A 40 Year Perspective
A lot has changed in manufacturing in the past 40 years. The globalization of manufacturing has moved manufacturing all over the globe. Supply chains have become extended and complex. Planning and executing in manufacturing facilities across multiple global locations has been greatly influenced by the implementation of ERP solutions. ERP systems allow companies to plan and execute their manufacturing across multiple geographic locations within a single global information technology application.
However, today many companies continue to plan and execute their raw material or component buying using the same business process or operating model they used 40 years ago. While information technology has improved in many companies, the use of the technology by material planners has not improved. What happened? Why is this the case? What are companies doing to address the need for better materials planning and execution?
A bit of historical perspective on manufacturing planning gives us where we began and where the material planning is going. A planner/buyer of 40 years ago counted raw material, looked at production orders and planned on how much material they should buy from the suppliers. Suppliers were consistent and geographically close to the manufacturing facilities. Planner/Buyers calling in or faxing a purchase order to the supplier to request raw materials. This approached worked because manufacturing plants had long manufacturing runs with a small number of finished goods with raw materials sourced locally. The supply chain was short and simple. An experienced planner kept the planning knowledge stored in their brains or in a notebook.
Fast forward 40 years, material planner/buyers are planning and executing in a complex global supply chain. Finished good proliferation, shorter production runs, global suppliers with longer lead times, frequent supplier changes, multiple manufacturing facilities, multiple distribution locations and shorter customer fulfillment cycles impact current supply chains. Lastly, planner/buyers need to optimize materials usage to improve working capital. Too complex, too dynamic to keep planning knowledge in a planner/buyer’s brain. Trusting an ERP system and managing master data has become an integral part of the planner/buyer’s job responsibilities. The role has changed dramatically in the past 40 years.
Forty years ago, material planner/buyers came off the manufacturing floor. These dedicated and loyal employees were promoted to a day job in the office. Many of these employees have successfully transitioned over time into the new material planner/buyer role. Today, because the changes to their supply chains, companies are reexamining this role and are looking to bring in a new type of skill set into these roles. A quick search of a large job site reveals 7987 open positions in material planning in the US. The profile for these positions is a college degree in Supply Chain Management, Engineering or Operations, ERP Planning enterprise and advanced quantitative skills. These individuals bring a greater understanding of the complexity of the global supply chain and the use of integrated supply chain processes and systems. These positions are becoming entry-level positions that train supply chain management professionals for every increasing supply chain job responsibilities.
In addition to hiring a new planner/buyer skill set, many companies are centralizing the material management function via a commodity planning/buying approach. Because planner/buyers are working in a common ERP system like SAP®, planners can plan commodities across multiple plants and multiple geographies. These planners become experts in the commodities they plan. They form a more impactful relationship with suppliers and can affect price and service in a positive way with suppliers by sharing forecast and order plans.
At Reveal, we see this transformation in material planning every day. Irrespective of current materials planning approach, Reveal consultants using the Reveal oVo® methodology teach new and experience planners how to become better material planner/buyers. We teach planner/buyers how to optimize raw material via improved processes and SAP® technology. Our clients achieve significant value with this approach. Companies that continue to focus on raw material value optimization and customer service will continue to look to skill upgrades and education infusion as well as organization changes to improve their business results.Tags: Buyer, Inventory Optimization, Material Planner, Supply chain