Integrating Technology and Just-In-Time Purchasing With Your Purchasing Processes: Does It Make Sense For Your City?
With the advent of electronic ordering, online catalogues and virtual warehousing, a number of procurement and budget officials are moving to "Just-In-Time" (JIT) purchasing. Notably, several suppliers for the National Cooperative Purchasing Alliance (NCPA) are now offering on-line services, including incentives for ordering over the internet.
Seattle Purchasing Manager Melody Mociulski tells us that the city utilizes Just-In-Time contractual arrangements in approximately 10% of its 1200 annual contracts. In addition to the office supply commodity, JIT purchasing is used extensively on electric stock annual contracts for the City Light Utility. The vendor guarantees delivery either on a specific date or within a narrow timeframe window to eliminate the need for the city to hold the stock in inventory. In turn the vendor is guaranteed payment within an established period of time, making a win-win contract for both city and vendor.
Houston's City Purchasing Agent Dewayne Huckabay says they are transitioning from time-consuming and costly processes to e-commerce with a "purchasing card" program. Transactions are captured electronically by vendors and reported monthly. The cards reduce the individual's and departmental workload while also providing better, more reliable data for small dollar purchases. It also gives end-users the ability to immediately procure supplies and services necessary for them to perform the day-to-day requirements of their job.
JIT purchasing reduces or eliminates the need for central warehousing and storage. With the warehouse gone, so too are gone the problems of shrinkage -- due to theft, damage or improper handling -- and inflexible purchasing schedules that cannot take advantage of market factors for a better price.
Fairfax, one of Virginia's largest county governments, uses electronic purchasing for the NCPA's office supplies contract. This allows the county employee to search catalogues online, order supplies and equipment and transfer the purchase to the appropriate supervisor for approval. The vendor guarantees the delivery of the order within 24 hours. This saves substantial money and time, thus freeing employees to do other work.
It's important to note, however, a few caveats about Just-In-Time purchasing and virtual warehousing. First, it depends upon vendors who have:
¥ Large and efficient warehouse operations;
¥ Access to suppliers on a demand basis; and
¥ Delivery systems that are consistent, dependable and close to your town or city.
Secondly, it is vulnerable to materials shortage in the case of a strike or slowdown by vendors or their transportation contractors.
Despite these risks, any city or municipality with a central stores or warehouse system should take the time to examine the benefits and potential cost savings to JIT purchasing, as well as electronic ordering.
The technology is available at a reasonable cost. Vendors of commonly purchased products are prepared to offer on-time delivery. Many jurisdictions have pioneered JIT systems, providing enhancements and improvements that will benefit others that follow their lead.
For information about Just-In-Time and electronic purchasing, contact Lilla Hammond or Justin O'Brien at 1-888-828-USME (8763), USCM's US Mayor Enterprises, Inc. or members of the National Cooperative Purchasing Alliance.