Supply Chain Management: The Next Frontier in Savings

Barry Swanson

Chief Procurement Officer, University of Kentucky

Posted: 5/15/18

Supply Chain Management: The Next Frontier in Saving

Managing separate facilities, zones and procurement systems when budgets are shrinking is a familiar challenge for any procurement leader. Beyond digital solutions to the problems facilities teams face, a fully integrated single approach to procurement, inventory and role management can help reduce strain on the team while increasing efficiency. 

In facilities with complex logistics or multiple zones, developing a single process with clear operations and the right tools to get the job done is the path into the next frontier in savings.

The Process Pain Point

At any facility, opportunities to optimize for savings can be easily found. Processes across multiple zones or facilities can be different, leading to slow or inefficient procurement. Because the average facilities budget is made up of common categories – personnel, maintenance, supplies and product, professional services and the usual rounding errors included – managing to efficiency can seem daunting. Keeping track of these demands and staying efficient is hard at small scale, and is often left behind as facilities grow.

With larger operations, the facilities process in place can be hard to even track and manage. Based on Grainger Consulting research, the process just to order a product has become time-consuming and expensive. The average PO now costs $124 to process (1), demanding 40% of staff time and 30 steps to order. This leads to five handoffs to get approval, significant delays in getting product and multiple conflicting approaches to managing inventory. The result is expected – low productivity, low compliance and complexity.

The Potential for Savings

Thankfully, these process inefficiencies are ready for change. The largest savings opportunity for most facilities is in managing its supply chain. If your process can leverage fewer people and less storage space, while cutting down on complexity and inefficiency in the procurement process, you can begin to save money and free up resources to meet other critical goals. 

The potential savings of an optimized supply chain become clear when counting the time and money spent in just staff going back and forth to supply closets to find a product. If you assume that 20 hours of each week go to finding product, the lost productivity alone can cost well over $230,000. You can find similar expensive and time-consuming steps in your process across normal shopping, ordering, managing and storing tasks.

Where to Find Areas to Change

The average procurement process requires governance, vendors, storage and the operations to get things done, paired with technology and metrics to track success. Each of these areas have their own staff and requirements, leading to internal complexity and a confusing overall process.

You can audit your own facility to understand where these complexities live. Governance can combine executive leadership and a core team to direct each step of procurement, each of whom have a different take one the right process. Vendor management can require staff to manage each vendor, each with their own paperwork, ordering process and POs. Storage requires staff to inventory and find product, a process complicated by more than one store and no central inventory management. With confusion in each area of the budget, the overall procurement process winds up poorly understood and hard to track.

How to Change

Getting a handle on procurement starts with a central team. Decide early who will manage the change to a new process, and set clear leadership team roles and goals.

With a team in place, look to set up a new process focused on efficiency and simplicity. This can mean leveraging an eProcurement system to put organization-wide shopping, ordering and managing in one place. Grainger’s eProcurement system offers your staff access to a single web or mobile punchout that ties into one ERP system. Orders are tracked automatically, compared to budget goals and automatically approved when possible. Grainger seamlessly manages vendors and inventory, with tools like on-site consulting and KeepStock® to ensure inventory is always timely and well organized.

Getting a handle on your procurement process does not mean changing everything. Just by establishing one system for ordering and managing inventory, with the right partners to make vendor and product management straightforward, you can see demonstrable impacts on your budget and efficiency.

Barry Swanson is currently serves as Chief Procurement Officer at the University of Kentucky. Prior to taking this position, Barry served as the Associate Vice Provost for Campus Operations/Chief Procurement Officer for the University of Kansas, where he was responsible for leading seven departments. He is currently the President of the E&I Board of Directors. Barry is a graduate of the University of Kansas with a degree in History and Political Science. He also has a Juris Doctor degree from the Washburn University School of Law.

1) https://www.grainger.com/content/kc-epro-article-why-shifting-to-eprocurement-makes-sense

 

 

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