3 Risks That Are Hurting Your Steel Purchasing

May 2, 2019

Successful purchasing requires everything to be on point, from the amount and quality of material to the right price, schedules and vendors. If any part of the process fails, the result can be excess money loss, which in turn hurts the entire production chain of your steel fabrication. There are three main pitfalls that you can encounter when you are planning, budgeting and ordering your purchases.

1. Overbuying or underbuying material 

If you are not fully aware of the exact amounts of material you need, there is always the chance that you buy more than what is required. If material calculations fail or the change-related communication chain breaks, your orders will not reflect the demand. You could end up with too little material, or unneeded material, which you still need to pay for. In the best case, you always aim to beat the set budget. In the worst case, you not only meet the budget, but you go over by a large margin. To make sure you’ve got the desired inventory levels, real-time information is crucial. 

2. Wrong material or bad timing

When you are choosing materials for your project, the expectation is of course that they also are shipped at a specific time. When evaluating quotes, you are making a decision not only about price, but about what it is exactly what you need–if there is something that can be sacrificed, and what elements need to be uncompromised. Can you splice? Which material do you need first? What substitutions can you make for unavailable materials?

If the purchased steel doesn’t meet the job requirements, you may need to make a repurchase. Another option if you don’t catch the faulty quality is that the products created down the production line will not pass inspection. Knowing the production sequencing is crucial when planning the JIT deliveries, especially in projects with tight site space constraints or complicated routing for finishes. In any case, wrong material or poor timing can jeopardize the project and even the company reputation in the long run.

3. Information doesn’t flow

If your information chain from approved project content isn’t up to date, it’s impossible to form a full understanding of what material is needed in what amounts, when and what the cost should optimally be. Having updated price information is paramount, and referring to data from previous projects can help.

Additionally, order and delivery schedules for the steel need to be established to match the project timeline and be available for relevant stakeholders. All in all, if the information is not easily accessible in real time, you are not able to make educated decisions about purchasing and deliver on schedule. 

Faulty purchases end up harming the profitability of your entire company 

All of the problems that you can encounter as part of your purchasing process ultimately come down to unnecessary costs. When you need to know who to buy from and on what schedule and do the same for all your simultaneous projects, things need to run smoothly throughout. Otherwise, you run the risk of accumulating payments or delays that could have been avoided. 

 

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