Materials and Service Management - The Cornerstone of Reengineering America
John Kovach, Jr., C.P.M.
John Kovach, Jr., C.P.M., President, Orion Management Services, Inc., Simi Valley, CA 93062, 805/526-0329.
80th Annual International Conference Proceedings - 1995 - Anaheim, California
Changes, in the way we do work in America's corporations, are escalating. These changes have created confusion and dislocation in the national employment pool. Hammer and Champy's work "Reengineering the Corporation" defines these changes and rationalizes the methods for taking charge of them and bringing them about. Professionals trained in purchasing and the other materials and services management disciplines have an advantage and can exert dynamic impact on these inevitable changes.
When you first read the book "Reengineering the Corporation, A Manifesto for Business Revolution" by Michael Hammer and James Champy, you find yourself realizing that you and your group have done a number of the referenced activities as much as twenty years ago. You also begin to realize that many of the examples of successful reengineering used in the book involved functions in business that fall clearly into the materials and services management area. Further, you begin to recognize methods and techniques which were being used in the reengineering process as "old friends" such as value analysis, make/buy analysis, systems development, ABC analysis and others. Suddenly you realize that this book you were reading with the expectation of finding some entirely new business organizational concept, is not so much something new as much as it is a lifesaving analysis of a process underway that will revolutionize the way we do business.
The reengineering process is not a "buzz word" or temporary fad. It is an idea whose time has come. We are clearly in a transition from the "Industrial Age", that lasted for 200+ years, to a new age that the authors simply call the "Post Industrial Age". This idea of reengineering is the way we are going to get there. Is it critical that we reengineer? I believe it is and stand four-square with the authors, Hammer and Champ, in their belief that "...reengineering is the only thing that stands between many U.S. corporations - indeed the U.S. economy - and disaster."
This revolutionary idea is gathering exponentially increasing numbers of believers within the ranks of the owners of Corporate America. And the pace of reengineering is accelerating. What does this mean to materials and services management professionals?
Hammer and Champy have determined that processes not organizations are the object of reengineering. Rather than reengineer departments, we reengineer the work that they do. To do this, we have to define and portray our business as processes rather than as departments or groups. A process produces a saleable product and the people involved in it are totally responsible for the process - start to finish. Consequently, the people involved in the process are responsible for the results of the process and can be accurately measured by those results as elements of real value to the corporation. Hammer and Champy recommend that Manufacturing, which sounds and acts like a department, is better called the Procurement-to-Shipment Process. An analysis of this process and the elements necessary to accomplish the work of this major corporate process, brings some more "old friends" to the surface. They are (1) Materials and services acquisition, (2) Material and services handling, (3) Inventory management, (4) Planning, (5) Production, (6) Quality management, (8) Distribution and delivery, (9) Cost & asset management.
Once again then - What does reengineering mean to materials and services management professionals? Clearly, the twenty plus years of the development of the materials and services management process is too close a description of the Procurement-to-Shipment Process, identified by Hammer and Champy, to be ignored. Without really knowing it, we in the materials and services management functions have been reengineering manufacturing in Corporate America for years. Because the Procurement-to-Shipment Process is one that is common to all business, whether they produce material products or services; and since we have identified the functional elements of what we know as Materials and Services Management as being essentially identical to the work elements of the Acquisition-to-Shipment Process, I submit that Materials and Services Management is the cornerstone of reengineering Corporate America.
This all seems fairly straight forward. Why is it, then, that far less than a majority of American corporations are reengineering? If reengineering is the only way we are going to become permanently competitive in the world market, why do we continue to struggle without direction with offshore competition and not reengineer on a much broader scale? Why is it so hard to convince more people than we have that reengineering is "essential to our corporate survival?" Why do we continue to have the trouble convincing corporate management to position, staff, and use materials and services management properly and more effectively?
The answers to these questions lie in our unwillingness to abandon the ways we have done work for 200+ years in the "Industrial Era". We keep trying to fix what's broken because it is what we understand and have been trained in. Quoting Hammer and Champy - "Business reengineering isn't about fixing anything. Business reengineering means starting all over, starting from scratch. Business reengineering means putting aside much of the received wisdom of two hundred years of industrial management,... How people and companies did things yesterday doesn't matter to the business reengineer." In the materials and services management function or the Procurement-to-Shipment Process, this doesn't mean abandoning principles of GOOD purchasing, GOOD materials and services handling, GOOD inventory management, GOOD planning and production, GOOD quality, etc. What it does mean is that we have to abandon the outdated organizations, methods and practices we have used to employe these principles in doing our work.
Materials and Services Management has engaged in the new and innovative use of true and lasting principles and has, in a very real sense, been in the business of reengineering for some years now. It is obvious that the failure of more of today's corporations to use materials and Services management properly is due to corporate management's inability or unwillingness to abandon the outmoded work practices of the rapidly dying "Industrial Era".
It took the world's businesses over two hundred years to bring Adam Smith's principle of breaking down industrial work into its simplest and most basic tasks to full maturity and it will likely take a long time for today's businesses to bring the reunifying of those tasks into coherent business processes. Because Michael Hammer and John Champy have now identified the phenomenon and put forward the idea and some of the methods of putting it into effect, the reengineering of all businesses, who wish to survive, is inevitable. In the words of a modern reengineering pioneer, Le Ioccoca, "our only choice is to lead, follow or get out of the way."
The challenge for we in the Materials and Services Management functions is to recognize and support Materials and Services Management as the cornerstone of reengineering American business; to study, understand and embrace Hammer and Champy's "...Manifesto for Business Revolution"; and make our own DECLARATION OF PROFESSIONAL INDEPENDENCE!
Hammer, Michael and James Champy. Reengineering the Corporation, New York: Harper Collins, 1993.