Leading manufacturers are focused on a common goal: improving factory output by focusing on factory inputs, or the amount of input goods per unit of production.
This approach positively impacts organizational cash flow, but it’s not always easy to achieve—especially if buyers are spending most of their time working with non-strategic suppliers of consumable goods.
Right now, for example, your buyers probably spend a good percentage of their time negotiating with and procuring goods from makers of boxes, nuts, bolts, and other consumable parts and materials. While necessary, these activities do little to improve factory output. Third-party procurement services through your logistics partner can help.
3PLs Can Help with Third-Party Procurement
Chances are a logistics partner is already helping you with inventory management and shipping of materials—either to your factory or to your customers. So integrating parts procurement services makes sense.
In the ebook Logistics Strategies to Improve Plant Operations, Kanban gives the example of a large defense contractor that, rather than hire additional staff in its supplier management group, outsourced the procurement of all packaging and related materials to its 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.
The right 3PL can perform third party procurement services 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.
5 Key Benefits of Third Party Procurement Services
Set up this type of arrangement with your 3PL and you’ll reap these rewards:
- Preserve your capital.
By serving as a middleman in the transaction, your 3PL will help you preserve your capital and buy only what you need, when you need it.
- Reduce your inventory and speed up the cash cycle.
No more boxes of obsolete parts sitting around the warehouse, and no more “over-buying” 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.
Then put the space to better use improving factory throughput.
- 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.
Now, you may get pushback about “outsiders” directly purchasing from suppliers. For example, your buyers 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 corrugated boxes you use.
As long as purchased materials meet spec, procurement of consumable parts is not strategic. Let your trusted logistics partner manage third party procurement of consumables, while you focus on more important goals.
Contact Kanban Logistics today to find out how you can use our services to improve manufacturing logistics.