Saturday, September 27, 2008

Assesing the Credential of Suppliers

This is one thing we, as procurement professional, have to do in every step of signing a new contract agreement and procurement activity. Every contract agreement has it's own importance in term of essence of time and cost factor. Same is applicable in the case of procurement of any kind.

It is very important to asses the background of supplier or contractor, so that you accomplish the main objective of procurement. We have to remember that every requirement or project has it's own time frame. Main objective should be to complete procurement proceeding within the time period and that too in optimum cost.

Few checklist, which may be followed while entering a contract or purchase are highlighted below
  • Expertise in the given area. You can not expect everybody to have expertise in all areas. That's why there areas of functions like Electrical, Electronics, Instrumentation, Mechanical, Process, etc. One should honour on the specialised fied only.
  • Profile need to studied as per the requirement of the contract.
  • Past project or supply record need to studied. You can get the same from the client list of the party.
  • Need to study the economical factor. You need to negotiate without compromising the technological factor.
  • Time factor is also one such factor you just can't compromise. Though the supplier is excellence in the given sector; but if they can't complete or commit as per the time frame specified for the project, it's pointless to honour the same to them.
If we take above factors into consideration, there will be limited room for making a mistake in selecting suppliers. But, we have to make it it sure that dealing in commercial terms always try negotiate safely so that the clients do not take undue advantage.

Friday, September 26, 2008

Efficient Logistic Practice

Logistic management is a very vast subject and it plays a vital roll to serve the customers and also to manage the procurement practice. In this topic I would like to focus on the role of logistic management in procurement.

There are many mode of logistic through Air, Sea, Road and Railways. We have to clear in our mind that what mode can be adopted. Time has it's own role to play and the cost factor is also one criteria we can not ignore. Choosing a mode which is most suitable should be of that kind which is efficient in term of Time, economical in terms of price factor and also we should take proper measure to ensure the safety of the good to be transported.

To transport Bulk items logistic through Sea is the most economical and efficient. Then next comes Railways and then Road. Logistic by air is the most efficent in terms of time but it very expensive. This mode is been adopted for limited quatity and mostly in the case of critical condition where accute requrement is there.

One should decide what mode of transportation to be adopted depending upon the want of the time. There are few factors which may be considered as the key to decide the mode of transportation to be adopted.
  • Type of goods to be transported. In this, if you you consider the goods in bulk; it's almost preferred the transportation through Sea if the service is available. If not Transportation by through Road by Rail or Lorry. In the case of rail again there are factors like availability of Railway Siding facility at the loading as well as unloading point. If this facility is not available, than the overhead will add up to cost you more.
  • In the case of domestic procurement, due to various reasons, transportation vide road is almost the only option as this the most economical and efficient provided the time factor is in favour of you.
  • For procurement of limited quantity, if the time factor is acute in nature, than logistic through Air is the only option. one should have to always study the type of requirement for selecting a suitable mode of transportation.
Calculation of time, cost and downtime are the factors which dictates the mode of logistic to be adopted. From all other factors, DOWNTIME analysis is very crucial. One need to study and cope the situation by understanding the downtime.

Thursday, September 25, 2008

Standardisation - Why, How and Where ...

Normally in most of the standard company, there is a practice of STANDARDISATION could be seen. In normal practice, there are set of specification for Raw Materials, Other Production related consumables, Electrical Panels & Switchgear, Mechanical & Maintenance Items, etc.

But for Raw materials the standard specs. would be the norm. You can't deviate the specified specs. unless it's been recommended by R&D department for betterment or other reason whatsoever. Same is been recommended for production related consumables.

For Electrical Panels and switchgear, to use standard equipments is very much essential as the application is critical and vital. There are any manufacturer who supply OEs in this areas, viz., Siements, L&T, Schnider Electric, ABB, etc. If you are using specific manufacturer's OE, it is recommended that to use the same manufacturer's spares. Precaution to be taken is that to procure the same from reliable vendor who are authorised by the Manufacturer. Specially in the case of switchgear, open market is full of spurious supply; so special attention is to be taken into consideration to authenticate the vendor is utmost essential.

For Mechanical Equipments & spares, again the OEs to be procured from known and proven record of customer satisfaction and it's existence is very much a point to be focused. For maintenance of such OEs the internal spares are to be procured from the same vendor so that the originality and the responsibility towards the OEM is been kept intact in a view towards long term relationship(sense of partnership) with the Manufacturer. If you divert this and create a misunderstanding with the manufacturer then it wold be case of loose-loose situation where no one of you will be benefited. But, in the case of external attachments and spares you can very well choose for the best and find an economical supplier. For example, Bearings, V-Belts, Couplings, Pulleys, Motors, valves, etc. It's not necessary that to buy such items form the OEMs. Mostly if you observe, you will find that even the OEMs are not using the best of the items available in the market. Here you can definitely find better supplies at better cost.

One simple understanding which is needed to be kept in mind is that "Never look at at supplier like an external agency, look at them as your partner. Thing will change in favor of you."

Saturday, September 20, 2008

Procurement - a new challenge

Procurement as we understand has new challenge everyday. As we know, in every industry reduction of the production cost is highlighted; as present regime of high price it's important to focus on consumers point of view so that the end user may be benefited.

In the present scenario, the raw material cost has reached a new height and other running cost is not less as the inflation has reached all time high. Taking all these into consideration, alternative source, efficient and economical mode of procurement to beat the heat is inevitable.

The focus should be such that how to procure in most economical way. The few notes are been made as precautionary measure, as below -
  • Use all effort to find alternative supplier across the border.
  • Consider other cost like fuel, energy, etc. with alternative solution.
  • Conserve energy, use automation to the optimum.
  • Control inventory because the present market is fluctuating.
  • Reduce down time of procurement(avoid shortages) and maintenance related down time. Because at the present scenario one can not afford to add on overhead cost.
  • Plan and forecast the future so as to face the eventualities due to unpredictable market condition.
  • Check misuses and reduce rejection. Proper audit and most importantly accountability should be assigned.
All these shall be possible when departments work together as team and not as entities which normally is been practiced in most of the corporates and manufacturing units.

Friday, September 19, 2008

Make a difference

You should not live life just for living. You can live for many reasons. It's all about making a difference by doing ordinary things in an unique way. Gandhiji didn't do any extraordinary thing to earn the title "Father of the nation" or " Mahatma". He just believed in himself and did what he had to do in a unique way. To do such things you need to be disciplined, determined and indifference.

In this world, you can choose so many disciplines where you can make a difference. Only thing is that you have to believe in it; so that you can do something..

Initialisation is hard but once you initialise to continue, once you are determined, you would be automatically guided.

Make a difference, live life to to the fullest and think beyond!...