Optimizing indirect purchase order processes: Streamlining process through minimization of purchase order modifications

Abstract

Management of the purchase order process is a key factor for effective procurement operations, but challenges and changes can disrupt the quality of operations. Purchasing is the first step in an organization's internal supply chain. In order for the organization to be able to purchase products or services, they must create a purchase order (PO), a legally binding document between the buyer and supplier. However, events can arise in the PO process, leading to PO modifications that can impact process quality. Modification of a PO refers to the correction of an error in the purchase order, which must be corrected in order for the purchase order to be usable.

This thesis examines the internal dynamics of the purchasing company's PO process with the aim of reducing PO modifications and improving the quality of the process. The main goals are identifying the primary causes of modifications, identifying process challenges, and proposing optimization methods. The thesis focuses on understanding the root causes of PO modifying and the impact of reduced modifications on the quality of the process, using a methodology that combines a literature review, interviews for data collection and thorough data analysis. This thesis is a case study of an electrical manufacturing company. The thesis deals with the optimization of indirect PO process by reducing purchase order modifying, leading to increase in efficiency and cost effectiveness in procurement. Through case company analysis, root cause identification, strategic framework development, technology integration and performance evaluation, the research aims to provide recommendations and best practices for organizations to enhance their indirect PO process and achieve improvements.

Key factors such as manual processes and staff training become critical in terms of reducing defects and maintaining quality. Emphasizing the importance of internal and external communication, the findings and suggestions offer general management implications, although organizations should tailor solutions based on the inefficiencies of their own processes.