Put wasteful buying on ice
I lifted the lid of our second freezer and asked my wife: "what do you see?" She looked puzzled as I pointed at the frozen packs of sausages, peas and chicken breasts. "Pounds, I see lots of pound notes," I said, unable to hide my frustration.
I would rather have cash in the bank than half of this stuff, but if there's a bargain to be had, my wife will buy it. It makes perfect sense to her, because she says she "will have saved us money"
Buy-one-get-one-free offers were bad enough. Now supermarkets are offering buy-one-get-two-free and she won't be able to resist. That's how she ends up with six packs of king prawns when we only needed some milk. You see, my wife is the purchasing type. I am more into day-to-day replenishment. The difference is key and the relationship between the two attitudes even more so.
In a supply chain, purchasing (or procurement) establishes and manages the framework with suppliers. The service level contract covers aspects from quality to lead-times and, of course, price. Within this framework, there should be plenty of movement to replenish stocks. People often avoid challenging set routines like delivery frequencies. Yet getting a material delivered twice as often can enable you to halve its stock holding.
Purchasing often agrees to supplier constraints that act as time bombs to get lower prices per unit. These range from sky-high minimum orders creating a year's worth of stock to 'full-lorry-only' policies, which generate more stock than is needed. Then there are the yearly agreements to buy guaranteed amounts. Everyone accepts these because they can be called off in small amounts. But come year end, the supplier will be shipping you the rest regardless.
Purchasing and stock replenishment need to work together to avoid short-sighted decisions. They should be as close as production planning and scheduling. So I'd better speak to my wife about her purchasing policies before I end up buying a third freezer.
Hugh Williams is founder of supply chain planning specialist consultancy Hughenden.
