Over the last few weeks, the AirFaas team has spent a lot of time talking to procurement and purchasing professionals from variety of companies, from all sizes and flavors of manufacturing. These have been really interesting discussions and have given us valuable insight into what buyers really want from their tools. I thought it would be interesting to all the readers of AirFaas blog as well, so here are some of the results of “What Do Buyers Want?”.
One of the biggest findings was that companies don’t really have any solutions for managing purchasing. Bigger companies have some solutions, but the way they have been either designed or implemented leave big pockets of transactions and suppliers uncovered. The lack of tools leads into three major problems:
These issues were troubling 86% of the companies we talked to. What is really interesting is that we didn’t talk to any companies that would have had “some” issue with procurement. The answers were binary: either no issues whatsoever, or lots of problems. This binary division revealed another interesting thing: A company’s position in the value chain has a major impact on their procurement operation. Businesses who do simpler, less value adding activities like machining, stamping, or welding, have less procurement related issues than companies that manufacture and deliver complex, more value-added solutions like machine building.
This difference is interesting but not surprising: Less value adding operations tend to be more repetitive, and the material flows tend to be “one-to-many”. Meaning that the same raw material is used to produce many end-products by addition of work and machining. This means that purchasing is straightforward and transactional. In more complex operations the flow is many-to-one, and the number of purchased material and components can be a thousand times more. This makes procurement the heart of operations and delivery capability, and the nature of purchasing more strategic and less transactional.
There is also a difference between companies who deliver more value-added products. Companies who sell standard products and have more serial production, suffered mostly from lack of data and insights, manual work and challenges of managing their suppliers. Companies who sell customized and tailored products suffered most with manual and laborious RFQ processes, and the issues with data and insights came only second. Again, this is interesting but not surprising: The more repetitive the purchasing is, the more focus is on optimizing and steering the flow of purchased materials. Conversely, the more unique the purchased items are, the more there needs to be focus on the sourcing and contracting of the goods.
So, what does this all mean? First of all, kudos to the purchasing people working in manufacturing. It is really difficult to cut trees with a table knife, and figuratively speaking that is exactly what these individuals are doing. Still, they manage to cut down the trees they need, despite the subpar tools. Second, these insights give us at AirFaas a lot of confidence that we are solving a problem that causes daily pain to numerous hard-working professionals globally. Knowing that we can help people to do their work better and help businesses thrive, gives us a great sense of purpose!