There are more steps and cost associated with the acquisition of parts than is often realised, and the modern OEM can gain greatly from attention to supply chain cost reduction. Often transactional costs are higher than product costs. Some companies have poor visibility of their total spend, they will have multiple purchasing solutions, sometimes poor data hygiene and difficulties with inconsistent multiple supplier performance measurement. It is also a common theme that an order is taken at a less than desirable margin and purchasing is given the task of cost reduction, project by project to improve profitability. This often has a negative effect on the supply chain as the relationships with suppliers become combative rather than consultative and consistent savings become harder to achieve.
Typical Purchasing Issues
- On time delivery performance from existing multiple electrical suppliers/manufacturers
- Price increases from multiple electrical suppliers/manufacturers
- Managing KPI’s and relationships of many electrical suppliers
- Raising a large amount of PO’s
- Component costs of Bill of Materials as there is always an upward drift
- Time taken to obtain quotations
- Cost savings through Procurement efficiency
- Consistent & accurate lower pricing (min 10%)
- Reduced delivery costs
- Significant reduction in orders
- Supply chain partnership
- Major reduction in time to create quotes and place a system order
A reduction in vendors has obvious benefits in terms of time saving and buying power. Routeco regularly deal with more than 450 suppliers, so a program of consolidation & standardisation is achievable without negative impact. Better/equal performing (lower cost) alternative products may be suggested as part of the consolidation process but always with engineering team input.
Reduction in electrical materials cost
Detailed analysis of bills of materials will identify areas where consolidation and Routeco's £70M+ buying power can be applied to drive down electrical materials cost. This means that better/equal performing (lower cost) alternative products may be suggested as part of the consolidation process but always with engineering team input. Typical savings achieved are 10 to 15%.
Reduction in order traffic by at least 80%
Vendor reduction and product consolidation will have a significant impact on order traffic reduction. This is further reduced by order consolidation and the use of “open orders” that can be added to during the life of a project to capture “nuisance spend”. Single line kit orders are another enhancement once scope of supply is confirmed.
Electronic trading and ecommerce
Routeco has the in-house capability to integrate with many business systems if this is a requirement of our customers. In the past we have integrated successfully with SAP, JD Edwards, Sage etc. Web based customer catalogues are created to allow real time pricing and availability. The creation of single line BOM quotes loaded as spread sheets or directly from an electrical drawing package is a standard feature of our offering.
Single kit orders
Once a BOM or variants of BOMS have been established, these can be stored and ordered as single line kit part numbers to allow simple ordering and shipment. These can be quickly modified and refreshed in terms of updated pricing and availability. Single kit orders can be for example, the known requirements at an early stage of machine build as customer input quite often drives minor changes. In our experience machine builders that state “we never build the same thing twice” are usually building “variations on a theme” of their core competencies and therefore the variation in components used is not excessive making kitting a viable option.