Wade C. Ferguson, DBA, C.P.M.
Wade C. Ferguson, DBA, C.P.M., Contract Administrator Santee Cooper, Moncks Corner, SC 29461, 803/761-8000
Robert F. Smith
Robert F. Smith, Principal, Training Technologies for Business, Winnetka, IL 60093, 708/446-7364
Although purchasing is one of the functions most radically changed by a typical reengineering effort, purchasing is rarely the catalyst for a reengineering project. This is due, in part, to the fact that purchasing is only one piece of the supply management "process," crossing many corporate boundaries. As a single part of the process, purchasing is usually not the initiator of reengineering, but rather a participant in a larger, corporate-wide effort. Therefore, purchasers must be aware of the implications of reengineering and how to achieve maximum productivity increases through the effort. Purchasers must also understand appropriate strategies for dealing with reengineering, since the purchasing function is normally not in control of the process.
What is Reengineering?
Reengineering is radically changing the way corporate America does business. Many purchasers have already experienced some degree of reengineering as will many others in coming years. In fact, recent surveys suggest that 40-50% of corporate America plans a major reengineering effort in the near future. A survey of 1,200 corporations by Systems Reengineering Economics, indicated that by 1997, companies will lay out more than $52 billion on business reengineering with nearly $40 million of that figure paying for information systems (Caldwell, 1994, p.50).
Reengineering, as defined by Michael Hammer, "is the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical contemporary measures of performance such as cost, quality, capital, service, and speed" (Hazeltine, 1994, p. 24). Business reengineering, also called process redesign, can enable a company to do much more with far less - less investment, less time, fewer people (Champy & Hammer, 1993, p. 94). Business reengineering isn't about fixing anything or throwing resources at failing systems. Instead, business reengineering is starting over from scratch. A successful reengineering effort must "break away from conventional wisdom and the constraints of organizational boundaries and should be broad and cross-functional in scope" (Hammer, 1990, p. 108).
Hazeltine categorizes organizations doing reengineering into three types. The first category consists of organizations that are "forced" to reengineer to survive. They must improve performance significantly or go out of business. Second, are organizations that perceive change as a means to obtain a competitive advantage. Such organizations are generally not on the brink of extinction nor are they the leaders in their particular industry or niche, but they perceive reengineering as an opportunity for improved competitiveness. Third, there are the innovators--world class organizations that are building a barrier for their competition in order to maintain their positions as market leaders (Hazeltine, 1994, p.25).
How do you reengineer? Consultant and author James A. Champy believes that the key to successful reengineering is identifying the purpose and focus of a business, its culture, and the processes it must affect (Brandt, 1994, p.72). While the basic concepts of reengineering are relatively simple, often management does not have a clear understanding of their own goals (Manganelli & Klein, 1994, p.10) nor of the specific goals to be obtained through the reengineering effort itself.
The reengineering process may take place in five parts: planning, internal learning, external learning, process redesign and implementation (Goldwasser, 1994, p.34). While each stage is important, the planning and implementation stages are critical to the success of a reengineering project.
The planning phase is basically an assessment of the organization, its goals, and its current processes. Specific business processes are examined and the most important processes are identified and targeted for redesign.
The next two phases, internal and external learning, occur simultaneously. The primary leaders of the reengineering effort should spend time with internal and external customers while examining tactical operations. A major pitfall is not focusing on those processes which are critical to the business and spending too much time over-analyzing minor processes. As the various operations and their processes are explored, many non-value added activities are frequently identified and should be quickly eliminated. In fact, complete processes may be eliminated altogether. Key processes, not slated for elimination, are identified as needing redesign work thus initiating the fourth phase, process redesign.
Process redesign must be done with a total customer focus, redesigning from the outside, in. The focus must be on the customer (both internal and external), finding out how the customer wants to deal with you, not how you want to deal with the customer. Customers should also be enlisted to help to critique plans, participate in trial runs, and give regular feedback.
It is also very important that the reengineering team gain commitment and understanding from the "powers that be" regarding the development of the foundation that will support the redesigned process. Enabling technology, policies and procedures, and organization structure must be designed to ensure the new process performs as planned. (Stewart, 1993, p.40 and Hazeltine, 1994, p.28).
The final stage, implementation, is critical. Keep the right people involved. Have a sense of urgency and continue to seek employee feedback. Deliver as many quick hits (i.e. those items that can be changed with a minimum of effort) as possible and have a measurement system in place.
There are a number of reengineering approaches on the market today. The Goldwasser methodology just described is only one approach and is offered as a typical example. Most of the approaches will work; some are better suited for larger corporations and others for smaller businesses, but one thing is certain - none of them will work, unless the company has a strong committed leadership with a clear direction of both intent and goals.
Why do so many efforts fail? Three-quarters of all efforts at reengineering fail because of a lack of understanding of how to actually put reengineering concepts into practice. A recent NAPMInsights article, "Reengineering, How to Fail" cited 10 sure ways to fail at reengineering, including lack of committed leadership and a lack of clear goals and objectives (King, 1995, p. 52). It is vitally important that the potential reengineer familiarize his or herself with the pitfalls of reengineering. While avoiding the common pitfalls of reengineering, focus on a proven formula for success, which according to Hazeltine (1994, p.26), will typically include:
How is purchasing effected by reengineering? Although purchasing may be radically changed by the typical reengineering effort, purchasing is rarely the reengineering catalyst. This is due, in part, to the fact that purchasing is only one piece of the supply management "process," crossing many corporate boundaries. As a single part of the process, purchasing is usually not the initiator of a reengineering project, but rather a participant in a larger, corporate-wide effort. As a result, purchasers must be aware of the implications of reengineering and how to achieve maximum productivity increases through the effort.
