The volume of chemicals required by an organization often fluctuates. During certain periods, consumption may follow a steady pattern. At times like this, it is a relatively simple task to ensure that adequate supplies are at hand.
In fact, the profitability of the consumer may be strongly influenced by the efficiency and flexibility of its supply chain.
Identifying the right supplier
While price is definitely a key consideration, it should not be the only factor to be considered when deciding upon a supplier. A consumer would do well to seek answers to some of these questions as well:
- Does the supplier have the capability of delivering varied quantities?
- What is the lead time required to fulfill a high-volume order? Will the rate remain the same or will you get a volume discount?
- Does your organization need additional services or any other form of support? Does the supplier have the resources to meet your needs?
- Is the supplier familiar with your industry? Is it possible for you to get help when your organization is developing new products or adding features to existing products?
There are times when a supplier who understands your processes can play a key role in providing important inputs that may prove of great benefit to your company. A purchasing department that keeps this in mind when establishing its supply chain can help the organization to reduce costs, increase efficiencies, and boost profitability.
Collaborating with your suppliers
It is essential to work jointly with your major suppliers and maintain direct communications with them. Purchasing departments that follow this practice gain several advantages. They are able to keep a close tab on technical and price developments for the chemicals that they regularly consume.
This can help in taking a decision on the frequency and size of orders that should be placed. At those times when prices of certain chemicals are falling, it may be advisable to place smaller orders. Conversely, when prices are rising, a decision to increase order quantities would make more sense.
But various other considerations would need to be borne in mind. The efficiency of the transport network being used, the cost of storing chemicals, and the necessity of maintaining an adequate buffer of stocks would play a role in the decision to place orders with suppliers.
Many small and medium-sized organizations think that the option of coordinating with suppliers is not open to them as they do not have the resources to invest in expensive IT systems. But it is possible to collaborate effectively without spending large amounts of money on such projects. Often, equally beneficial results can be obtained by taking simple steps such as running joint forecasting exercises with suppliers.
Consider your supplier to be a solution-provider
Chemical consumers can gain tremendous operational efficiencies by taking advantage of the specific strengths of different suppliers. The purchasing department of a company should view its major suppliers as business partners and guides rather than just the firms that fulfill the purchase orders placed on them.
Taking this approach will provide chemical consumers with the opportunity to build strong and reliable supply chains. This will help to get them not only the best prices for their purchases but also give them the ability to improve their products and strengthen their business.
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