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Courier billing format for Procurement

[Music] hello and thank you for joining me I'm Tracy Smith from numerical insights today I'd like to show you how supplier delivery performance impacts your bottom line and how to use data analysis to reduce that impact imagine a predictable world where your customers order a total of 20 shirts from you each day all products arrive from your supplier in perfect condition and you never have a delivery delay even in this predictable world it's not that simple to meet your constant customer demand let's see why you and your supplier are open for business from Monday to Friday you decide to order 10 shirts each morning and 10 each afternoon to meet your constant demand of 20 your supplier has a daily truck that picks up orders at 3 p.m. and delivers in exactly 4 days what you order in the morning ships out on the same day and what you order in the afternoon ships out the next day here's what your inventory arrivals and delivery times will look like inventory arrivals are not equal each day you receive no shipments on Thursdays and delivery times actually range from four to seven days so why should you care about this even in this predictable world you need to adjust your ordering to match your demand and you need excess inventory on Wednesday to get you through Thursday's demand we care because a lack of inventory to meet customer demand translates into lost sales customer experience issues and a negative impact on your company brand the requirement of excess inventory means you tie up extra cash and float a greater dollar amount in your accounts receivables to understand the impact of the cash flow gap this creates be sure to watch episode number one in this series additionally if you are a manufacturer who is contracted to deliver specified amounts of inventory to your clients by certain dates there is probably a clause in your customer contract which imposes a fine for missed delivery of product business decision then become a balance of how much cash to tie up an extra inventory to avoid fines and lost sales this is where data analysis can help let's enter the real world which is even more challenging customer demand fluctuates with the market suppliers are neither perfect in their quality nor in their delivery I'll focus on how to evaluate supplier delivery performance and talk about quality in a future video first we need some data which is what you see on the screen I've gathered the order dates from our purchase order history records the delivery dates from receiving records and calculated our delivery times what shown now is data from January 2018 to June 2019 I've restricted this example to show only two items so two part numbers or two SKUs we can see the range of our delivery days is from four to twelve during this time period what's even more interesting is that if we look at our data from 2018 and 2019 separately we can see that the delivery times and the spread of delivery times have both increased in 2019 vs. 2018 this might be a hint that your supplier is becoming increasingly challenged in meeting the needs of all customers to see how widespread this issue might be you can compare the change in delivery times of your supplier to a standardized supplier delivery index such as the one provided by the Institute of Supply Management we see the increased delivery time easily in the table on the right for even more detail we can insert the part number to see if the supplier is struggling with increased delivery times for all parts you need or just one there are only two part numbers in the scenario so you can imagine the level of detail available in your data if you're a business that sells hundreds of product numbers or SKUs an increasing trend in delivery times can be mitigated by carrying more inventory as with the previous example there is a price to pay in cash flow to mitigate the delivery risk the results of this analysis can be used on your supplier scorecards to rate suppliers and possibly for negotiating future discounts lay dates in this analysis can be used to tied to cashflow predictions which are useful when seeking approval for a line of credit to carry you through the cash flow gap suppliers can make or break your business because they impact your sales customer service levels and company reputation using data analysis can help guide you in making decisions to minimize their impact most companies base their inventory calculations on the suppliers promise delivery time but you can see from this video that it's a good idea to track the real delivery times and how much they vary if you found this video insightful press the like button and subscribe to our channel to receive notification of future videos you can also visit our website for more information on using data analysis to improve decision making