Parts Procurement Services Improve Cash Flow

A large defense contractor, rather than hire additional staff in its supplier management group, outsourced the purchasing of all packaging and related materials to its third party logistics partner (3PL) as part of a manufacturing logistics solution. This freed up management time to meet the demands of the department with no new headcount, saving time and money.

purchase-orderWhy tie up your buyers’ time sourcing things like nuts, bolts, boxes and packaging?

The right 3PL can do all this for you at a lower administrative cost. And, on top of that, can bill you for the materials only as they are used, letting you keep your cash longer.

We write more about this in our quick-read eBook: Logistics Strategies to Improve Plant Throughput and Financial Performance.

Chances are a logsitics partner is already helping you with inventory management and shipping of materials – either to your factory or to your customers. So integrating parts procurment services makes sense.

Benefits of parts procurement and packaging procurement services

  • Preserve your capital
  • Reduce the time buyers spend with non-strategic suppliers
  • Reduce the cost of materials, since 3PLs who source for multiple customers could get a volume discount
  • Reduce inventory and speed the cash cycle

Barriers to outsourcing parts procurement

You may get pushback about “outsiders” directly purchasing from suppliers. Your sourcing team may want to maintain responsibility for choosing suppliers, negotiating deals and managing these relationships.  But, let’s face it, you’re not competing in the market based on what kind of corrugate boxes you use.  As long as purchased materials meet spec, procurement of consummable parts is not strategic.

If it’s a genuine concern, 3PL sourcing can be limited to basic commodity items and you can have the 3PL purchase only from an approved supplier list.

Whatever the parameters, parts procurement by 3PLs can save you time and money. That the bottom line.

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