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Do vendors prefer monthly or weekly rolling orders?
Many companies have the practice of raising purchase orders on vendors on a monthly basis. This practice has been derived from the concept of a monthly production plan, derived from monthly sales forecast as a part of the S&OP process.
The process of monthly purchase orders does result in frequent shortages and pile ups, leading to either expediting or delaying the scheduled incoming materials. Vendors do get stressed due to such firefighting actions.
A better approach is to reassess the requirements on a weekly basis and release weekly orders. Vendors get better visibility and the need for expediting and delaying goes down. It is intriguing why this process is not prevalent amongst major companies.
I have spoken to many Supply Chain teams, who say that vendors resist moving from monthly to weekly orders. It appears more as an inertia with the purchase team, rather than an issue with the vendors, who in fact love it when spoken to.
Implementing weekly rolling orders also leads to higher sales for the company as well as the vendors, since stockouts go down considerably. Once this benefit is explained, vendors are quite eager to move to the weekly system.
Would love to hear your experience in this regard…