Getting control of your SAP procurement lead-times (we all know they're rubbish...)

| 0 Comments

 

images.jpgIt is not unknown that suppliers’ lead times from suppliers as well as internal procurement’s processing lead times are critical in determining the amount of inventory you need to keep: the shorter the lead time the less you need to keep, the longer the lead time the more you need to keep. Even more obvious is that those in your organisation who determine your stocking strategies will need to know exactly what these lead times are.


But this is not always obvious, writes Steven Freemantle, of SweetThorn Thought Leadership, in this month’s SmartProcurement. In fact, it is his experience that many SAP-driven supply chains have lead times that are inaccurate, inflated and often generalised.

 
How did lead times get so out of control?

Most organisations begin their implementation journey with the intention of conducting a master data clean-up prior to going live. This is mostly an excel-based exercise involving the cleansing of data for an upload into SAP. However, as implementation pressures mount this vital task takes more of a back seat and is ultimately relegated to a last-minute haphazardly-executed task, justified by a pending revisit of the master data settings after going live (which, too, seldom ever happens…).


The result is that outdated and inaccurate lead times are taken across from legacy systems, they are estimated and, worst of all, generalised: X-number of days for all local suppliers and X-number of days for all imports.


I sometimes wonder if companies implementing SAP understand the significance of those lead-time fields (let alone all the other master data settings) and whether they might have delayed their go live until all master data had received the scrutiny it deserves?
 

How do you get your lead times under control?

You’ll need to begin the lead time clean-up process by finding owners of lead times across your value chain. There are many lead times in SAP that will affect your inventory holding strategies, such as:


• Production lead times (order preparation time, queue time, setup time, run time, move time, inspection time, and put-away time)
• Procurement processing times
• Supplier lead times
• Goods-receipting and processing times
• Sales-order shipping, routing and transporting lead times


In each of the business functions you will find standard SAP reports that will tell you how well you are managing your lead times. Recording your lead times in SAP is critical for procurement, particularly if you are to serve your customers effectively and if you are using SAP to manage supplier performance.
 

StevenFreemantle2.JPGThere are 3 steps in gaining control of your lead times :
 

1. Get your lead times accurate:
Update your lead times in SAP’s material masters to reflect your reality. Record the actual lead times without generalisations nor building in buffers and then contract with your suppliers to stick to these actual lead times.
 

2. Ensure that lead times are adhered to:
Once you have updated your material masters you can begin to manage your suppliers, using standard SAP reports, to ensure that they deliver according to their agreed lead times. There are standard tools inside SAP that enable you to update lead times, automatically, in accordance with what happens in reality.
 

But, these tools must be used with caution.
 

If your internal process, such as purchase order approval or goods receipting, is not up to speed, then the lead times calculated in these SAP tools will be distorted. In the past I have also written about the importance of housekeeping. If you have these challenges, then the results of these lead-time management tools cannot be trusted.
 

3. Aim to reduce lead times:
Once your internal processes are stable and under control and you can more predictably send your suppliers inventory needs, you can move to reducing lead times. The obvious outcome of which is that less cash will be tied up in stock.
 

Why bother?

It is simple really, procurement’s function to keep demand and supply in balance is pivotal. To simplify it even more, procurement must be meticulous about balancing quantity and time. That is a buyer’s job – to get certain quantities of inventory into your organisation by a certain time. If your lead times in SAP are rubbish, then procurement will be in a constant struggle to meet your organisation’s strategic stocking strategies.


For more information on streamlining SAP in your organisation, please contact Steven Freemantle of SweetThorn Thought Leadership, on stevenf@sweet-thorn.com.

 

Leave a comment


 

 

Career opportunites

Planner

  • <500 000 Gauteng Operations, Planning & Inventory Supply Chain
Are you looking for new career opportunities as

Procurement Specialist

  • >500 000 Gauteng Procurement Officer / Specialist Strategic Sourcing Supplier / Business Development
As a specialist Supply Chain recruiter, I am

Logistics Controller

  • <500 000 Gauteng Logistics & Warehousing Procurement Officer / Specialist
Seeking dynamic up and coming candidates looking for

Supply Chain Manager

  • >500 000 Permanent Procurement Management Supply Chain Western Cape
As a specialist Supply Chain recruiter, I am

Business Process Specialist

  • <500 000 Gauteng Procurement Consultant Procurement Officer / Specialist Supply Chain
A company within the financial services sector is

LOC Procurement Manager

  • Gauteng Permanent Procurement Management Procurement Officer / Specialist
Your Responsibilities: Job Purpose To be the interface ...More

Account Manager

  • >500 000 Procurement Officer / Specialist Supplier / Business Development Western Cape
Key Performance Areas:• To ensure that all aspects

Consultant

  • >500 000 Gauteng Procurement Consultant Strategic Sourcing Supply Chain
Key Performance Areas:• You'll be concerned primarily with

Commercial Buyer

  • <500 000 Buyer Contracts Procurement Officer / Specialist Western Cape
A well-known Mining company is seeking the services

Technical Buyer

  • <500 000 Buyer Contracts Procurement Officer / Specialist Western Cape
A well-known Mining company is seeking the services

Business Development Executive

  • >500 000 Gauteng Supplier / Business Development
A retail solutions company is seeking a New

Financial Manager

  • >500 000 Contract Operations, Planning & Inventory Procurement Management Western Cape
Looking for an unemployed CA (SA) in Cape

Chief Financial Officer

  • >500 000 Gauteng Operations, Planning & Inventory Procurement Management
An exciting opportunity exists for a CFO with

Procurement Consultant

  • >500 000 Gauteng Procurement Officer / Specialist Strategic Sourcing
Key Performance Areas: A profound knowledge of sourcing

Commodity Specialist: IT

  • >500 000 Commodities Gauteng Procurement Officer / Specialist
Key Performance Areas:• Effectively applies acquired technical/functional skills

Senior Consultant

  • >500 000 Gauteng Projects / Category Management Supplier / Business Development
Key Performance Areas:• Adheres to best practice processes

Logistics Manager

  • >500 000 Gauteng Logistics & Warehousing Operations, Planning & Inventory Procurement Management
Key Performance Areas:• Manage warehousing and distribution 3PL's

Head of Franchise Network

  • >500 000 Contracts Operations, Planning & Inventory Western Cape
The opportunity to work for a multinational retail

National Driver Manager

  • >500 000 Analyst Contracts Logistics & Warehousing Operations, Planning & Inventory Western Cape
The opportunity for an extraordinary individual to join

Commodity Specialist: Industries

  • >500 000 Commodities Gauteng Procurement Officer / Specialist
Key Performance Areas:• Under the guidance of the