Optimization of Procurement Cycle:

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This is a project initiated to reduce to time spent for completing a procurement cycle in an industry that i worked. The existing process was taking 174 hours to complete a single procurement cycle. At the end of the project this time came down to 90 hours which was a 46% optimization of

Introduction:

TASL being a leader in Indian aerospace and defense industry, the load of procurement and sourcing
is immense. Since the throughput is lesser in numbers, more emphasis is given to the quality of the
material delivered. This required a huge emphasis on selecting the proper suppliers with high quality.
At the same time, due to this, the lead time of most of the materials are too high. This is because the
materials are not standard materials and doesn’t have a lot of suppliers around the world. Due to this,
the materials of superior quality are sourced from overseas and the suppliers don’t hold stock of these
materials, rather follow ‘make-to-order’ process. These are the main reasons that contribute to the high
lead times of materials.
With that said, these are the external factors that increase the lead time of the process. Similarly, there
are many internal factors that increase the lead time of the process.
For a department to procure a material, 4 stages are involved
PR
• The production team creates a procurement request after
undergoing various approvals.
PO
• The Procurement team sends RFQ’s to various approved
suppliers and arrives at a final quote after competitive pricing.
Once the price is approved, the PO is placed
RECIEPT
• The supplier produces the product and delivery is done according
to the estimated lead-time
PAYMENT
• After the approval of stores, customs and quality, the product is
taken in and the payment is initiated
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PRIMARY OBJECTIVE
• To reduce the internal lead time of procuring materials for production
• To provide transparency and visibility among the stakeholders so that everyone can know the
status of each process
• Establishing pro-activeness by being prepared for an upcoming process
• Improve Buyer-Supplier relationship
• Improve the efficiency of operation in the firm

SCOPE OF STUDY
The project aims at centralizing the process of materials procurement for production. This project when
implemented, brings all the teams creating PR, interacting with the supplier and placing PO for the
required material, in-warding the material into the company and paying the supplier, all under one roof
through a centralized portal.
The objectives of the Optimization of Procurement Cycle are as follows:
• To reduce the internal lead time of procuring materials for production
• To provide transparency and visibility among the stakeholders so that everyone can know the
status of each process
• Establishing pro-activeness by being prepared for an upcoming process
• Improve Buyer-Supplier relationship
• Improve the efficiency of operation in the firm

 

Process involved in completing the project:

 

Analysis:

 

Pareto Chart:

Helps to understand which process takes the most time to complete:

 

Cause and Effect Diagram:

Helps to find the root cause

 

Future State Map to make the process efficient:

 

Detailed Work Breakdown structure to implement the project:

Gantt Chart:

 

Recommendations:


• In PR approval, Boss approval and HOD approval can be removed. Instead, they can be notified
of the process and the only approving authority can be the Project Manager. This is because
they will already be aware of the requirement and just notifying them will suffice
• The software should be designed in a way that data can be sourced directly from an excel file,
rather than requiring a user to enter all the entries one after another
• A response time of 13.5 working hours (1.5 days) can be added to the list of conditions that a
supplier should fulfill to be added to the approved supplier list
• The software should have an App interface which will make the process easier and quicker
• Once SCN is created, it can be sent for approval to all the approving authorities rather than
following hierarchy. This is to avoid the situations of wastage of time when an SCN is approved
by everyone in the pipeline but gets rejected at the final stage
• A separate data collection agent can be contracted to provide monthly data on the possible
suppliers for materials already used in the plant or has the probability of being used.
• For domestic deliveries also, the customs can be notified once the consignment leaves the
supplier’s end
• The security personnel can be allowed and prepared to receive a delivery on their own rather
than waiting for an individual from the stores to come down to the gate just to receive a delivery
• The security cabin at the gate can be installed with a personal computer so that the security
personnel can do the gate entry instantly, therefore the process doesn’t get stalled here
• A list of expected delivery can be generated every day and given to the security personnel
• The company can sponsor people in the quality team to earn the required certificates so that
most of the individual will possess the stamping authority, therefore redundancy can be avoided
• The paperwork can be eradicated from most of the process involved

 

 

Result:

Stages involved

Time taken before implementation

(hours)

Time after implementing

(hours)

Time saved

(hours)

 
 

PR creation (Manual PR’s)

4

0.75

-3.25

 

Approvals for PR creation

9

4

-5

 

Placing a Purchase Order

90

54

-36

 

Approvals for a Purchase Order

18

10

-8

 

In-warding Process - Customs

2

1.5

-0.5

 

Gate Entry

9

1.5

-7.5

 

Stores and Quality

36

18

-18

 

Moving to Inventory

6

4

-2

 

Total

174

93.75

-80.25

 

 

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