I’m going to run a short series of blogs which observe key learning points for Procurement from different industries. We have been looking for examples and illustrations of approaches in an industry which may provide insights and thoughts from people in different industries.
I’d be happy to hear suggestions of which industry you’d like comments on, but we thought we would start here: Automotive
The Automotive industry has learned a lot about making supply chains efficient over the years, and there are some key characteristics that they do well, and allow them to operate effectively. The best of them operate at levels of repeatability which most industries cannot believe, but there has been a huge and long term effort to get there. There are things which make automotive able to take advantage of some key supply chain technique; one is volume and the other is repetition. However, many of the characteristics are repeatable everywhere.
- Maximise the capability of your suppliers
- Manage cost out over the long term
- Keep buying active and alert and capable
- Train your staff
- Get quality right
Maximise the capability of your suppliers
If your suppliers are not thinking about the requirements which are important to you, they pass costs to you with no clear understanding of the impact. If you can make your supplier more capable, it will be cheaper than changing supplier and drive your costs down dramatically. Investing in this area is a massive win win.
Managing cost out over the long term
Understanding and driving out cost across the supply chain has a significant cumulative effect. It can drive efficiency in a range of ways, from stock reduction, reduced waste, reduced movement or standing time. There are a host of techniques which can be adopted to optimise flow and to reduce a range of costs inherent in supply chains. This is a longer term approach as often the improvements are smaller, but build over time
Keep buying active and alert and capable
Automotive purchasing organisations are huge organisations, operating with maximum energy. Maximising that energy and enthusiasm keeps people engaged and delivering hard outputs. By ensuring that there is pace, speed and a healthy amount of pressure keeps the organisation running at full pace
Train your staff
Automotive procurement staff are expected to be able to use a wide range of techniques. To give good exposure to those techniques, and to find people who are interested in progressing, means that a steady stream of training is provided. The training covers specialist areas such as problem solving techniques, commercial approaches, risk management techniques and many others. With a well trained team, many options become available, and opportunities to capture value are more easily accessed.
Get quality right
Supply chain in automotive measures and improves quality obsessively. The key techniques in this space have been worked on for 25 and more years, so the language and approaches of supplier development and improvement are well embedded. The measurement of quality works in small numbers of parts per million, and targets are set and monitored continually. As a consequence, the quality we all experience on a day to day basis is very high in many markets, with higher levels still sought in future. Many industries see this as impossible; but automotive started out at a low level and have worked forwards, realising improvements and benefits for many years.
None of these approaches are unique to Automotive, but they have walked further down this path than many. There are philosophies here than can be adopted and adapted by many, but there is a need to allow that progress to happen.
Mark Hubbard aims to learn from all sectors at http://www.positivepurchasing.com