The Purchasing Manager is Dead - Long Live the Sourcing Leader!
Eberhard E. Scheuing, Ph.D., C.P.M., A.P.P.
Eberhard E. Scheuing, Ph.D., C.P.M., A.P.P., NAPM Professor of Purchasing and Supply Leadership, St. John's University, New York 718/990-6770
Vivian V. Longo
Vivian V. Longo, Vice President/Division Executive, Corporate Strategic Sourcing, Citibank N.A., Long Island City, NY 718/248/2890
83rd Annual International Conference Proceedings - 1998
Abstract. As purchasing, long a sleepy backwater, boldly reinvents itself as an organization's strategic sourcing team, a new kind of professional has burst upon the scene: dynamic change agents and well-rounded global citizens who provide visionary leadership in leveraging internal and external resources for sustained competitive advantage. They have little patience for traditional purchasing and management, instead embracing a broader process, relationship, and business perspective to provide value-added solutions to chosen clients. Building the new sourcing team requires a thoughtful combination of selection, Broad-based understanding of their clients' opportunities, needs, and challenges as well as innovative leveraging of their suppliers' talents are the hallmarks of the new sourcing leaders.
The Change Imperative. Leadership is an essential element in these times of turbulent change. While we always seem to be looking for a leader who can bring about necessary change in an organization, the reality is that we must all be leaders of change.
Purchasing managers of old were not players at the corporate table. As reactive creatures, they were told what to do, and to do it in a hurry because acquiring necessary goods and services always seemed to be an afterthought. Purchasing was a dumping ground for underachievers whose calling in life was to browbeat suppliers for the best price. Most CEOs, in fact, felt that purchasing was a necessary evil and did not significantly contribute to organizational performance.
The marketplace challenges of the nineties brought about restructuring and enlightenment. CEOs who were steering their corporate ships into uncharted waters realized that they needed to get rid of unnecessary ballast through reengineering. They could also accelerate progress by outsourcing non-core activities and leveraging the corporate buy to reduce expense drag. Somewhat belatedly recognizing that purchases of goods and services from external sources represented more than half of their organizations' revenue streams, they began to discover the largely untapped potential of purchasing as a strategic resource. And they initiated the consolidation of dispersed acquisition activities into upgraded centralized purchasing organizations.
Outsourcing Non-Core Activities. As organizations examined the sources of their competitive advantage, they identified a number of non-core activities that could be transferred to external service providers. These external resources might well be able to deliver these services in a superior manner while saving the organization time and money. Services that appeared to be good candidates for outsourcing included:
• Customer Service
• Software Development
• Temporary Staff
• Data Processing
• Food Services
• Guard Services
• Mail Services
• Messenger Services
• Travel Services
The rush to outsource produced mixed results:
• The Ugly: Some outsourcing was driven by the desire for the quick fix of short-term expense reduction. Organizations paid the price by either having to bring the service back into the operation or having to find a more appropriate supplier.
• The Bad: Some outsourcing was done helter-skelter. So although the reasons were solid, the implementation process was poor.
• The Good: At the epicenter of all this frantic activity were purchasing managers who were starting to look and act differently. Possessing years of in-the-trenches experience and the will to lead the change effort, sourcing leadership became the new battle cry for the professionals who lived to see and seize this watershed opportunity.
Sourcing Organizations: the Difference is Leadership! During the purchasing era, purchasers were order takers who processed paper. A good deal of this paperwork has been going away, thanks to EDI, purchasing cards, the Internet and other productivity enhancers.
As purchasing departments transform themselves into sourcing organizations, the need to lead requires change in three critical areas:
• How the organization spends money: Spend Smart(tm)
Customer, commodity, and service knowledge
• How work gets done: Work Smart(tm)
• How information is leveraged: Think Smart(tm)
The radical change brought about by this transformation process must be governed by ten leadership principles:
1. Be client-focused and service-oriented
2. Be professional and trusted
3. Be a change driver with new work solutions
4. Know your clients' needs and suppliers' capabilities
5. Anticipate and lead change
6. Understand and apply technology
7. Use care and influence to make teams work effectively
8. See the global picture and paint the local solution
9. Leverage information better than anyone else
10. Learn, learn, learn
1. Be client-focused and service-oriented. To effect lasting change in your working relationships, visit your clients and find out what their plans and needs are. Examine their past spending patterns to identify opportunities for improvement. Offer ideas to clients that show Sourcing as a creative, timely solutions provider.
Examples: Analyze spending on temporary help by month and adequacy of skills and training to support particular business needs. Then use this information to suggest service enhancements. Issue monthly reports on travel spending to track policy compliance and cost per person versus business benefit. This will facilitate process improvements, such as direct on-line booking of frequently made trips by clients themselves, giving them better service and control.
2. Be professional and trusted. Consider this definition of professionalism: A professional is a competent, educated, ethical, and continuously developing person with analytical, interpersonal, communication, and leadership skills and a holistic perspective who is dedicated to delivering value-added services to selected clients. Apply a professional process to every aspect of sourcing and demonstrate its quality in your reports and visits. Instead of being measured by the quantity of transactions processed, insist on evaluations based on the value you bring to your clients. You will be trusted and, in fact, sought out by your clients if you demonstrate a solid understanding of their business needs and consistently deliver satisfactory results.
