Do you know your head of purchasing ?
Jean-Marc S.
Sr. Consultant @ Transition Management Consulting | Driving Cost Reduction with Six Sigma | Managing Director
You already met this guy but could not remember his name. You remember a nice guy who spent years and years in the company first in production, then development to finally end his career in purchasing. That's pretty common.
He is very knowledgeable about the suppliers, the internal processes, the history of business between your company and the supply base, the past agreements and, quite frankly, he is delivering 3 - 5% savings year over year. On top of this, you rarely hear about suppliers' issues from production department.
So you feel safe, everything seems under control and you can focus on increasing sales and getting production to deliver what your sales team managed to sale.
Life is beautiful.
Really ?
I have one question for you and I am recommending you to ask the same to this nice chap: "What is the total cost reduction potential ?" (no opinion here, just hard facts).
That is the only valid question to ask a purchasing dept. and here is why.
- If the potential is high and easy to get, why waiting years to collect it ? Your nice guy is just filling the pipeline with enough savings to keep you happy and wait for his retirement. This is a typical case of negotiation compromise. Replace him straight away. Hire a fighter instead.
- If the potential is low and easy to get, start reallocating your purchasing team to other projects, it's a waste of money to maintain a big team if there is no saving ahead. You need no strong leader, you can keep your old chap.
- If the potential is high and hard to get, you need high profiles buyers and boss to get it. Your nice old chap is outdated, replace him straight away.
- If the potential is low and hard to get, do nothing, that's called in LEAN, the necessary waste. Just reduce your purchasing dept. size to keep maintaining your supply base. You need no strong leader, you can keep your old chap.
As you can see, the answer to that question has a dramatic effect on the organization. On top of this, in cases 1 and 4, you should urgently reconsider your company organization and resources allocation in order to collect ASAP the extra potential identified.
The whole plan and decision depends on the savings potential vs. risk / difficulty analysis also called sourcing or commodity strategy. Btw do not mix up sourcing vs. purchasing vs. Procurement.
Contact me if you need an assessment of the situation both in potential savings and purchasing team capability.
Otherwise, go and have a nice time with your good old chap keeping your fingers crossed your competitors are not doing differently.
Experienced Business Leader of Adhesives, Sealants, Coatings & NVH Parts catering to Auto OEM / Industrial Applications
4 年Nice article. Like every accomplishment, this goal too has the human relations impact to score. When logic is out of table, people still dare to think and hope to do the impossible just because of who is in front. Thanks
Group Indirect Purchasing Director FORVIA India, Thailand & Vietnam / Director Purchasing Faurecia India | Environmental Sustainability, Business Law
4 年Real thought provoking ... the best purchasing results comes when it is backed by good leadership , processes and patience and ofthen if one is missing we might have a quick / Win which is a Mirage?