So you’ve executed a purchase contract and now the supplier spends the next 6 months manufacturing the parts you’ve ordered. Or so you thought. A few days before the parts were scheduled to be delivered, the supplier informs you that they are still another 2 months away from being able to deliver any parts. The team scrambles to figure out a solution, but with so little time to mitigate the shortage, there is little that can be done.
The scenario above, no doubt, has kept countless buyers on edge across every industry. In bad-case scenarios like these, it could understandably be asked – what could be done to mitigate the disconnect between what the buyer is planning to receive and what the build status actually is at the supplier. This is where moving from reactive to proactive can make a substantial difference. One way to do this is to implement a Purchase Order Follow-up process, whereby the supplier provides regular updates to the buyer on all goods under contract.
Implementing a purchase order follow-up process can have several benefits to both the buyer and the supplier, including:
Improve Supplier On-Time Delivery: When the buyer is closely and proactively monitor the purchase order status at the supplier, this reduces the likelihood of the supplier incorrectly planning their production schedule or even overlooking the order entirely. Especially when a supplier is very busy with many orders from many customers, it is easy for things to get misplaced, lost or forgotten. Having a dedicated system to to following up on supplier orders can help dramatically improve supplier delivery performance.
Set performance standards and expectations: In some cases, the supplier may assume that a minor slip in schedule will not have a major impact for their customer. This is rarely the case as many manufacturers try to run their operations as lean as they can without large quantities of buffer inventory. It is important to clearly and regularly communicate this to the supplier so that they understand the impact that any delays, even minor, will have on the buyer’s operations.
Get Advance Notification of Schedule Delays: Ideally, the Purchase Order follow-up process will prevent, or at least substantially reduce the frequency of late deliveries. However, in the event that an order does fall behind schedule, it can still be tremendously helpful to the buyer to get advanced notice that the order will be late. This way, rather than having to scramble at the last minute, the buying organization can evaluate a broader range of options to mitigate the impact of the late delivery. This could be changing the order of operations on the production floor to accommodate the late parts or it could also be looking for available alternates.
Implement solution to resolve in time: Implementing a PO status update process can also help uncover issues earlier than they might normally be uncovered. This is obviously beneficial for both buyer and supplier because ideally, following this process encourages the supplier to proactively confirm all relevant details on the production floor and in their procurement organization. This provides an opportunity for potential issues to come to the surface ahead of when they may have otherwise and give the supplier more time to devise a solution on their own before it impacts the customer.
Clearly communication expectations & requirements to suppliers: The first step is to have a discussion with the supplier on how Purchase Order status tracking might work and be mutually beneficial. This will include what specific things buyer & supplier can identify as being relevant to report on a recurring basis throughout the build. This could be handled through various milestones identified across the project schedule or it could simply be a status update on work completed on a weekly basis
Include clause in purchase contract: Once a discussion and agreement has been made between buyer and supplier, it is important to have the requirement for the supplier to provide updates at the buyer’s request spelled out in the terms of the purchase contract. Having a written agreement helps ensure all parties are clear on the requirements and expectations.
Which Software Tools to Consider: The next item to consider is which software tools can be utilized to facilitate the Purchase Order Follow-ups. Although it may be tempting to simply do an excel sheet and email solution, it may be worthwhile to consider a dedicated software solution. Some procure-to-pay software systems include features to enable buyers and suppliers to easily track their orders directly on the platforms.
With excel and email, all the steps needed to track status of the purchase orders are manual steps. The buyer must send an email to the supplier, the supplier either checks their ERP system or goes out to the production floor to check status, then the supplier sends an email back to the buyer. The buyer then updates the spreadsheet with the latest status. This can potentially run into issues if the spreadsheet po status tracker does not get saved in a shared location or if it is in a shared location and the file is accidentally deleted.
Manual vs Automated Processes: With a dedicated purchase order tracking software system, there are no back and forth emails and manual efforts required. The supplier can simply write in their updates or some systems can even integrate directly with the supplier’s planning systems. This solves several issues: it automates a large portion of the process, makes it harder for information errors to occur, and makes the records much more secure than they would be in an excel sheet.
Lasso is an all-in-one procure-to-pay solution. From requisitioning, sourcing, contracting, build status tracking, receiving and invoicing – Lasso has native features for buyers and suppliers to efficiently communicate build status updates. Buyers and suppliers can simply view all the relevant orders through their portal. Suppliers can update the purchase order build status and the information is instantly transmitted to the buyer.
Lasso is free to start and offers an all-in-one cloud procurement solution. Get started by creating a free account or check out additional platform tutorials.
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