What our advisers see

By Staff -- Purchasing, 4/5/2001

To ensure that our examination of team buying is comprehensive and focused on the main issues, we decided to augment and back up our mail and telephone polling with an analysis of team buying by a group of seasoned veterans.

Our panel is made up of seven members of P URCHASING 's editorial advisory board. The seven members selected for the panel all have significant experience with the concept of cross-functional teaming and its successful implementation. On the panel are Dave Nelson, vice president worldwide supply management, Deere & Co., and former vice president of purchasing with Honda of America; Gene Richter, who has held the top purchasing slot at IBM, Hewlett-Packard and Black & Decker; Lance Dixon, executive director, JIT II Education & Research Ctr., BOSE Corp.; Michael Katzorke, senior vice president supply chain management, Cessna Aircraft Co.; Gary S. Berryman, vice president materials management and product cost, Harley Davidson Motor Co.; Tom Stallkamp, vice chairman and CEO, MSX International and former president and vice president-procurement at Chrysler Corp; and Roger Whittier, director of purchasing, Intel Corp.

We asked each of the participants to give their considered opinions in these four areas:

• The future of the team-buying concept,

• The major challenges to teaming,

• Teaming's major accomplishments, and

• The critical issues that will shape team buying's future.

Dave Nelson

In Dave Nelson's estimation, team buying is only beginning. Its biggest problem, he feels, is lack of buy-in of team members' bosses. When allowed to go unchecked, it "can lead to renegade buying" after agreements are reached.

On the achievement side, cross-functional teaming has netted a number of companies, "including Bristol-Meyers Squibb and ourselves, reduced costs of hundreds of millions of dollars."

The most critical issue that will ultimately shape the success or failure of team buying is team buy-in. After an agreement is struck, all that really matters is that all the participating parties keep their word.

Gene Richter

Though he sees no flagging of interest in teaming, Gene Richter stresses that team buying is hard and time consuming. He warns that in periods of widespread critical shortages or financial crisis, "there will always be a temptation to crash forward without building consensus."

The biggest challenge, he says, will involve determining which function will lead the team. "I'm biased, of course, and think the procurement person should be the leader." Why? "It has the most to lose (in terms of reputation and performance measurement) if the wrong supplier is picked or subsequently mismanaged."

The accomplishments of team buying, he feels, are enormous. Among the most outstanding: better world-class suppliers found and chosen, more balanced supplier management, and elimination of "divide and conquer" backdoor selling.

Critical to the success or failure of team buying: management support and willingness to provide the resources. Leaders and team members will need training in teamwork and consensus building, he feels.

Lance Dixon

Lance Dixon sees no reduction in interest in team buying. "In fact, the team buying approach is the foundation of good purchasing procedure."

Major challenge? Having the "proper leadership skills and the challenge of applying/getting the other functions to carry out their role in a busy operation."

A typical accomplishment of team buying is a correctly designed part, purchased to proper quality specs, one that can be purchased in volume and be easily used.

Critical to the success of team buying: Making sure that problems are not allowed to soar out of control.

Michael Katzorke

There is no flagging of interest in well-led companies, says Michael Katzorke. Rather than cross-functional buying teams, he uses the term "commodity teams," which he says were designed for supply base rationalization; supply chain alignment and long-term contracting; supplier improvement; supply chain integration in design and manufacturing, etc. "They were never intended for buying/order release." Commodity teams are evolutionary-what they do in the initial phases and their associated structure is quite different from what they should do and how they should be structured and focused as the supply chain process matures.

Further, if they (teams) are not sold and deployed appropriately by a strong and visionary enterprise leadership team, and are seen as a strictly purchasing initiative, disillusionment will usually set in rather quickly for lack of results due to lack of enterprise support. "The concept has to be packaged and sold at the top, supported with adequate budget, integrated across the enterprise from a leadership standpoint, and regarded as a long-term strategy, not a short-term road to quick hit savings."

Major challenges, he feels, really depend on who's doing the looking. Engineering can view them (teams) as a loss of power; product support can view them as focused production; finance often views them as more overhead; manufacturing often tends to view them as focused on "blue sky stuff" taking resources away from such down-to-earth things as expediting parts; quality can view them as infringing on its turf. In short, if the organization is still hierarchical and functionally oriented, and does not have a strong visionary leadership team, they could be viewed as inefficient and not in the heart of the design and manufacturing game.

The major accomplishment of cross-functional team buying has to be the process orientation that replaces functional orientation. It affects people, their growth, and the strategic focus of the company.

The truly critical factors in cross-functional teaming as seen by Katzorke are "vision and leadership and the ability to stay the course to strategic results."

Garry Berryman

Team buying, says Garry Berryman, "has always had questionable viability." He calls it a concept built on a series of compromises that attempt to create a buying/transaction-based environment somewhat independent of designing, developing and building/providing products.

The most fundamental compromise is the belief that you can successfully separate the "buying" element of the product's lifecycle management from the other functional leadership responsibilities of design engineering, marketing, manufacturing, supply management and finance. Concurrent product and process development methodologies, if executed at a high degree of cross-functional interdependency, require that the discipline and rules of engagement be such that the "buying element is nearly transparent."

Cross-functional teaming at a product/process development level has enormous business leverage. It is based on legitimate and recognizable value contributions delivered on a real-time basis through cross-functional members working hand in glove with each other while providing technical influence at every step of the way.

Major accomplishment up to here has been integration of enterprise-wide resources, which has eliminated waste, encouraged innovation, built competency-based relationships, and yielded bottom-line performance results.

Critical factors in success: Real work with real empowerment and accountability.

Thomas Stallkamp

In Tom Stallkamp's estimation, "team buying isn't losing interest except in those industries that are suddenly hit by economic crunch. Anything that requires teamwork requires constant pressure to make it work." (Parenthetically, he suggests there may have been some backsliding on this point at his former place of employ.)

There are two major items that will keep this team approach alive. First and foremost is senior management approval and active encouragement. Top managers need to be somewhat sheltered from the finance people "who want to control everything." Second, there must be training on how to function and operate in a group setting.

A major set of accomplishments, says Stallkamp, includes the cross-functional understanding of engineering and buying positions. Everyone thinks he/she can be a buyer because it looks easy. Engineers hide behind their technical training when much of what they do is common sense. I think that team procurement has broken down the chimneys (silos) in many companies. "But unless there is constant pressure to stay at it, those chimneys will reappear."

Most critical factor in success: Senior management's attention and support and the recognition it gives to team successes.

Roger Whittier

"Here at Intel," says Roger Whittier, "we see no waning in enthusiasm for team buying." To the contrary, he sees greater team-to-team integration of buying.

A major challenge to teaming is the need to transfer old departmental loyalties to the overall strategic material focus of the company as a whole.

A major accomplishment of teams: A substantial increase in quality. As an example, "I do not think it would have been possible to deliver the sub-100 ppm quality level we have today without teams." A second related accomplishment is inventory reduction. Teaming has allowed Intel to reduce the uncertainty about both demand and supply.

Critical issues in teaming: Changing technology and the need to move from introduction to high-volume manufacturing technology without losing momentum. Another is diversification, which can result in staffing problems. Whittier also has concerns about the effect outsourcing may have on team buying in the future-in terms of meeting changing volume needs and maintaining quality.