The manufacturing industry exists within a world of radical uncertainties. The global competition is growing ever bigger, changing the face of industrial manufacturing and manufacturing procurement. Not only do you need to be on your A-game to be competitive, delivering high-quality products to your customers, you also need to produce them at the lowest possible cost to make profit to be able to expand your business. Many other industries, such as the transport industry, are in the same position.
In this global market, the success of your manufacturing business depends on your ability to manage and balance increased customer expectations and demands, while at the same time protecting margins. In other words, your company needs to deliver: Lower prices, Higher quality, Newer features, More customization and Shorter production times while also maintaining market share and managing costs effectively.
The procurement in a manufacturing company is one of the areas with the biggest potential for cost savings by finding the best suppliers and negotiating with current one’s to gain better contract deals. It is often the go-to starting point for a company to develop their business and reduce costs.
How to optimize your procurement in the manufacturing industry
Procurement in the manufacturing industry is a complex endeavor requiring a well-established procurement framework and the skills to execute your chosen strategies. There are however a few key steps to the procurement process in the manufacturing industry you need to carry out to ensure the best products at the lowest prices.
Performing a manufacturing cost analysis
Performing regular cost analysis is a vital part to gain insight into the procurement in your manufacturing industry to identify potential cost saving opportunities. But creating a cost-breakdown analysis for your manufacturing procurement process is at times a complex and daunting task, relying heavily on big amounts of data from multiple sources to create a useful cost analysis where you can identify potential cost saving opportunities.
Prognos manufacturing procurement software gives you access to all cost data required in order to both perform the necessary cost analysis and support your fact-based negotiations with suppliers.
The importance of concrete cost data
Knowledge is power, and data is knowledge.
Having access to vast amounts of cost data is necessary for you to get the most out of your suppliers. It gives you important insights into both direct and indirect costs concerning your procurement and the manufacturing industry as a whole. This cost data and information will give you an edge when negotiating with your suppliers, or at least level out the playing field.
Stay up to date with the latest procurement and manufacturing trends
Procurement and manufacturing trends come and go. Hence, it is important to reflect on the learnings from the years gone by and resolve to strengthen your capabilities and capacity for the future. Staying up to date with the latest procurement and manufacturing trends, both globally and locally, are essential to ensure you can obtain the products and services you need to support your daily business.
Using Prognos for your manufacturing procurement
Prognos’ platforms gathers data from multiple sources to give you up to date data in one place for raw materials, manufacturing costs, tax & transport, labor costs and currencies.
Prognos is available as two different platforms:
- From our platform Prognos Tailored you can access interactive, continuously updated, reports where you can drill down in your materials, compare the prices to your own cost development, export the graphs, or export the underlying data for further analysis. The reports are customized for you by Prognos, leaving you to focus on the negotiation strategy and not on finding the data. You also get access to several different features including: should cost trackers, selected indices and country focus.
- With Prognos Online you get access to over 8 000 indices on raw materials, components, wages and currencies in an interactive online tool capable of transforming the data to fit your needs.
Get in touch with us to try out the Prognos platform today and experience all the benefits it provides.
Frequently Asked Questions
Benefits of a procurement tool for the manufacturing sector
Benefits:
- Efficient sourcing
- Reduced costs
- Manufacturing procurement cycle transparency
- Quality control
- Minimized risk
- Global indices data dashboard
What is procurement in manufacturing?
Procurement in manufacturing refers to every activity about obtaining the goods and services a manufacturing company needs to support their manufacturing and shipping of their products. It includes all direct and indirect purchasing as well as procurement of services in the manufacturing industry.
What are the stages of procurement?
Procurement involves five steps from beginning to end:
- Step 1: Identify needs to find out what products and services you may need to continue your daily business
- Step 2: Evaluate suppliers to find the best option for your needs in terms of cost, reliability, and logistics.
- Step 3: Select the supplier that matches your needs and demands the best.
- Step 4: Negotiating with your suppliers on the terms and conditions of your contract or the acquisition of the products and/or services. If you aren’t able to compromise, select the next supplier on your shortlist to start the negotiation process once more until you are satisfied with the contract.
- Step 5: Once the terms have been agreed and the purchase order or contract is signed, the next step is the delivery of the products or services on the specifics which have been agreed upon.
What are the different types of procurement?
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The three different types of procurement are:
- Direct procurement refers to all purchasing activities of products that directly contribute to your company’s end product, such as components of the end product or machinery building it.
- Indirect procurement refers to all purchasing activities of products that do not directly impact the end product or bottom line, such as office supplies, but support the day-to-day management of the business.
- Services procurement refers to all purchasing activities of services, such as hiring staff or leasing software.
What are the benefits of a procurement tool for the manufacturing sector?
The manufacturing sector is ever-changing, with new manufacturing procurement requirements cropping up on a daily basis. As demand grows and resources stay limited, manufacturers face a dilemma as to whether they should compromise on resource quality in order to sustain. This is where manufacturing procurement software tools can highly benefit you and your enterprise.
Benefits:
- Efficient sourcing
- Reduced costs
- Manufacturing procurement cycle transparency
- Quality control
- Minimized risk
- Global indices data dashboard
Why is it important to perform a manufacturing cost analysis?
A manufacturing cost analysis is important as it helps create simplicity in the overall cost structure. With manufacturing timelines growing tighter, conducting cost analysis to enhance manufacturing capabilities is the need of the hour. It helps identify potential risks in procurement in a manufacturing company and also highlights potential benefits, such as:
- Cost-saving opportunities
- Clear forecasts of potential costs to be incurred
- Financing opportunities
- Eliminating redundant investments
- Selection of economic, high-quality materials
- Product re-engineering to remain competitive
What is procurement management?
Procurement management is the process of selecting the right products and services for a project. The process involves in-depth research and brainstorming about the product to project relevance, quality, long-term return on investment, payment, service delivery, and most importantly, risk mitigation.
Using a manufacturing procurement strategy helps you select the most cost-efficient choices that provide long-term returns for your business
What are some common problems in manufacturing procurement?
- Inconsistency in procurement data
- Supplier-side compliance problems
- Low-quality resources
- Volatile commodity prices
- Communication gaps
Adopting manufacturing procurement software can help tackle common problems faced in the manufacturing procurement industry and align your procurement strategy in the right direction.
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