| The simplest way to purchase
engineering raw materials (e.g. aluminium bar or plate) is to
contact a supplier and ask for price and a delivery estimate. If
the offer meets your requirements, you can then accept it and
pay for it either straight away or on credit terms. With the
transaction complete you don't need to think about it again
until you need some more. Many, many companies continue to buy
their raw materials in this way every day.
Smiths aims to have as wide an
ex-stock product range as possible to allow our customers to
continue to buy their materials in this way. We continually
analyse and adjust our stock levels to give us the best chance
possible of being able to supply the next incoming enquiry from
stock on a 24/48 hour basis.
However, 'spot purchasing' in
this way has three potential drawbacks:
Firstly, if the required purchase
quantities get big enough its possible that there won't be
enough material on our shelves to cover the order. For some
materials this threshold could be quite low and there may not be
enough material in whole market.
Secondly, many of the materials
we supply are subject to large price movements due to
speculation on international commodity markets. Spot purchasing
leaves a buyer open to short term price movements and could mean
that a very high price has to be paid for the material on one
particular day that wouldn't have had to be paid a few days
later.
Thirdly, spot purchasing means
that processing work (e.g. plate cutting or rod billeting) can
only commence on the day of purchase. For large jobs this can
significantly add to the led time.
The answer for some customers is
to enter into a supply contact. Such a contact need not be
complicated or difficult to agree but it will go a long way to
eliminating the above drawbacks. We can order stock and reserve
against a known customer demand, we can fix prices over a
required period of time (if required) and we can schedule
processing operations well ahead of a customers due date
requirements.
Furthermore, through liaison with
a customer, we can construct a batch delivery programme whereby
batches of material are delivered to only cover short term
production requirements keeping raw material inventories to a
minimum. We operate many JIT, Kan-ban and other forms of supply
procedures.
Beyond contractual purchasing we
also offer a Supplier Managed Inventory
supply solution. |
