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Subject: RE: POs considered harmful for dependent demands

Stephenie Cooper wrote:
     There's one point I haven't seen  
     anybody make.  Or I've missed it by reading the thread too fast, so  
     pardon me if the point has been made ... the appeal to the bottom-line  

No, your perception is accurate: that point has been implicit.  
Thank you for stating it explicitly.
     [...] The  
     overhead associated with processing releases is significantly less  
     than the overhead associated with a new purchase order.   When a  
     supplier receives a new purchase order, it has to be reviewed.  Is the  
     pricing agreeable?  Has this material been forecasted?  Has material  
     been allocated to this buyer?  Is the contract current and valid?  Do  
     I have this buyer's address in my system? And so on. All the overhead  
     associated with discrete POs occurs early in the process when the BPO  
     is negotiated, and the releases in the Material Release need minimal  
     validation and can flow straight through to the supplier's shipping  

And then in some systems POs require 3-way matches and
explicit closing at the end of their lives.

     And then I try to explain to the buyer that even though they push the  
     same amount of buttons for a release as they do for a PO, the  
     reduction in administrative and tactical time is significant.

Yes, very much so.  By the way, in some newer systems, 
it may require no human effort to generate and transmit 
a dependent demand signal to a supplier - not even 
pushing a button.  The choice of whether human judgment
is required or not is determined by a policy rule.

     By the way, a semantic point ... we never really "eliminate" purchase  
     orders.  We may call things by different names, but there is still,  
     somehow, some way, always "Written authorization for a supplier to  
     ship products at a specified price, which becomes a legally binding  
     contract once the supplier accepts it," which is a legal definition of  
     "purchase order".
>From a legal perspective, I could go along with that. 
When I think of purchase order, though, I think of the
common document or software object of that name,
not a contract release or electronic Kanban or any
of the lighter-weight authorization mechanisms.
The difference, as you so clearly pointed out,
is the administrative overhead and the speed 
of the material flow.

Bob Haugen

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