#How to rate the performance of your Purchasing Departament?

Dear #CEO 

How do you rate the performance of your purchasing team !?

Key Points to consider:

  • Never set as a KPI achieving a discount from a supplier, unless,
  • This is directly associated with improving inventory turnover.
  • Orders for production over one to two months, are almost certainly “freezing” your cash-flow if not throwing it down the sewer.
  • Buying more stock than you can consume in say one month is not good management. What is your business cycle from order to delivery?
  • In some businesses, the inventory turn-over is reasonable to good if it is less than 2 days.
  • Look to improve your Inventory Turnover Ratio – ITO in relation to your production pull needs.
  • Distinguish between safety stock, long-lead ordering times stock, buffer stock and normal stock.
  • Kanban systems are great method for manging stock. Using a kanban system is some form of acknowledgement that you have failed to focus on and reach a flow system of work. keep on kaizening your kanban to your needs.
  • Focus on On time in full with your suppliers. Deal with missing items and faulty stock as soon as possible.
  • Ensure that if R&D & design make changes to product they are also in the team responsible for utilising the current materials in the warehouse, Good 3S, house-keeping is everyone responsibility.
  • Your work-in progress between processes or production sites is also cash-tied up being wasted. make sure you are working on moving from pull to flow, but never push.
  • If you have over stock of parts and raw materials which you now have to consume then ask the following question to the Finance Director, Plant Manager and Purchasing Manager. When did you set up the KPI and train people in the basic principles of a good Purchasing Management System? Don’t blame the purchasing team.