When it comes to industrial manufacturing, a robust purchase order system is the beating heart of any hard-working supply chain. More than a contract for materials and services, purchase orders keep stakeholders across the supply chain in sync about what’s happening, when it’s happening and how supply chain transactions are to be executed. However, many material resource planning (MRP) systems leave room for improvement.
Most industrial shippers use order management systems that require suppliers to ship materials by a set delivery date. Typically, that date is driven by a customer or manufacturing requirement.
All that’s changing as more and more shippers set up order management systems driven by supplier ship dates instead of delivery dates. And for good reason. Ship-date-driven purchase order systems enable better control of transportation costs and better transportation network planning.
While industrial shippers can provide suppliers with routing instructions, they have little control over when suppliers ship or service levels applied to shipments. This invariably leads to costly premium shipping and unplanned shipments. The result: high costs, issues with dock congestion, inventory, material flow, and un-optimized inbound transportation.
That said, how do you implement a more shipping-friendly, ship-date-driven purchase order system that gets materials to the receiving dock when they’re needed – with tighter control of costs and smarter transportation planning?
Five keys to successfully launching a ship-date-driven order management system
- Implementing a supplier ship date is a significant change: communicate clearly
It’s no small thing to reconfigure a supply chain to focus on ship dates vs. delivery dates.
Action Item: Communicate your objectives clearly to suppliers, aligning their terms and conditions to your desired shipping outcome on a planned day. This increases the likelihood of a successful transformation.
- You may already have what you need to create ship date triggers
Chances are you already have the tool you need to generate ship date triggers with the Materials Resource Planning (MRP) system you’re using now to generate purchase orders for suppliers. The infrastructure exists. You just have to decide how to integrate a Transportation Management System (TMS). You can upgrade your existing system to include a TMS application that generates P.O.s based on ship dates. Or you can partner with a 3PL and integrate with its TMS to manage carrier transit schedules.
Action Item: analyze your internal resources, expertise and capabilities to determine whether it makes sense to add a bolt-on TMS application to your existing MRP or to partner with a 3PL that can manage all the processes and carrier updates for you.
- Suppliers will have to change their processes to shift to a ship date schedule. Establishing ship days and windows for every supplier is a critical milestone in launching a successful program. To get this step right, shippers must support suppliers, as supplier agreements will have to be changed.
Action Item: Work with suppliers to help them determine one-time part and container adjustments, ship days and windows.
- Institute a project to train and onboard your suppliers in phases
Shifting from a delivery-date-driven purchase order system to a ship-date driven purchase order system won’t happen on its own. It will mean training suppliers.The best way is a phased rollout, starting with the suppliers that incur most of your transportation costs.
Action Items: Generate a list of the top 20 percent of suppliers that have the biggest impact on transportation costs. Determine a launch plan that makes the most sense for your business (e.g. by division, supplier, manufacturing center, etc.). Then, train suppliers to use a TMS for things like shipment entries, order changes or Advance Shipment Notification (ASN) transactions.
- Material planners will have to change ordering practices to sync with ship days
And they’ll have to do so across the board for every supplier. For example, an ordering practice that will require change is the matching of MRP requirements to fixed plans and processes for changing planned routes.
Action Item: Train any stakeholders involved in changing ordering practices. The planning and change management effort is the key to a successful transition.
While the transition from a delivery-date-driven order management system to a ship-date-driven system requires time and effort, the payoff is worth the investment. A better planned, ship-date-driven supply chain typically delivers valuable returns – including lower transportation costs and streamlined material flow through the supply chain.
Looking to reduce transportation costs and move goods through your industrial supply chain more efficiently by shifting from a purchase orders based on delivery dates to ship dates? Fill out the “Want to know more” form to the right and one of our representatives will contact you.
Mark A. Spieles is a Director of Supply Chain Solutions at Ryder. In his role, he is responsible for Industrial and Aerospace customers. He holds leadership responsibilities on teams that support procurement, network engineering, distribution management and inventory management. He is a supply chain professional with 27 years of experience in transportation and distribution management. Throughout his career, Mr. Spieles has played an active leadership role supporting over 50 Ryder customers across numerous industry segments.