As previously stated, an effective reengineering effort will focus on customer needs, i.e. not on what we want to do, but on what the customer wants us to do. An increased customer focus provides the purchaser with an excellent opportunity to determine if the needs of internal clients are truly being met, and by so doing, add value to the supply management process through an increased customer focus, which in turn, allows the organization to better serve its external customers. Typically the two areas of greatest importance will emerge as cycle time and quality.
A typical reengineering effort will eliminate non-value added steps from the purchasing process. As such steps are eliminated, don't be surprised if purchasing's job paradigm begins to change. In many cases, purchasers become so bogged down in the "process" that we think the primary function of purchasing is to issue purchase orders. Is it? If purchasing has ensured the "best" source of supply is available, if it has ensured that the seven rights of purchasing have been satisfied (i.e. right materials, right quantity, right time, right place, right source, right service, right price)(Leenders & Feeron, 1993, p.28) via blanket agreements or other mechanisms, does it really matter who issues the purchase order?
Frequently, the term reengineering has become synonymous with downsizing. However, the goal of reengineering should never be to reduce work force. If the results of the finished process indicate reductions then, they should, and must occur if the firm wishes to maintain its competitive position. But, again, reduction of forces should be the evaluated result, and not the goal, of reengineering.
Where true reengineering has occurred, purchasers have been faced with a myriad of results. True, we have seen cutbacks of purchasing personnel in some companies in excess of 30%. In others, we have seen increases in the purchasing department to accommodate resultant reengineering recommendations in other areas. While in a few companies we have seen the virtual elimination of the purchasing "department," in others we have seen purchasing become more decentralized, but in others more centralized. This is the exact output that we should expect from the application of true reengineering principles. The results SHOULD be different in each firm, as the internal environment is redefined within the context of a more customer-oriented focus.
How should a purchaser prepare for reengineering? Purchasers must understand appropriate strategies for dealing with reengineering efforts, since the purchasing function is usually not in control of the effort. Reengineering means change and change involves risk. When first confronted with the possibility of reengineering, one would be less than human if the first thought were not, will I be a survivor or a casualty? There is no guarantee of being a survivor - absolutely none. But, there are some ideas that may help.
Perhaps the best defense is a good offense - be proactive, take the initiative. Don't wait until your organization decides to reengineer, begin to examine your process today to find improvement opportunities. Contact your key clients and be aware of their expectations. Change what you can and make recommendations for what is beyond your authority to change. Request that teams be formed to examine changes that cross functional lines. Nothing will guarantee that you will avoid being reengineered, but the process will be less traumatic if it comes as just another stage in the ongoing process of change.
Secondly, take the initiative at continuous improvement of yourself. The most successful purchasers will be those who proactively broaden their own skill/knowledge base. You will increase the perception of your professional expertise by completing your degree, pursuing an advanced degree or obtaining professional certification such as C.P.M. or A.P.P.
In addition to sharpening your professional purchasing skills, you should broaden your skills into other areas. It is important to demonstrate to your organization that you have the ability to contribute in the new organization, no matter what it looks like. Broaden your skill base to become a viable candidate for a position with new/expanded duties, both in purchasing and beyond. Remember, your new area of greatest contribution after reengineering might be elsewhere in the organization.
And then if you are reengineered... Strive to be part of the solution, not the problem. Even though you are personally at risk, be perceived as a change agent. Be perceived as one who will continue to support the efforts of continuous improvement in your organization, because true reengineering must continue as an on-going process to be successful. It is not a one-time (albeit lengthy and expensive) event. If you are perceived as a member of the team, you have a better chance of "making the cut," should one occur. Throughout the process, be cooperative, contribute as much talent and information as possible. And, be flexible, demonstrating your ability to adapt to new duties and new expectations. Show your organization that you have what it takes to continue to add value in the "new," reengineered organization.
(Thanks to Diane Miller and Glover Pinckney of Webster University, Charleston Metro Campus, for their research assistance)
Caldwell, B. (1994, July). Missteps, Miscues. INFORMATIONWEEK, pp. 5058.
Champy, J. & Hammer, M. (1993, Nov.) Reengineering the corporation. Small Business Reports, 18(11), p. 65.
Goldwasser, C. (1994, May-June). Lessons learned: the initial reengineering project at Southern California Gas. PLANNING REVIEW, p. 34.
Hammer, M. (1990, July-August). Reengineering work: Don't automate, obliterate. Harvard Business Review, pp. 105-112.
Hazeltine, F.W. (1994, May). Believe it or not... Business process re-engineering is not for everybody. APICS - THE PERFORMANCE ADVANTAGE, pp. 24-29.
King, S. (1995, February). Reengineering - How to fail. NAPMInsights, pp. 50-52.
Leenders, M.R. & Feeron, H.E. (1993). Purchasing and Materials Management (10th ed.). Homewood, IL: Richard D. Irwin.
Manganelli R.L. and Klein M.M. (1994, June). A framework for reengineering. MANAGEMENT REVIEW, p. 10.
Stewart, T.A. (1993, August). Reengineering: The hot new managing tool. FORTUNE, p. 40.