Understanding GNFR Perfect Order
In this blog series, the topic of goods not for resale (GNFR) is one that has appeared quite a few times. This is due to the fact that, when it comes to improving a company’s bottom line, there’s no area that goes overlooked as often as GNFR.
As previously stated, GNFR is made up of all purchases of goods and services that do not go into the final sellable product. However, though such items are not sold to customers, they’re essential for a company’s day-to-day operations.
In this discussion of indirect spend and, specifically, GNFR, we would be remiss if we didn’t cover GNFR Perfect Order.
First and foremost, it’s worth discussing the reason why ordering using purchase orders is so important to the procurement process.
Why Is a Purchase Order Important for GNFR?
Companies routinely create purchase orders for GFR, but they often fail to do the same for GNFR. Instead, companies will simply pay by invoice, assuming the invoice itself will be an adequate means of tracking the purchase.
However, taking the aforementioned approach means there is less control and poorer visibility of the purchase. Additionally, paying by invoice rather than creating a purchase order results in a buyer’s inability to monitor and manage the delivery.
Particularly for large companies with multiple locations, purchase order requirements are defined by very sophisticated systems. It only makes sense that GNFR should have a similar process in place.
What Is Involved in GNFR Perfect Order?
To create a GNFR Perfect Order, the key is to order the right goods at the right time so they’re delivered to the right location when they’re needed.
Sending out purchase orders to each supplier that a company needs products and/or services from can be a difficult and time-consuming task—particularly when those products and/or services must all be received at the scheduled time. Since a significant amount of time and effort must go into creating a purchase order, it’s important to perform forecasting/demand planning. Specifically, companies need to project full order quantities for a given time period, then go through the process to write the correct orders for each piece.
The Importance of Having a GNFR Perfect Order
An excellent example that demonstrates the importance of having a GNFR Perfect Order is the opening of a new retail store, which requires a wide assortment of GNFR items, from construction materials to fixtures within the building, such as the following:
- Flooring tile
- Cash registers
- Light fixtures
- Shelving units
- Cleaning supplies
- And anything else going into the new store outside of merchandise
In creating purchase orders for a new store, the goal is to write each one so that all parties involved know exactly what pieces and parts are needed for the job.
For construction materials, it’s deciding if there are cost savings in providing buyer-purchased goods to reduce the cost through a volume purchase program. For fixtures, it’s deciding what is needed and how to deliver the material to the store—direct, cross dock, or via inventory—which is predicated upon reducing costs and better managing delivery time tables to streamline the build-out. If inventory is used as a delivery tactic, there must be a replenishment program in place that is driven and managed by great forecasts/demand planning.
An example of a well-organized process is as follows:
- Develop a plan for Special Project/New Construction/Remodel/etc.
- Ensure that every part needed is included
- Submit Perfect Order
- Authorize all parts, along with timing
- Receive Perfect Delivery
- Check to make sure delivery matches what is needed and when it’s needed in each store
- Complete Special Project/New Construction/Remodel/etc.
- Within planned time frame
If done correctly, all required goods will be bought, shipped, and delivered just-in-time so there is no impact on the store opening as a result of lost or forgotten goods.
The store can open at the scheduled time, and opportunities for revenue won’t be missed.
How Add-on Orders Affect a GNFR Perfect Order
Sometimes add-on orders are unavoidable. For instance, if the carrier damaged the material or the material was damaged on-site, a new add-on purchase order will have to be submitted.
However, add-on orders are mostly tracked for projects. If an add-on is not created due to damage or other legitimate reason, it may be explained by a breakdown in the Perfect Order (not correctly ordering what was needed), poor delivery performance by the supplier, or a replenishment error.
Add-on problems create potential for the project to miss its deadline and/or to create excess inventory that may be scrapped, lost, or cost more to be used.
How to Optimize a GNFR Perfect Order
As highlighted above, a massive amount of work must be put into organizing GNFR orders for a new retail store. Those in charge of bringing everything together into one cohesive plan must take the various suppliers, product/service categories, transactions, and internal stakeholders into consideration.
Therefore, it only makes sense to have a system in place that allows the procurement team to track when products were purchased, how many were purchased, where they’re being shipped from, when they’re slated to arrive, and where they will be delivered.
The project’s success depends on what occurs during the planning stage. In the case of a remodel, you must know what you are changing, how much of the existing material on-site can be reused, and what is the net to be ordered. If the preliminary work is completed properly, the Perfect Order can be created by ordering based upon the best delivery plan developed earlier (direct, cross dock, inventory, or some combination of the three).
In taking such an approach, companies can look forward to a decrease in errors and a significant boost in overall performance throughout the course of completing such projects.
GNFR purchase orders are just as important as GFR purchase orders, but the former is more complicated. In addition to consisting of a much larger amount of smaller orders, GNFR purchase orders are put under less scrutiny since they don’t lead directly to revenue generation.
Further, creating a GNFR Perfect Order is more challenging because companies don’t invest in the tools to properly manage this area.
It is well worth the time and effort to gather all of the pieces together to open a new store or complete a remodel as quickly as possible.
By implementing a system designed to track GNFR purchase orders, companies have the risk-mitigation strategy they need to avoid lost profits, supply chain delays, missed deadlines, and more.
Lumatrak provides a full range of real-time OTIF visibility tools to help you better manage supplier and delivery performance from order to the final mile of your indirect goods supply chain. Provided in the cloud through its Software-as-a-Service (SaaS) offering and already connected to vast number of manufacturers and contractors, Lumatrak’s solution can be quickly implemented to complement and enhance any ERP, Strategic Sourcing and Procure-to-Pay systems.
To learn more about how a better GNFR-delivery management solution could save your company both time and money, contact the team at Lumatrak today.