In small and medium-sized manufacturing organizations, people tend to wear many hats. Responsibilities in large businesses that would otherwise be managed by separate individuals or groups tend to be combined into one position at a smaller company. More often than not in smaller firms, the buyer and the production planner roles are merged into a hybrid role uncreatively called a ‘buyer/planner.’
Let’s investigate the two major contributing job functions that define this combined role!
The “Production Planner” Role
A production planner works to ensure that products are manufactured efficiently and on time. They do this through the development and management of the organization’s production schedules. This involves analyzing demand forecasts and sales data to determine the quantity of products needed and when they should be produced. The production planner creates detailed schedules that align with these forecasts, taking into account factors such as production capacity, labor availability, and material supply. They ensure that production plans are feasible and optimize the use of resources to meet customer demand without overburdening the production line.
A production planner also focuses on continual improvement and efficiency in the production process. They monitor production performance against the schedule, identifying any deviations and analyzing their causes. This includes tracking Key Performance Indicators (KPI) such as production cycle time, efficiency rates, and on-time delivery rates. Based on this analysis, they implement process improvements to enhance productivity and reduce waste. By optimizing production schedules and processes, production planners play a critical role in maintaining the firm’s operational efficiency and ensuring that products are delivered to customers in a timely manner.
Coordination is a key aspect of a production planner’s role. They work closely with various departments, including procurement, inventory management, and manufacturing, to ensure that all necessary materials and components are available when needed. By aligning material availability with production schedules, they help prevent delays and disruptions in the manufacturing process. Additionally, production planners communicate with the sales and customer service teams to provide updates on production status and address any changes in demand or production issues that may arise.
The Buyer Role
The buyer is primarily responsible for sourcing and procuring the raw materials, components, and supplies necessary for production. This involves identifying and evaluating potential suppliers based on factors such as quality, cost, reliability, and delivery speed. The buyer negotiates contracts and terms of purchase to secure the best possible prices and conditions for the company. Additionally, the buyer continually analyzes market trends and supplier performance seeking opportunities to reduce costs, improve quality, and increase efficiency.
In addition to procurement, the buyer also plays a key role in quality assurance by ensuring that the materials purchased meet the company’s quality standards. They may work with the quality control department to inspect materials upon receipt and address any quality issues with suppliers promptly.
Buyers work closely with the company’s production planner to understand material requirements and align procurement activities with production needs. The buyer monitors inventory levels to ensure that materials are available to meet production schedules without causing overstocking which ties up capital and increases storage costs. This coordination helps avoid production delays caused by material shortages and optimizes inventory turnover, ensuring that materials are used efficiently.
Why Combine the Roles?
In small and medium-sized businesses, the functions of buying (‘procurement’ or ‘purchasing’) and production planning are often merged due to several practical and strategic reasons. For operations on a smaller-than-enterprise scale, the combined role offers several advantages.
Operational Efficiency
In more efficient manufacturing operations, the roles of planner and buyer tend to be symbiotic in function, as their processes tend to overlap. Combining both functions into one role leads to faster and more cohesive decision-making processes. Having a single person or team manage both procurement and production planning eliminates the need for extensive cross-departmental coordination. It also reduces potential miscommunications and delays between groups.
Additionally, an integrated role allows for a more holistic approach to planning and procurement, ensuring that purchasing decisions are closely aligned with production needs and schedules. This results in better inventory management, optimizing the use of resources and balancing inventory levels to avoid both shortages and excesses.
Increased Agility and Flexibility
The ability to quickly adjust procurement and production plans in response to changing conditions, such as shifts in customer demand or supplier issues, is enhanced when one person oversees both functions. This setup also allows for immediate and informed decisions to be made when issues arise, such as material shortages or quality problems, reducing downtime and maintaining production flow.
Greater Strategic Alignment
Combining these roles ensures that procurement strategies are directly aligned with production goals. The combination can lead to better overall performance and strategic coherence. A single person can prioritize tasks based on the overall business strategy without conflicting departmental interests. This results in clearer accountability for outcomes related to material availability, production efficiency, and cost management, while maintaining consistency in processes from procurement to production.
Cost Efficiency
SMBs typically operate with tighter budgets and cannot afford to hire large specialized teams. Combining roles reduces the need for additional headcount, lowering overhead costs related to salaries, benefits, and office space. This multi-tasking approach maximizes productivity and minimizes labor costs.
Future-Proofing
Starting with this combined position also provides easier scalability at a future date. As the business grows, the role can gradually be spread across more specialized positions as needed based on an already unified system of operations. This allows for a smoother expansion of the workforce while keeping the needs of the company foremost in the process and sidesteppin the siloing of operations.
