H.B. Fuller (www.hbfuller.com) provides adhesive products to a variety of price sensitive markets. To stay competitive, they must continually innovate and cut costs. Because procurement represented a major expense, the company saw the need for smarter, sleeker procurement. They sought a way to increase the effectiveness of their procurement people and procedures while addressing administrative cost.
Like many traditional manufacturing companies, H.B. Fuller was still using many manual and time consuming procurement processes in a digital world. Given the volume of transactions with suppliers, 20,000 purchases orders per year for direct goods, there were tremendous inefficiencies associated with faxing, paper forms, re-keying, as well as opportunities for errors.
Cutting a purchase order at H.B. Fuller North America, like at most other large companies, has typically involved many steps and numerous "hand-offs." However, because the process tends to be spread across so many people and departments throughout the enterprise, it is very difficult to understand the "fully loaded" cost of this frequent and mundane task. Typically, the true cost is underestimated. Industry averages peg the cost at between $100-$200 per purchase order. For H.B Fuller, it has been estimated that Fuller's cost per purchase order was in the range of $150.
Eliminating cost was not the only objective. James Jorde, H.B. Fuller Materials Management Manager stated, "The less time we spend pushing paper around, the more time we can think strategically about how to buy smart."
Today, H.B. Fuller is leveraging a Private Supplier Extranet with a number of its key suppliers. H.B. Fuller first generates a purchase order in its ERP system (PRISM), where it is then "translated" and sent to the Extranet. The supplier is automatically notified of the PO via email, and then goes to the Extranet to retrieve it. Later phases will feature functionality that "pushes" the PO to the supplier and, eventually, functionality that enables the supplier to have visibility into H.B. Fuller's demand patterns to enable the supplier to produce to those forecasts on a Just-in-Time basis (vendor managed inventory). The Extranet is intended to be an interim step, prior to the ERP-to-ERP transactions to be enabled by its e-business supplier, Stratyc (www.stratyc.com).
Work is underway to define and build a direct connection from H.B. Fuller's ERP system into the backend system of one of its major suppliers as a first step to H.B. Fuller's plan to migrate most if not all of its suppliers to electronic transactions. The objective is that by the end of the year the majority of spend transactions will be in the form of ERP-to-ERP transactions. H.B. Fuller's expectations are that this will result in streamlined operations, lower costs, and fewer errors. The end result for both H.B. Fuller and its suppliers will be better information, shorter turnaround time, less manual processing, decreased holding costs and lower processing costs. The ultimate end result will be improved customer service levels, and a stronger relationship between the trading partners.
H.B. Fuller processes more than 20,000 purchase orders for direct goods each year, at an estimated fully loaded cost of $150 per. The company estimates that online procurement using the supplier extranet will eliminate at least 35% of today's tasks from the process, resulting in tremendous savings in both time and cost.
Later, when H.B. Fuller has achieved Vendor Managed Inventory, it is projected that the time spent processing purchase orders will decrease by 65%. In addition to significant savings for both H.B. Fuller and its suppliers, it will also result in a more strategic use of personnel time.
Online transactions reduce manual processing for the supplier, giving H.B. Fuller additional leverage for pricing discounts. It is estimated (conservatively) that this could result in a 3% discount on at least 10% of its purchases, translating to large overall savings potential on its single most significant expense item, directly impacting the bottom line.
H.B. Fuller's buy-side e-business applications went live in the first quarter of 2001 with payback anticipated after only 5 months. This payback period assumed a gradual supplier adoption over time. As of the summer of 2001, supplier adoption rate is on target relative to dollar volume, and this metric is doubling every month. After the initial payback period, every Purchase Order processed represents a net savings versus the previous method, translating to bottom line profit.
Future planned projects such as vendor-managed inventory (VMI) will result in added efficiencies and more strategic decisions. Fuller is committed to transforming how it does business, and recognizes that its success in this endeavor will depend on how quickly it can begin transacting online with its suppliers. This effort will be an ongoing process, but one that will have tremendous and quantifiable positive impact on bottom line results.
