Integrating procurement and engineering organizations is a challenge for many companies, but one that has come naturally to Ron Torten, vice president of global materials for Agilent Technologies in Palo Alto, Calif. Torten's background and training is a mix of engineering and materials management (he holds both a degree in chemical engineering and an MBA), which helps him understand the requirements of both organizations. He sees this as a trend in the industry, impacting both design and sourcing selection. Torten worked for high-tech firms Quantum and Agere Systems before he joined Agilent in January 2004.

In less than two years at Agilent, Torten has successfully combined three separate regional operations into one Global Materials function of 100 people. But Torten went one step further.

"Not only did I put the global materials organization under one umbrella, but I restructured the organization so worldwide procurement and worldwide engineering organizations can leverage processes and skill sets across functions and locations." The result was a common view to the supply base for both organizations, improved supplier consolidation, and an initiative to reduce its non-IC suppliers from 140 to 70 by next year. Torten also created an organization within global materials to focus on supplier relationships and strategy for ICs (foundry partners) due to the size of these relationships and the criticality of Agilent's success.

And like any high-tech firm, Torten is preparing the global materials team at Agilent for an increasing spend from overseas suppliers. He says his organization is on a path to grow its spend in China dramatically within the next three years, from about $4 million spent in China last year to $170 million in 2008.

Are engineers called in to consult with purchasing more often in your new organization?

Yes, within worldwide materials we have the purchasing group, which is not necessarily engineering-oriented, but separately we have a supplier engineering group where we have all of our engineers because our sourcing strategies come from more of the engineering side. Then in the procurement area we try to automate as much as we can to minimize the effort on the tactical activity. Our Oracle system cuts the POs and the purchasing guys don't do fundamental procurement anymore. They look at purchase order, reports and make sure suppliers are able to deliver what we need.

What is the ideal purchasing candidate for your organization?

We want people with the ability to look at both business and technical aspects. For example, when you give a problem to an engineer, they immediately try to stimulate that problem to see if they've solved a similar problem. Based on that, they figure out the answer. A businessperson's approach is, 'What do I do with the answer, if I know the answer?' Having the ability to think both ways is important. If they're not engineers but they can think like engineers, then they tend to ask some of the better questions because they're not constrained by what they were taught and can come up with creative answers.

What is the most challenging material to source in today's market?

The toughest is the foundry relationships, or buying wafers. The challenge is that the production cycle time is the longest of anything we do. Flexibility and the ability to meet customer requirements are tied in to how well you can manage your longest leadtime item. Fortunately, we've consolidated suppliers by 60%. It means making sure that you have the relationship, alignment and strategic benefits to both you and the supplier to be successful together.

What other major challenges are you facing?

Moving to China is a big effort for our organization. Going over the mental barrier to low-cost markets is not easy. You always think that quality and cost go hand in hand, but when you look at low-cost suppliers, in many cases, you worry about paying the price back in quality and many companies tend to stay with what they know, which are local suppliers that are not in low cost regions.

What advice do you give to businesses going to China?

Going to China today should produce about a 30% cost reduction. To do that well, you have to make sure that there is a specific internal objective. Know what percentage of your spend is going to be in China, and make sure the teams at the engineering level, supplier engineering and quality teams are aligned to make that happen. Secondly, you have to be very proactive with your suppliers. We have time-zone issues, new people to talk to and things we took for granted with new suppliers. Behavior and expectations that you had with a previous supply chain may not be there anymore. A lot of program management work has to go into it. In some areas the suppliers realize the benefits and move to China.