Beyond Buying: Purchasing's Changing Role
Jim Limperis, C.P.M., CFPIM
Jim Limperis, C.P.M., CFPIM, OEM/MRO Commodity Manager, Motorola Inc., Mansfield, MA 02048-1193, 508.261.4438
Richard G. Weissman, C.P.M.
Richard G. Weissman, C.P.M., Commodity manager, Varian Associates, Inc., Gloucester, MA 01930-2297, 508.282.2754
81st Annual International Conference Proceedings - 1996 - Chicago, IL
Buyers must focus beyond buying in order to assure that they continue to grow within the changing role of the purchasing professional. Traditional transaction based procurement must be replaced by strategic sourcing management.
In the past, concentration on being more "efficient" in the speed of the transaction was of utmost importance. However, the efficiency was limited to learning curve improvements by the buyers placing the purchase orders. In the future, concentration will be on being more "effective" in transactional purchasing. To go beyond the limited learning curve advances by the buyer, a more effective system of transacting purchase information to the supplier needs to be implemented. Significant benefits are best realized when the procurement process is re-engineered rather than redesigned. Fir example, throughput can be enhanced by increasing the signature authority of a buyer, I. e., redesigning the process. However, longer term benefits could be gained by changing the paper laden procurement system into an Electronic Data Interchange system (EDI). Through EDI, the demands of the buyer are flowed electronically into the supplier's facility so that the supplier has access to the on-line MRP requirements of the customer. Paper handling is significantly reduced as purchase requisitions no longer flow inter-office, requiring signature approval or modifications, and in many cases being returned to the originator for revision. Filing is virtually eliminated as the need to print hard copies of purchase orders is no longer a requirement. The key to doing things smarter, not harder, is the underlying theme when looking beyond buying.
In order to work smarter, the progressive buyer must be skillful in many areas, assuming the role of a supply base general manager. The changing role of the purchasing professional touches upon many areas. Buyers need to increase their professional development in areas such as financial evaluation, quality system assessment, ISO 9000, enhanced communications, supplier training and development, environmental compliance, global economics, worldwide sourcing, cost analysis, customer service and support, and personal motivation and development. Today's purchaser must be both a team member and a team leader; a facilitator and consensus builder.
Tomorrow's purchasing professional will be more provocatively involved in economic forecasting, countertrade, make/buy analysis, international materials management, managing transportation and logistics, supplier quality, and customer responsiveness.
A critical paradigm shift that must occur is to transform a buyer's perception of their role as a "job" to a more fluid definition of servicing internal customer's needs. In order for this paradigm shift to crystallize, senior management must support this crucial change in responsibilities. As well, human resources must take a more open ended and progressive view in defining purchasing's evolving role via corporate job descriptions.
Why should an organization undertake this paradigm change? The answer is clear. There are bottom line savings for the entire organization!. Studies have shown that nearly 30% of all MRO purchasing expenditures bypass the Supply Management (i.e., Purchasing) Department. It is no surprise that half of these purchases cost companies an average of 10-50% more than they would if purchasing were involved at the outset.
The following are just some of the areas that tomorrow's purchasing professional need to be concerned with.
Financial Evaluation. Since when does financial evaluation fall under the guise of buyer's responsibilities? With the numerous mergers, buyouts, consolidations and bankruptcies changing the profile of our supplier base, it is imperative that the buyer "prepare" for the fallout instead of "repair" the aftermath of product/service interruptions. There are many reputable financial service organizations that can assess suppliers' financial statements, appraise the riskiness of their financial stability, and alert you when significant management changes or critical financial ratios worsen. Where applicable, the buyer should solicit the support of their finance departments' expertise to assess the suppliers financial health. Regardless of which tool is used, the responsibility for ongoing financial evaluations must be borne by the buyer so that supply base optimization can be a proactive, not a reactive strategy.
Quality System Assessment. Like financial evaluation, quality system assessment must be a continuous practice to assure that a supplier's process is under control. A common tool/technique should be utilized to warrant consistency and objectivity. Frequency of assessments should also be standardized so continuous improvement can be measured regularly from the original baseline. Although quality or supplier engineers may take team leader roles in the assessment, it is critical that the buyer become well versed in the quality system evaluation process to maintain a primary role in the source selection process.
ISO 9000. ISO registration requires conformity to documented processes. Although the quality assurance department will probably take the lead role in assuring the integrity and consistency of the documented procedures, the organizations that are conducting the activities will be responsible for documenting how they conduct business. buyers will be required to document how purchase orders are placed.
On the surface, this sounds simplistic. However, there are many issues that may arise when a purchase order is placed. For example, how does the buyer know from whom to purchase the commodity? How does the buyer know that the supplier has been qualified? What happens when there is an engineering change order (ECO) which changes the specification? How is the new specification communicated to the supplier? Is the change critical or can the effectively date be set to utilize existing inventory? How are non-ECO related changes (i.e., price, delivery, date, quantity, carrier, destination, etc.) implemented?
