24 June 2010 | Adviser Q&A
I have been asked to take on, review and make savings to our company’s engineering consumable spend. How do I approach it without damaging relationships with our engineers and suppliers?
Purchasing and logistics manager, South Wales
MARTIN WAKELIN
Purchasing director – global elastomers, Trelleborg Sealing Solutions
Start by building credibility. Go into discussions well prepared by knowing data such as spend information, supplier performance and specifications.
Understand your stakeholders. Who is buying engineering consumables? It may not just be your engineering department. Face-to-face consultation with stakeholders will allow you to present the exercise as an opportunity. Do the suppliers deliver on time? Do they carry the correct ranges?
Explain to stakeholders the business benefits of refining specifications and avoiding specific brands and proprietary products.
Where you must source specific items consider using “one stop shop” suppliers that will stock a specific item for a small mark-up, avoiding the complexity of multiple suppliers.
Gain support from senior management by presenting your recommendations to the decision-makers from all involved departments. Above all, remember to take a balanced assessment of value – it’s not just about price.
SIMON MARKS
Interim manager, Nomis Associates
Consumables are no different from any other commodity where purchasing has not previously had an input such as travel, energy, marketing and HR.
The first stage is to sell the benefits of your services to engineering as a customer. You are there to help them get more from their budget, better value for the company’s money and reduce the administrative burden.
Analyse the current spend to establish a baseline and the number of invoices and suppliers. Cost savings are not only realised by reduced cost price but can come from reducing the number of invoices, deliveries and suppliers.
Next, develop a plan with engineering to eliminate the “tail” of suppliers. This will require engineering to develop specifications and establish demand levels rather than ordering for delivery today.
Finally implement the plan and report progress. Make sure you give credit for the savings to engineering when you write your savings report and maybe suggest other areas of spend where you can repeat the process.
ANDY HICKS
Inventory manager, E.ON UK
Get buy-in from your engineering team by involving them in the process. Explain that you want to explore a different approach for the supply of these items that would benefit the business (and them). Why not ask engineers and suppliers for their ideas for cost benefits? You might be surprised by what they come up with.
Invite current and new suppliers to tender for three- or five-year agreements, and decide on the appropriate supplier for your needs. Either use the list to call off against when items are required, or consider consignment stock, where you’ll pay only for what you use.
Benefits include lower stock levels and only one invoice per month. One call off order could be placed either per month or, even better, annually. If the spend is high enough you may also be able to negotiate a rebate scheme with suppliers.
Key points
• Build a rapport with engineering; present your role as helping them get more from their budget
• Get hold of as much data as you can about suppliers and specifications
• Implement a savings plan in conjunction with engineers and vendors
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✹ Please note: responses can only be given on this page, represent writers’ personal views and should be regarded as general guidance only. The adviser panel includes experts from a range of disciplines
