As we move into a new era of great expectations for the purchasing and supply management executive, each of the Seven-Star Purchasing Areas of Excellence below will represent aspects that need to be handled - and handled well - by tomorrow's purchasing and supply management functions. Keeping up with the fads simply won’t keep you competitive. Perfecting the basics will.
1. Think strategically about how to add value. This includes selling the importance of Purchasing, Procurement, and Supply Management to the C-level (CEO, COO, CFO) executives responsible for strategy involvement. If purchasing cannot prove it is adding value to the organization, the function my face outsourcing, elimination, or downsizing.
2. Encourage training and development of purchasing personnel. Training needs to be “smart” training - the type of development that focuses first on making sure professionals are comfortable with the basics before tackling the esoteric. To increase coordination, internal linkages, communication, resource utilization, focus, efficiency, creativity, and overall effectiveness; cross-functional teams must be developed and trained to assist in guiding the purchasing and supply management process.
3. Use cost-price analytics and techniques. This requires an understanding of the global economy, including marketplace infrastructures, supply chain requirements, logistical channels, and total landed costs. Clearly, effective purchasing and supply management can have a profound effect on the bottom line. This often overlooked source of profitability is ripe for exploration by many companies who have long emphasized their sales as the primary vehicle for fiscal strength. With the current state of the economy and its negative ramifications in the marketplace, purchasing’s cost-price analytics should be employed with even more fervor than ever to eke out elusive profitability.
4. Develop structured supplier relationships for your commodity/service group. Suppliers play a critical role in the success of an organization’s operations. However, different suppliers require different management techniques. A stratification of the supply base not only identifies the depth of your relationship with the supplier but assists purchasing and supply management in utilizing its resources effectively during its management of the supply base. To achieve excellence in this area effectively, most organizations have gone through a strategic sourcing program that allows them to structure and focus on their most important supplier relationships.
5. Advance your communication and negotiation skills. With so much business taking place on a global level, one needs to hone the ability to negotiate effectively, especially across international boundaries. In short, a cross-cultural negotiator has to be a good communicator. It may sound obvious, but communication impacts everyone and has a profound influence on how we act and respond. It is the way people create, send, process, and interpret information. Negotiation is actually a very specialized form of communication.
6. Cultivate inbound freight control opportunities. Management of the inbound freight function is one of the most overlooked areas for significant cost reduction. Some estimates rate inbound freight costs as high as 35% of the total logistics cost for many companies. Remember that any inbound freight cost savings go directly to the bottom line. Most successful organizations that have paid attention to their inbound freight costs see inbound freight management as controlling their inventory in transit. A case in point is Wal-Mart recently taking control of its inbound freight from its vendors.
7. Focus on enhancing the contracting process. In today’s litigious and competitive business world it is vitally important for contracts to reflect accurately the rights and obligations of the parties. Without the ability to select and apply the correct RFX tool at the correct time, the solicitation process can suffer timing setbacks, miscommunicated terms, and even the need for complete redefinition - all of which adversely affect the desired end result. Increasingly, purchasing departments and purchasing professionals are being held responsible for assuring that appropriate language is included in contracts, so much so that contract drafting and writing have become critical skills.
Rather than representing a new paradigm, the Seven-Star Purchasing Areas of Excellence are tried-and-true areas of excellence that have long been driving forces in the purchasing and supply management field. Sometimes, it’s easy to get lost in the intricacies of aiming while losing sight of the target. In an attempt to move to a “world class” mode, many companies focus on the technicalities of achieving the paradigm in lieu of achieving the true goal: to master the basic processes that will produce excellence in the end result.
This article part of the monthly series authored by ISM’s Logistics & Transportation Group Board Members, who are current practitioners, consultants and educators. In future columns they will continue to share their views on a number of Supply Chain topics.
Thomas L. Tanel, CTL, C.P.M., CISCM, is the President and CEO of CATTAN Services Group, Inc., specializing in Logistics and Supply Chain issues. He is also the Chair of ISM’s Logistics & Transportation Group and can be reached at tanel@cattan.com or (979) 212-8200. Membership in the Group is open to all ISM members who are responsible for or have an interest in the Logistics & Transportation fields.
