How To Improve Logistics Efficiency In Your OEM Purchasing Strategy
April 28, 2017
Purchasing managers at OEMs are increasingly under pressure to prioritize logistics efficiency in their procurement decisions.
As a result, they’re limiting freight lanes and increasing their use of returnable containers while also consolidating suppliers.
You’ve probably fine-tuned your purchasing strategy to reduce metal manufacturing costs as much as possible. Logistics is only one aspect of your plan, but it plays a vital role. Learn more about how to improve logistics efficiency and lower costs for your OEM.
The most reliable way to improve logistics efficiency in procurement is to consolidate suppliers. The fewer suppliers you work with, the tighter your shipping loads. You’re able to use space in your trucks more efficiently and reduce the number of trucks you need weekly.
Consolidating your freight also enables you to negotiate better rates with trucking companies.
You can usually provide a trucking company with consistent business when you run fewer, fully loaded trucks for fewer suppliers. Compare this against occasionally running partially loaded trucks with several suppliers and trucking companies.
By keeping your primary trucking company busy, you have more leverage in financial negotiations and save on shipping costs.
Take Advantage Of Assembly Services
When your supplier ships a unit as an assembly, the assembly takes up less space than all of its composite parts would need if they were unassembled. Shipping pieces unassembled is simply inefficient.
You should work with a metal manufacturer that offers assembly services in addition to fabrication, welding, machining and finishing. Your supplier can likely do assembly more cost-effectively than your OEM since it has less overhead.
As an added benefit, you don’t have to store hundreds of parts since assemblies come to you complete. You can dedicate more open floor space to production rather than storage and assembly when you order finished assemblies.
Visibility, Variability And Velocity
Purchasing managers should incorporate the “three V’s” of supply chain management in their purchasing strategy: visibility, variability and velocity.
- Visibility – Keeping tabs on where your products are located
- Variability – Ensuring you have the right amount of products to meet fluctuating demand
- Velocity – Knowing how to keep up with growing demand
Although the “three V’s” aren’t usually thought of as central to OEM logistics, they need to be a part of the discussion.
As changes in visibility, variability and velocity occur, you need to revisit your logistics to make sure you’re accounting for those shifts. For example, your supplier may generally ship loads to you Sunday through Wednesday nights so you can run your production lines Monday through Thursday.
What happens if your demand goes down? If your supplier isn’t shipping as many parts, you must account for this variability in demand.
You and your supplier may decide to change shipments to only Sunday and Tuesday nights. That way, your supplier can deliver two full trucks as opposed to four half-full trucks, saving you money.
Improving logistics efficiency will ultimately help your business reduce waste associated with movement, time and energy. Not to mention, you’ll save significantly on logistics and procurement costs.
Logistics conversations challenge you to question why your OEM operates the way it does. If you’ve always done things a certain way, should you continue to do so? Moving forward, you may need to adopt new strategies based on your logistics goals and changes in your organization.
Are you ready to learn how Miller can meet your efficiency needs? Contact us today!