The Future Of Purchasing: A Process Becomes A Department
David N. Burt, Ph.D.
David N. Burt, Ph.D., NAPM Professor of Supply Management, University of San Diego, San Diego, CA 92110, 619/260-4868
79th Annual International Conference Proceedings - 1994 - Atlanta, GA
I predict a very bright future for purchasing, as the process progresses to procurement and on to strategic supply management. The term "purchasing" will change in meaning from a process to a department. As has been recognized at numerous world class organizations, procurement and supply management demand a cross-functional approach to the four key processes of: requirements determination, sourcing, cost management, and supplier relations management. As Mike Doyle and I point out in our 1993 book, "The American Keiretsu":
- Supply management will be recognized as a strategic weapon.
- The organization's supply strategy will be integrated into the organization's strategic business plan.
- Continuous improvement will be the norm within the entire value chain.
- Organizations will embrace a global view, both from a supply and a marketing point of view.
- Cost and price analysis will progress to strategic cost management, a process of squeezing cost out of the value chain.
- The development and management of the organization's supply strategy will be centralized, while supply activities will be decentralized.
- As a direct result, the number of people assigned to the purchasing department will decrease, while their professional qualifications and compensation will increase significantly.
- Supply management personnel will be both commercially and technically competent.
- The organization's supply base will occur by design, not happenstance.
- Supply managers will be assigned the responsibility of managing the firm's five to ten key supply relationships or alliances.
- Supply management will play a key role in protecting the organization's core technologies.
- At the same time, supply management will provide a window to technology available from its supply base.
- Supply management will monitor the supply environment for both threats and opportunities.
- Supply management will manage the organization's supply chains to ensure that the value chain to which the organization belongs is successful in an increasingly competitive marketplace.
- Supply management will report to the chief of the strategic business unit.
- The function and its personnel will be seen as coequal to marketing and engineering. Pay will be equal to similarly qualified personnel in marketing and engineering.
- Market driven supply strategies will be developed for each strategic commodity or commodity class.
- All in all, I predict a challenging and rewarding future for those involved in strategic supply management!