COMPASS self-selection guide

COMPASS selfiselection guide – manufacturer

AS A MANUFACTURER, COULD YOU BENEFIT FROM INCORPORATING AN INTERMEDIARY IN YOUR SUPPLY CHAIN?

This selection guide is in the form of a questionnaire and is in 2 parts.

Part 1

This section relates to some of the cost-benefits available to a manufacturer should he enter a formal partnering relationship with an intermediary.

Select the one statement from each heading which most closely relates to your company's strategy then apply points as follows to each of the questions you select based on your objectives.

2 = Not significant to our strategy.
4 = Limited significance to our strategy.
6 = Some importance to our strategy.
8 = Essential to our strategy.

Sales force (intermediaries offer selling resources)

1. We intend to grow our sales levels, but do not intend to substantially add to the costs of our external sales force.

2. We intend to achieve the same or similar sales levels, whilst reducing the costs of our external sales force.

Transport (fewer, but larger value deliveries with an intermediary)

1. We intend to grow our sales levels without adding substantially to our transport costs.

2. We intend to achieve the same or similar sales levels, whilst reducing the costs of our transport.

Warehousing (intermediaries have warehousing facilities)

1. We intend to grow our sales levels without adding substantially to our warehousing capacity or cost.

2. We intend to achieve the same or similar sales levels, whilst reducing our warehousing capacity and costs.

Stock (intermediaries carry stock)

1. We intend to grow our sales levels, but do not intend to increase the value of stock of our products.

2. We intend to achieve the same or similar sales levels, whilst reducing the value of stock of our products.

Production (larger production runs)

1. We intend to grow our sales levels without adding substantially to our average unit production costs.

2. We intend to achieve the same or similar sales levels, whilst reducing the average unit production costs.

Packaging (intermediaries are more likely to accept larger pack sizes)

1. We intend to grow our sales levels without adding substantially to our average unit costs through reducing pack sizes.

2. We intend to achieve the same or similar sales levels, whilst reducing the average unit cost by increasing the pack sizes.

Administration (intermediaries have systems to deal with large customer numbers)

1. We intend to grow our sales levels without adding substantially to our administrative costs.

2. We intend to achieve the same or similar sales levels, whilst reducing our administrative costs.

Credit management (intermediaries take the debt risk in the marketplace)

1. We intend to grow our sales levels without adding substantially to our bad debts.

2. We intend to achieve the same or similar sales levels, whilst reducing our bad debt costs.

If your score is between: -
48 – 60 A fully integrated solution with an intermediary is likely to provide you with cost benefits. Go to part 2 to ascertain if other benefits are available.
24 – 48 A fully integrated solution with an intermediary may provide you with cost benefits. Go to part 2 to ascertain if other benefits are available.
16 – 24 A fully integrated solution with an intermediary probably will not provide cost benefits. Go to part 2 to ascertain if other benefits are available.

COMPASS self-selection guide – construction procurement teams

AS A CONSTRUCTION PROCUREMENT PROFESSIONAL, COULD YOU BENEFIT FROM INCORPORATING AN INTERMEDIARY IN YOUR SUPPLY CHAIN?

Construction procurement team

Construction procurement teams and intermediaries have worked together for many years and many partnerships have produced benefits to each partner and the industry, but few are fully integrated and therefore few are able to achieve the strategic benefits available from a fully integrated partnership.

Traditionally, procurement of construction materials has revolved around price. Few consider the full cost of raising the order, processing the order, whole-life-cost of the product, or if the product is fit-for-purpose, or even if the various products being compared on price are like-for-like.

Now construction procurement teams and intermediaries are adopting the 'Accelerating Change' agenda with its accent on supply chain integration and continuous improvement.

Listed below are many of the benefits currently available to construction procurement teams from fully integrated partnerships with intermediaries. If you use an intermediary and you do not enjoy some or all of these benefits then you should raise the matter with the intermediary concerned.

