Procurement procedure of chemical products raw materials
Chemical companies use raw materials for resale or production. This includes everything from the chemicals used in the production process to shrink packaging, labeling and pallets needed to transport the finished product.
Although the process of each company may be different, the chemical products raw material procurement procedure should include the following steps:
Identify requirements. The purchase of raw materials shall be determined according to the demand of the finished products used. Your first step in purchasing is to determine how many complete products or projects you want to sell in a given period of time.
For example, determine how much antifreeze and radiator coolant you want to sell in summer and winter. Professional chemicals purchasing and purchasing software, such as datacor ERP, provides demand planning and forecasting functions to help predict what products you may sell to which customers in the future.
Calculate the components needed to meet the requirements. Next, you need to determine how many given raw materials are needed to meet your forecast requirements. This is achieved by multiplying the number of raw materials required to produce a unit of finished product by the number of products you expect to sell.
In discrete manufacturing, the calculation is simple: just determine the number of finished products you expect to sell, and multiply the raw materials by that number. If your finished product is a car, one of the raw materials you need is tires; therefore, just multiply the number of cars you expect to sell by the number of tires you need for each car: 4. If you want to keep spare parts, you can even order extra stock.
However, in the field of chemical and process manufacturing, the process may become more complex because the same raw material can be used for multiple products, and most companies do not want to keep excess inventory.
If raw materials are only used for a few products: simply calculate the number of products you expect to sell and order ingredients based on that number. In our example, if antifreeze and radiator coolant are the only products that use ethylene glycol, you can determine the quantity of ethylene glycol purchased only based on the predicted demand for these products.
Keep zero inventory. Chemical products materials have a shelf life, and the shelf life is usually short; if the product breaks down, you lose money. That's why most chemical companies try to keep real-time inventory: enough raw materials to meet demand, without storing any excess inventory. In this system, raw materials are ordered only long enough to replenish inventory before they are used up.
Back to our example, this means ordering enough glycol to meet the expected summer orders for antifreeze and radiator coolant, and replenishing supplies in time to start production for winter orders.
Optimize the transportation quantity. Transportation and logistics costs may account for a large proportion of material landing costs. That's why it's important to optimize purchasing and purchasing on the basis of complete vehicles or the number of complete vehicles: the price of some complete vehicles is usually twice that of complete vehicles.
The right ERP software will determine when and how many raw materials to order from which suppliers in order to manufacture the whole truck and optimize the immediate ordering. The system then recommends the order to the supply chain or purchasing manager. Datacor ERP provides this function through its demand planning and forecasting module.
Consider other logistics factors. In addition to freight, you also need to consider the logistics from the source of raw materials (suppliers) to the final destination (production facilities or laboratories). This will not only affect the overall production cost, but also affect the profitability of the final product. A good ERP system will allow you to accurately track all logistics costs, which may include shipping, insurance, tariffs, tariffs and taxes.
Use your human resources. Your supply chain or purchasing manager may know something that the software doesn't know - for example, there's a global epidemic going on, the delivery time is now 14 weeks, not two weeks, or maybe a hurricane is about to hit the Gulf region, temporarily closing a factory.
Po. Once managers decide what to buy, they should always create a purchase order (PO) that records everything they are purchasing, including quantity and freight - and then send an email or hard copy of the Po to the supplier. Since the Po is a legal document, it ensures that the pricing and quantity are fixed and guaranteed in case of problems with the order.
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