There's more to purchasing than cost reduction, says Mark Mirelez, global procurement manager at National Instruments in Austin, Texas.

In no way is he diminishing the success of his team—they've rung up double-digit savings in each of the past three years. "We continue to focus on managing costs," says Mirelez, a member of Purchasing's Editorial Advisory Board. "It's a huge value add. If you can't keep it up, you can't do other things."

Indeed, during each of the past three years, Mirelez and his team have cut costs by 10% or more on the $100-million annual direct-material buy for this global provider of virtual instrumentation used by scientists, engineers and technical professionals in a variety of industries. They've done it through a variety of efforts.

"But," he says, "we need to take one more step." Procurement has evolved over the years from cutting POs to reducing costs, Mirelez asserts. "Now, we can add value to the purchasing process in other areas."

One of those areas is indirectmaterials, and he and his staff are remarketing the purchasing function within NI so they can position themselves to further leverage that area of spending. They have a big head start in those efforts thanks to their relationship with the IT department. IT already asks procurement early on in the purchasing process to help with supplier selection.

On the direct side, Mirelez would also like his team to be involved early in the product development process. He believes he can help the company's engineers design products with low total cost of ownership.

Supply chain management is another big issue for Mirelez's team in managing the global supply chain. He recalls that seven or eight years ago, manufacturing was located in Austin and the supply base was mainly in the U.S. Now, the company has direct operations in 40 countries and procurement, which is center-led, supports manufacturing in the U.S., Hungary and Ireland. Suppliers are located in North America, Europe and Asia. He's attacking supply chain management head-on by defining a global process and mapping it out. "If it works in Austin, then, with a little tweaking it will work in Europe and Asia," he says.

To manage the process, Mirelez reorganized the procurement structure. Global commodity managers with responsibility for electronic components, mechanical devices and software and print report to Mirelez. Each of the global commodity managers in turn has regional commodity managers in Europe and Asia plus the software and print commodity manager has direct access to the general manager in Ireland. Mirelez reports to Rob Porterfield, vice president of manufacturing.

Everyone in procurement keeps in touch daily through an online dashboard that consists of 28 key performance metrics, including worldwide shortages, worldwide supplier quality, worldwide inventory days and worldwide annualized savings. They participate in a year-end global procurement conference to discuss strategy and prepare for the months ahead. Some of the team also take part in an exchange program through which a buyer, say from Hungary, comes to Austin for two or three months to learn more about American culture and NI procurement strategy, while a procurement analyst from, say, Austin, may spend time in Europe.

Over the past two years, Mirelez and his team have consolidated NI's direct-materials supply base from 80 suppliers that represented 80% of the annual spend to 36 global suppliers. Now, they focus more of their time on managing these suppliers. And that focus has helped them turn at least one potential problem into a success.

The company was in the process of moving production of a chassis to Asia. The move would provide a lower total cost of ownership and better visibility to the Asian market, says Mirelez. "It gets us closer to some of our end customers in Asia."

They had narrowed down their selection from four or five suppliers to one in Mexico and believed it was the right decision. Mirelez along with his global commodity manager for mechanicals, traveled to Mexico with a team of NI engineers to ensure that the supplier was qualified but soon came to the conclusion that the supplier wasn't right for NI.

Result: Rather than change suppliers, procurement opted to go with its incumbent supplier's chassis-manufacturing location in Asia mainly because of NI's strong working relationship with the supplier. Mirelez concedes that the supplier didn't have the lowest total cost of ownership of the pool of potential suppliers. But the team worked with the supplier on the move to Asia. "We figured there would be fewer issues and less risk if we stayed with the same supplier," he says.

Good customer. Putting a value on relationships is one way the procurement group at NI, which is a relatively small customer, manages its supply base. Management at NI believes that suppliers are an integral part of its operation so much so that "supplier success" is a pillar of its mission statement. "We don't have the largest spend," says Mirelez. "But we counter that with good sound sourcing strategy and supplier-relationship management. We spend a lot of time with suppliers at all levels up to the CEO, sharing our roadmaps." He adds that NI, because of its stable growth over the past 28 years, also is a good customer.

Another edge NI has over larger companies using the same suppliers is a technology-access program. It brings together NI engineers with OEMs to share technology roadmaps and develop stronger relationships.

In other steps, procurement recently added a supplier scorecard to its toolbox. The team monitors performance of the company's 36 global suppliers, providing them with detailed feedback on cost, quality, supply assurance and service metrics through quarterly business reviews.

Another new addition: a supplier portal that helps streamline transactions between NI and its supply base. The portal, built and maintained in conjunction with GXS, allows NI to send and receive documents in EDI format, and for suppliers to choose to send and receive in either EDI, hosted Web space or a combination of the two. The use of EDI transaction sets such as 855/865s places the onus for maintaining supply visibility accuracy on the suppliers themselves, freeing up procurement's time for more strategic initiatives. NI also uses Oracle's 11i suite of procurement applications and i2 Technology Factory Planner as its MRP (Materials Resource Planning) system.

Looking ahead, Mirelez thinks about scaling for the future. "We have to make sure we have the right people, processes and suppliers in place to grow our financials," he says. "It's tough because we don't know what information we are going to need. But we have to be on the leading edge to drive the organization."