“Would you order about ten gross of those British chocolate bars?” asked Dexter, the head of Procurement at COME’N’GET’EM, a chain of 12 convenience stores. The company was doing remarkably well during the pandemic.
“Sure, but we’ll have to order 12 to get the discount.” responded Dewey, the best number cruncher in his department.
Dexter peered over the mound of paperwork on his desk and asked, “Why? Don’t we have a blanket PO for buying those bars?”
Dewey walked toward Dexter’s desk to explain, “Yes, we do, but the displays come in sets of 12 – so the numbers are as follows – as there are 12 bars in each display and each box that we buy holds 12 displays, that means there are 144 bars or, as you know, a gross – in each box. But to get the 8.3% discount, we must buy a dozen boxes at a time. It’s worth it because we get a box free and that’s a full gross of bars free on each order!”
(Read more below about the number 12)
“Hey,” shouted Denise from her Associate Buyer desk in the corner, “I need some for my stores too.” Bettina, the Category Acquisition Manager Buyer, overheard the exchange and chimed in, “Yes, I was going to order a couple of displays as well; they are selling like hot-cakes!”
Dexter nodded his approval and Dewey shot off an order via email. The process of the blanket PO could make controlling the spend better, shorten the re-order process, and, best of all, the gross of bars could be in their warehouse in two days, as they had contracted.
But wait a minute! Dexter frowned as he thought about the interchange the four of them had just had about buying the chocolate. He realized that there was a lot of discussion every time they went to purchase SKUs to put on the shelves.
He thought about the overall procurement process used in that one interaction and throughout the company.
How does a master PO work in a system when there are 3 buyers and the optimal purchase threshold amount needs to be met?
How did Bettina and Denise coordinate purchasing before their ERP system came along?
Are they using the features of the ERP system? How many rows and columns are in the spreadsheets that are used to track the hundreds of suppliers that a retailer sources from and each one’s terms?
Dexter looked at his computer screen and realized that the ERP system they had purchased a year ago was clearly not being used. “This should be a ‘no-brainer,’" he thought to himself. “We should be placing orders through our system and not emailing or calling them in. This is painful!" Dexter muttered in exasperation.
Dexter wondered about their ERP system – it had been selected by his predecessor, but it seems that it was not being used to the company’s advantage.
He called for a quick meeting with Dewey, Bettina, and Denise. “We need to coordinate the purchasing better.”
They all nodded in agreement even though none of them were certain about where Dexter was going.
“Have you all been trained on the ERP system?” Dexter asked.
“Well, not really” responded Denise. “You see, we don’t have time - the trainers said that we would need to put all the master supplier information into the new system. That would take days! It’s easier just to remember or to look at the spreadsheet that Dewey works on…all day,” she added and then grinned at Dewey, thinking that she had dropped a compliment.
Dexter became noticeably agitated. “Why are we still using spreadsheets and not using the new ERP system to its max?” He had come from a larger company and knew they could smooth the operations if they just used the system's features.
He continued more evenly, “Look, let’s agree upon three things.” He then wrote on the white-board:
1. Blanket Purchase Orders
Our spend is managed and invoices are reconciled to the PO
2. Contract Management
All Suppliers are maintained in the ERP system with the terms and payment methods.
3. Payment Methods
Optimize the payment process via Check, ACH, Credit Card
“We are going to use the ERP system and smooth the ordering process,” announced Dexter. “Let’s start by getting all the suppliers into the system – Denise, you take that task. Then, let’s put the terms into each record – Bettina, you update each record after Denise puts them in. And Dewey, you update the Blanket PO from your magic spreadsheet. We are joining the 21st century!”
Need Procurement Improvement? Use the System!
Dexter knew that there were a hundred other features that he wanted the team to use, but they couldn’t get there on their own.
He needed someone from outside the firm to assess their processes and remap the way they did their work.
An operations improvement exercise would be just the trick. This would set the bar higher for operations and probably bring some cost savings as well.