Marilyn Gettinger, President, New Directions Consulting Group, Cranford, NJ 07016, 908-709-0656, Mgettinger@aol.com
Abstract. Chief Executive Officers throughout the country have awakened at last to the existing value and the potential additional contribution their procurement departments offer their organizations. Now that they have discovered this little bit of information, they are already raising the stakes and are "leveling-up" their expectations of the role purchasing is to play in the future. The cry is for less tactical emphasis from the purchasing department and a move to more strategic thinking.
Purchasing management and personnel are already scratching their heads and saying, "Okay, we will be happy to be strategic thinkers. However, we are not sure exactly what that means, or what does that look like? In other words, Mr. CEO, what do you really want from us?"
Each of the topics discussed in this presentation will answer those questions. The presentation provides tools, ideas, and challenges for those committed to moving from tactical to strategic thinking.
Definitions. It is important to first clarify the terms, tactical and strategic. The Merriam Collegiate Dictionary defines these terms as follows:
Tactical skills involve processing large amounts of paper or electronic transactions and creating and maintaining accurate files focusing on details. A few of the tactical skills necessary to the purchasing function include placing purchase orders, focusing on unit costs, identifying discrepancies, and reconciling discrepancies.
Examples of strategic skills are building supplier alliances, leveraging the supply base, and supply arrangements which provide a consistent flow of product with minimal inventory investment.
Important Questions. Many purchasing professionals will be inspired by their CEOs to take on the challenge. However, they must be willing to ask themselves a couple of important questions.
Developing form a tactical to a strategic thinker may prove very difficult for some people. It is important to be honest with oneself. Many people will not be willing to accept where they are at nor what it will take to move to a new paradigm.
Taking a Skills Assessment. Purchasing professionals need to evaluate the strength of their analytical/critical thinking, decision-making, initiative, dependability, flexibility, adaptability, courage, innovativeness, creativity, job skills and knowledge, behavioral understanding, and communication skills. It is wise to ask for feedback in these areas from bosses, peers, and employees. People tend to see themselves differently than those with whom they interact. It is important to take an honest assessment for these are a few of the outstanding skills of strategic thinkers.
Other skills to develop are the ability to turn problems into opportunities, the ability to create a vision, to collaborate, to bring play into the formula, and to step back and look at the big picture. Strategic thinkers are also information experts.
The strategic thinker also has good organizational skills and is adept at understanding others' viewpoints, building relationships, and getting buy-in from those within the organization.
The question again is, "Are you willing to take a good, hard look at how skilled you are at the above- listed attributes? If so, then are you willing to do what it takes to develop or improve these skills?
The Tactical Issues of Purchasing. Tactical activities are an inevitable part of any business and are a substantial and necessary part of the purchasing function. The day-to-day activities are not going to go away. Purchasing strategists must find new ways to manage these processes so that the energy and time of purchasing personnel are focused on more important issues. They ask how, why, when, where, and who could do this better, more efficient, and simpler. Many organizations still require that every item in an organization no matter how small be purchased with a hard purchase order. Here is one of those challenges for the purchasing department to take on. How could tracking and documentation be handled so that auditors and the finance personnel would feel comfortable with any of the simpler processes available for the handling of low dollar purchases? That is the question purchasing needs to ask. Then, the job is to prove it can be done. Purchasing must take a proactive stance rather than an accepting attitude. The return on investment in reducing the number of purchase orders processed is enormous in reducing costs and freeing up valuable time. This is just one example of how any purchasing staff must push to change the status quo. The emphasis on the benefit of electronic commerce is another valuable resource in reducing the tactical purchasing processes. In selling such opportunities to senior management, it is always helpful to note what savings and contributions the staff can now make that they are relieved from some of their tactical responsibilities.
Organization Mission, Objectives, and Goals. The strategic thinker begins with a very clear understanding of the mission, objectives, and goals of the organization. He or she is then able to effectively interpret this information and communicate it to others within the company. It is surprising how many employees have little knowledge of the organizations within which they work. The strategist is able then to develop objectives and goals for the department and for his/her own career plans. The question is, "What do we have to do now to obtain our objective tomorrow?" The strategic thinker develops sound plans with alternative paths to reach those objectives and goals. He or she also places controls within that plan to identify the need for adjustments. Also, these people are adaptable and flexible. Changing directions or terminating a project or goal is just part of the big picture. Also, the strategist does not get caught up in perfectionism. They know which tasks need perfection and which need less effort. Strategic purchasing professionals emphasize good planning and spend over half of their time in planning and adjusting existing plans.
A Futuristic Approach. The strategic thinker is forward looking and has given up for good reacting to situations. He is already thinking about what changes are on the horizon and how those changes will impact the organization in the next year, the next five years, and the next ten years. These people can, therefore, capitalize on new ideas and opportunities because they have seen them coming. They are well read and current on conditions in the marketplace and in the environment.
They build internal relationships and network well. Thus, they are able to gather information that helps them make successful decisions or plan for their internal customers' requirements prior to the completion of the requisition. To think strategically, one must make good use of inter-organizational relationships.
The strategic thinker also is aware of the needs and requirements of not only their internal customers but of the final, end customer. They have schooled themselves not only on the supply base but also on the final marketplace in which their organization does business.
Now, For the Real Challenge. If one's goal is to be known as a strategic thinker within the organization, then it is important
Thinking Like a Purchasing Strategic Thinker. Purchasing professionals are out there in the marketplace using new strategic tools and methods to impact the bottom line of their organizations. They are responding to the call issued by their organizations' CEO.
To think Strategically, one makes good use of all the possible sources of supply. A few of these are strategic alliances with our suppliers, reverse marketing, performance measurements, integrated supply arrangements such as in-house tool cribs, vendor-managed inventory, consignment, vertical and horizontal supply, life cycle costing, cost-functional teaming, early supply involvement, supplier skill leveraging, and outsourcing arrangements. Electronic commerce is perhaps the most powerful strategic tool available to the purchasing function today. It holds tremendous untapped opportunity for the purchasing staff. Every purchasing professional must be selling this concept to his senior management.
Other strategies critical to organizational success in which purchasing personnel must be included in are decisions whether to single or multiple source material, when to stockpile, when to purchase locally, nationally, or internationally, where to build new manufacturing facilities, make-or-buy decisions, asset recovery programs, and centralizing forms.
Questions To Keep Asking About You and Your Staff.
The strategic purchasing department of the 21st century is not waiting to be asked or pushed into a strategic paradigm. It is leading the way meeting the challenge head-on posed by senior management.
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