Recession's Silver Lining - There is no doubt that the economy is in a downturn. Also, the economic slowdown will not end in the near term.  Clearly, this is a scary time for many corporations and for us personally. It is however a great time to be a buyer! The past several years were a time when the seller gained market power because of capacity constraints. Cost reductions were harder to achieve. The current economy reverses this trend. We are back in the drivers seat and the sellers are scared. What actions should you take? 

1. Negotiate aggressive on spot buys and contracts.

2. Re-open evergreen contracts.

3. Obtain de-escalation clauses for multi-year deals.

4. Pay for inventory after use.

5. Attain early payment discounts.

Contract Terms Extended to Supply Chain Partners - Buyers have found a new source of savings for their companies. By extending the terms of their contracts to their supply partners they are reducing costs for purchased materials and services.  They are also increasing their volume leverage.

Streamlined Administration Frees Purchasing to Focus on Real Value Add - Purchasing departments are teaming with users and finance to adopt administrative best practices.  Once in place the practices are freeing purchasing staff to focus on where the greatest value can be added - implementing requirements planning and contracting best practices. Some of the ways purchasing executives are cutting administrative efforts are listed below:

Requisition to Purchase Order

Preformatted electronic requisitions

Online catalogs tied to requisitions

Electronic communication with Purchasing

Purchase Order to Receipt

Pre-established blanket contracts

"Bypass Purchasing for contracted items

Electronic advanced shipping notices

Electronic scheduling of bill of materials items

Receipt to Payment

Streamlined discrepancy resolution process

Suppliers invoice end customers

Summary invoices with electronic detail

Electronic payment of invoices

Separate, rapid process for payment of discount invoices

Third party audit of "nuisance" invoices

Pay for materials/services upon receipt

Reduce acceptable variance over time

Entire Requisition to Payment

Complete electronic process

Procurement card for unplanned low value purchases

Limit hard copy files

Streamline/online approval process

Evaluate and communicate supplier performance

Utility Taps Supplier to Manage Inventory - After years of battling to reduce cable inventories an electric utility has turned to its supplier to solve the problem.  The supplier has repurchased the inventory and is now providing JIT deliveries based on bi-weekly forecasts.  The supplier, using its nationwide supply volumes, is able to accommodate demand variation.  The utility is now able to focus its attention on what is does best - laying cable and delivering electric service.

 
April 9, 2000
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