A metal recycling company's spending-control measures simply weren't working.
The process this worldwide metal recycling company set in place to control spending wasn't working. The process not only drove up spending, but caused a tremendous amount of rework in both procurement and accounts payable. Invoices were arriving before purchase orders were even approved. The controls that were put in place were actually hindering their process. In short, what they were doing wasn't working and employees were down, stressed, overwhelmed and not hopeful things could change.
- Improve procurement efficiencies that will help improve productivity and allow employees to devote themselves to other priorities.
- Significantly help reduce the added costs associated with an antiquated and ineffective procurement process.
KEY OBSERVATIONS & FINDINGS
- The Approach
- Document every step of the purchasing process from start to finish. Get input from everyone from a maintenance technician to the President and CFO of the NE region.
- What Was Learned
- Due to three layers of approvals, all the way up to the regional president on every single order, employees were creating loopholes to get product into the facility. And with good reason—end users couldn't get the product they needed to do their jobs well.
- Orders were getting placed as an "emergency" or against an open account and reconciled after the PO had been approved. The largest problem arose when invoices would arrive and the POs still hadn't been approved to order the product. In some cases, the product had already been purchased and delivered—and in some cases, used.
- This "emergency" approach caused headaches for procurement and their attempts to get end users what they needed in a timely fashion. It also created a bottleneck on the accounts payable side of the business because of a slew of open invoices.
- Paper invoices were stacked up, and accounts payable employees were bringing home their work every night and on some weekends. Additional work was also created when procurement had to research a justification for orders not approved by leadership that had already been purchased.
- What Was Shared
- The amount of time it took for each step of the procurement process was documented to identify areas where they were losing time and money. Those results were then compared to a traditional procurement process (illustrated below):