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As popular, simple and timesaving as these methods are (especially the electronic catalog), they have their own limitation. For some there are very few, if any, records left of what happened. This might be a problem for tax calculation, accounting, and audit trail. This limits the applicability of most of them to indirect buys and MRO (maintenance and repair) only. Most of these methods are limited to few suppliers, thus leaving the buyer with a limited leverage. Working outside the system allows for a very limited control of what is bought where and how, and in many cases that is not compliant with the company culture or procedures.


Strategic purchasing agreements are common between business. These agreements in most cases identify spe­cific items and their price break. Leverage and assurance of best price in the market are part of the negotiation before the agreement is reached. All other terms and conditions, quality requirement, payment methods, cus­tomer service level, lead times, or delivery dates are pre-negotiated also. Therefore this is a good process to automate. Since we are now inside the legacy process described previously, the process starts with a purchase requisition (PR), generated manually or by the MRP process. The part numbers (or other identifiers) are matched against the agreement databases. If there is a match, the source is identified, and a purchase order (PO) is issued to the supplier. There are several variants here as to whether a confirmation is required or not. The rest of the process is similar to the legacy process. While auto-release has all the advantages of a fully automated process and very low cost, fitting directly with EDI standards, it has some serious limitations. The first one is that the implied assumption of availability is al­ways questionable. In many cases it is invalid. Ongoing data maintenance of inventory and ATP is complicated, work intensive, and impractical. Most auto-release sys­tems do not have an automated or simple method of cancellation of unfulfilled POs. The supplier has to be able to communicate that he cannot provide the need, and the system has to know how to react and how to continue. This is not that easy to program and auto­mate, and in most cases is done manually. This system also does not cover effectively recommendations for other optional or substitute parts. A different method is clearly needed to answer these concerns.

To Be Continued

For balance of this article, click on the below link:

Lean Manufacturing Articles and click on Series 14

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