Benefits of Combining Material Procurement & Purchase Divisions
Here, you need to manage and monitor your inventory that could be best done with the help of an ERP system. But at the same time, there should be pretty good coordination between material management and purchase departments. Synchronization between the two will make your job far easier than expected.
Here, in this article, we will show you what benefits you can earn by bringing the materials and purchase departments together.
Accurate & Timely Material Procurement:
Yes, manufacturing success depends on accurate procurement at the appropriate time – ensuring no stock-outs, no dead stock – a balanced inventory that will help produce the items without delay.
The key objective of material procurement and management is to get raw materials and general supplies, etc., used in production at the right time and in the right quantity. Now, combined with the purchase department, it generally involves;
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Material acquisition request prepared by the stock control department.
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Purchase order processing and follow-up by the purchase department.
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Generating material shortage reports by material stores at different stages.
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Clearing the good from the logistics department and from docks or railways in case of material purchase from distant sources.
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Verifying and stocking the materials into inventory by the stores or stock control department.
The combined and fully synchronized set up in any company ensures greater coordination between all departments. Considering the stock control and purchase sections, you will observe an increased sense of responsibility, proactiveness, and quality work with regard to material procurement at the accurate time.
Independent functioning of both departments will result in divided responsibility, in turn delay in procuring materials may occur besides other shortcomings. Therefore, it is important that the two key personnel of these two sections, the purchase officer and storekeeper, should be on the same line of action and this requires combining the materials and purchase departments.
Reduced Cost And Increased Productivity:
The bottom line of every single business of any kind is growing net profit. To achieve this goal, improved productivity at the reduced cost becomes crucial. Materials management helps in improving the efficiency of the materials used in the production. The ratio between the material input and output determines their productivity. It implies cost reduction and thereby increase in sales and profit margin.
You can use a modern and dynamic inventory tracker software to avoid stock-outs because you will get real-time insights on material and get automated updates when the inventory is running low based on the sales order.
With competitive bidding and procurement negotiations, you can manage to get the material at a low cost without compromising on the quality. However, another way to lower the procurement cost lies in value analysis and placing the purchase order in bulk. Standardization and simplification will make your job far easier. Moreover, you can control the material acquisition cost by low rates of delivery and getting only the material you need, and having good consumption control over the materials procured.
Now, if stock control isn’t in complete coordination with the purchasing department it will create a conflict of interest. Apart from this the procurement and carrying cost of the materials aren’t controlled well it will vitiate the problem. Therefore, it is important to make a satisfactory decision by having both the purchase officer and stock keeper on the same page.
Knowledge of Required Materials:
The classification of the materials and their codification according to the production processes requires their complete knowledge and use. This involves the actual and manually performed examination of the materials stocked in the stores along with the strict scrutiny of the materials requisition letters available with the purchase department from the suppliers.
Now, this material classification will become a hard nut to crack if your stock controls and purchase sections are functioning separately. To avoid this inconvenience and making your production operations more streamlined and smoother, you need to combine stock control, stores, and purchase sections.
In this way the head of the department can have first-hand information about the material requisition and procurement. Also, he can regularly visit the stores to review the materials classification and check their actual use in the production plant. In this way, he gets a good opportunity to know more about the materials and other supplies and their applications across the shop floor and assembly line. With this, he will be in a better position to communicate with various other departments and interact with the suppliers.
Moreover, he can make effective recommendations about standardization, simplification, and the quality of the raw materials, components, tools and other supplies, etc., to be purchased. And, he can make decisions about what alternate materials and supplies can be used to reduce cost and increase productivity because he isn’t dependent on paperwork only like purchase officers.
There is a lot more to it; let’s take a look at what else you can gain from combining material management purchase sections.
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Effectively adjusted stock levels
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Improved manufacturing lead time
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Better control on materials price and quality
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Keeping the inventory stock at required levels
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Bulk purchase and inventory management
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Manage surplus materials without difficulty
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Smooth handling of material receipts and unloading
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Well-controlled arrival of material and their issuance
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Quick decision making with the least correspondence
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Easy handling of records and audits in a combined set up
In a nutshell, the combined setup in which your material and purchase departments function together brings you a lot of advantages. So, you should consider it as a key factor for cost control and increased production. Make it more feasible for you by automating the material procurement and purchase process through an ERP software for manufacturing like MIE Trak Pro.
Source: https://thefunmedia.com/news/benefits-of-combining-material-procurement-purchase-divisions
