SASTech - Technical Journal of RUAS

Indirect materials procurement, more often than not, consists of high variety and low volume. Though indirect materials technically are not part of the end-sale product, they are as important as direct materials. For example, without an indirect material like a grinding wheel an automated production line might grind to a halt, hence procurement and supply of indirect materials to assembly line at right time is of paramount of importance. In most manufacturing companies, the lead time for converting an indirect material PR to PO is high and in one reputed manufacturing company it is as high as 8 days and ordering cost per PO is Rs.129. The reduction of non value added activities in this process would result in shorter lead time and reduce administrative efforts of buyers. Hence, this study has been taken up for improving effectiveness and efficiency of the current procurement process.

Data collection was done and analysis was carried out by plotting current state value stream map and ABC analysis of procured items. Potential FMEA analysis was carried out for current process and actions to be taken were prioritized based on RPN. Future state value stream map was developed focusing on minimizing/eliminating non value added activities in current process. New process was developed for automated PO generation and communication. Design of FMEA was carried out for risk management of newly designed process and actions identified has been incorporated.

Auto PO generation program and reinstating cash purchase procedure was seen to result in reduction of PRs in stock items by 21.3% and reduction of PRs in non-stock items by 40.6%. Development of automated PO communication software was seen to result in reduction of process cycle time by 40% and reduction of total lead time from 8 days to 2.8 days resulting in shortening lead time by 65%. We conclude that automated pending PO communication software has reduced follow-up with suppliers.