Purchase Order Automation

The Cost of Downtime When Parts Are Missing

It is a well-known fact in manufacturing that unplanned downtime is a significant threat to productivity and profitability. Beyond the usual suspects like equipment failures, another critical cause is the lack of necessary parts and materials. That’s why highly streamlined direct materials procurement operations are crucial. Enter SourceDay..

On-hand and inbound inventory reliability is key in any manufacturing operation. At the extreme end, something as simple as missing assembly screws can disrupt a production line; either shutting it down or requiring the build to be done in stages. Or, consider an even more costly disruption, such as what happened at Dell, where a missing foam end cap escalated costs due to expedited shipping and production delays. SourceDay is specifically designed to prevent these issues by enhancing visibility, responsiveness, and accountability across one of the most critical parts of a company’s supply chain, PO Lifecycle Management

The Real Impact of Missing Parts on Production

A ServiceMax study conducted with PTC, an industrial IoT company, estimates the average cost of downtime at $4,333 per minute. For larger organizations, costs can escalate up to $1 million per hour when production lines are down. But it goes beyond shipping costs and production downtime. An underperforming PO Lifecycle Management operation causes ripple effects across the organization…beyond the supply chain to finance, in the form of cost of goods sold (COGs), and even to sales (you can’t bill on time if you can’t ship product on time). 

Without a high performing PO Lifecycle Management solution like SourceDay’s, manufacturers continue to live with these costly issues, often maintaining heavily manual and error-prone workarounds, and simply absorbing unnecessary rush charges, overtime, and the cost of excessive buffer stock to prevent future parts shortages. 

High Performing PO Lifecycle Management: Fixing the Core Problem in the PO Process

Companies typically invest well in their ERP and sales & operations (S&OP) systems to ensure orders and revenue flow correctly and on time. A sales order is cut and then the ERP calculates the necessary materials based on inventory and cuts the PO. 

Unfortunately, the investment in the right technology and processes for this next step is often lacking. As a result, this is where the risk begins. There is little-to-no real-time visibility into the life of that PO. Was it received by the supplier? Was it acknowledged? Does the supplier want to change the price, the arrival date, and/or the quantity? These are questions that need answering just in the first few hours. And to get those answers, staff often resort to manual follow up efforts to ensure important orders arrive in full and on time. Then, as the days go by, the process repeats again, and again, and again.

Now imagine 10,000 active POs across hundreds of suppliers. Data reveals that 5,200 (52%) of these orders will change, and each individual line within those changed orders will change an average of 2.5 times. 

Even at 1/10th of the PO volume above, it creates a situation that is impossible to manage. ERPs are not designed for this type of real-time data management, and manual tracking with spreadsheets and post-it notes is both labor-intensive and error-prone, even with added staff. As a result, parts and orders slip through the cracks. And if the part is a critical or single-sourced item, those ‘slips’ can be even more expensive and disruptive.

SourceDay’s PO Lifecycle Management solves this core problem in the PO process by delivering critical visibility and management for every step and every stage of every PO…enabling highly confident, real-time decision-making. We do this with cutting-edge technology that captures and updates communications and changes in real-time, keeping data clean, accurate, and current in the ERP.  We’ve also removed the number one barrier to supplier communications and engagement through a pioneering approach that makes any buy/supplier communication, PO change, and acknowledgement as easy as sending an email. 

SourceDay: The Cost-Effective Solution to PO Problems

Because SourceDay has solved the hard to fix challenge of PO Lifecycle Management, customers are experiencing 100% data capture and accuracy and up to 96% on-time-delivery (OTD). And more than 80,000 suppliers actively engage with customers through SourceDay technology on a daily basis. 

This impressive adoption of SourceDay technology within the supply chain ecosystem means time-to-value is nominal and customers can quickly begin to prevent unplanned and unnecessary expenses. 

Customer Snapshot

SourceDay customer Mott Corporation, a semiconductor manufacturer, was able to enhance efficiency and reduce risk in its supplier collaboration process. Mott Corp., with a lean procurement team, faced tedious and time-consuming back-and-forth emails with suppliers. This often led to lost POs and overworked buyers. 

After partnering with SourceDay, Mott Corp. saw a 25% reduction in each buyer’s daily workload, eliminated lost POs, and streamlined supplier communications. Most importantly, missing parts no longer led to downtime, achieving 90% customer OTD within the first year of using SourceDay. Besides saving on indirect production costs, Mott Corp. established brand equity with customers by setting a new standard for reliability.  

Let’s talk

How much are production delays, missing parts, and excessive inventory impacting you and other areas of the company? Connect with a SourceDay supply chain expert today to learn how we can put the best PO Lifecycle Management technology in the industry to work for you.

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