Supply Management: How are You Really Doing? (3)
-- Supply Chain Management Review, 12/1/2005
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7. Do you have the right leadership in your procurement function? Is your procurement head a leader, a follower, or roadkill?
Having the right procurement leader is critically important to ensuring the success of any supply chain strategy. This individual should understand your overall business objectives as well as have a superior grasp and understanding of the fundamentals of supply management. Having the full range of knowledge in supply chain from purchasing through logistics is a key enabler for the leader to perform this job efficiently. Also, a good working knowledge of the technology that is available is a must. Most good supply leaders are able to move between industries and apply the skills needed to get the job done. This leader should be a good judge of people and have great sales and communication skills. Ultimately, what this individual spends a great deal of time doing is selling the value of the organization. He or she also needs to be a visionary and one that is tuned in to the changing business climate. Great supply-side leaders are innovators and not afraid to take a risk. Being able to gain the respect of critical business leaders as well as having credibility with the supplier community will cause this leader to be effective.
8. What is the working relationship between purchasing professionals and those in other disciplines (manufacturing, engineering, R&D, finance, etc.)? Do they operate in silos?
Traditionally, the role of most purchasing organizations supporting manufacturing businesses was to negotiate, develop contracts, and place orders for parts and materials. Engineers designed and decided sources at the quantities and schedules defined by the manufacturing organization. This separation of activities led to supply-base proliferation and spend diffusion. Another problem: Purchasing focused much of its energy on expediting parts deliveries and coordinating the short-term resolution of quality issues. In the 21st century corporation, purchasing must play a strategic—not tactical—role. It is important that sourcing and technical professionals work in teams, starting with new-product development. At Buell Motorcycles in East Troy, Wis., founder Erik Buell would launch product-development through a meeting with internal product development teams made up of engineering, sourcing, and other professionals. He would stipulate key performance goals for the new sports bike: acceleration speed, look and feel, durability, and price. It was the job of the buyers to make sure engineers kept the project within cost guidelines—a trait that had become an almost fatal characteristic of Buell’s parent, Harley-Davidson. Sourcing engineers would also scout the supply base for new technologies, such as a dramatic new metal-molding technology used in the Firebolt that reduced a 22-part structure to one piece. Then buyers brought in key supplier partners to help develop the bike. Giving technical personnel free rein is a prescription for corporate disaster. Of course, the purchasing and finance departments must be closely engaged. Best-in-class companies today are also forming close alliances between sourcing and marketing.
9. What are the opportunities for training and improvement for the purchasing professionals in your company? Some companies have no opportunities for training for purchasing professionals. If yours does, is the focus on the right subjects? Topics covered should include strategic sourcing, supplier partnering, negotiating, innovation tools, and stewardship. Again, start with the process: strategic sourcing and the role of suppliers. Then make sure your people are getting trained in new technology. An important subject is stewardship, including social responsibility. You must make sure your suppliers are following, at a minimum, legal mandates on the environment and labor. Companies should also have goals to promote diversity among the supply base. A good resource is the Institute for Supply Management website (www.ism.ws). Sadly, training is often the first line item eliminated when times get tough. Improving your purchasing skills and effectiveness should be your first priority when times get tough. Do you rotate your best high-potentials through the purchasing department? Some best-in-class companies make a point of doing so. Purchasing provides a unique opportunity to learn about supply markets, negotiations management, internal cost considerations, team leadership across multiple functions, and the incredibly enabling power of your supply base.
10. And most important, what is your level of personal commitment to achieving improved corporate performance through a best-in-class purchasing organization?
Everything you do—and don’t do—sends a powerful signal throughout the enterprise. For example, do you subject your purchasing department to an annual, tactical budget debate with every location in your company, where the opportunity to optimize the whole company’s performance is lost in local “service charge” arguments? Or does the head of purchasing present his or her business case to the executive team, outlining purchasing’s commitments for the coming year in exchange for a strategic decision regarding purchasing resources and budget? Even if you just say supply side is important, that’s a positive start. We are not advocating that you learn strategic sourcing or contract management. We are advocating that you at least know the concepts and ask the right questions. Incorporate sourcing into your strategic plan. Set at least one or two measurable goals related to sourcing, and then measure them. Quarterly is fine as long as the chief procurement officer has access to your office. It is also important that you show interest in your most powerful allies—your supply base. Make sure your business-unit leaders have a personal relationship with the CEOs of your two or three most important suppliers. Participate personally in annually recognizing your very best suppliers. Let them know you value their role in your success. Organizations go through phases as they move toward outstanding supply management. Ask your chief procurement officer to indicate where you are as a first step. Continued...
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