You run a profitable mining company and expect the production at the local mining site to steadily grow in the next five to ten years. Your procurement team is struggling to keep up with processing requisitions into purchase orders. Your Warehouse Lead is persistently asking to start looking at nearby warehouses to keep inventory of critical spare parts and frequently used consumables. While you are looking into the possibility of hiring more buyers for the procurement team and warehouse lease options, consider this - do you have a material catalog in place?
We are used to seeing vendor catalogs, which are created and maintained in order to sell their products. However, not every company that procures parts and supplies for their projects or operations has a material catalog set up in their system. Most rely on vendor's description, manufacturer, model and part number, which is manually populated on the purchase order. What these businesses do not recognize is that a material catalog is integral to efficient and cost effective procurement and contracting activities. Material catalog is a also must if you want to maintain accurate inventory. Overall, setting up the catalog of materials provides greater data control and visibility, and increased efficiencies in procurement, warehouse and inventory processes.
Data Control and Visibility
According to Merriam-Webster, the definition of catalog is: "a complete enumeration of items arranged systematically with descriptive details". Adding and maintaining systematic, descriptive, and detailed information of the items you procure and store in inventory not only will give you access to the abundance of data, it will help your company to comply with financial and accounting requirements.
Historical Trend Reporting
Historical reports with ordering frequency and total or average order quantity by a certain item or material type, with additional report filters for vendors, Buyers, or transportation provides will aid the following strategic procurement and contracting activities:
Monitoring volume and spend trends for better planning of upcoming projects or inventory replenishment
Preparing and analyzing bid or contract renewal packages
Highlighting items, material type or manufacturer to look into potential cost savings (substitution for a cheaper material, request additional discount on an existing contract, re-bid the contract, etc.)
Organizing and re-aligning Procurement team's workload based on historical volume data
Key Performance Indicators (KPIs) for effective and timely vendor management through reporting of problematic shipments (over/short/damaged/discrepant), shipment delays for certain items, frequent price increases, etc.
Equipment and Parts Information
Access to detailed master data for equipment and parts that are associated with the existing assets can help to reduce operational costs and assist with planned asset maintenance through:
Strategically grouping items into packages for the upcoming planned maintenance work
Having visibility of obsolete, nearing expiration or recalled parts that belong to different equipment and assets
Tracing superseded or interchangeable parts via catalog notes or system functionality
Financial and Accounting Accuracy and Compliance
A comprehensive catalog with accurate pricing helps to ensure financial and accounting compliance by:
Providing current and historical inventory balance for financial statements and tax accounting
Traceability of receipts, issues and returns for financial inventory and capital projects
Organizing pricing data by material condition (new, refurbished, obsolete, surplus etc) for items that require repairs, or inventory that is obsolete or excess and needs to be written off
Efficiencies in Procurement, Warehouse and Inventory Processes
Besides valuable and accurate data and reporting, access to material data in a catalog can also lead to efficiencies in procurement, warehousing and inventory management.
Procurement
Accurate, detailed and consistent material data requires an upfront catalog development cost and an on-going maintenance expense. This investment will pay off once your business gains efficiencies in procurement through decreased time required to process and complete purchase orders. This will be achieved by:
Giving Buyers access to historical vendor and pricing data to aid with vendor selection process and comparing quoted prices
Grouping purchase orders by item or material type, which would lower the overall purchase order volume and lead to a reduction in the cost of processing transactions
Lowering chances of inaccurate material information on the purchase orders, which is often caused by erroneous information or typos when the data is hand-entered
Providing consistent and accurate material information to vendors, which leads to faster order processing time and fewer shipment errors
Warehousing and Inventory Management
Access to material data can help the warehouse and inventory teams to improve shipment, receiving and inventory issuance efficiencies and overall accuracy.
Accurate material master data speeds up the shipment processing and inventory put away time
If the system has a functionality to store expiration and material receipt dates, you can reduce the amount of expired and aged inventory by prioritizing which items get issued out first
Part number substitutions can be easily processed and confirmed for compliance if the warehouse team has access to material master data and substitution notes
Consistent and accurate information for inventory items is one of the ways to set up the layout of the warehouse and determine storage requirements: material to be stored on a shelf, on the floor or an outdoor yard. For example, heavy parts are often stored on the floor and small consumables are stored on the shelf. Frequently used items should be located in the where the material is issued out for the delivery.
Is your company ready to invest into setting up a material catalog? Are you facing purchase order delays, rising transactional costs, increase in duplicated, missing or inaccurate orders, or lack of accurate accounting data for taxes? Maybe it's time?
ABOUT THE AUTHOR
Rosita Johnson is ASCI's Business Development Manager. Rosita has been with the company for over 20 years in different areas of supply chain management: procurement, contracting, inventory management, and ERP system implementation. Send an email to hello@ascillc.com to set up a free consultation appointment or to share any ideas or experience that could help other businesses.