Communications. Excellent, enhanced communications, both internal and external, are mandatory to successful procurement. A buyer can no longer be content to process paper and make the obligatory telephone call to place orders and check pricing and delivery. Today's buyers needs to be an aggressive communicator, using verbal, written, and multimedia tools to properly manage a global supply base.
A key purchasing function is facilitation. The buyer is in a unique and strategic position to act as a company communicator in all supply management issues. Strategic use of communication tools enhances this process. The buyer must be aware of the goals and objectives of their company, fully understand them, and be able to communicate the objectives throughout the supply chain. The buyer must also be knowledgeable of the objectives of the members of the supply base by understanding their requirements and business issues. When information from all directions is understood, the buyer must be ready to represent all parties to ensure a successful procurement process. The buyer must be able to interface with all levels of management, both internally and throughout the supply base. There is a need to coordinate efforts and issues, be a clearing house of information, and act as a supplier ombudsman when the situation warrants.
Communication skills that are needed vary by the situation. However, the buyer who operates in a global arena must understand that the era of the eight hour day has passed. Purchasers must adopt the attitude of always being "on call" to solve a supply problem. Any attitude less than this total commitment, undermines the importance of the challenges facing the profession. Improved telecommunications, personal computers and other technological aids are the tools of today's buyer as compared to the "green visor" of yesterday's buyer. The tools of the trade, as well as the shady perception of the profession, have changes. The buyer now has to make that same commitment to change. Until the buyer takes the initial step of seeking early involvement with the internal users, it will continue to be business as usual. Once the first step is taken and on-the-job skillsets are established by working with the users, follow up efforts become more routine. The buyer must market their skills as a product, establishing and keeping happy customers.
Education. Never stop learning! Buyers who feel that they "know it all" will be quickly relegated to the "non-recyclable" scrap heap. With the world changing so quickly, today's buyer must be keenly aware of global, economic, and political issues that affect procurement issues, their companies, and their careers.
Formal education is easy to define. At the minimum, purchasers must have a college degree, or be in the process of obtaining one. Many purchasing jobs now require a bachelor's degree. Technical degrees are becoming popular, but business degrees are still the most relevant. Advanced degrees are also being required by many employers as the purchasing profession becomes more sophisticated. The degree requirement is a positive sign that the profession is being taken seriously by senior management.
Formal education also includes professional certification. The Certified Purchasing Manager (C.P.M.) as offered by the National Association of Purchasing Management (NAPM) is the most popular certification in the purchasing profession. Recently, the NAPM also announced an additional certification for the purchasing professional who does not aspire to me a purchasing manager. The Accredited Purchasing Practitioner, or A.P.P., was developed for entry level buyers, who are primarily engaged in the operational side of purchasing. The A.P.P. is also suitable for those who work outside of an organization's purchasing department, but are part of the supply management process. However, as the purchasing profession continues to evolve beyond buying, complimentary disciplines, such as the American Production and Inventory Control Society (APICS), offer the Certified in Production and Inventory Management (CPIM) and Certified in Integrated Resource Management (CIRM) certifications. The American Society for Quality Control (ASQC) offers the Certified Quality Auditor (CQA) certification as well as other similar certification opportunities. All professional certifications enhance professionalism and show a personal commitment to education, personal growth, and the continual evolution of the profession.
Informal education is harder to define, but it is also critical to business operations. Attend seminars, read books, utilize company training, benchmark, attend lectures, network, subscribe to newsletters and magazines, sign on to information networks, join professional associations, visit libraries, read the newspaper, watch the news. Local purchasing management associations offer excellent resources to take advantage of many sources of informal education. We are surrounded by information. Tap in! Think purchasing!
Motivation. Personal motivation is the key to success. All of the training in the world is useless unless each individual has the internal desire to succeed. The workplace, and purchasing's role in it, has rapidly change and continues to evolve at a blistering pace. Not long ago, articles were being written about the strategic importance of purchasing. Now articles are being written about the elimination of purchasing. Obviously, this cannot be allowed to happen, or it just may!
Unfortunately, the profession is in a constant credibility fight. A personal commitment to yourself and the profession is needed to continue the positive focus. In order to continue to win the battles wages, the purchasing professional's self-motivation and pride must transcend to value.
In conclusion, buyers must look beyond buying to assure that they continue to grow or they may find that their companies will find it necessary to grow without them! As organizations continue to flatten, the purchasing professional must grow by expanding their own capabilities and skillsets. As purchasing departments continue evolve to complete supply management, and become more efficient through the use of EDI, supplier optimization, enhanced communication, and other tools, there will be less and less demand for the transactional employees. Those buyers who will quickly be labeled as excess resources will be those individuals who maintain a status quo paradigm of what is required to do the job.