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21st Century Macro Trends: Impact on Purchasing/Materials

Author(s):

Diane Brown, C.P.M., CFPIM
Diane Brown, C.P.M., CFPIM, Diane Brown Consulting, Evergreen, CO, 80439, (303) 670-0532.

80th Annual International Conference Proceedings - 1995 - Anaheim, California

INTRODUCTION. Organizations have gone through a unprecedented level of change over the last twenty-five years. Competition is now based on the ability to recognize and act on opportunities, learn quickly, innovate, reduce cycle time, produce and deliver quality, be flexible, produce and deliver reliability and be responsive. This has created an increased focus on customers, processes, and the continuous improvement of quality, cost, speed and flexibility. What a great opportunity for purchasing--materials are often the pacing items in determining an organization's ability to compete in this new marketplace.

The challenge for purchasing is to ensure that the organization understands its strategic role in ensuring a long-term competitive position. In some cases they do, but don't see the purchasing department as the area that can rise to the strategic challenge. In other cases they don t know what purchasing really does.

The focus of this presentation will be to explore three aspects of selling the strategic contribution that purchasing has to offer. They are: strategic alignment, formulating your message and communicating your message.

TOP MANAGEMENT EXPECTATIONS. Top management have expectations of purchasing. What follows are some of them. First and foremost that we understand the market-place that our organizations operate in, our final customers expectations and perceptions and the measures that drive our respective organizations--those factors and measurements should also drive purchasing. They expect us to have a cross-functional perspective and initiate those activities where required. They expect us to look beyond purchasing and understand the important processes or our organization. They expect us to develop the appropriate acquisition strategies for the items we purchase, which includes identifying, evaluating, implementing, and managing outsourcing opportunities. They expect us to be pro-active in the management of inventories, and, while recognizing that quality is only one element of determining the total value of an item purchased, to understand the market of that item and develop target costs, where appropriate instead of depending on competitive bidding. Finally, for strategic items they expect us to utilize or develop world-class suppliers.

DEFINING CUSTOMER EXPECTATIONS. Every good salesperson does their homework. In positioning purchasing you must first understand your final customer. Who are they? What markets do they do business in? What are their current and future expectations of your organization? What are their unidentified needs? What tools does your organization use to identify customer expectations and measure customer satisfaction? What ways do you or can you contribute to your organization's final customer satisfaction?

TAPPING INTO THE STRATEGIC PLAN. The next research step involves really understanding your organization. Your organization s strategic plan should tell you what's important to your organization. It should tell you the short and long term objectives of the organization from many different perspectives: markets, customers, expected financial results to name a few. If you don t have a copy ask for one. If your company does not have a strategic plan, there are many places to find this information, some include: vision statements and mission statements (if they are followed), annual reports, product literature, news articles, observation or asking someone to spend the time to share the information with you. From this research, again identify how you are presently contributing to your organization's strategic success.

UNDERSTANDING MANAGEMENT. How is your boss performance measured? What is important to them? What should the purchasing department's tangible contribution be to their success?

UNDERSTANDING PROCESSES. If they haven't been, identify and understand the processes that drive your organization. They might include: strategic planning, customer acquisition, order fulfillment, customer billing, new product development, post-sale service, supplier management, human resource management, financial management and technology management. During this process begin to understand their objectives and expectations. Hopefully, they will be consistent with those of your final customer. Visit key process managers and employees, listen to them, you may choose to survey them. Develop an understanding of what is and what should be purchasing's contribution to each process.

STRATEGIC ALIGNMENT. After you have completed your research, then it's time to do some planning in the purchasing department. This should be done with the department and a few key individuals from outside of the department. The first step is to ask yourself two questions: Why do you exist? and Where does purchasing need to be in five years to ensure organizational success? If you choose you can turn your answers into the mission and vision statements of your department. The importance of this part of the process is to understand the answers.

Next, define your long and short term objectives be if you are to be successful in realizing your vision and mission?

Third, take a pragmatic look at the strengths and weaknesses of your department. What will assist you in achieving your objectives and what will hold you back. Also take a look outside of the organization and determine the opportunities that remain untapped and any threats that could be avoided. This is known as a SWOT analysis (strengths, weaknesses, opportunities, threats).

Fourth, understand where your focus currently is and the corresponding activities and time that take place to support those activities. Then identify the activities and time required to meet your objectives. Look at your SWOT analysis. Where are their gaps? What activities, resources and time commitments are critical to your organization's success and what has to happen to focus the department s energies there? Typically there will be four areas of focus: building an information infrastructure, ensuring that routine, time-consuming, low value, high volume activities and purchases are handled appropriately so that time can be focused on high return, value-added activities, developing an organizational infrastructure and building world-class suppliers.

Fifth, measure and report only those areas of performance that are important to the organization. They should be limited, meaningful, specific, measurable, time-sensitive and simple.

Sixth, develop action plans that detail how you are going to accomplish your objectives. They should include the activities required, the individual with key accountability, start dates, completion dates and a section for comments. These should drive the department's actions.

Finally, communicate your plan and intended course of action.

FORMULATING YOUR COMMUNICATION. You have laid the foundation to effectively sell purchasing. One key factor to remember in this process is to be an effective listener and observer at all times. Effective salespersons listen and observe their customers more than they talk.

The first step in this process is to determine what you are trying to sell or accomplish: educate, obtain something, update? What do you want the outcome to be?

The next step is to determine the appropriate means of communication. Will you be meeting, writing a memo or report or preparing a presentation? This may be determined for you or by your observations you will determine the most effective means of communicating your message. People receive information by seeing, reading and hearing. Which is the best format for your audience?

DEVELOPING THE SUBSTANCE OF YOUR COMMUNICATION. The five w's are still appropriate: what do you want to accomplish, who is your target audience--who will give final approval, who is involved, etc., where will your objective take place, when, why is it important to the organization, how will it get accomplished? Everything in your communication reinforce and explain your objective and everything in your communication relate to the person receiving it (what's in it for them?)

Keep the words you use in your communication simple and clear. Be clear, logical and concise. Watch out for the use of technical terms that your audience may not understand. If they are critical to your communication, explain them. In written and formal presentations format, grammar, spelling are important. Make your written and visual communications easy to read. In any communication format, always have an opening, the development of your subject and a close.

CLOSING YOUR MESSAGE. Summarize what the benefit will be to your audience and remember the eleventh commandment: If you don t ask, you surely won't receive.

SUMMARY. This presentation will focus on positioning purchasing as a strategic resource and then selling purchasing both orally and in writing. However, every day the spotlight is on us as purchasing professionals. People make assessments before they read something or before we say a word. We are evaluated every day by our actions and inaction s--by how we present ourselves, act and conduct ourselves on the job. Those assessments by others will determine how open they are to hearing your message and believing that purchasing really can make a strategic impact on the organization.


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