Value for Money when Purchasing for Hotels: J. Confirm the Order On Time.

BurjKhalifaPrettyIf a supplier requires twelve weeks from confirmation of order, make sure he gets it. He needs it. He has a whole series of processes to carry out, in a specific order, that take as long as they take -- e.g. annealing glass. He has to order materials (which will take time to come) and subassemblies from his subcontractors, who are subject to the same pressures. The production has to be scheduled in with everything else going through the workshop that month.

Part of the time requested will be to allow for errors to be corrected. For example, some of the brass castings for a chromed or silvered structure may have to be rejected. Time has to be allowed for new castings to be made.

Then there are holidays:" twelve weeks" means twelve working weeks, four of which are typically lost in August and two at Christmas/New Year.

Time has to be allowed for delivery: when a factory talks about "delivery", it usually means when the goods are ready to leave, NOT when they will arrive on site.

More often than not, though, orders are placed too late, putting great strain on every link in the chain. This is where so much time is wasted, tempers rise, and deliveries will be late.

Value goes out of the window, as money has to be thrown at the problem, to speed production, to speed delivery. Late deliveries mean problems on site -- more costs.

In fact, the order has often been placed on time, but the payment to confirm it has not been made. If there is any doubt about the Accounts Department making the payment at the right time, it should be briefed on the consequences of a delay. But this should not be necessary. They can always make an emergency payment (I know, I've run enough of them myself).

The rule a well run Finance Department follows is that it makes payments when the purchasers have agreed that they will be made. If they think that the purchasing department is agreeing to the wrong terms, they should discuss this with them -- not arbitrarily hold up payments. The purchasing department may have negotiated a favourable price or other condition from the seller, a quid pro quo being that the payment is made at a particular time. If the Accounts Department then fails to meet that part of the bargain, the deal unwinds. This is not clever.

The fact is that we regularly see situations where longer is taken to make the payment than the factory is given to make the lights!  It should take a maximum of half an hour's labour to make a payment, whereas (remember from the top of this post?) the maker has "a whole series of processes to carry out, in a specific order, that take as long as they take -- e.g. annealing glass. He has to order materials (which will take time to come) and subassemblies from his subcontractors, who are subject to the same pressures. The production has to be scheduled in with everything else going through the workshop that month."

You'd be amazed how contemptuous purchasers frequently are of the manufacturer, merely because it takes time to make what they make. Yet that same purchaser may be asking favours of that manufacturer because of his inability to get a payment made on time.

Note: this series of posts builds up into a single Briefing, a PDF of which is downloadable here: A Briefing on Value for Money when Purchasing for Hotels.

 

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