May 11 2008

HEAD IN THE SAND PURCHASING

Published by at 6:52 pm under Uncategorized


I’ve always loved my friends e-mailing me with they new jobs and titles – Supply Chain Manager, Global Procurement Strategist, Intergalactic Procurement Director – (Sounds like an inter-planetary pimp yes?). Many have even sent me multi-lingual business cards – one in English on one side and the other in a different language. I get pictures from all over the globe and news of their divorces but I always wonder – Is this new Management Philosophy (currently on best seller list at the B-Schools) worth all the Hoopla?

When I was young and working in the Evil Empire life was relatively simple. You were given a job, you were trained, you were given help when you needed it and were accountable for the results of your efforts. I remember working for the Big Three where the plant manager told us frequently: “Your job is to have molds built that produce perfect (acceptable) parts, delivered on time, all the time (worked without failure) or the guy who replaces you will.”  No, it wasn’t a kinder and gentler world and several of my office mates who thought they could coast; found out how quickly judgment could be applied. However we also learned how to build good molds that worked. The added incentive was that our home phone numbers were on the ID tag of the mold. You could be called out of bed or back from vacation if your mold got into trouble.

Wow! What happened to the group-hug-everybody-should-be-treated-equally HR chant? Well I believe that pay for performance isn’t theatrical in meaning. I don’t care how pretty your PowerPoint slides are, how fluent you are in CorpSpeak, if you give ‘good phone’ or put on good meetings. I’m interested in the results of your efforts. If you’re good at what you do, you should be paid for it. If you aren’t, you should be paid on that level also.

So much for my rant.

Now let’s look at Head-in-the-sand-purchasing. Buyers, purchasing agents, procurers or whatever they’re called today have their jobs measured by how well they control their costs. On the surface that’s a good metric. But quite like my grand daughters when I come into the room and find two cereal bowls empty with the contents of one on the floor, I always am treated to one who said she ate everything and the other saying she’s not responsible for the mess. Taking this into the realm of purchasing we see an interesting parallel: Have a buyer see a tool shop offshore quoting one third of what their US counterparts are and the job will go offshore in a New York Minute with the buyer taking credit for the savings. Have that same job be delivered late, the mold not work, the parts are of less than the required quality and itÃ’s somebody else’s fault.

In my dreams my buyer’s bonus would be as follows: We quote US and Offshore. If the job goes offshore the buyer can KEEP THE SAVINGS as his bonus. But, he is also liable for the additional costs of late delivery, mold repairs, and the cost of bad quality all of which would be a payroll deduction for the life if the part.

Look at my dream. If you were a buyer would you sign up to that kind of a bonus system? I don’t think so.

So what do we do? The idea is actually fairly simple. Let’s hold people accountable. Why should the buyer arbitrarily be able to place a job essentially on the strength of seeing an ad in a trade magazine then dump the responsibility onto engineering and production? Give me a good answer that holds up with experience and I’ll be quiet. If you can’t, why not (dare we even use the word in mixed company????) cooperate?

What if production, engineering, engineering, quality AND purchasing all had a say in the tooling and production placement of the contract? This way if they all hung together originally, they’ll either succeed or all hang together later on. I’m the first to agree that in professional expertise buyers speak the language of contracts and money better than anybody in a company. But they wouldn’t know a set of tooling specifications if somebody swatted them on the nose with them. Quality is NOT in the business of enforcing specifications. They are in the business of first determining if the specs are reasonable and achievable; and then in the business of seeing that compliance is sustained. Production’s purpose is to make the most efficient use of what purchasing, engineering and quality has given them.

Manufacturing is a Team Effort. Engineering, purchasing, quality and production are an unbeatable team. Like any team effort while each participant might be an expert in their own area, they are useless without the rest of the team.

The reason team play doesn’t happen is simple math. If sourcing of tooling and production was a team effort the ‘savings’ the buyer would take sole credit for would quickly become diluted with the cost of overseas trips by engineering, and then all the money and time spent correcting the less than ideal decisions what were originally made.

The other problem is simple reality: SME did a study on outsourcing. When all was said and done; the real savings of using other sources (offshore) than your seemingly higher priced local supplier base only ended up to be about 5%. If all this fuss and noise is about 5% you could probably get that locally and avoid the mess and the blame of who spilled the cereal. However joining the parade of clowns currently dancing to the latest philosophy won’t allow you the rational concept of looking at reality and making decisions based on it.

But . . . like the latest Management Philosophy De Jour, somebody (Usually a PhD who’s never manufactured anything in his life other than diplomas) writes a book pointing out all the benefits and politely ignores all the liabilities of this theory of how things should be done. Management falls in love with it and it is inflicted on the Little People who have to make it work. In the short term it probably does work, but a hard look at the bottom line hardly ever shows a lower price for superior quality. It takes time, pain, and unfortunately many business failures where management gets its golden parachutes while everyone else gets downsized before the lesson is learned.

Taking up the New Philosophy is a career builder. It automatically creates a new layer of bureaucracy. Remember the Quality Czars? How long did it take before people learned sufficient was just as marketable and less expensive than perfect, and somehow people were finally convinced that Quality Isn’t Free. Remember the days before “Supply Chain Management”? Why do you have to manage a supply chain unless you’re worried the chain might break or be filled with inferior product? And if it has bad product in it; what will you do? To use today’s lexicon using local suppliers you have short supply chains. The shorter the chain the less you need somebody on the payroll (eating up your profits) to manage it. Duh!

Those who are smart always constantly look at the bottom line, learn from the mistakes of others, and implement changes slowly with a flexible plan. They are slow to ‘downsize’ but even slower to add expensive infrastructure. They are the ‘lean and mean’ companies who continue to grow and prosper while the companies who chase fads go the way of the polyester leisure suit.

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This article is virtual, the opinion of the author, and I’ve got the scars to prove it. You can validly say it’s an excellent case of sour grapes on my part. You can also say it’s sage advice and perhaps do something about how your Multi-National-Global-Manufacturing strategy is working. You can give it to others, or you can delete it. In the end what you do is your choice and you’ll reap or suffer the rewards because of it.

Have fun.

3 responses so far

3 Responses to “HEAD IN THE SAND PURCHASING”

  1. Gene Wellson 12 May 2008 at 9:38 am

    Very well said. I have lived this nightmare for years and it is so stupid when the real culprit way up the food chain is living good while us little people have to deal with the mess that was created.

  2. Brenton 15 May 2008 at 7:18 pm

    Bill,

    This should be required reading by management of all North American manufacturing businesses, big or small.

    Keep these articles coming.

    Brent

  3. Gene Wellson 16 May 2008 at 8:04 am

    Another thing is you can tell that this is being rewarded somewhere in the system up the food chain or good logic would prevail. I had one customer whose philosophy was that it was better to by 10 cheap tools than it was to buy one really good one that could far outperform the 10 cheap ones. In reality the 10 cheap ones almost never ran at full cavitation or to cycle and never did both cycle and cavitation.

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