Industry's problems were many and varied, often difficult, but they were solvable
By Jim Morgan -- Purchasing, 11/18/1999
The arrival of Ronald Reagan in the White House brought with it a new era of business optimism. It also brought with it a sense that whatever was broken or not working could be fixed.Industry began to focus in on just what ailed American competitiveness. For the most part focus was directed to the manufacturing sector where America seemed to be suffering its most serious setbacks. In some cases the villains were surprisingly obvious. In others it took time to make the adjustments. In any case the villains tended to sort themselves out into four general categories:
- Companies were spending too much to produce their products and, therefore, their products tended to be at a price disadvantage in international markets.
- Despite high spending in the production of new products, the quality of American-made products often was found to be lacking.
- Waste, especially in the form of inventories, was rampant. Excess inventories often were choking production facilities and soaking up scarce investment capital.
- Management (executive as well as middle) was often unsuitable and/or redundant. As a result too many dumb decisions were being made or allowed to stand.
The first three categories could be solved by the direct, albeit painful, approach. High costs, for instance, could generally be traced to waste--in sourcing goods, in manufacturing products, in planning new products and product designs, in the deployment of inventory, in allocating corporate resources. In most cases dealing with unsuitable management was deferred.
Purchasing--now often calling itself supply, supply management, or supply chain management--began to work more closely with other functions looking for causes of noncompetitive pricing, bad quality, and unacceptable waste. Causes of and solutions to many of the problems that occurred in these areas often crossed functional boundaries. In some companies cross-functional teaming was beginning to be recognized and in a handful of companies--mostly large and engaged in competing for global markets--basic approaches were being developed to instutionalizing the use of cross-functional teaming.
Tackling the problems of quality soon became a major pursuit of purchasing/supply departments. Purchasing/materials/supply managers stressed three areas in tackling the need to improve product quality.
First was the matter of a common language. As Phil Crosby, former vice-president and director of quality at ITT, put it there needed to be a common language of quality--"an understanding that quality is not a relative thing, but conformance to requirements....Some of the requirements are specifications and some are policies."
Buyers also recognized that there needed to be a more formal method of communication. "Too much of what purchasing does," noted the head of one company's supplier quality team, "is done at the last minute and the message is not made really clear to the supplier."
A third area that was recognized as critical--especially for purchasing--was the need to learn more about management. More and more purchasing managers were stressing the need for those charged with buying quality in the form of goods and components to have an understanding of what management wants--on a strategic basis.
In dealing with pricing, quality, and waste problems, purchasing/supply/procurement managers began taking a much more active part in insuring that suppliers have the capability of performing at a world class level. More and more sourcing teams began working with preferred suppliers to assure quality of purchased parts and systems.
By the end of the decade key suppliers were performing their own quality inspections. In JIT areas more teams of purchasing professionals were working with suppliers to assure that they could perform the higher service requirements of JIT without having to raise inventory safety stock levels.
Such analytic tools as benchmarking, reverse engineering, and competitive analysis also began to be used extensively to analyze internal competitive strengths and weaknesses, to examine strengths and weaknesses of competitors, and to seek best practices.
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