The right place is referred to as the optimal location where items procured should be delivered by the supplier and received by the buyer.
With a central warehouse where materials or products are mainly distributed, this is not always a huge problem.
When your company runs a regional or global operation with multiple manufacturing and distribution locations, you will find that this is crucial to keeping your costs competitive.
Where should materials be delivered and produced to achieve nearness to market while keeping costs down? A set-up such as this requires long-term collaboration with suppliers to drive value.
In some companies, suppliers situate some elements of their production facility within the buyer’s factory to be close to other activities involved in the Supply Network. Certain infrastructure costs are also shared which in turn creates benefits for both parties.
In discussing Right Place, it’s sometimes worth noting that suppliers with global operations also need to decide on optimum production locations for the buyers’ orders, even when these locations are temporary or holding points. They also need to optimize their costs and share some of this value with the client. They are in competition with their peers and may lose business if they don’t run a tight ship.
The right time is dependent on proper Inventory Management because of the element of demand forecasting, and planning, but there are other steps that must be considered.
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Data, data, data – when you analyze the full production and sales cycle, at what point should an order be placed? How much visibility do you have of the end-to-end process such that you can know with certainty that you are delivering value?
Procurement processing – how long does the procurement process take? Sourcing, Negotiations, Supplier Evaluation, Contracting agreements, and approvals.
Supplier processing and delivery lead times – we often ignore the suppliers’ processing times. These should be on the critical path of our project GANTT Chart because they also must reserve some production capacity to fulfill your orders.
The right time is also a function of a lean or agile approach to Supply Chain Management.
A lean supply chain is characterized by predictable or steady demand, low variety, long lead times, and relatively high volumes. Production can be scheduled, and forecasts are more accurate than not.
An agile supply chain however is needed when there are short lead times, demand for lots of variety, and unpredictable, or volatile demand. Agility is all about flexibility, response time, small production runs, minimum order quantities, and the ability to change direction as the trends move.
Martin Christopher often referred to as the father of Supply Chain Management has proposed that “The option for supply chains that cannot reduce lead times is to “seek to create a hybrid lean/agile solution.” This means that different aspects of the supply chain need to be managed separately. This is a solution companies in Nigeria might need to explore to stay ahead of the importation challenges.
The imperative of Right Place and Right Time cannot be compromised in the delivery of business objectives. The procurement function is tasked with this responsibility and must partner effectively with relevant internal and external stakeholders to achieve this. Ignoring any one of these elements could have major impacts on the right Price and erode value for the organisation. Therefore, Procurement must be involved in all areas of the Supply Chain, and the business at large.
Harold Nwariaku FCIPS
Lead Consultant, Harold & Co Procurement/Supply Chain Consulting, and Branch Chair, CIPS Nigeria
