Communication is important. It’s safe to say that’s an understatement in any industry. Consider this, The Society for Human Resource Management estimates poor communication costs larger companies (100,000 employees or more) up to $62.4 million annually. Smaller companies (100 employees or less) average losses in the amount of $420,000 per year. Even though our communication tools are more advanced than ever, effective internal and external communications for many companies remains elusive. What are the effects of poor communication between your manufacturing organization and your suppliers and how can you overcome them?
Avoiding the Pitfalls
Manufacturing companies are like intricate machines. Each department, regardless of how small, is critical to operations. Implementing an effective communications plan and utilizing the right tools ensures that the machine runs as efficiently as possible. In addition to internal communication, manufacturers must stay in constant communication with suppliers and customers. Companies literally can not survive without good communication. Here are four reasons why.
- Missed Purchase Orders– What happens when a supplier purchase order is missed or overlooked by your supplier? In the short-term, you may have to pay for expedited shipping or pay an expedited rush fee to your supplier. In the long-term, you may damage your reputation with your customer. Said another way, your suppliers impact how you well you service your customers positively and negatively. Don’t forget to factor in the extra administrative time it takes to find out what happened and prioritize the issue. Real-time purchase order management solutions provide critical communications that will avoid missed purchase orders.
- Changes To Purchase Orders– POs are always dynamic. Vendors are constantly changing purchase orders, and your ERP system is constantly adjusting material demand. How quickly are you able to capture these changes with your suppliers? And, are you updating your ERP system with these changes, so your company can make adjustments to your production schedules? Good communication means implementing a system that will automatically make updates and send the change data to all appropriate departments.
- Quality Issues– Real-time scorecards and communicating quality issues on a timely basis with your suppliers is critical to keeping rejected materials out of your inventory saving precise capital. Furthermore, supplier quality issues can be detrimental to your organization if these quality issues impact your customers’. Does your current software provide you with valuable data about suppliers? Quality ratings, timeliness, responsiveness and price are key data points that help you get the highest quality at the best price. Are you receiving that real-time communication?
- Employee frustration– “Frustration” has been dubbed the silent killer of productivity. Employees need the tools to work productively. Frustration ensues when they feel accountable, yet helpless, when orders are missed, quality is lacking or some other part of their job goes wrong. The company pays with decreased productivity and increased turnover.
You Can Survive
This is certainly the technology age. Companies have numerous tools at their disposal to improve communications, such as email, fax, text, chat and internal networks. However, communications coming from numerous sources are easy to get lost, overlooked or ignored. The solution is a single platform that allows suppliers, and the manufacturer to access real-time data 24/7. An automated purchase order process is more than just a system to manage orders. An effective purchase order process provides the communications that are critical to a manufacturing company’s survival, including:
- PO Status updates, including vendor acknowledgment, past due tracking, alerts for “at-risk” items, shipped item tracking and historical data.
- Supplier scorecard data, including their reliability record, quality rating, price variance over time and responsiveness.
- Real-time reports.
SourceDay is a software as a service company that specializes in the needs of manufacturers. Contact us to learn more about improving your communication through an automated purchase order process.