3. Be a change driver with new work solutions. Because change is inevitable, it is better to drive it than become its victim. Leaders initiate change by formulating compelling visions that transform work from drudgery to growth opportunity. Automating transactions through electronic commerce frees up talent for strategically building the organization's future success.
Examples: Work solution tools, such as on-line workflow software, can take a faxed document and integrate it into a virtual in-box so that work can be measured, managed, and mastered. Develop workflow solutions so that the in-box isn't filled with the wrong kind of work. Demythologize current processes by mapping them and eliminating steps that do not add value, thus freeing up time, talent, and treasure.
4. Know your clients' needs and suppliers' capabilities. As a sourcing leader, you are in the unique position of an honest broker by bringing your suppliers' capabilities to bear in delivering solutions to your clients' needs. To excel in this role, you must be intimately familiar with both through ongoing dialogue and frequent visits.
Here is a suggestion for radical change: Get rid of your desk and your office. They are too confining and, in fact, act as barriers to the effective and efficient discharge of your leadership responsibilities. So create a virtual office by taking your laptop and mobile phone on the road. Visit and interview your clients and their processes frequently and take prompt action. Extend the same courtesy to your suppliers to help solve their problems and learn about emerging technologies.
5. Anticipate and lead change. The old axiom "If it ain't broke, don't fix it" reflects inertia and the fuzzy comfort of familiar ways of doing things. Instead of resisting and delaying change, sourcing leaders embrace and champion it. They invite progressive suppliers to use their sourcing organizations as laboratories and test sites for innovative technologies and work solutions.
Examples: Challenge your suppliers to jointly develop new approaches and pilot such innovations as purchasing cards, smart cards, new software, and internet applications with your sourcing team. This will give you an invaluable opportunity to guide change processes, shape tomorrow's technologies, and sharpen your organization's marketplace edge.
6. Understand and apply technology. Sourcing leaders appreciate and use technology for what it is worth. New technology is not a cure-all for old process ills. But it should not pose a threat, either. Rather, you need to keep up with advances in information technology to examine their applicability to your own work and to your clients' challenges. In fact, new technology can greatly facilitate your interactions with your clients, your suppliers, and members of your own team in various locations and time zones around the world.
Examples: Systems integration provides exciting opportunities for accessing, linking, and sharing information across functions and locations. Document processing centers can combine previously stand-alone computer, fax, copier, and scanning functionality into a cohesive whole that offers exciting new capabilities for combining and leveraging information.
7. Use care and influence to make teams work effectively. A team has been defined as a small number of people with complementary skills who are committed to a common purpose, performance goals, and approach for which they hold themselves mutually accountable (Katzenbach and Smith). To function effectively, teams need to be nurtured. We have care plans for cars and machines but few of us have care plans for people, our most precious resources. Team members appreciate attention to their needs in an effort to enrich their work experiences.
Examples: Team breakfasts, knowledge days, one-on-one conversations, offsite meetings with suppliers and/or clients are all invaluable ways of fostering communication, participation, and commitment to a common cause.
8. See the global picture and paint the local solution. In today's fast-moving sourcing environment, it is easy not to see the forest for the trees. To best serve an organization's sourcing needs, we must look beyond national boundaries and use global sourcing teams to scour the globe for suppliers who offer the greatest value. Drawing on a worldwide resource network, we can then develop and implement local solutions that add value to our clients' business requirements.
9. Leverage information better than anyone else. It is a well-known fact that you can only manage what you can measure. Together with people, information is at the heart of sourcing leadership. We need timely, accurate, and complete information to make successful decisions and lead change. From price information to performance information, there is a need for sourcing professionals to be keepers and users of information. With the necessary information at their fingertips, they can leverage buys and relationships for maximum mutual benefit.
Examples: Aggregating payment information across organizational units can trigger dramatic changes in sourcing patterns and cost as well as service. Measuring and communicating supplier performance can produce significant improvements in quality, cost, and delivery.
10. Learn, learn, learn. Inasmuch as they drive change in their organizations, sourcing leaders are open to change. Constantly absorbing and adapting new tools and techniques, leading organizations are learning organizations, forever reinventing themselves in response to internal and external dynamics. Leaders emphasize education and continuing professional development. They benchmark to learn best practices from other organizations. And they readily share what they have learned with members of their teams, clients, and suppliers.
Ellram, Lisa M. and Arnold Maltz. Outsourcing: Implications for Supply Management. Tempe: CAPS 1997.
Katzenbach, Jon and Douglas K. Smith. The Wisdom of Teams. Cambridge: Harvard Business School Press 1993.
Lacity, Mary C. and Rudy Hirschheim. "The Information Systems Outsourcing Bandwagon," in Sloan Management Review 35/1 (1993).
Scheuing, Eberhard E. Value-Added Purchasing: Partnering for World Class Performance. Menlo Park: Crisp 1998.