Acquiring Procurement Process of Direct Materials

In today’s competitive business World, the corporations are always searching for IT solutions to enhance the efficiency of their business processes and thereby reduce price of operation to boost their margins. The businesses are under constant pressure to increase their bottom line no matter the growth in top line. They have no choice but to embrace the new procurement options, to increase time-to-market, reduce operations cost, avoid expensive mistakes to remain on top of competition and prevent risk of extinction. To be able to enhance the procurement efficiency and realize maximum potential savings, it is crucial that the whole supply chain has to be very efficient. The providers and the trading partners, like shipping agents, clearing and forwarding agents and fund agents must be efficient so as to provide the perfect materials at the perfect time at the right place at the perfect price at the ideal quality.

Procurement Strategies

This is only possible by a collaborative Solution between buyers, suppliers and trading partners. It is essential that the procurement solution must focus on collaborative supply chain practices to be able to understand the fullest savings. There are numerous forms of procurement actions in a business based on indirect and direct materials. The direct materials are items which are purchased for the production and the indirect materials MRO items are bought for support of manufacturing activities. The qualities and the specifications of the procurement alternatives vary for direct and indirect materials, based on the procurement process of different vertical industries. Due to these diverse requirements of procurement, distinct procurement suppliers concentrate on either different vertical industries or flat procedures based on their domain knowledge and expertise. Procurement solutions come in various flavors and colors to cater to variety of business requirements.

  • Vertical and Horizontal Exchanges
  • Public exchanges for various vertical markets
  • Private exchanges sponsored by corporations

The above technologies can Provide efficient procurement solutions, but have limited extent in their efficacy. Vertical exchanges center on transacting goods in one industry, product or substance. They typically exist in businesses where sellers and buyers are fragmented and inefficient. Horizontal exchanges focus on leveraging expertise in a specific business process across variety of businesses. Service industries lend themselves nicely to a flat exchange. Additionally, the costs of direct materials are already pre-negotiated into the cable and just scope of further decrease in costs is possible by improving operating efficiencies. Changing suppliers of direct materials is a very long drawn expensive process as it involves extensive part or  vendor qualification and frequently requires elaborate reliability and merchandise testing. The companies are not inclined to break-up long standing relationship with existing providers and risk with unfamiliar new providers, unless it is absolutely essential. Procurement solutions need to automate the procurement of direct materials with existing providers and trading partners without having to change the present business or  procurement processes with suppliers and trading partners, thereby reducing the operating costs and improves time-to-market.