Managing inventory levels of raw materials, semi-finished products and finished goods is a key issue for any company. Under-stocking runs the risk of stock or activity shortages. On the other hand, over-stocking has negative operational and financial impacts for the organization. Implementing an adapted, automated supply management process therefore improves efficiency and customer satisfaction.
A supply management process often involves operating procedures, a multi-actor approval circuit (operator, production manager, purchasing manager, executive, etc.) and various software packages (ERP, WMS, Excel spreadsheet, communication and collaboration tools, etc.).
In this article, we’ll tell you how to manage all these variables efficiently, and how to interconnect software with a dedicated solution: a workflow and automation platform.
What is supply management?
Definition of supply management
Among the key processes in a company’s production and logistics activities, supply management aims to meet the company’s needs for raw materials, supplies, sowing products or products.
A procurement process is a sequence of tasks, sometimes simultaneous. It enables an efficient flow of information between players and tools. This process aims to plan, organize and control purchasing.
It includes tasks such as formalizing the supply request, the approval circuit, supplier selection, negotiation, order acceptance, purchase order and invoice management, reconciliations, etc.
There are several variables to take into account when making purchases:
- storage locations and levels
- requirements for production orders
- order forecasts
- the price of materials
- supplier management
- purchasing terms and conditions
Operational objectives of supply management :
- Ensure continuity of operations and avoid stock-outs that would impact production
- Minimize costs,
- Manage supplier relations
- Ensure control and quality of supplies
What is the supply management process?
There are as many supply management processes as there are companies. This process is representative of an organization’s know-how and financial stakes. Below is just one example of a procurement process.
On this map, we identify the various tasks, the actors involved, the conditions and decisions, and the data. It would also have been possible to show the software used, performance indicators, stock levels, etc.
There are 3 types of process
- Informal process (not documented by the company)
- Documented process, i.e. a paper document or pdf format
- Digitalized management. Beyond the document, all stages are supported by dedicated software that makes the process tangible/operational for employees. Thanks to a combination of forms, validation and approval circuits, notifications…
- Digitalized and partially automated procurement. Employees are freed from repetitive, time-consuming tasks such as multiple data entry, information retrieval, etc. And ERP and WMS software are interconnected.
The benefits of purchasing automation and digitalization
Greater profitability
By improving collaboration and automating repetitive, non-value-added tasks, you can cut costs and quickly achieve ROI.
What’s more, digitization helps improve inventory management to avoid over-stocking and stock-outs.
Customer satisfaction
Good supply management means meeting deadlines.
It can also lead to the purchase of better quality components, thanks to lower automation costs.
Upgrading skills
Automation platforms create guided requisition experiences based on company know-how.
Newcomers to the position of operator or production manager can concentrate on technical rather than administrative matters.
Software interconnection
ERP, WMS, Excel sheet, Mail, business software… they’re all connected. No more multiple entries of the same information in different programs, no more searching for information in different programs. Updates and creations are automated. This reduces errors and enables data analysis.
Find out more in our article on process automation
Methods for better supply management
Recurrent supervision (calendar method)
At fixed dates, identify the stock level and ensure that what has been consumed is restocked for the next period. This method can be useful for companies that are not subject to seasonal fluctuations.
Just-In-Time
To supply, at the customer’s request, what he needs, when he needs it, and in the right quantity, without additional production. It is based on continuous flow, takt time and a pull system.
Visual management
A minimum stock level is defined and physically represented on storage areas (red line drawn on shelves or walls). This visual indicator enables an operator to launch an order as soon as the line is crossed. A measuring device can also be installed to automatically trigger supply requests. Visual management can also be carried out on dedicated software, using Kanbans for example.
Method based on historical supplies (known as the empirical method) and/or on forecast orders (known as the forecasting method)
If it has the necessary data and can process it without error, a company can conduct any kind of analysis on purchasing history and forecast future orders. It can also go a step further, drawing on data from standards, market and competitive research.
100% customized supply management, connected to all your software with the Lapala solution
With an automation platform, you can easily parameterize all stages of the procurement process, either by connecting your existing software or starting from scratch. You can create input forms, validation circuits, automations and connect your software.
In the example below, we’ve defined a certain sequence of steps. Please note that everything on the Lapala platform is 100% customizable.
- Each box represents a stage, assigned to an actor (operator, production manager, purchasing manager, director, etc.). At the appropriate time, each player receives information, approval requests and a form for entering further information.
- Some tasks are automated, such as alerts, updating ERP, WMS or business software, compilation and calculations...
- Conditions may be set to activate other stages, depending on the case
Description of the supply management process
Steps 1, 2 and 3 – Enter a new request (from scratch or from a new request). These steps enable any employee with a computer, smartphone or tablet to create a requisition.
Request entry: Using a 100% personalized form, this stage enables employees to enter their requests simply. It is also possible to connect to the ERP or business software or spreadsheet via API to select the relevant references. Or import a .csv or xlsx file.
By connecting via API to your procurement software, spreadsheet or other ERP, you can display all your procurement data. The Lapala platform can then extract the various data and allow the employee to use it as is, or make the relevant modifications.
Step 4 – Validate the request. This step enables the manager to check the request before sending it to the purchasing department.
Step 4a – Iterate on demand. Following the manager’s refusal, this step invites the employee to modify his request and read his manager’s comments.
Step 5 – Select a supplier. This step puts the purchasing manager in charge. The form can display the supplier database directly from this form, thanks to the APIs of the ERP or dedicated software.
Step 6 – Solicit supplier. This automated step allows you to send an email to a supplier with all the information and documents required for a response.
Step 7: Collect the offer – Using this form, the supplier can fill in your own response box directly on Lapala.
Steps 8 to 10: Validate the supplier’s offer – This step is the first in the approval circuit you have chosen to validate your supply. The circuit may start with purchasing, then pass through a business manager and, depending on the parameters, even a director. Depending on validation or refusal, different retroactive steps can be triggered.
In this circuit, we have created a condition for amounts over €15,000. If the condition is activated, the director is contacted.
Step 11 – Automation – Confirm order to supplier for issue of purchase order and invoice. Lapala automatically sends the necessary information and documents to the supplier
Step 12 – Automation – Update ERP or other software. This automated step enables you to update all your software and avoid multiple entries.
Step 13 – Automation – Notify prod and requester. And prepare to receive the supply
We’ve stopped there for the sake of argument, but the process could have been much longer. We could have easily integrated the following steps:
- Receipt of order
- Compliance validation
- Invoice receipt and reconciliation
- Payment
- Bank reconciliation
- Reporting
- Etc.
Discover the Lapala platform in 1 minute
In conclusion
In conclusion, supply management is a key element in ensuring business continuity, minimizing costs, maintaining good supplier relations and guaranteeing supply quality. Digitizing and automating procurement processes improves profitability, customer satisfaction, skills enhancement and software interconnection within the company.
With a dedicated solution like Lapala’s workflow and automation platform, companies can benefit from 100% customized supply management connected to all their software.
Now you know all about supply management. Now it’s your turn! See you soon for more content!
Leave a Reply