Purchasing 2000: Building the Infrastructure

Author(s):

Robert M. Monczka, Ph.D., C.P.M.
Robert M. Monczka, Ph.D., C.P.M., Professor of Strategic Sourcing Management and The National Association of Purchasing Management Professor, Michigan State University, East Lansing, MI 48824-1121, 517/336-3503.

79th Annual International Conference Proceedings - 1994 - Atlanta, GA

INTRODUCTION
World class manufacturing firms who are leading the competitive race in the year 2000 will be confronting extensions of current competitive and business trends and will have to react quickly to still unforeseen worldwide events. Identified here are key competitive pressures forcing greater reliance on internal and external world class suppliers and the required procurement/sourcing and supply base attributes to compete effectively in the year 2000. Specifically addressed will be changing competitive pressures, resulting requirements for change in procurement/sourcing and supply base management infrastructure, and critical actions required for key business and procurement executives to ensure the necessary procurement and supply base infrastructure to maximize competitive contributions.

COMPETITIVE AND BUSINESS TRENDS: 2000
Seven key trends will drive procurement/sourcing in 2000. These include:

1. Continued globalization of industries and elimination of trade barriers combined with increasing competitive cost pressures,
   
   
2. Enhanced information technology enabling on-line real-time global communications, internally and with customers and suppliers,
   
   
3. Increased focus on the external customer; providing customers the best overall total value will result in further decentralization of overall decisions directly adding customer value, and at the same time increase the need for firms to consolidate over-lapping business and operational activities to eliminate waste and leverage opportunities,
   
   
4. Change in product and process technologies,
   
   
5. Increasing complexity of skill set requirements for all positions and levels within organizations,
   
   
6. Increasing need to meet environmental and legal requirements, and
   
   
7. Continual re-engineering of businesses to drive both efficiency and effectiveness.

REQUIREMENTS FOR CHANGE IN PROCUREMENT/SOURCING
The identified competitive and business trends will drive significant change at most firms. Exhibit one illustrates the potential impact of the seven trends on the procurement/sourcing infrastructure, which includes:

1. organization
2. People
3. Systems
4. Measurements
5. Procurement/sourcing strategies and practices

Each of the key trends will impact procurement/sourcing infrastructure components somewhat different ways. Each of these impacts must be understood by firms and managed to achieve the necessary infrastructure required in 2000.

REQUIRED ACTIONS:
A minimum set of executive actions must be taken to assure the necessary procurement/sourcing infrastructure to compete effectively in the twenty-first century. This is critical because of the cost, quality, time and cost contributions of the firms supply base and increasingly competitive business environment. These actions include:

1. Establishing an executive committee to review how competitive advantage can be achieved through procurement/sourcing and supply base strategies throughout the product value/supply chain,
   
   
2. Redefinition of the standard measurements to be used to establish procurement/sourcing effectiveness and deployment of these measures,
   
   
3. Reviewing the organization structure and processes used to coordinate and perform procurement/sourcing tasks with appropriate modification to meet external customer generate needs and the product/safety strategy.
   
   This would include location of procurement/sourcing personnel at customer focused decision-making locations in the firm, while at the same time maintaining leveraging opportunities through appropriate use of information technology and cross-functional/location teams.
   
   
4. Identifying suppliers critical to the firm's competitiveness and establishing strategic value-added alliances where appropriate to beat/ neutralize the competition--with executive management participation,
   
   
5. Critically evaluating procurement/sourcing personnel capabilities to carry-out an increasingly complex set of tasks, and
   
   
6. Continual re-engineering of the procurement/sourcing process, consistent with a customer focused business. This requires appropriate use of information technology and tools.

Additional detail and discussion to be provided at the NAPM Conference presentation.

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