Success and failure on collaboration
By Paul Teague | editor in chief -- Purchasing, 7/17/2008 6:00:00 AM
Last month, I spoke at the 2008 International Forum on Design For Manufacturing and Assembly (DFMA). Sponsored by Boothroyd Dewhurst, it was a conference on DFMA best practices of the Fortune 1000. The audience was engineers, all of whom were eager to share ideas and learn from each other how they could design products more cost effectively by reducing parts count, using alternative materials and components and simplifying manufacture and assembly.
Each of those three tactics are tasks where purchasing professionals can help by leveraging the capabilities of the supplier base. My message to the conference was that engineers and buyers are partners in product design, and the earlier in a project that they work together the more success they'll have in producing quality products cost effectively.
The audience agreed, and some of those in attendance volunteered examples of their own successful collaboration with their purchasing colleagues.
Then came a conversation I had after the speech with an engineering manager at one company who had a different story to tell. He was frustrated. For a long time, he said, he had been trying to get his purchasing department to work more closely with his engineering staff on design projects. But his purchasing department was not interested. He wanted to know how he could convince his buyers to get involved. It's hard to imagine anything to say in that case.
Purchasing as a profession has been knocking on the door of engineering for a long time asking for the opportunity to use its knowledge of the supply base to help companies cut the costs and improve the quality and efficiency of the design process. Companies of all kinds have opened the door, and the successes they've had have prompted CEOs, CFOs and others in the executive suite to rely increasingly on purchasing to help achieve corporate financial objectives. And yet at this one company, which, of course, we won't name, purchasing is evidently not interested.
Maybe it's a matter of training. Maybe it's a matter of resources. Or, maybe it's an outdated mindset—an attitude that purchasing's only jobs are to beat up suppliers for lower costs and write purchase orders. It's a mindset that never should have existed, and in any case should have died years ago.
Is it a mindset that you think is widespread in manufacturing today? Have you seen other examples of it? Or, do you have examples of engineering not letting purchasing into the design process early?
And, if you have any suggestions on how to get that purchasing department—or any other purchasing department—more involved, let me know at the email address below and I'll forward the message.
How not to outsource
Recently, we received an e-mail from Colleen Walsh Schultz, an attorney in the Houston law firm of Boyar & Miller PC. It was about an especially bad example of negotiating an outsourced relationship. An 800-bed hospital outsourced its support services, including call center, housekeeping, food services and engineering, among others, in exchange for an 8.5% reduction in run-rate costs over 10 years. Within 18 months, the hospital's costs actually went up 25% and performance didn't meet minimum government standards.
What happened? The hospital bore all the risks, including price fluctuation. When food and other prices went up, the hospital bore all the cost. When the hospital added another facility to the contract, it got no volume discount because it had not put that possibility into the contract.
The lessons, says Schultz: Fully set forth your expectations in a contract, balance the risks and rewards, insist that you benefit from savings you identify, demand financial transparency and document everything.
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