1. Reducing the cost of procurement

Most construction companies accept that it currently costs around £70 to raise a purchase order, even if the goods you require are only worth £1. This is particularly significant in the maintenance sector and therefore businesses in this sector are often looking for a reduction in the transactional costs of procuring materials.

Many intermediaries have invested in e-business solutions, which result in paperless systems. Some systems even allow for 'back office to back office', communicate with the intermediary without any significant change to your system.

A less high-tech solution is the use of procurement cards. These cards are just like using a credit card, but the intermediaries have set up their systems to provide your bank with full line-by-line itemised details, including VAT. Procurement cards give the construction procurement team far greater control than the traditional order-pad system.

2. Cost-saving incentives

It is now wide practice for an intermediary to agree annual spend targets with the construction procurement team, which, if achieved, lead to savings on the materials. Many different loyalty schemes exist, which provide benefits linked to sales growth.

3. Improved service

Some of the greatest benefits from a fully integrated partnership with an intermediary come in terms of service improvements, which are often encompassed in a Service Level Agreement. These improvements are numerous and depend largely on the circumstances. The list below is not exhaustive, but gives an indication of what can be achieved:

• single point of contact, throughout UK

• just-in-time deliveries

• intermediary staff based in your office / on your site

• shared information for site deliveries

• agreed joint procedures.

• operation of stores/depots

4. Extension of the supply chain

Intermediaries have long established supply chains. Indeed in many cases the intermediary can be the largest customer of manufacturers. Intermediaries can bring their established supply chain and supply chain management expertise to the construction procurement team. Therefore it is often advantageous that the intermediary be called in to assist with any product solutions. This includes selecting a solution that is 'fit-for-purpose', consideration of 'life-cycle-economics' and information on installation and maintenance.

5. Improved logistics

Intermediaries are by their nature experts in logistics. Transportation, stock control, warehouse management, delivery scheduling and materials handling are vital to their success & these skills can and are being shared with their fully integrated partners. Benefits gained in this area can be vitally important to the end user. For instance, the Intermediary can assist in reducing traffic disruption in the vicinity of the site; this can be achieved by reducing the numbers of deliveries to the site by ensuring orders are aggregated on to one vehicle where possible.

On major sites it is often desirable to have intermediary set up a temporary depot on site. This can lead to reduced costs, improved service levels and a reduction in CO2 emissions.

6. Continuous improvement

Egan and other reformers have stressed the need for the construction industry to develop a culture of continuous improvement. Such improvement must be measured using Key Performance Indicators (KPIs) to allow benchmarking and visible progress towards defined targets. As a result intermediaries have developed a range of KPIs which allow them to continually review performance and demonstrate improvement in the processes used and the service levels provided.

These KPIs include:

• Credit note analysis.

• Deliveries supplied in full.

• Deliveries supplied on time.

• Enquiry-to-order ratios.

• Orders lost, with reason.

7. Innovation

Intermediaries are resourceful; they may be capable of more than you might think.

• They can often leverage additional support from manufacturers.

• They can offer improved levels of service to their fully integrated partners.

• They make it easier to trade with them through advanced e-commerce facilities.

• They can provide certainty in the cost and competitiveness of materials.

If as a construction procurement team you see areas where you are not enjoying all the above benefits from an intermediary partner, you should firstly confirm your own commitment to a full partnering relationship. A partnering relationship is based on teamwork, shared objectives and mutual trust. Intermediaries cannot be expected to provide the highest levels of support and service if there is no reciprocation from your own organisation. However, within a true strategic partnership you can expect to enjoy many mutual benefits. If this isn't the case, you either have the wrong partner or you are not working in a true partnership mode. Either way, it is time to act.

back to top

Using the Toolkit | Site structure | Site map | About the SFC | About the Toolkit | Acknowledgements
Copyright, terms and conditions | Contact and feedback

© 2003 The Strategic Forum for Construction

Designed by Format Design