You have different terms with your suppliers and don't know how much you buy from each supplier.

Profile

During an ad-hoc vendor analysis project, a large computer manufacturing company discovered that throughout the organization, it had many different contracts with each of its suppliers, each with different payment terms, inconsistent discounts, and shipment policies making it difficult to determine how much business they did with any one supplier, whether they were getting the best prices, and whether they were able to leverage their purchasing power. Furthermore, it discovered that there was no uniform way of accounting for the cost of goods sold, as expenses were set up to be tracked only by product. While accounting for expenses by product made it easy to determine profit margins for a particular product line, the lack of consistent accounting practices.

Solution

The company used eprentise Reorganization software's MS Inventory Organizations module to consolidate its inventory organizations into organizations based on product lines, and to assign their costs consistently at the subinventory level within each organization. They also standardized on their min/max reorder points for each item, and standardized on their receiving policies within each organization unit. They used eprentise Data Quality software to identify and resolve duplicate suppliers and MRO items. Four hundred vendor contracts were renegotiated, the supplier list was consolidated, and the company was able to save an estimated $9 million a year in supplies.