The economy calls for purchasing to take charge
By Paul Teague, Editor in Chief -- Purchasing, 11/13/2008 2:00:00 AM
With all the doom and gloom you hear and read about on the state of the economy, you could be forgiven for feeling a heavy sense of despair. But don't linger in that despair too long: You have work to do.
The fact is that in rough and unstable economic times like these companies rely on their purchasing and supply chain staffs even more than usual to find the strategies that will help them survive and position them to prosper in the better times ahead. Now is the time to show what supply chain management can do.
As you know, there are plenty of things you can do. Robert Rudzki, president of Greybeard Advisors and a former Fortune 500 chief procurement officer, says this is a good time to do a candid assessment of your supply chain and your supply-management and procurement practices. Measure them against best practices and identify areas where you can improve. There may be savings opportunities you haven't noticed before.
You can begin to find them by intensifying your internal-collaboration efforts. Work more closely with your product-design partners in your company to find ways to save in new product development. Together, you may be able to identify opportunities for using alternative materials or components that cost less without sacrificing functionality. Of course, finding those alternative materials may require a hard look at your supplier base, but that's a good thing. In bad economic times it's more important than ever to be sure of the capabilities and finances of suppliers. This is also a time when it's critical to work with others within the company to make sure forecasts are adequate so you don't over buy.
It's also a time when the importance of the concept of total cost shines through. And total means just what the word implies—everything. Gene Hagedorn, executive vice president of materials at Baldor Electric Company, advises buyers to consider life-cycle costs for parts and components. With a motor, for example, he says they should consider electricity cost as well as the purchase price.
As Executive Editor Tom Stundza points out in "Liquidity Lock" (page 48), many purchasing professionals are pursuing these and other steps to help their companies get through the credit crunch and related economic woes. And the more they—and you—do, the more you prove the value and potential of supply management. As Rudzki says, this is not a time to hunker down. It's a time to be proactive.
It's a matter of good business
Pick up almost any annual report today and chances are you'll find a section on the company's efforts involving social responsibility. Those efforts—which extend from diversity to Green to ensuring fair labor practices within the supply base—are important. Not because of their public relations value, though they are valuable in that sense. They're important because they can have an effect on the bottom line and share value.
Particularly in a globalized business world, where suppliers may be located in far-off shores, companies have to make sure all aspects of their operations conform to acceptable standards. Supply chains, no matter where they're located, are an extension of a company's business. Executive Editor Jim Carbone explains in his article on page 58 why corporate social responsibility—for example, ensuring ethical behavior of suppliers—is critical today. It's just good business sense.
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