It is amazing how much non-value added work manufacturing companies are still doing nowadays in purchasing and supply chain management.
As a part of Jakamo’s business design and user research processes, we are conducting a lot of interviews, observations and co-design workshops in our customer companies in the manufacturing industry. With these methods, we research what types of pain points the companies and their employees are facing in their daily operations and how supply chain digitalization could help them with that.
Non-value added work overloads purchasers
Problems and improvement initiatives are found in many areas, for instance, in supplier quality management, engineering collaboration and sourcing, but let’s take biggest problem area, operative purchasing, as an example for more precise analysis at this point. According to our research, approximately 50 % of the working time of an operative purchaser in a typical manufacturing company is spent to non-value added work. That’s four hours per day!
Common examples of that type of work are:
- Comparing information of a purchase order and supplier’s order confirmation
- Typing purchase order confirmations to ERP system
- Handling and manually sending purchase order related documents
- Delivery control: reminding suppliers of late order confirmations, late deliveries and upcoming important deliveries
- Searching purchase order-related communication information that is scattered in tens of emails of many people
- Searching purchase order related material certificates and quality documents
This is all clearly non-value added work and not any customer wants to pay anything for that. This type of manual routine work decreases significantly the company’s operative throughput, creates additional costs, causes unnecessary delays in the delivery process, and what is maybe the worst, reduces employee satisfaction.
It is very common in the manufacturing industry that due to heavy manual workload purchasers are overloaded and do not have enough time to do more value-added (and personally much more pleasant work), such as, supplier collaboration, quality management, coordinating, development, sourcing, bidding and negotiating. Imagine what more your company could achieve if your purchasers could use four hours every day for that instead of non-value added work.
A digital transformation journey towards better productivity and happier staff
Luckily this type of manual work can be easily automatized by a holistic digital platform and based on our customer value mappings we have gained good customer evidence of the benefits of that. Our customers have improved their productivity significantly and purchasers’ work time has been released for value-added and more pleasant work. In general, their purchasing teams focus has changed from operative manual routine work more towards strategic and development-oriented work.
Below I have summarized some practical examples of the benefits gained in our customer companies:
- 100 % improvement in white-collar productivity of the operative purchase team
- 2 % savings in annual purchase budget
- 20 %-points improvement in suppliers’ OTD
- 20 % decrease in supplier quality costs
- Significant improvement in employee satisfaction
Impressive numbers and it is not difficult at all! Technology to do this is already available. It is just about to take this in purchase management’s priority list and to start the digital transformation journey towards a huge productivity leap and much happier purchasing staff.
This blog post was originally published in Jakamo’s online magazine Friction Free Community on 4 March 2020.