What the Buyer/Planner Does
This merger of roles has a lot of benefits but it also places a lot of tasks in the hands of the worker doing both. A buyer/planner has to manage several processes and metrics to ensure efficient procurement and production planning. In smaller operations this can be easily done, but as volumes rise, complexity also increases.
While no company or industry operates the same, we’ve provided an overview of the more common aspects a buyer/planner oversees. It is important to understand the key processes and metrics the combined role will handle and provide the tools necessary to streamline the work activities and reduce potential bottlenecks.
Purchasing and planning processes managed
1. Procurement
- Supplier Selection: Identifying and evaluating potential suppliers based on quality, cost, and reliability.
- Order Placement: Issuing purchase orders for required materials and components.
- Contract Negotiation: Negotiating terms and conditions with suppliers to secure favorable terms.
- Supplier Relationship Management: Building and maintaining strong relationships with suppliers to ensure reliable supply chains.
2. Inventory Management
- Stock Monitoring: Regularly checking inventory levels to prevent stockouts and overstocking.
- Replenishment Planning: Planning and executing material replenishment to maintain optimal inventory levels.
- Inventory Turnover: Managing the rate at which inventory is used and replenished.
3. Production Planning
- Scheduling: Creating and updating production schedules to meet demand forecasts.
- Demand Forecasting: Using historical data and market trends to predict future material needs.
- Capacity Planning: Ensuring that production capacity aligns with demand and material availability.
4. Quality Assurance
- Material Inspection: Inspecting materials upon receipt to ensure they meet quality standards.
- Issue Resolution: Addressing and resolving any quality issues with suppliers promptly.
5. Data Analysis and Reporting
- Performance Monitoring: Tracking key performance indicators (KPIs) related to procurement, inventory, and production.
- Continuous Improvement: Analyzing data to identify areas for process improvement and implementing changes.
Performance metrics used to manage buying and planning
1. Procurement Metrics
- Cost Savings: The amount saved through effective negotiation and procurement strategies.
- Purchase Price Variance (PPV): The difference between the standard cost and the actual purchase cost.
- Supplier Lead Time: The time taken by suppliers to deliver materials after an order is placed.
- Supplier On-Time Delivery Rate: The percentage of orders delivered by suppliers on or before the agreed-upon date.
2. Inventory Metrics
- Inventory Turnover Ratio: The rate at which inventory is used and replenished over a period.
- Days of Inventory on Hand (DOH): The number of days the current inventory will last based on usage.
- Stockout Rate: The frequency of stockouts over a specific period.
- Carrying Cost of Inventory: The total cost of holding inventory, including storage, insurance, and obsolescence.
3. Production Planning Metrics
- Production Schedule Adherence: The degree to which actual production matches the planned schedule.
- Capacity Utilization Rate: The percentage of production capacity that is actually used.
- Demand Forecast Accuracy: The accuracy of demand forecasts compared to actual demand.
4. Quality Metrics
- Supplier Quality Rating: The quality performance of suppliers, often measured in defects per million.
- Return Rate: The rate at which materials are returned to suppliers due to quality issues.
- Inspection Pass Rate: The percentage of materials that pass quality inspection upon receipt.
5. Performance Metrics
- Order Cycle Time: The total time from placing an order to receiving the materials.
- Total Spend Under Management: The total value of procurement managed by the buyer/planner.
- Compliance Rate: The percentage of procurement activities that comply with company policies and regulations.
The right tools for the job
When combining typically standalone roles, it puts a lot on the plate of the singular position. That means the position all but requires purpose-built management tools to be effective. Relying on spreadsheets is not the answer. The buyer/planner needs a management suite that efficiently integrates both planning and purchasing, rather than a patchwork of standalone tools.
For small and medium sized businesses, Material Requirements Planning (MRP) software is the go-to choice. These MRP systems are designed for manufacturing environments and are built with both purchasing and vendor management capabilities, as well as production planning tools included. Advanced systems like Aligni have both functionalities highly integrated. That makes it easier and more efficient for a buyer/planner to manage the various aspects of the role more effectively – even in the face of growing complexity or production volumes.
Once fully integrated within the organization, MRP systems can provide greater visibility into procurement and planning processes for the rest of the company. It also builds a more collaborative and streamlined approach to managing production needs.
Making the role work
Overall, combining the functions of buying and production planning enhances cost efficiency, operational efficiency, agility, strategic alignment, and practicality, helping small and medium-sized businesses maximize resources, streamline operations, and remain competitive in a fast-changing business environment. However, doing so requires much more oversight and organization from the individual given the task and the use of home-grown systems or spreadsheets may not be up to managing it effectively. Purpose-built systems like Aligni MRP should be employed to streamline the combined operation, given the importance to the organization.