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Management Side
Week of 17 June 2019: Fine tuning the procurement function

Email Jim at jthompson@taii.com

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If you survived last week's column on procurement and are back for more, welcome to the continuing discussion.

Most know not to buy a car at the beginning of the month. Likewise, most know, if you live in a place that charges car dealers personal property tax on the inventory on their lots on the last day of the calendar year, that the absolutely best time to buy a car in the whole year is the last week of the year. Dealers want to move that iron off the lot before the tax man cometh.

Well, what works for car dealers often works with the companies where we procure capital and maintenance goods. Their shops get full; their shops have spare capacity. This may or may not be seasonal. If I were I in charge of a mill today, I would look to my purchasing department to know these things on a continual basis, seasonal or not.

Maintenance stores inventory is often looked at as simply an overhead burden. It has certain capital costs and carrying costs associated with it. I am not aware of any mill ever, that looked at this with a smart buying approach, stocking up when prices are low and riding through times when prices are high (because they bought when price were low; I am not talking about taking risks that I will not have something when I need it).

I once was involved in a major capital project where the capital approval decision was delayed so long that when we finally had approval, the equipment manufacturing segment was in a real slump. Through no fault of our own (engineering) and no fault of the purchasing function, we likely bought all the equipment for that rebuild at a discount of 50% from what it had been just a couple of years before and was a couple of years later. Likewise, delivery was super-fast for that day and time.

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Onlypulpandpaperjobs.com has hundreds of registrants! [03.01.19]

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When I was in the custom equipment design business back at the beginning of my career, electric motors would fluctuate from off-the-shelf delivery to as much as six months lead time. This was nearly fifty years ago; I suspect these sorts of time lapses are not allowed today.

Yet, I still suspect bargains are to be found. My expectation is that my finely tuned purchasing department will find and recommend taking advantage of these situations.

The way to do this is to take the purchasing or procurement department from the traditional staff function to an active participant in the profit and loss of the mill. Find a formula to burden or reward them, based on the circumstances for machine downtime and the annual carrying cost of maintenance stores. Throw in machine consumables, too.

We easily assign downtime to operations or maintenance. There is no reason why procurement/purchasing could not be thrown into this mix as well. The only reason we don't do this is because our traditional thinking is they are "just the green eyeshade types who fill out forms." We have never seen their function rise beyond keeping us out of legal trouble when we buy things.

When it comes to safety, I'll bet, if challenged, procurement could rise above just purchasing our safety equipment to getting initial and repetitive training by the manufacturers thrown in for little or no cost.

Be safe and we will talk next week.

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Onlypulpandpaperjobs.com has taken off like a rocket! Over fifty jobs are posted, in many interesting categories. These jobs are in at least 15 different US states. [06.19.19]

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Employers are on board with Onlypulpandpaperjobs.com. There are nearly forty employers located in fifteen different US states and six other countries. [06.19.19]

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