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Purchasing and Manufacturing
Part 3 of 3
Lean Manufacturing, Basics, Principles, Techniques
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The APICS CIRM Program One way for purchasing and manufacturing to work better into the 21 st century is for these two groups to understand one another's role in the enterprise. To take this a step further, purchasing and manufacturing will work better together if they understand the roles everyone plays in the enterprise. The APICS CIRM program is the ideal program to accomplish this task. The CIRM program offers a basic understanding of the thirteen basic business activities of a manufacturing enterprise:
Why, for example, should purchasing and manufacturing know about field service? If field service is out in the field and finding a particular part is failing or constantly breaking down, perhaps manufacturing can find a better way of manufacturing the part so that this type of breakdown doesn't occur in the future. If it is a purchased part that is constantly failing, then purchasing should be aware of it. These are the sorts of things that purchasing and manufacturing must know about field service. I've been in some companies over the years where purchasing had no clue what their own field service department did. All they knew was they received a list of parts required by field service and they went out and purchased them. The APICS CIRM program discusses the importance of field service, the things they typically do, and performance measures important in this area. I have only used field service as an example. One could make a case for learning any of the manufacturing functions. In summary, the APICS CIRM program is an excellent way to gain a broad understanding of the manufacturing enterprise. NEW PERFORMANCE MEASURES SHARED BY MANUFACTURING AND PURCHASING Over the years I have seen purchasing and manufacturing working toward performance measures that were at odds with one another's goals and objectives—but were satisfying the enterprise goals and objectives, for example, purchasing receiving a bonus for having a favorable "purchase price variance." The company had standard costs of purchased parts and if purchasing could get the part for less, they had achieved a favorable purchase price variance. This one particular time they did this and bought an inferior yarn (a weaving operation) that had quite a few knots or snags in the beamed yarn even though it met mill specs. In this same company, manufacturing had incentives for having high operating efficiency. That is, they had standards that indicated they should produce so much of a particular product in an hour,and if they beat the standard (made more), they achieved a favorable production variance. Well the two conflicting objectives became apparent when they loaded the inferior yarn on the knitting machines. Who got the favorable variance that day, purchasing or manufacturing? Obviously purchasing won that one. Manufacturing failed miserably. The knotted yarn wouldn't go through the needles properly, and the machines were constantly stopping because of these jams, yet purchasing was meeting its goal and objectives. This is but one example of having different goals and objectives for different groups in a manufacturing enterprise. In the future, the performance measures (goals and objectives) that will be used and work best in the enterprise will be those performance measures that can be shared by all groups. For example, raw material inventory reduction is not a performance measurement for the purchasing department only. It should also be shared by manufacturing and other groups such as warehousing and design engineering. I had an experience once that I'll never forget. I was told by the president of a company (the owner actually) that one of five company goals that year was to reduce raw material inventory by 20 percent for the fiscal year. As I walked around the plant and talked to various people in different groups, I couldn't find anyone, outside of the purchasing department, who had a clue that inventory reduction was one of the top five goals for the year. Even the purchasing department didn't have a clue as to how they were going to accomplish this objective, since one of the other top five goals was to increase sales by 15 percent, which would seem to increase the need for raw materials rather than decrease raw material inventory levels. Needless to say, adjustments had to be made, including a companywide awareness program and shared performance measures. In conclusion, purchasing and manufacturing will be two of the vital links in the supply chain as we move into the 21 st century. By implementing some of the ideas of what I consider best practices companies, manufacturing companies will benefit by reducing manufacturing lead times, new product development time and reducing or eliminating unwanted and unnecessary paperwork. Purchasing and manufacturing must understand the roles and responsibilities of all the links in the supply chain. The supply chain is only as strong as its weakest link. We must think beyond the enterprise and work together as a total supply chain delivering products and services to our customers.
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