Buying on Internet cuts paper and cost
By Staff -- Purchasing, 11/19/1998
Purchasing management at 3M's Specialty Materials Division chemical plant has wanted to streamline the transaction process for some time. But until recently, the plant continued to buy acetone the old-fashioned way--cut a purchase order, call the supplier (in this case, JLM Industries), then pay for the goods once they're delivered.This year, that all changed, says Bob Ryner, purchasing agent. The company buys 28,000 to 30,000 gallons in jumbo rail cars, storing it in 50,000 gallon tanks. 3M wasn't using the leverage it had on this high-volume buy. Also, the company recognized that it had to take out costs associated with replenishment.
To reduce the cost of monitoring acetone supplies, 3M took advantage of certain features of JLM's web site. At 3M, whoever is responsible for raw materials measures the acetone levels and temperature, says Ryner. That person then signs onto JLM's web site and punches the information into a secure portion of the site.
JLM picks up the acetone level from the Internet. If the level is close to the reorder level, JLM sends a new rail car of acetone and notifies 3M.
Ted Lelek, vice president for marketing at JLM says that when the supplier sends out a shipment it "sends 3M a notice via our web site." Once 3M has "pumped the acetone into its storage tank, it lets us know through the web site as well," he notes.
The quicker and paperless method form of communication also is integrated into a new billing process. Based on JLM's Internet ordering system, customers pay JLM every 30 days for the acetone they use during the month. Ryner says that, "At the end of the month we total the consumption, print out a summary of acetone used on the last working day of the month, and figure in the unit price. Accounts payable then simply transfers the payment to JLM."
The process eliminates costs such as blanket purchase orders, invoicing separately each rail car 3M orders, receiving each car into 3M's system separately, and paying individually.
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