WHAT IS EXPEDITING FOR?
The value of expediting is intrinsically linked to the proportional value of the costs entailed in problems caused by a potential error when delivering material by a supplier.
Complete guide of expediting check-list at factory
In this article I will tell you about the mistake that cost €500,000. I’m sure it will help you find out what the crucial points are when expediting.
Therefore, the key to expediting is to help my clients identify and prevent potential problems in the chain of supply, checking suppliers comply with requirements in the purchase order and they respect the terms of delivery and deadlines set.
What is and what does expediting mean?
Expediting – or tracking how the order is progressing – is essential to any business.
The aim of this activity is to make an in-depth study of all aspects of supply, to provide constructive solutions to the supplier in order to respect the delivery periods and finally to inform the client immediately about the real situation of how the order is progressing.
Delays caused by human error and/or other factors, will continue to affect suppliers. Therefore, they need to react swiftly to ensure the aims of the service to the client are complied with in an economically-viable manner.
Efficient and effective expediting may help all suppliers to reduce their expediting costs, and at the same time improve the quality of the service, responsibility, productivity in all operations and the chain of production.
When producing equipment or essential items (over a long manufacturing period of 1 year or more), it is very easy for different unexpected problems to arise, leading to delays in production. This may be repairing welding work, manufacturing defects, drawings that have not been updated, communication problems between departments or problems that have arisen in the course of the tests required. Indeed, there are endless situations in which things can go wrong, and each of these will have a direct impact on manufacturing planning, thereby leading to a delay, to a greater or lesser degree in the delivery date. To a lesser extent, these delays entail a series of penalties – previously shown in the contract – for the manufacturer. To give a real example, in an order for equipment of certain importance, where the end price is over 5 million euros, there are the following penalties for the manufacturer:
- ·Liquidated damages for delays in delivery of engineering documentation and drawings:
– 0.3 % of total contract price per week for delays in key/critical documents or drawings; up to a maximum of 3 % of the total contract price..
- · Liquidated damages for delays in equipment and material delivery:
– An amount equivalent to 0.5 % of total contract price per week; with a maximum of 7 % of the total contract price.
Maximum combined limit of exposure to penalties for both the above concepts will be 10% of the total contract price.
So, we are talking about a “fine” of at least €500,000 for each of these causes for delays to the client.
To a greater extent, these delays will have a direct impact on the general flow of operations at the plant which will imply beginning production far later than foreseen.
If we bear in mind that every day an average of 250,000 to 300,000 barrels are produced, each of which costs $45 – 50; it can be seen that the effect in terms of losses of starting one week later than foreseen will be from around $78,750,000 to $105,000,000.
Therefore, efficient expediting will ensure that the products acquired will comply with the requirements, be delivered without any defects and received in the place and at the time required.
Why is expediting important?
Large-scale projects and supplying materials and critical equipment may involve complex, international supply chains, with goods bought from suppliers in different countries. Any delay in delivery from any supplier may affect the whole chain of production, thereby preventing the project from being completed on time and within the budget set.
Monitoring the chain of production by expediting enables all the necessary activities to be implemented, thus ensuring delivery times are fulfilled and according to the specifications provided.
The different levels within expediting are as follows:
- Production control: the expeditor will check that the production process complies with standards (qualitative, mandatory, environmental…) in the destination country for the goods. This is especially required in sectors such as engineering. For example, for components for power stations in energy.
- Quality control: that the components work, and they are checked that they work according to the required specifications, both in terms of measurements and in fulfilling the standards set by the client.
- Control of packaging and shipping: This is simply based on a visual inspection of the goods and there is a check that the packaging and dispatch specifications have been complied with.
- Project management: In large-scale projects, the expeditor will check the project deadlines and landmarks have been fulfilled. In this way, the essential aspects of supply are monitored.
What is expediting in the chain of production and project management?
With project deadlines and schedules being calculated with ever less room for delay of any kind, professional expediting resources have become key to successful completion of the project.
Starting the expediting process once the order has already been delayed is not likely to result in timely delivery and it may affect the overall construction schedule, which may lead to additional costs to the project.
Expediting is a project management activity implemented as part of they chain of production or procurement process for ensuring quality and the timely delivery of goods and components. Sometimes expediting is performed by an external ‘expediter’ or by the internal department in charge of in order to monitor how the manufacturer is progressing in terms of quality, packaging, conformity with standards and the timelines set.
With numerous suppliers involved in the chain of production, keeping the projects on schedule is a challenge. Delayed delivery of materials, products or equipment prevents the project from being completed on time and on budget.
What is expediting in procurement?
Nowadays, expediting is fully integrated into the procurement process.
In the past, expediting was only considered when there was a critical delay in the delivery of a specific order, but expediting is far more efficient, when it is a continuous process, initiated from the time an order is made. Therefore, the role of expediting used to be considered as a corrective instead of a preventative action as it is seen today.
This way and given that project schedules and prices have become ever more critical, expediting is now incorporated from the start of the project planning process.
