Automating the supplier management process improves accuracy and frees up employees for more strategic initiatives, said Dave Wiedenfeld, senior architect, applications development, at fertilizer manufacturer CF Industries in Donaldsonville, La.
"We don't do approvals on purchase orders," he said. "We do approvals on requisitions. That's our control point. We've automated that to a certain extent. But if there's anything out of tolerance, it will have to go through the manual approval. We set up all our vendors to automatically create invoices."
Speaking at the 2009 Invensys North American Client Conference in Houston, Wiedenfeld explained how CF has achieved a significant reduction in the clerical and transactional efforts required to manage its purchase catalog, primary vendors and prices. CF requests materials, purchases them and pays vendors using Avantis.PRO, Invensys-provided application program interfaces (APIs), and with the help of Invensys partners B2B Connex for supply-chain collaboration and IMA for catalog management.
"Supply chain management means buying stuff cheaper, better and faster," said Wiedenfeld. "The big reason to automate is to improve accuracy. You want to reduce your overall procurement lead times. You want to improve the overall performance and get better feedback for vendors. It also reduces processing costs, but the biggest reason is increasing the time available for strategic activities."
Some of the opportunities procurement automation offers are the abilities to create a clean purchase catalog, to utilize procurement contracts and to automate a workflow process, said Wiedenfeld. CF also has created a vendor portal that it uses to process requests for quote (RFQ) and manage supply.
"A clean catalog is very important," said Wiedenfeld. "If you have consistent naming, you'll have less confusion with your vendors. We process new additions through a catalog manager. Keeping your descriptions consistent throughout makes it a lot easier."
For its catalog management, CF uses Invensys partner IMA. "We do not allow non-catalog purchases," said Wiedenfeld. "If there's a non-catalog item on requisition, the system will route it for inclusion."
Procurement contracts eliminate the need for numerous single transactions to process. The contracts also can be coupled with aggregate data over time to reduce spend through leveraged negotiations, suggested Wiedenfeld.
Auto-creation of requisitions streamlines workflow at CF. "We have a concept called ‘control-release' requisitions," said Wiedenfeld. "We have an audit for prices of contracted SKUs, and once work tasks are placed in the backlog, pick lists and requisitions are created. We strongly encourage our purchases through work orders. Our automated workflow system will check them. We've set up control-release requisitions for things that are done repetitively. You know what you're going to spend. Why force people to do that every time? The workflow manager will automatically approve each requisition as long as it's within spec. It automatically creates a PO and sends an email to the requestor. Price and vendor resource variances are routed for review."
Invoice approval of receivables might still require some custodial documentation. "If it's out of tolerance, it'll have to go through the approval process," said Wiedenfeld. "If it's not a receivable, we'll need to verify that we received it."
CF's supply chain collaboration model, or vendor portal, is a window for vendors to communicate and deliver an item at the price indicated. "They'll get an email through the portal when there's a request, including price, deliver date and terms," explained Wiedenfeld. "One feature of the portal is automatic expediting. The PO is updated from the portal and confirmed. Nothing can be received before it's confirmed and updated."
Wiedenfeld said CF also uses Avantis for its RFQ processing. "You can create RFQs in Avantis," he explained. "We send it up to the portal. Once the vendor responds with a bid, it's updated." Bids are analyzed based on various factors; vendor resources and prices are updated or created; and the bid is awarded.
"We need to stage material," he explained. "We're a hydrocarbon plant, and a lot of our work is centered around turnarounds, which means we need to get materials out fast. The stage feature is not available in Avantis, but we use the worksheet process. Our issue transaction worksheets are pre-populated with pick lists, and our warehouse transaction worksheets control activity based on the status from tasks, POs and the portal."
Evaluated receipt settlement (ERS), however, is a feature that is available in Avantis to create invoices from POs and receipts. "We use ERS for everything as data entry automation," said Wiedenfeld. "Our AP clerks don't have to enter anything by hand. The PO number is the invoice number. True ERS completely eliminates invoicing from vendor; they don't even send invoices to us anymore. We're not entirely there yet. If you have accurate prices and a vendor you buy a lot from, you can set up to pay them weekly, instead of processing and paying several invoices per day."
A decision support system (DSS) helps to analyze the data you put in the system. "How much did I spend on fasteners, for example?" said Wiedenfeld. "It can be a powerful tool. The caveat is it needs to be accurate data. You also can drill in on these categories and tell a vendor how much business you expect to do over a year, for example, and negotiate a deal for better price."
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"Supply chain management means buying stuff cheaper, better and faster." CF Industries' Dave Wiedenfeld discussed how Avantis has freed the company's employees to focus on more strategic activities.