Streamlined MRO buy saves Photronics $15 million

By Staff -- Purchasing, 10/19/2000

By consolidating its supplier base, Photronics has helped to reduce purchase price, improve delivery, and lower inventory levels. And, perhaps as important, by working with fewer suppliers, "we have become a better customer," says Jon Martin, purchasing manager. "This has improved our position with suppliers, improving our customer service."

Headquartered in Brookfield, Conn., Photronics is a global manufacturer of photomasks, high-precision quartz plates that contain microscopic images of electronic circuits. Used in the manufacture of semiconductors, photomasks transfer circuit patterns onto semiconductor wafers during the fabrication of integrated circuits.

With annual sales of $277 million in 1999, Photronics has 13 manufacturing locations in five countries on three continents. In the past five years, it has opened new facilities in Texas, Singapore and the U.K. The company's annual MRO spend (which includes freight) is about $80 million.

Martin's efforts at consolidating the supplier base began after he joined Photronics in 1996. "We made changes to capitalize on the scope and size of the organization to reduce overall costs helping us to better compete in the global economy," he says. Prior to Photronics, Martin worked in purchasing at DuPont.

His current responsibilities include purchasing, sourcing and materials management. As such, he says that process controls and improvements are a large part of his daily tasks. Opportunities for improvement are in actual cost reductions, functional process improvements and quality improvements. In his role, Martin acts as champion for implementation of change and every member of his supply team is involved in the actual implementation of the change.

Four years ago, each Photronics location used different suppliers for MRO supplies. With a consolidated list of suppliers, the company has been able to cut steps out of its purchasing process as well. Consolidating requests, he says, helps reduce costs by minimizing orders and streamlining the accounts-payables process. These efforts have helped Photronics reduce costs by $10 million in 1999. For 2000, Martin expects the company to save another $5 million.

Photronics has consolidated its supplier base by selecting suppliers with capacity to service all of its U.S. sites. "We prefer that they can service Photronics on a global basis," says Martin. Each site used to qualify its own suppliers; now each has a site champion. Other supplier-selection criteria include quality, service and cost.

At the same time, suppliers able to perform electronic services (online catalog specific to Photronics, EDI, etc.) are more apt to become a supplier of choice. "Just two of our successes are Staples for office supplies and Fisher Scientific for cleanroom supplies," says Martin. Both have Photronics specific online catalogs with negotiated pricing. Each of the suppliers can have orders placed via the Internet or EDI (electronic data interchange). Photronics is using the Oracle financial system, which currently is not linked to either of these two suppliers.

"In a perfect world, the buyer would enter an order in his or her system and be able to access information regarding that order in his system," says Martin. "Information is going to have to become easier to use and flow better between MRO supplier and the customer without adding additional cost to the product or service."

Photronics also works with a relatively small supplier base for raw materials and has two suppliers for freight.

"Suppliers need to have the technology and infrastructure to accomplish the needs required by the customer," says Martin. "Most global MRO suppliers realize the future of MRO is serving the customers in a new global atmosphere and attitude. Centralization and consolidation has forced new types of markets in which we all must compete. The MRO supplier needs to become an advocate of the customer, understanding the markets they are in, and attempt to make their customer globally competitive-through cost, deliveries and added services."

For example, having a distributor provide the company with a host of cleanroom supplies presents one face to the customer. Also: The two companies frequently are involved in three-way negotiations with manufacturers of such supplies.

Photronics measures suppliers on price, delivery (performance to scheduled delivery dates-the company receives 24-hour delivery on stock items), quality, and capability to provide value-added services.