Like many traditional manufacturing companies, H.B. Fuller was still using many manual and time consuming procurement processes in a digital world. Given the volume of transactions with suppliers, 20,000 purchases orders per year for direct goods, there were tremendous inefficiencies associated with faxing, paper forms, re-keying, as well as opportunities for errors.
Cutting a purchase order at H.B. Fuller North America, like at most other large companies, has typically involved many steps and numerous "hand-offs." However, because the process tends to be spread across so many people and departments throughout the enterprise, it is very difficult to understand the "fully loaded" cost of this frequent and mundane task. Typically, the true cost is underestimated. Industry averages peg the cost at between $100-$200 per purchase order. For H.B Fuller, it has been estimated that Fuller's cost per purchase order was in the range of $150.
Eliminating cost was not the only objective. James Jorde, H.B. Fuller Materials Management Manager stated, "The less time we spend pushing paper around, the more time we can think strategically about how to buy smart."
Today, H.B. Fuller is leveraging a Private Supplier Extranet with a number of its key suppliers. H.B. Fuller first generates a purchase order in its ERP system (PRISM), where it is then "translated" and sent to the Extranet. The supplier is automatically notified of the PO via email, and then goes to the Extranet to retrieve it. Later phases will feature functionality that "pushes" the PO to the supplier and, eventually, functionality that enables the supplier to have visibility into H.B. Fuller's demand patterns to enable the supplier to produce to those forecasts on a Just-in-Time basis (vendor managed inventory). The Extranet is intended to be an interim step, prior to the ERP-to-ERP transactions to be enabled by its e-business supplier, Stratyc (www.stratyc.com).
Work is underway to define and build a direct connection from H.B. Fuller's ERP system into the backend system of one of its major suppliers as a first step to H.B. Fuller's plan to migrate most if not all of its suppliers to electronic transactions. The objective is that by the end of the year the majority of spend transactions will be in the form of ERP-to-ERP transactions. H.B. Fuller's expectations are that this will result in streamlined operations, lower costs, and fewer errors. The end result for both H.B. Fuller and its suppliers will be better information, shorter turnaround time, less manual processing, decreased holding costs and lower processing costs. The ultimate end result will be improved customer service levels, and a stronger relationship between the trading partners.
H.B. Fuller processes more than 20,000 purchase orders for direct goods each year, at an estimated fully loaded cost of $150 per. The company estimates that online procurement using the supplier extranet will eliminate at least 35% of today's tasks from the process, resulting in tremendous savings in both time and cost.
Later, when H.B. Fuller has achieved Vendor Managed Inventory, it is projected that the time spent processing purchase orders will decrease by 65%. In addition to significant savings for both H.B. Fuller and its suppliers, it will also result in a more strategic use of personnel time.
Online transactions reduce manual processing for the supplier, giving H.B. Fuller additional leverage for pricing discounts. It is estimated (conservatively) that this could result in a 3% discount on at least 10% of its purchases, translating to large overall savings potential on its single most significant expense item, directly impacting the bottom line.
H.B. Fuller's buy-side e-business applications went live in the first quarter of 2001 with payback anticipated after only 5 months. This payback period assumed a gradual supplier adoption over time. As of the summer of 2001, supplier adoption rate is on target relative to dollar volume, and this metric is doubling every month. After the initial payback period, every Purchase Order processed represents a net savings versus the previous method, translating to bottom line profit.
Future planned projects such as vendor-managed inventory (VMI) will result in added efficiencies and more strategic decisions. Fuller is committed to transforming how it does business, and recognizes that its success in this endeavor will depend on how quickly it can begin transacting online with its suppliers. This effort will be an ongoing process, but one that will have tremendous and quantifiable positive impact on bottom line results.
1 comments
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regards
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