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21st Century Macro Trends: Impact on Purchasing/Materials

Author(s):

Michael J. Moyer, C.P.M.
Michael J. Moyer, C.P.M., K2 & Associates, Inc., Austin, TX 78723, 512/926-6734.

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

THE ISSUES
Purchasing and Materials people are currently experiencing increased competition, rapid changes in technologies, and increased emphasis on: Quality (TQM, Baldrige and ISO 9000), total cost versus price, long term contracts versus individual purchase orders, shrinking supplier bases, JIT deliveries and "anticipated" reduced inventories, out-sourcing of the functional activities including Purchasing, and "right sizing" Purchasing staffs with the emphasis on retaining those with technical skills. What else can we expect? We can anticipate additional and more drastic changes, and with these changes are "opportunities" to not only excel, but, more importantly, to be employed in the 21st Century. This paper will review the current trends, provide some insight as to what to expect as we prepare to enter the 21st Century, and steps we can take to capitalize on these "opportunities" in order to be more productive.

CURRENT TRENDS
In general we have seen: phase out of the traditional adversarial relationships between buyers and sellers and the phase in of partnerships based upon mutual trust and respect; the utilization of Value Analysis as a way of life in one's every day business routine; utilizing single sourcing versus multiple sourcing as a Purchasing strategy; and doing more work with less people.

Specific emphasis has centered around the following activities:

QUALITY
We have found out, tragically, that less than zero defect means additional work for the buyer, and results in additional overhead costs due to reworks not charged back to the supplier, breaks in continuity of production, late customer shipments, and in some cases lost customers. We have seen emphasis placed on the Baldrige Award, ISO 9000, "continuous improvement" in every facet of the business, and measuring quality of product or service from the point of meeting the customer's requirements.

REDUCED CYCLE TIMES AND LEAD TIMES
Emphasis, due to increasing competition and technology changes, has been placed on reducing cycle and lead times by: driving for zero defect quality, JIT deliveries, early purchasing involvement (EDI) and early supplier involvement (ESI), reducing the supplier base, and forming partnerships and alliances.

TOTAL PRICE VERSUS PRICE
Cases have been documented demonstrating that the lowest quoted price in many situations cases results in higher total costs to the business unit. We have also seen examples where procedures and practices, which are out dated and have little or no value add (i.e. processing invoices where valid purchase orders exist), must be Value Analyzed (eliminated, combined, simplified or substituted) in order to remain competitive in the world market.

PAPERLESS PURCHASING
The technology world of computers, telecommunications, electronic data interchange (EDI), digitizing records for storage and retrieval, and yes, even credit cards, have forced buyers to adapt in order to become more effective and efficient in performing their function.

CHANGING PERSONNEL QUALIFICATIONS
We are now seeing more buyer positions going to personnel with dual degrees in an engineering discipline and business, and preferably with C.P.M. recognition.

OUTSOURCING PURCHASING ACTIVITIES
Companies are vending more of their business functions in an effort to reduce overhead costs and be more competitive. Many Purchasing people are finding that even their sacred positions are vulnerable.

The areas addressed above are but a few of the changes we have seen over the last five years. These are now either behind us or evolving even as we sit here today.

FUTURE TRENDS BY 2000 AD.
What else can we expect? Change is inevitable if our business is to survive the 90's. The major challenge facing tomorrow's Purchasing Management will be maintaining the competitive leverage while at the same time maximizing the mutual goals of the customer and supplier. Some the events that will take place are:

NAME
Purchasing will take on a new title, that of Supply Manager. These Supply Managers will be involved in the initial meetings with customers of the ultimate product or service; they will be an integral part of the team that will deliver the final product or service.

INCREASED GLOBAL TRADE
EEC and NAFTA, coupled with the U.S. excess production capacity, and the rise of third world countries will increase the Supply Manager's involvement in the international arena, and not just from the purchasing perspective, but also in the marketing of finished products.

GLOBAL PARTNERSHIPS
Global Trade will necessitate establishing partnerships and alliances outside the United States.

COUNTERTRADE
The increase Global Trade, especially in the third world countries with currency problems, will necessitate increase use of various forms of countertrade.

GLOBAL CULTURAL SKILLS AND LANGUAGE
The referenced increased trade will necessitate learning and developing cultural skills and language for the trading countries where trade is conducted.

SUPPLIER PARTNERING TO CUSTOMER PARTNERING
Increased emphasis on developing inter-personal relationships between members of the partnerships; closer and more frequent communications, without either party appearing to be dictating conditions to the other; and always striving for the "win-win" out come.

INCREASE IN FOREIGN OWNERSHIPS
Many U.S. firms will be bought out by foreign companies, and as a result the manner in conducting business will turn towards the patterns of home country of the new owner. Learning these patterns and being alert to potential conflict with U.S. laws, will become very important if we wish to stay out of prison.

INCREASED EMPHASIS ON ETHICS
With the changes identified above, it is only natural to conclude that emphasis will be placed on ethical conduct. The nature of business may change, but not ethical behavior.

QUALITY GOALS
The Baldrige Award, and its emphasis on "Customer's Needs", will be folded into the revised ISO 9000 requirements. ISO 9000 will be a must in the global trade arena.

ACTIVITY BASED COSTING
Supply Managers will have to learn a new costing technique in order to successfully negotiate costs with their partners.

SUPPLER MANAGER QUALIFICATIONS
The Supply Manager will possess a combination technical and business education, strong inter-personal skills, and focused on team building.

CISG REPLACES UCC
With the growth of the international market the laws governing the manner in which businesses, in various countries, will resolve their differences will take on a new uniform acceptance in the form of the United Nations Convention on the International Sale of Goods.

CHALLENGE
The Supply Manager, employing tools such as cost-to-benefit analysis, will be expected to challenge current policies, procedures and practices for their value add to the overall operations.

CREATIVE/INNOVATIVE
The successful Supply Manager will be expected to be creative and innovative in finding solutions to not only prevailing problems but also to ways of providing continual improvement to the operation; they will be pro-active versus reactive; and they will exhibit the "intrapreneuring" spirit (a consummate innovator and risk taker as defined by Alvin J. Williams, Ph.D., N.A.P.M.'s former Chair of the Academic Planning Committee).

RECOMMENDATIONS FOR ADAPTING TO THESE TRENDS AND CHANGES
The following are suggestions for preparing oneself, in light of the above changes:

RE-ENGINEER YOUR CAREER NOW - You should start this process by:

  • assess your strengths and weaknesses in light of the needs for the future;

  • assess your employer's strengths and weaknesses also, since, maybe you will discover that your employer's future is short lived, so you should start early looking around;

  • establish for yourself new goals, objectives and action plans required to counter identified weaknesses;

  • keep current on business and technical trends; develop a pro-active stance and attitude -- be the "intraprenuer";

  • develop a positive attitude about yourself and your profession;

  • sell yourself at every opportunity;

  • network with other professionals;

  • and keep an updated resume with you at all times.

In summary, changes are inevitable; "What you did during the last two years is highly unlikely to be what you'll be doing in the next five years." (Author unknown.) You must make calculated preparations in order to manage rationally the dynamics (trends and changes) of Supply Management for the year 2000 AD and beyond.

In the meantime, provide continuous improvement in all that you do, and this can be helped along thru continuing education; provide exceptional service to your customer; strive to be unique and flexible in all that you do; provide team leadership, and above all be a team player. Finally, market and sell: YOURSELF, YOUR PROFESSION, AND YOUR EMPLOYER.

REFERENCES

Williams, Alvin J., Ph.D. "Megatrends 2000 (And Beyond)", NAPM Insights, October 1993, 30-31.


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