Sharp fluctuations in purchase orders can have a dramatic impact on an organization's supply chain and the business as a whole. As a result, companies should address the three factors that contribute to purchase order volatility, according to a Spend Matter report. These elements include timing variations between orders, varying order quantities and the frequency of orders placed.
While it is normal to have some fluctuations in purchase orders, supply chain managers need to ensure they don't have too many problems associated with one of the three. Issues can derive from companies thinking suppliers work for the business, rather than with it.
One of these issues deals with lead times. Instead of constantly updating purchase order requests, supply chain employees should spread them out. This will help suppliers make more informed decisions about how many products need to be manufactured, rather than waiting until the last minute to guess what volume it will be, Spend Matters noted.
If problems with purchase orders aren't avoided by the supplier, they can then be transferred onto the manufacturer and cost more money. A successful manufacturing plant needs to have consistent and transparent production schedules, the news source said. If it doesn't, an unstable schedule will develop and the business may fall into the habit of under[ ]utilizing systems or paying employees more money for working overtime.
However, there are ways that volatile purchase orders can be addressed.
1. Suppliers should be treated as partners
Although it is sometimes easier to cover for poor planning by adjusting purchase orders, businesses should not pass the buck onto suppliers if they are having internal problems.
Instead, it's important to remain open with these organizations, as supplier success will often lead to benefits experienced by the company in the long run, the news source asserted.
2. Build supply chains around demand flexibilities
According to an EBN Online report, successful supply chains should be focused on consumption trends rather than demand forecasts. This allows supply chain managers to make more knowledgeable decisions about purchase order adjustments in order to produce the right amount of products for customers.
Supply chain management should understand that simple inconsistency errors and a lack of transparency can reverberate throughout the company. As a result, making adjustments to simple things like purchase order habits can make a big difference.