Purchasing Steps

Purchasing is a critical process in any business. A company purchases raw materials, sub-components and support services that all are essential to the production and delivery of the finished product to their customer. There is tremendous value in developing a purchasing process that is tailored to a business' specific needs and that obtains components and services from outside sources in an effective, efficient and timely manner.

Whether it is a product or service, the purchasing process consists of four basic steps:

1. Define requirements and develop a purchasing plan.
2. Request and evaluate bids from potential sources.
3. Select a source and negotiate contract terms.
4. Carry out the contract and pursue continuous improvement.

Purchasing does not end with the selection of a source and contract agreement because the process isn't complete until the required product/service is received and meets the requirements for quality, cost delivery and service. Purchasing continues through product delivery. The following sections provide detailed guidance on purchasing cast components.

1. Requirements Definition
The first step in any purchasing process is to define the product requirements and develop a purchasing plan. For cast components, product requirements are based on technical performance and targets for quality, quantity, schedule and cost. With this information, a complete and accurate "request for quotation" can be drafted and distributed to foundries for consideration.

To be a "smart buyer," you need more than just a requirements list. You also require a purchasing plan that outlines and defines:

• the objectives and issues in the purchase
• the purchase requirements
• how sources will be identified, screened and selected
• how the purchase will be contracted and managed for quality, cost and schedule

This plan may be simple and straightforward for small, low-value purchases; it may be very detailed and extensive for a high-value, critical purchase.

2. The Request for Quotation
Purchasing cast components generally is not a simple matter of transferring pattern numbers and quantity desired from the engineering bill of materials to a purchase order. Careful consideration of technical quality, quantity and schedule factors is necessary to ensure that all pertinent and important information is supplied to the foundry. When necessary information is not provided, this slows the procurement and results in an inaccurate cost estimate or in a cast component that does not fully meet requirements.

When possible, the foundry should be supplied with CAD files or blueprints for both the as-cast and the machined part. If the foundry is to provide the most suitable and useful cast components, it is important that the buyer indicate the areas to be machined and the locating points for machining.

In addition, the buyer must know and understand the critical factors in specifying cast components and how those factors impact production and costs in the foundry.

A request-for-quotation form is used to good advantage by many foundries and cast component buyers. It provides a convenient way to develop the component requirements in a comprehensive and detailed approach. It supplies the foundry with complete information on component requirements and enables the foundry to make an accurate casting price quotation for the most suitable casting for a particular application.

3. Select a Supplier and Negotiate Contract Terms
After the initial bids have been received, evaluated and ranked, the qualifying, "best-value" bids will be selected. If the component is well defined in terms of simple shape/complexity and of relatively low risk, the quotation may be sufficient for closing the contract and moving into production.

However, for the more complex, high-value cast components, additional engineering design and contract negotiation may be required to reach final agreement. Specifically, it may be necessary to:

• perform a final review and refinement of the design for manufacturability with the casting engineer;
• finalize technical, quality and schedule requirements;
• review and resolve non-technical contractual issues.

In contract negotiations, all parties should consider the following factors:

• the level and scope of technical service, including design consultation, production, quality control and product improvement;
• detailed instructions and guidance on specifications and quality assurance requirements;
• assigned responsibilities for and integration of supporting engineering activities among the different production activities; these include the patternmaker, foundry, machine shop and heat treater;
• cost of quality assessment (rejects, delays, rework, etc.);
• scheduling and lead-time planning;
• product liability.

After these factors are considered, the next steps are to review, negotiate and resolve cost details, performance clauses and conditions of sale and then finalize and sign the contract.

4.  Carry Out the Contract and Seek Continuous Improvement
A signed contract is not the completion of the purchasing process. The contract must be completed by two actions: on-time delivery of a fully qualified product at the agreed cost by the foundry and prompt and timely payment by the buyer. During the life of the contract, all parties have a valuable stake in continuous improvement in quality, delivery and best value. Specific issues that must be considered during the production cycle include:

• open and timely communication (by visits, phone calls, e-mail, etc.) between customer and supplier on project status, shortfalls, potential problems, forecasted changes and opportunities for value improvement;
• monitoring of quality, delivery, cost and performance by both the supplier and the customer;
• identification of opportunities to improve quality and increase value to the final customer by the customer and supplier.