Supply Management

Oakland school district case study

FACTS:

Increase in number of requisitions and purchase orders.

15% of suppliers concentrated ~83% of the total dollar volume spend.

Large supply base.

Purchase order process is complicated and not well mapped.

Suppliers not happy with the large no. of small orders as it is not cost effective.

Last minute changes in the purchase order adding to extra unnecessary expenses.

PROBLEM STATEMENT:

How will Mr. Smith (Supply Manager) centralize the purchasing process to make it cost effective for both the Oakland School District and its suppliers?

SOLUTION:

Mr. Smith's first target should be at standardizing the ordering process throughout the district level and reducing the large number of small orders and large supply base.

Steps:

Mr Smith should emphasize the need for re-structuring of the ordering process. The current ordering process is complex. A representative from every function should participate in mapping the process favoring collective interests of every function for each order type. These changes will make work easy, lighten the documentation workload, simplify the information flow and thereby drive performance improvements at all levels.

Mr. Smith should identify critical items and less critical one's through ABC analysis method. Then, focus on reducing the supply base, investigate and analyze best suitable supplier for every critical and less critical items. Select and maintain a fixed price base contract with these best suppliers, favoring user needs. This will eventually cultivate in building a long term supplier relationships and win strong supplier support.

Mr. Smith should emphasize the use of traveling order instead of a single purchase order for every small delivery. Under traveling order,recurring purchases can be made up to 24-36 times. This will bring down the order placement costs considerably.

Sundry items should be procured by users on corporate credit card. This will...