US firms spend as much as $1,4 trillion on MRO supplies and services each year. According to Grainger Consulting Services, that can account for up to 60% of total expenditures for an individual company. Utilising Internet-based procurement for the management of MRO supplies provides an immense strategic advantage to the purchasing organisation. The main reason that e-procurement is so appealing is that it streamlines the purchasing process and creates efficiencies.
According to Aberdeen Group, a technology research firm, it costs, on average, $107 to process an MRO purchase order using traditional, paper-based processes, with an average cycle time of 7,3 days from order to fulfilment. On the other hand, purchasing via the Internet costs an average of $30 to process an order and reduces cycle time to two days. In essence, e-commerce helps manufacturers to:
* Find and terminate noncompetitive suppliers.
* Use purchasing scale effectively across multiple buying locations.
* Lower cycle time.
* Reduce product, acquisition and inventory costs.
* Cut down on the number of costly human touches.
In addition, e-procurement helps manufacturers electronically connect with their suppliers to make realtime decisions. For example, if a machine goes down at 8:00 pm, a plant manager can search a supplier's website to access information or order a part. On-line suppliers create a whole new level of efficiency in purchasing because the plant manager will not have to wait until 8:00 a.m. for the supplier to open its doors and answer the phones.
For MRO buyers, Internet-based buying solutions offer the ability to improve efficiency of the entire MRO supply chain, not just the buying process. By reducing operating costs and inefficient manual processes, personnel can focus on more value-added strategic activities. Manufacturers can maximise the value of their people because the Internet enables complete automation of the purchasing process. And this, in turn, allows both manufacturers and suppliers to concentrate their human resources on far more strategic activities than processing transactions.
Strategic activities can include: relationship building with strategically important suppliers, evaluation of outsourcing opportunities and developing more powerful 'total-cost-of-ownership' solutions on key purchased goods. In fact, this benefit - the ability to shift purchasing resources from the business of processing transactions to more strategic activities - is the most important long-term potential benefit of Internet-based procurement.
For manufacturers, clearly forming the right e-procurement relationships and implementing an e-procurement system is a strategic issue that requires management involvement. However, there are a myriad of e-procurement choices and models. Should manufacturers explore partnerships with their suppliers to conceive and execute an e-procurement strategy? Should they embrace on-line marketplaces? Or, should they set up their own web portal, such as a website or service, with partnering companies? To compound the confusion, manufacturers must also deal with multiple supplier relationships and how those partnerships integrate into their own e-business strategies.
These days, manufacturers are feeling increased pressure to streamline their relationships with suppliers and seek out cost savings. In particular, companies that operate manufacturing plants in multiple locations are discovering that supply for those plants has become more costly. Plant managers and engineers know best a single facility's equipment specifications and capacity needs, as well as the value of local relationships, service and support from the supplier and its distributors. In the end, the plant's management is responsible for meeting production goals and desired efficiencies in their operations.
At the same time, however, multiple plant operations can cause a nightmare for a company's procurement manager, who oversees purchasing for all facilities. While company procurement is not making the call on an individual plant's equipment needs, it is responsible for overall management of contracts and pricing. If each plant is reaching its own pricing and supply agreements with suppliers, the procurement manager is left to manage and justify the financial transactions for all of the facilities. The emergence of Internet technology has opened the door for suppliers to streamline contracts with companies and meet the needs of the local plant and the company's front office. For today's manufacturers, the plant engineers are considering the needs of the procurement managers, and vice-versa. An organisation will not have a single source that will determine the procurement solutions themselves and the transactional process and delivery of those solutions and support. Engineers and procurement managers need to work together, particularly in procuring technically sophisticated equipment such as electrical supplies and automation systems.
For manufacturers, pursuing alliances with suppliers who have successful experiences implementing technology solutions is key to success in e-business. In addition, manufacturers and suppliers should have a sound understanding of each other's business, including an understanding of each other's needs and objectives. For manufacturers, suppliers form part of the unified enterprise; therefore, it is vitally important to take the time to select the right supplier and move forward together.
The four enablers of design, operate, maintain, and synchronise competencies for a complete e-manufacturing strategy (integrated architecture, manufacturing information management, asset and reliability centred maintenance, and e-procurement) have several common characteristics. First, foundations are in place today for any of these best practices to occur, in nearly every manufacturing facility. Second, the Internet is a great facilitator of the technologies and processes needed to seamlessly link these enablers together. And third, these enablers do not have to happen all at once; a manufacturer can find a starting point that best suits its current business model, and build the strategy from within over time.
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