Expediting can be carried out at any stage of the project, whether this is during manufacturing and assembly, repairs, missing material, a fault when carrying out a test or inspection, shipping and packaging and presenting the final documentation.
This methodology reduces the risk of delay not just for the order but to the entire project. With the right planning, proposal and execution, it can provide great results for the company.
Based on a previous assessment of items concerning the factors of Quality, Safety, Design Complexity, Commercial and Lead Time, a critical analysis of them will be made. With the results, procurement will be able to assess this input and use it as the basis for monitoring each order.
What is the role of an expeditor?
The expeditor is entrusted with supervising how production progresses at the supplier factory, and monitors everything in the purchase order, quality control and ensuring that it meets all requirements, and the deadlines agreed to. This way, the expeditor may check that the goods arrive on time and at the place and are of the required quality.
Normally, this is done presentially on the supplier or sub-supplier premises. This is the most efficient way to check “in situ” and in person how the order is progressing. However, “desk expediting” can also be carried out in which this is done by telephone or videocall, between presential visits.
How do you expedite a supplier?
Expediting is a complex task and may be tiresome and tedious, if not well organised. Moreover, the supplier needs to be highly proactive.
According to how critical the goods are, there may be many stakeholders involved in complying with the dates set.
Lack of accurate and timely information, too many means of correspondence and an absence of a proper procedure for expediting are just some of the challenges that buyers must deal with on a daily basis when discussing realistic recovery dates. Implementing a common process, maintaining great connection among suppliers and buyers, and ensuring that the organisation has a policy for escalation is a good start toward improving and establishing expediting flow. If an expediting procedure is properly executed, it can guarantee that during the project, the team can manage any factors that have caused delays and mitigate them effectively.
Expediting activities are tailored to each customer’s needs, the approach may range from Desk Expediting, Field Expediting – or a combination of both – or Resident Expediting (inspection).
- Desk Expediting also referred to as phone expediting is the most common and cheapest expediting approach used to monitor how the order is progressing from each supplier. It´s effectiveness will depend on the supplier being highly cooperative with great communication and very accurate data, otherwise another approach must be taken, such as Field Expediting.
- Field Expediting provide in-depth information about the actual status of the order, site situation and any bottlenecks and/or potential delays that needs immediate rectification. It will result in an independent forecast of what the remaining activities are and when they will be performed, so the expeditor can compare this with the supplier’s progress report and hence check if it is accurate or not. If field expedition finds serious problems that do indeed compromise the ability to meet contractual delivery dates, then a Resident expeditor/inspector may be required.
- Resident Expediting/Inspection is the most expensive type but the most valuable one for monitoring the order. It requires an expeditor to be resident for a certain period in the manufacturing place. The inspector checks the entire production process, documentation, and recovery (if needed) that the manufacturer must make to meet the contractual delivery dates.
In order to have an accurate idea of the current state of the order, in reference to all we have explained in this article (quality, detecting problems, manufacturing, complying with the deadlines set) the expeditor must visit the supplier on their premises and make an effective expediting visit. This will be who will propose how frequent the visits are to be, always with the approval of the end client, on the basis of what has been seen and found during the actual expediting visit.
As we have explainedhttps://www.nexuaquality.com/project/other-projects-as-workshop-expeditor/, the essence of expediting is to gain an insight into the current state of each of the manufacturing stages. To do so, the expeditor must ask the supplier precise questions in order to gain a detailed comprehensive overview of what state the order is at.
These questions will refer to purchasing materials, delivering them, that they comply with requirements, the start of manufacturing, the state of documentation (drawings, procedures) monitoring manufacturing according to the ITP (Inspection Test Plan), workload and sufficient manpower on the premises to carry out the order according to that foreseen, space and equipment for correctly moving the different items in the order, tools, tests performed, inspections and a compilation of all pertinent certificates.
The proactivity of the supplier, especially, making the precise questions, will enable the expeditor to know or foresee if there is or will be any kind of setback. This way, corrective and/or preventative measures can be carried out in order to correct or anticipate any problem that may cause delays in manufacturing and, in turn, to the delivery date, with highly negative consequences on operations and the critical assets of the client.
In short, the expediting visit will be truly effective when the precise questions are asked, in which the responses to each of them, will provide the expeditor with the necessary information to gain a perfect overview which will fully cover the current state of the order.
With my experience of expediting visits, I have combined these key questions, which are part of the methodology I have developed to make an expediting visit effective, direct and swift. Each of the partners certified by Nexua Excellence Quality partners in 6 continents uses this methodology.
For me, it is a pleasure to share with you part of the exclusive methodology I have developed to monitor orders in a rigorous and effective manner.
You will see it is simpler than you think.
I recommend you download the guide I have prepared. With these, I hope they will help you pay visits orientated at excellence and obtain the best expediting results whether this is at the factory, at a “desk” or as a resident expeditor. Say goodbye to inefficient meetings and innovate. You will see in the guide that I have digitalised my questionnaire to make the visit easier and, of course you can download it, if you prefer working offline. My only aim is to help you and so I am providing you this tool to work with it in whichever way you prefer.
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