Active Management Support
- How well does your company’s management support your purchasing activities?
- How important is the purchasing function considered in your company?
- Do you have a purchasing director or similar as a member of your company’s leadership team?
- What is your company’s perception of the purchasing organization? Strategic function that adds value to the business or just a call off function for placing orders and driving material?
Active management support
In any organization it is important to have support from the senior management for the activities you are driving. Of all cooperate functions; purchasing is probably the one that has changed most over the last 20 years. The purchasing function is changing from being and administrative order fulfillment-, shipment follow up- and pure price negotiations function to a much more strategic role. The best performing organizations have now included the purchasing function in their top leadership teams as well as development of supplier related corporate strategies. The senior management must be aware of the fact that a successful purchasing function will impact many drivers to positively improve the company’s financials:
- Increase of revenue: by securing supply and setting up a flexible supply chain the company can drive more flexibility and sales thereby increasing their deliveries. Furthermore, the purchasing function should drive innovations from the supplier base into the company and can by that create new value in products and services that will differentiate from competition.
- Total cost reductions: traditionally the purchasing organization is measured on price reduction for direct material but with a total cost focus this should always be balanced with: quality of product and service, lead times, flexibility, technology leadership, streamlining purchasing processes, cost avoidance, focus on indirect material, contract compliance, etc.
- Invested capital reductions: by renegotiating terms of payments, optimizing inventory and supply chain buffers as well as optimizing the operational procurement process will lead to decreased invested capital.
With a clear top management support, the purchasing function will be involved at a corporate level to outline the strategy for the company and will then break down and develop purchasing strategies that are in line with the company goal.
- Your purchasing director (or similar) is not included in your company’s management team
- Your purchasing organization’s work and contribution to the company is not measured or followed up
- The purchasing function is seen as an administrative order and material follow up function
- succesful purchases