Overview

The manufacturing industry is now in a pivotal position to make modifications to its procurement process. Trends over the past few decades have resulted in an increase in outsourcing and offshoring, heightened production capabilities, and competition that has been escalating to unprecedented levels. In addition to quality and price, factors such as compliance, performance, and corporate social responsibility have caused manufacturers to establish more strategic relationships with their suppliers. These factors, combined with the pressure to meet tight schedules without going over budget, have created a demand for adaptable, affordable purchasing software. To add to this, manufacturers must be able to handle complex logistics and manage demands associated with ordering items in an appropriate quantity.

Collectively, these factors result in some distinctive challenges for the manufacturing sector. Besides supply shortages and cost increases, regulatory variations from country to country can also trigger quality inconsistencies, overspending, and a lack of proper documentation.

This report outlines the challenges experienced by manufacturing companies and provides comprehensive solutions. These strategies are necessary considering procurement success in the midst of a sluggish economy requires informed decision-making.

Challenges

One of the most significant obstacles confronting the manufacturing sector involves inconsistencies in item quality. Discrepancies are likely to occur for several reasons. A lack of standardized descriptions for item specifications and no proper terms and conditions for compliance can cause confusion and inaccuracies when placing orders. In the manufacturing sector, the quality of materials must be of an acceptable standard to prevent a halt in production and/or variations in the end product. Requisitions are typically placed by individuals with technical backgrounds, which causes problems for procurement professionals who tend to be unskilled in other departments. This creates communication difficulties, as a single order of parts may involve numerous dimensions, materials, UOM, and technical information that is beyond the expertise of procurement professionals. With this many factors to consider, it’s easy for item quality variations to occur without notice. Items that fail to meet expected standards cannot be used in the manufacturing process, resulting in a waste of time and money.

Keeping this in mind, it’s easy to see how manufacturers are susceptible to overspending. Factors such as rapid production schedules, a lack of appropriate approval systems, and an inability to determine an effective manufacturing strategy can create the perfect environment for excess costs. The manufacturing sector is notorious for its fast-paced deadlines that promote hasty decision-making, and strict procedures that further hinder progress. Without a system for approvals, managers are unable to check orders before they’re sent, which further increases the possibility of unnecessary spending. Whether it’s Engineer to Order, Make to Order, or Assemble to Order, choosing the right strategy for a business is vital to minimize overspending. That’s not enough, though – effective tools combined with proper execution creates success. This is difficult, considering the manufacturing sector is well known for its lack of transparency – buyers struggle to determine a suitable approach as they watch costs escalate over time.

The final significant challenge faced by procurement professionals in the manufacturing sector involves a lack of proper documentation for order fulfillment. This is a concern, particularly in an industry that handles a high amount of material on a daily basis – it’s imperative that mistakes are tracked in order to take preventative action. Modified production schedules and a lack of interdepartmental communication contribute to an increased risk of scattered, disorganized documentation.

In Brief

  • Manufactures must be able to meet material standards and quality or risk major production delays and the resulting loss of revenue.
  • Overspending is likely to occur without a system that facilitates manufacturing ordering strategies and controlled approvals.
  • A lack of proper documentation is dangerous when receiving a high volume of orders on a daily basis.

Solution

Procurement challenges in the manufacturing sector dictate the implementation of software that can handle specific requirements. Quality inconsistencies, overspending, and a lack of proper documentation can be easily prevented. Tradogram facilitates solutions to these difficulties with numerous features designed for professionals in the manufacturing sector. Variations in item quality are easily corrected through the use of select features. When negotiating a deal, technical experts can select or dismiss offers based solely on technical details, as opposed to cost. The Items Database allows these specifications to be made clear, so procurement professionals (who lack technical expertise) can focus on more strategic tasks. Another feature that eliminates variations in item quality is Enforceable Approval Routing (based on $ amount or category). With this feature, Managers are able to approve POs before they’re sent to suppliers, ensuring that the items ordered are of appropriate merit, at the right price, and from the best supplier. Heightened control guarantees your materials are of expected caliber.

Overspending can be solved through Custom Reports and Approval Routing, two features out of several that Tradogram offers for maximum spend control. Customizable Reports give users the chance to select the data they want to analyze. This feature targets the needs of companies within the manufacturing industry by providing visibility into all data in regards to purchasing. Additionally, the ability to set budgets establishes clear limits on company spending while also providing visibility of spend.

Tradogram facilitates accurate, up-to-date documentation through Real-Time Monitoring and Audit Reports. Tracking orders in real-time permits buyers to stay on top of every phase of a transaction – any delays or changes in a delivery status are known, and adjustments can be made accordingly. Deviations in purchasing objectives are also immediately apparent and can be effortlessly noted on the system. Audit reports enable buyers to identify their purchasing trends and view a historical analysis of spending. Manufacturers have the security of purchasing with easy-to-access documents and increased overall agility.

Tradogram Understands Manufacturing

Manufacturing companies interested in becoming more innovative and achieving target cost objectives are leveraging the power of procurement software. Tradogram is designed for procurement in the manufacturing industry and provides solutions for companies looking to prevent common issues such as variations in item quality, overspending, and a lack of proper documentation.

The unique position of manufacturers in the midst of increasing globalization and complex supply chains provide a perfect opportunity for procurement optimization. Manufacturers using software that encourages supplier collaboration, spend control, and the consistency of quality materials have experienced improved workflow and immediate savings.