Blozis

Some suppliers are complaining about long overdue payments on materials received by Blozis Company. In most cases, this was caused by Blozis Company placing orders without issuing a purchase order number, and following verbal orders with an order confirmation. Another contributing factor is related specifically to the receipt of materials, and not controlling the records, and communicating with accounting in a timely manner. It’s my job to solve this problem. The late payments are being caused by a lack of process and controls in place, both when orders are placed, and when goods are received.

In some cases, people are performing tasks of others in order to satisfy the needs of their internals customer, but neglecting their own tasks which are equally important. I have identified two main areas for improvement, Purchasing Procedures and Receiving Control. Effective immediately, Blozis Company is implementing a Purchasing Procedure, which includes, but is not limited to the use of purchase requisitions, more control of materials incoming and how they are stored for production, as well as a new process for letting accounting know materials have arrived with weekly report of actual receipts from the previous week.

The second issue is the definition of roles and responsibilities for all key roles with the company, specifically the Expeditor. This report will define the Expeditor’s role more clearly. Purchasing will be responsible for placing orders with vendors and suppliers, based on specifications provided to them by engineering. The expediter monitors the orders to be sure that the materials are delivered in the specified amount of time. Organizations that maintain lean inventories rely on vendors to deliver materials as they are needed. The expediter plays a vital role in making sure that production has the resources it needs to run.

With these new processes, and continued and monitoring, and with the support of everyone in the Supply Chain Group, I am confident, Blozis Company will quickly resolve the accounting issues related to overdue accounts, and will soon return to focus on growing the business for Blozis Company in the future. Please feel free to contact me at any time to discuss the progress of the plans detailed in the attached report. ISSUE(S) IDENTIFICATION Immediate Issues: Suppliers are complaining about long overdue payments on materials received by Blozis Company.

In most cases, this was caused by Blozis Company placing orders without issuing a purchase order. As well, sizeable payment discounts are missed because invoices cannot be paid within the discount period. Also, Blozis Company is also extremely late on several supplier accounts. The issue is due to a lack of receiving reports being created and submitted to accounting for payment processing. Currently, accounting is relying on the memory of the Expeditor and Stock Clerk as to when and if materials were received. Often, materials have been delivered, but go missing in the warehouse, or are brought into the engineering department.

If this occurs on a constant basis then eventually suppliers may not want to do business with Blozis. Roles and responsibilities are not clearly defined for the roles of Expeditor and Store Room Clerk. Expeditor types some of his own purchase orders, and picked up rush items. Often, engineering and production would contact him for specifying materials, or for making substitutions, and in some cases write a specification from an oral description provided by engineering. Systematic Issues: See Figure 1 below which shows the current organization chart of Blozis Company.

The major role of the procurement department is to get the products in the door, with little concern for price, to satisfy the needs of production and engineering. There are no basic systems in place to control materials once they arrive. The expediter often typed up purchase orders for rush items, and in other cases, picked up the items and told the supplier they would receive an order confirmation from the Blozis Company supply department. Once returning to Blozis, and distracted by other issues he would forget to ask supply for a confirming order.

This caused distress for the supply department clerks, as they would need to process invoices for which it had no corresponding orders. Purchase orders were often made up to match invoices if the material had obviously been received from the supplier, after the fact. Roles and responsibilities of the departments are not clearly defined. There are some cross functional reporting between departments. It is common for the expeditor to make decisions on substitution of materials without proper approval or any consideration to the consequences the change will have on the quality of the product or on the end user.

They come to him because he is a technician with some technical training received in the Army. There are no clear and defined procedures for any of the major processes, such as purchasing, receiving, material handling, and document control. Supply Chain Management personnel have no formal education in Procurement or performance of the proper procedures, and do not possess any technical education and or background. There is no true accountability within the company. Typically, when small companies’ business increase, and unless leaders are acutely aware of the growth happening around them, they continue to do things as you always have.

The statement, “we’ve always done it that way, so why should new change now? ” is clearly at work here. Companies not prepared for the growth will not survive. What worked when a company was small may not work as the company grows. As company grows, systems must grow with the company. People are comfortable in doing things the way they have always done them, because they perceive the situation as manageable. If people are not held accountable for the tasks they undertake, one cannot expect problems to be resolved and improvements to be made.

There is no system in place to check the materials which are received, against what has been ordered. The receiving of product is done improperly or sometimes not at all. It is often triggered by accounting chasing the Expeditor or Stock Room Clerk for a packing slip to see when and if product was received at the receiving dock or picked up at the supplier directly. There are no systems in place to control purchases, typing of purchase orders, sending Purchase Order (PO) confirmations to suppliers, or even for storage of materials when they arrive and are destined for production.

Many times materials go missing, because they were given to someone in the office. Without a record of what was required on the project and an area to store the materials specific to the project, secure from the general workforce, in an enclosed environment, it is possible for this to occur on a frequent basis. At a minimum, the following basic systems should be instituted and maintained, either manually, or by a computer: 1. PO Log (see figure 2 below) to identify the purchase orders issued on a daily basis and used to maintain the status of all PO’s, and whether they are open or closed.

There should be no PO’s issued as a “verbal” order, without a PO number. As well it should be stipulated, “Vendor invoices will not be paid without it. It should also include a due date for materials. This will assist the Expeditor in understanding when materials will arrive, and when he should call the supplier to expedite and improve delivery.