Procuremax has entered into a distribution agreement with global polyurethane wheel and castor manufacturer Rader-Vogel. The agreement covers exclusive distribution rights for Rader Vogel's product offering to Mining and Other Industries in Australia.

The companies used the recent AIMEX mining exhibition in Sydney to launch the partnership where a selection of Rader-Vogel's product offering was on display. Visitors also had the opportunity to meet with senior sales and technical representatives from Rader-Vogel to discuss their industry specific product needs.

Commonly in negotiations or when establishing new a new business relationship you will hear or use the phrase “win-win”, but in an increasingly competitive market do such relationships really exist?

As business management software applications become more advanced, companies are placing a greater reliance on automated processes and data to support Supply Chain Management functions including inventory management, warehousing and procurement activities in an effort to make their businesses more efficient and improve profitability.

Improved access to meaningful data through intuitive reporting tools also has the potential to provide new insights into company performance and assist in the identification of areas for improvement. Given this, why is it that many businesses don’t realise the full benefit, including process efficiency and improved financial performance, of implementing such systems?

Assuming the system implementation was done properly, and that users are consistently applying the processes and tools as intended, the answer is most probably found in the quality of the data that the systems and processes rely upon.

Data integrity or accuracy is a fundamental assumption on which the benefits of these software applications are based. They perform calculations based on programmed logic, they don’t question the accuracy of the data which is provided and subject to complying with any pre-defined validation rules, simply perform programmed calculations to generate outputs or perform pre-programmed actions based on the information that has been provided.

Effective Supply Chain Management relies on accurate and relevant data including but not limited to; Stock on Hand, Storage Location, Min/Max, Safety Stock, Re-Order Points, Re-Order Quantities, Supplier Lead Times, Standard Costs, Bill of Materials, Part Numbers, Drawing Revision, etc. Some examples of how poor data integrity can impact not only supply chain processes, but ultimately the overall operational and financial performance of the business, include;

Inventory Management - ERP systems and MRP functionality can automate the process of inventory replenishment but inaccurate data can result in incorrect inventory investment decisions, reduced stock availability, production bottlenecks, scheduling issues, poor customer delivery performance, reduced customer service levels, increased inventory levels and obsolescence exposure to name a few.

Warehouse Management - Inaccurate stock on hand and storage location data impacts the company’s available to promise performance for customer orders as well as creating warehouse inefficiencies as warehouse staff spend unnecessary time trying to find inventory that is either not stored in the correct location or is not physically in stock at all.

Strategic Procurement – Procurement related data not only helps companies understand where they spend valuable company funds, it also plays a major role in ongoing supplier management, the effectiveness of strategic procurement activities and negotiation with suppliers. Negotiations with suppliers are most effective when the business has reliable historical spend data with which to develop targeted negotiation strategies. Potential savings may be left on the table if procurement staff do not fully understand their current spend or supplier performance as part of negotiating new prices and supplier agreement terms.

As part of any system implementation, a key activity should be a focused effort around data integrity. Identify the data which the system needs to operate effectively, document standards for data storage and maintenance and cleanse the existing data before it is uploaded into the new system. Similarly, businesses that have issues with data integrity in their existing systems should take a structured approach to reviewing and cleansing the affected data. Once the initial data cleansing is complete, a diligent and consistent application of standardised processes and controls is required to ensure that data integrity is maintained.

If you think your data could be hindering your Supply Chain performance, contact Procuremax to see how we can help.

Inventory, whether it be in the form of Raw Material, Work in Progress (WIP) or Finished Goods, has the potential to significantly impact a company’s operational and financial performance. Whether that impact is positive or negative depends on a number of factors.

When managed effectively, inventory can provide a company with a strategic advantage over its competitors. Reduced lead times, improved order fill rates, less stock-outs, reduced administrative cost and the ability to meet unforeseen changes in demand can lead to increased levels of customer service, improved customer retention rates and growth in market share and profitability. In some cases, companies can even charge a price premium for items they can supply ex stock rather than the customer having to order the item and wait for the standard manufacturing or supply lead time to pass.

Conversely, inventory holdings represent an investment in working capital that ties up cash that would be otherwise available to invest in the business. Inventory holdings can also lead to additional financial exposure in the form of increased storage and holding costs and obsolescence risk.

The challenge for any business is determining the optimal level of inventory to meet desired customer service levels while managing the various risks associated with holding stock, which leads me to the Good, the Bad and the Ugly from an inventory perspective.

First for the Good. Good inventory is inventory that is held in optimal quantities and provides a competitive advantage to the business. The investment in inventory is more than offset by the benefits the company derives from carrying the inventory. Good inventory typically has some if not all of the following characteristics; high inventory turns, predictable demand patterns, low obsolescence risk, low holding costs, etc.

Now for the Bad. Bad inventory is inventory that is held in quantities that are excess to requirements or is approaching the end of its product life cycle and is often the result of poor inventory management processes, a lack of effective planning or in response to poor supplier delivery performance. It ties up valuable working capital that could be used elsewhere in the business to fund more profitable activities and growth. Bad inventory typically has some if not all of the following characteristics; low inventory turns, unpredictable demand patterns, high obsolescence risk, significant storage and holding costs, etc.

And finally, the Ugly. This is inventory that no longer has a use in the business, it has become obsolete and future sales are highly unlikely. Opportunities to deal with obsolete inventory are fewer, but still may exist. Investigate alternatives to re-engineer or modify the product so it can be used in new or alternate product applications and markets. Review existing equipment populations and determine whether there is potential, albeit at reduced prices, to offload the inventory to support ageing equipment in the existing field populations. And finally, as a last resort, scrap the inventory to realise any scrap value and free up warehouse space. Decisions not to deal with obsolete inventory, which in many cases are financially driven because it is still recorded on the company’s balance sheet at its original cost, are mostly counterproductive. Continuing to hold obsolete stock adds to the financial burden through ongoing warehousing and storage costs as well and hindering a change in culture to support effective inventory management as employees see the obsolete inventory as an accepted and necessary part of doing business rather than waste that should be managed and avoided.

The key is to address Bad inventory before it becomes Ugly and implement inventory management strategies and processes that eliminates Bad inventory or transitions it into Good inventory. This is not a once off exercise, but rather an ongoing process that continually analyses and responds to changing market conditions and product life-cycle requirements. Effective demand planning, supplier management, production scheduling, data accuracy, management reporting and use of ERP & MRP tools all play a part in achieving this goal as does the alignment of employees to company objectives through effective goal setting and performance management systems. Understanding why particular categories of inventory are held also assists in developing optimal inventory management strategies and processes.

Talk to Procuremax to find out how we can help you sort the Good from the Bad and the Ugly.