Here are two questions a plant manager or manufacturing executive could be asked by the boss:
Question 1: “What’s your strategy for boosting output in the second half of the year?”
Question 2: “What’s your strategy for procuring nuts and bolts?”
Clearly, the plant output question is the one you likely WILL be asked. But does your daily calendar truly reflect that? Or, do you find yourself bogged down by the little things in your operation that divert time away from larger strategic items?
If the answer is “yes,” then it may be time to consider outsourcing parts purchasing and other services to a third-party logistics (3PL) provider, assuming you are working with a 3PL to manage the flow of component inventory to your plant.
Outsourced purchasing wouldn’t apply to strategic components. Obviously, you need to stay close to these tier-one and tier-two partners. But there are a host of non-strategic consumable parts vendors – boxes, nuts, bolts, etc. – that require time to evaluate, negotiate a price, and order/replenish products. Time that your team could be spending on more difference-making projects.
Outsourcing purchasing: the basics
The purchasing and storage of the consumable materials can be outsourced to a 3PL provider – freeing up your buyers to work with strategic suppliers, and saving you money in the process.
Typically, manufacturing logistics partners simply store the inventory you have bought and ship them to you based on production signals. But these 3PLs can do much more, including buying parts inventory on your behalf.
The way it works is simple: the 3PL procures the materials, stores them, manages the inventory, and invoices you only for the parts you need, when you need them. Naturally, the 3PL would build inventory financing costs into the overall cost of the service, and there would need to be a contractual agreement that guaranteed purchased materials would be used.
To learn more, download the free eBook: Logistics Strategies to Improve Plant Operations
5 key benefits of outsourcing purchasing
By allowing your 3PL provider to purchase non-strategic materials on your behalf, you’ll reap the following rewards:
- Keep your cash longer.
By invoicing you only as parts are used, your 3PL allows you to preserve your capital. It’s essentially a vendor-managed inventory model, with your 3PL in the middle.
- Reduce your inventory and speed up the cash cycle.
By outsourcing purchasing to a 3PL, you’ll no longer have to “over-buy” to make sure the factory has the raw materials it needs to operate.
- Pay less for supplies.
Your 3PL may be purchasing for multiple customers to achieve economies of scale that you wouldn’t otherwise have on your own.
- Free up floor space taken up by non-strategic parts.
Instead of being a storage warehouse for boxes of parts and materials, your floor space could be used for production only, thereby increasing throughout. When you need these materials, your 3PL will deliver them just in time.
- Free up buyer time to work with tier 1 & tier 2 suppliers.
By reducing time buyers spend with non-strategic suppliers, you’ll free them up to work on more important, larger contracts.
Outsourcing purchasing to Kanban Logistics
With locations throughout Eastern North Carolina, Kanban provides logistics services and solutions to manufacturers throughout the region. In addition to parts procurement, services include warehousing, packaging, kitting, JIT delivery, and vendor-managed inventory (VMI services). To learn how we can support your manufacturing operation, contact Kanban today.