Diriger - Automating High-Volume Low-Risk Low-Cost

Automating High-Volume / Low-Risk / Low-Cost Goods Purchases

Authors: Updated by Bronwyn Hanley & Greg L Towne (Diriger)

Organisational buying power is constantly being marginalised or eroded through a loss of productivity measures, supply chain interruptions, inflationary pressures, and difficulty in changing current practices in alignment with internal and external influences. As this has an impact across the whole enterprise, it’s past time for our strategies, tactics, and work practices to be re-examined and re-energised.

WHAT ISSUES AND PROBLEMS CURRENTLY EXIST IN THE INDUSTRY?

Let’s look at some of the problems we already know about:

Repair and maintenance costs are increasing by 10 – 15% annually, a significant impact on our strategies and planning
Under-performing assets account for approximately 30% share of operating expenses so we need to look at how we are not adding to this situation
Approximately $4 of profit is lost for each $1 spent (or overspent) on repairs
Operations and Maintenance activities are being delayed due to stock-outs and the delayed arrival of parts and commodities
Partly due to administrative overheads, the ‘Wrench time’ of our working staff in the field or on the shop floor has decreased to less than 4 hours daily on the direct execution of work
Furthermore, parts supply, availability of the right parts, and dead stock continues to marginalise the organisation’s buying power, viz. it has had an impact on working capital.
The above item is impacting the supply chain alignment to Operations and Maintenance (Fit, Form, Function) and the needed critical integration as a business support practice
Analytics show that 80% of goods purchasing transactions ONLY apply to 20% of the organisation’s spend on goods with each transaction (purchase order) costing ~$50 or more.

The High-Volume, Low-Risk, Low-Cost non-critical goods purchases are getting the same amount of attention and cost of transaction as critical spend items, placing a huge and unnecessary burden on all parts of the business.

TRENDING BUSINESS GOALS

The problems above have been accentuated by existing and predicted business expectations and goals, such as:

Doing more with less e.g. maximising reliability and availability so that impacts of current volatility on OEE can be readily assessed
Providing quick access to trusted asset information, usage metrics, and parts across all classes in real-time
Building workforce and systems collaboration to maximise skills utilisation through automation, AI and Machine Learning
Visualisation of AI-based insights that facilitate fast and accurate decision-making
Accurate remediation to close the loop, control costs and sweet your assets.

There is a HUGE need to drive risk and cost out of the equation.

INFLUENCES AND MEGATRENDS

Our approach is influenced by leveraging several mega-trends impacting most asset-intensive operations.

The transition from human-based decisions to digital machine-assisted decisions
The gig economy where personnel do not stay in the same job for very long and their knowledge keeps walking out the door
The transition to sustainable and renewable resources means that traditional life cycle asset management has additional complexity and constraints that the supply chain must master
The rapid increase in new technologies and methodologies forces organisations to embrace change or risk obsolescence.

These mega-trends drive towards increased use of digital technologies to support faster decisions and sustainability within increasingly complex environments and constraints.

Hence Supply Chain Management needs to re-focus and re-energise.

RE-FOCUSING AND RE-ENERGISING VIA THE KRALJIC AND PARETO MODELS

Our guiding concepts have been to introduce modern day methods and automation to tried and proven models and analytics. We have achieved this by using the models and tactics outlined below.

PROCUREMENT v PURCHASING STRUCTURES

SOLUTION CAPABILITY OVERVIEW

The Maturity Model Spectrum

Built on DirigerHUB's Interoperability and Adaptive Governance Platform .... A Composable Capability that allows Customer Organisations to progressively adopt the model "Without Boiling the Ocean".

There are 3 Maturity Traps to be Aware of ...

When reviewing this maturity model, we need to emphasize these critical failure points where organizations get stuck ...

The Level 2 Ceiling: Many organizations believe implementing SAP or Oracle moves them to Level 4. In reality, it only moves them to Level 2 (Standardized). They have a better record of their problems, but they are still firefighting.
The Kraljic Disconnect: Organizations at Level 3 often have a Kraljic Matrix in a PowerPoint deck, but their ERP treats a $2M turbine and a $2 box of pens with the exact same workflow.
The Human Bottleneck: Strategy is often "trapped" in the heads of senior buyers. When they leave, the organization's maturity drops back to Level 1.

Whereas Diriger Institutionalizes the Intelligence

Start the Journey with a 10-Rule Procurement Health Diagnostic

Key Steps ….

1. Run it as a 45-minute workshop with your warehouse, procurement, and finance teams.

2. Gather evidence for each rule. Be honest. If you cannot prove it, it is RED.

3. Map RED rules to DirigerHUB capability layers to build a targeted remediation roadmap.

4. Re-run quarterly to track maturity progression.

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