Last week we talked about the role of purchasing. I never once brought up negotiating a good price. I am not going to bring up negotiating a good price this week, either.
This week, we will talk about educating the purchasing department. And we are not going to talk about contract writing as we talk about education.
It is important that purchasing agents and purchasing department personnel understand the business for which they are procuring. If they do not understand the business and its needs, they will make dumb and expensive purchasing decisions.
True story. An acquaintance sells and services doctor blades. He was at a mill that he normally services. He got a message that the purchasing agent was upset and wanted to see him.
The purchasing agent was upset because the mill was constantly paying rush charges to get doctor blades they needed. Our helpful friend asked to go over the list of blades regularly purchased. The purchasing agent pulled it out.
"I see the problem," our doctor blade tech said.
"You have got your min/max levels set too low. If you will raise the minimum quantity that you keep in stores, you will not get into a pinch. You will always have blades. Here, let me help you," he finished.
The grateful purchasing agent gladly accepted his "help." They went down the list and adjusted the inventory quantities.
Our tech friend laughed as he told the story. He said he sold over $30,000 worth of blades in that meeting. Some of the positions on which he was able to change the stocking levels required a blade change only every ten years!
This is what I mean by educating the purchasing department. That mill closed a few years later. I wonder why...
I saw a similar situation in a printing plant long ago. The ink companies offered to help. There were two ink companies and they kept two separate fireproof rooms on site. Each company, as part of their service, had an employee on site to maintain inventories, restock as necessary and take away the partial batches left over from print runs. This was all built into the ink costs; these people were "invisible" to the plant.
A new plant manager decided he would hire his own ink managers and take over this function. There was an instant 30% drop in ink costs. The plant had been used by the ink companies to absorb problems they had elsewhere.
I still have not talked about negotiating prices.
For safety this week, make sure your purchasing department is as tuned into your safety rules and training as anyone else in your facility.
Be safe and we will talk next week.