4 Ways an ERP Improves Purchasing - Onramp Solutions

Author: Paul Henriques in: Purchasing

February 15, 2023

4 Ways an ERP Improves Purchasing

It’s been a hard start to the 2020s and manufacturing is not immune. There have been: ships causing traffic jams, a new batch of oil issues, sneezes causing chaos, and too much money causing soaring prices. It really brings the old Greek curse of “may you live in interesting times” into focus.

As manufacturers, there are some issues that might have actually been made worse by a lack of better purchasing software, or not using the one you have to its full potential. What used to be a well-oiled and streamlined process, in this case purchasing, has cracked under the enormous pressure that was placed on it by a world going mad.

What you need now is to redefine an efficient purchasing process while taking into consideration other important components of the new decade. Things like sustainability and ethical sourcing, maintaining good vendor relations, and a focus on investing in your partnerships (both upstream and down).

Purchasing in Industry 4.0

The days of buying the lowest bidder are starting to fall behind. Keeping to the single-source suppliers and minimal risk is no longer a feasible long-term strategy. “We go farther together” is a proverb as old as time. Manufacturing has to start betting on the long game with value-based selling and buying, where all the firms that you interact with are seen as partners in a prosperous future together instead of parts to be discarded when it is time to sink or swim.

By focusing on a digital transformation for both you and your vendors, you can greatly improve the transparency and the lines of communication between your organizations in a way that is always mutually beneficial. When looking forward to your supply chain restructuring, look for a wider net with more collaboration and accessibility with all your partners, with things like:

  • Diversifying your list of approved vendors with local suppliers
  • Partnerships where you can develop mutually beneficial strategies
  • Better purchasing automation and lot traceability
  • Better vendor relation management

Diversifying Purchasing

Parts shipped in from overseas involve more risk and costs than they did 3 years ago. This means that you will have to re-analyze any overseas purchasing. Can you still justify the risks to your stakeholders when the past few years have shown that keeping those suppliers is more likely to compromise your business? With shipping rates jumping over 100% since 2020, the answer would be that it is time to start diversifying your list of approved vendors to be closer to home.

Historically, this has been the better way to do business, with manufacturing clusters usually providing all the outputs for a finished product in a series of shops that support one another. Since 2020, the local manufacturing cluster areas have seen a resurgence. This means that you are more likely to find local shops that are looking for cooperative development along with you. In short, a wealth of local options improves your overall output more than any previous long-distance relationships.

Adding geographical closeness to the immediacy of digital communications can greatly improve the reaction time of your vendors in a way that improves your competitive edge. You can also improve your list of alternate suppliers with better material and shipment tracking. A better ERP can help you analyze and organize the information received to help you make better purchasing decisions in the future.

Strategic Purchasing

This just in: Prices are up. On everything. For companies running Lean, this has been a particularly hard time, since keeping low inventory means that any shock to the purchase price is immediately felt, as opposed to companies that had a larger pool of raw materials and could ease the added costs for a bit longer. This also means that suppliers that have a higher demand for their goods are more likely to sell to their partners first and everyone else gets the leftovers. This can affect your quality and your customers negatively.

The only time better than 10 years ago to begin a strategic partnership is right now. By developing with your suppliers as partners, you can improve their interest in providing you with what you need, since it benefits both of you equally. Here, again, the analysis provided to you by a better ERP can help you decide how to spread your purchases to partners in a way that encourages constant growth between and an advantage for you over your competitors.

Automated Purchasing

Manually reviewing every order and inputting it from one system or email into another is time consuming and generating errors. With time being of the essence and every purchase becoming more important with higher price tags, mistakes and delays are hurting you.

This is actually almost easier done than said. After implementing a new ERP system, the digital technology available to you, such as a vendor portal and EDI, can decrease user errors, improve your communication with your vendors, and save time that allows you to broaden your vendor-base.

Vendor Relations

An ERP system can’t magically create partnerships where there were none, but it can help. Part of the partnership model is a more intimate relationship with customers and suppliers. With more and more companies shifting to a digital transformation model, the real-time benefits of digital communication are being seeing more often by businesses everywhere. When the goal is mutually transformative strategies and transparent reporting between the different members of a supply chain, it is becoming more important to have tools in place that your suppliers can use to let you know what is going on.

Here, again, a modern ERP with a vendor portal and instant communications, via EDI or another source, is a competitive edge. Keeping open communications with your vendors and having them be able to reciprocate can help save you time and money.

Conclusion

New ERP systems come with a vast number of benefits that can positively impact your firm, including a suite of tools to help you with purchasing, vendor relation management, and automation. Improve your collaboration with your suppliers and increase your productivity and competitive edge with better partnerships and communication. The results speak for themselves, with ERP users seeing decreases in inventory while improving deliverables and a better bottom line.

 

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