1. Think strategically about how to add value. This includes selling the importance of Purchasing, Procurement, and Supply Management to the C-level (CEO, COO, CFO) executives responsible for strategy involvement. If purchasing cannot prove it is adding value to the organization, the function my face outsourcing, elimination, or downsizing.
2. Encourage training and development of purchasing personnel. Training needs to be “smart” training - the type of development that focuses first on making sure professionals are comfortable with the basics before tackling the esoteric. To increase coordination, internal linkages, communication, resource utilization, focus, efficiency, creativity, and overall effectiveness; cross-functional teams must be developed and trained to assist in guiding the purchasing and supply management process.
3. Use cost-price analytics and techniques. This requires an understanding of the global economy, including marketplace infrastructures, supply chain requirements, logistical channels, and total landed costs. Clearly, effective purchasing and supply management can have a profound effect on the bottom line. This often overlooked source of profitability is ripe for exploration by many companies who have long emphasized their sales as the primary vehicle for fiscal strength. With the current state of the economy and its negative ramifications in the marketplace, purchasing’s cost-price analytics should be employed with even more fervor than ever to eke out elusive profitability.
4. Develop structured supplier relationships for your commodity/service group. Suppliers play a critical role in the success of an organization’s operations. However, different suppliers require different management techniques. A stratification of the supply base not only identifies the depth of your relationship with the supplier but assists purchasing and supply management in utilizing its resources effectively during its management of the supply base. To achieve excellence in this area effectively, most organizations have gone through a strategic sourcing program that allows them to structure and focus on their most important supplier relationships.
5. Advance your communication and negotiation skills. With so much business taking place on a global level, one needs to hone the ability to negotiate effectively, especially across international boundaries. In short, a cross-cultural negotiator has to be a good communicator. It may sound obvious, but communication impacts everyone and has a profound influence on how we act and respond. It is the way people create, send, process, and interpret information. Negotiation is actually a very specialized form of communication.
6. Cultivate inbound freight control opportunities. Management of the inbound freight function is one of the most overlooked areas for significant cost reduction. Some estimates rate inbound freight costs as high as 35% of the total logistics cost for many companies. Remember that any inbound freight cost savings go directly to the bottom line. Most successful organizations that have paid attention to their inbound freight costs see inbound freight management as controlling their inventory in transit. A case in point is Wal-Mart recently taking control of its inbound freight from its vendors.
7. Focus on enhancing the contracting process. In today’s litigious and competitive business world it is vitally important for contracts to reflect accurately the rights and obligations of the parties. Without the ability to select and apply the correct RFX tool at the correct time, the solicitation process can suffer timing setbacks, miscommunicated terms, and even the need for complete redefinition - all of which adversely affect the desired end result. Increasingly, purchasing departments and purchasing professionals are being held responsible for assuring that appropriate language is included in contracts, so much so that contract drafting and writing have become critical skills.
Rather than representing a new paradigm, the Seven-Star Purchasing Areas of Excellence are tried-and-true areas of excellence that have long been driving forces in the purchasing and supply management field. Sometimes, it’s easy to get lost in the intricacies of aiming while losing sight of the target. In an attempt to move to a “world class” mode, many companies focus on the technicalities of achieving the paradigm in lieu of achieving the true goal: to master the basic processes that will produce excellence in the end result.
This article part of the monthly series authored by ISM’s Logistics & Transportation Group Board Members, who are current practitioners, consultants and educators. In future columns they will continue to share their views on a number of Supply Chain topics.
Thomas L. Tanel, CTL, C.P.M., CISCM, is the President and CEO of CATTAN Services Group, Inc., specializing in Logistics and Supply Chain issues. He is also the Chair of ISM’s Logistics & Transportation Group and can be reached at tanel@cattan.com or (979) 212-8200. Membership in the Group is open to all ISM members who are responsible for or have an interest in the Logistics & Transportation fields.
