Purchasing links suppliers, customers
Susan Avery -- Purchasing, 7/13/2006 2:00:00 AM
Ron Kirscht, president of Donnelly Custom Manufacturing in Alexandria, Minn., likes to pose this question to purchasing professionals who do business with his company: What processes would you eliminate if someone else would do them for you?
In most cases customers' responses center around short-run manufacturing of injection-molded thermoplastic parts, which has been part of Donnelly's business since it was founded in 1984. Donnelly makes parts for manufacturers in such industries as business machines, fluid handling equipment, medical equipment, instrumentation and others. It also offers manufacturing, engineering and custom services.
Like other manufacturers, Kirscht and his employees have to deal every day with complexity. They define a short run typically as less than 11 hours, and regularly produce batches as small as 50 parts and as large as 150,000. Donnelly has 32 injection molding machines, 2,700 molds and uses 600 different plastic resins. To get a handle on complexity in short run manufacturing, multiply these figures to reach the number of different parts the company is capable of manufacturing for customers.
Donnelly delivers parts just-in-time to customers typically producing a 30-day supply using a kanban system based on minimum and maximum inventory levels. Darla Brink, director of planning and custom logistics, is responsible for all purchasing activity. She and her staff work closely with both engineering and manufacturing internally and meet often with both customers and suppliers.
Purchasing isn't much different at a short-run injection molding company, she says. In addition to getting suppliers involved early in the design process through meetings with customers, Donnelly also has a Lean manufacturing initiative. Brink's biggest buying challenge lately is managing rising energy costs—higher prices for both the resins she buys and fuel used to deliver them.
She keeps a close eye on prices, in some cases doubling up on receipt of an order to eliminate a delivery surcharge. "With pressures to purchase overseas, our customers don't want to pay higher prices for the parts we make," she says. But we don't have control over resin prices.
One way that Donnelly meets this challenge is through a tool the company created called Firm Charge Fluctuation, where customers are sent a monthly invoice for parts ordered at the price initially negotiated and one that takes into account the increase. Donnelly doesn't charge the customer for the increase until they have paid their own suppliers. "So if the material goes up or down, we can make that change, leaving the piece-part price as is," says Brink. "It gives the customer a truer reflection of its costs."
Pricing is one issue Brink discusses when she provides suppliers with customer forecasts and talks with suppliers about performance measures such as quality and delivery.
Suppliers provide Brink with all the information she needs to meet customer demand for information on compliance with government regulations, an initiative that has taken on new importance in the past two years, she says.
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