--- To enhance the value and performance of procurement and SCM practitioners and their organizations worldwide ---



Add Value or Bust

Author(s):

Gerard J. (Jerry) Hayes, C.P.M.
Gerard J. (Jerry) Hayes, C.P.M., Director, Purchasing, Nippondenso Manufacturing U.S.A., Inc., Battle Creek, MI 49015-1083, 616/965-9862

81st Annual International Conference Proceedings - 1996 - Chicago, IL

Abstract. The profession of purchasing evolved within the corporate structure having as its primary responsibility, control. The traditional roles upon which purchasing developed no longer fulfill a progressive management's expectation. Changes due to competitive pressure now require a much expanded responsibility. Remaining traditional philosophy detracts from making the necessary changes. Purchasing must provide value to the business process by becoming a resource. Management, by purchasing, of the supply chain, relationships, and developments is essential to the profession's survival. Many barriers exist, including ourselves.

Evolution of Purchasing. The function of Purchasing as a corporate entity grew out of a need to control the awarding of contracts by people other than those in receipt of goods or those paying the bills. The function was originally perceived as the last bastion of staunch process orientation and hold-the-line mentality.

Traditional Functions. "Findin' Vendors," "Writin' P.O.'s," "Watchin' spendin'," "Resistin'," etc., all those traditional things many of us were taught by our predecessors in and of themselves, are no longer enough to sustain a competitive edge.

Changes. Paradigm shifts, reengineering, transaction costs, computers, software, the Internet, etc. have all served to greatly expand our access to information. The myopic world of traditional purchasing no longer satisfies the need to plan and strategize procurement.

Detractors. There are many. Among the more common are: the empire builders, those in an organization attempting to be autonomous, uncommitted and unsupportive suppliers, and certainly acceptance of the status quo.

Adding Value. As a profession, we have not focused on measuring our contributions to the corporate well-being, nor in many cases have we sought out what it is the boardroom expects of us. If not done, this is the obvious starting point to adding value. Purchasing, as the "window" to the outside world, should be an information resource to executive management on all issues affecting material cost, supply, and general economic conditions. Of course, the internal customer requirements too must be met with the efficiency necessary to sustain operations. This is most readily achieved by becoming intimate with those requirements and then mutually designing a system to deal with the issues.

New Functions. Continuity of quality supply is based on the strength of supply relationships. Such performance has as its foundation a working knowledge and management of the complete supply chain from feed stocks to disposal. Outstanding suppliers are rarely discovered in such a condition, but rather are developed by their customers into what they need to be. Great suppliers have great customers.

Barriers. Tradition is an enjoyable thing, and it helps us to reflect back to the "way things used to be," but when allowed to become a business philosophy, it's disastrous. Managing in the shadow of tradition is not to grow, and anything not growing is dying. Our own success can be a deterrent to change if arrogance is allowed to develop. Someone once said: "Whom the gods want to destroy, they send forty years of success."

Ten Sure Ways To Add Value:

  1. Be a businessperson first, a purchaser second.
  2. Understand your organization's direction, especially relating to your function.
  3. Understand the limitations and benefits of new practices.
  4. Never fight the trends.
  5. Use your suppliers' knowledge to better understand opportunities.
  6. Learn to sell your contributions.
  7. Document and express to management your real cost-savings potential.
  8. Discover who else in the organization is buying and how much they are spending; then determine areas for improvement or how you can add value to the process.
  9. Develop effective measures that support organizational goals, then show the contribution.
  10. Be a leader.

REFERENCES

  1. Long, Brian G., Value-Added Purchasing. Marketing & Management Inst. Kalamazoo, MI, 1995.
  2. Erickson, Tamara J., Best of the Best. Arthur D. Little, 1994.
  3. Kiplinger, Austin, The Kiplinger Washington Letter. Washington, DC., 1995.
  4. Bales, William A., How Purchasing Fits into the Total Organization. National Association of Purchasing Management, InfoEdge, Tempe, AZ, 1995.
  5. Coleman, Stephanie J., Developing Continuous Improvement Activities. National Association of Purchasing Management, InfoEdge, Tempe, AZ, 1995.
  6. Davis, Henry, The Empowered Organization: Redefining the Roles and Practices of Finance. Financial Executives Research Foundation.

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