There is no easy way to get employees to trust you. One of things that I’ve always done is to make sure that I do what I told them I was going to do. Nothing impresses employees more than keeping your word. Another good tactic to use is to always admit your mistakes and do not try to cover them up. Employees appreciate when you invest the time and effort to train them. Make sure you have a training plan for all of your employees. Try to behave ethically, employees expect you to lead by example and to live by your word. Communicate to them daily if possible in use as many different channels of communication as you can. Remember some people have preferred channels for communication. Take the time to understand what they do and respect what they do.
One of the things that I always did was sitting down with my employees and not only watching how they do their jobs but actually have them teach me how to do their job, then go out and actually do some of it. This really grounds you as a boss. You get a good understanding of the aspects of their job and what they go through every day. If I work for a company that had well documented work practices, I would read these before I sat down with the employee. This gave me a good background to learn more rapidly. It also showed the employee that I was very interested in what they do.
Running a purchasing or supply chain organization poses unique challenges to a leader. Purchasing organizations are constantly “fighting fires”, handling unique crises and influencing a broad network of people internally and externally. The range of personal contacts, cultural differences, emotions and challenges is global. In two of my books I have used poetic license and characterized the so called normal purchasing day as “zoo-ee”. Although many of the skills that I discuss are also required by other leaders, the sheer nature of the purchasing beast demands a special combination of these skills.
One of the most valued characteristics of a leader is integrity. A purchasing leader needs to never waiver in being honest to everyone in all their relationships. The quickest way to demoralize your team is to not keep your word. There can be no compromise on this trait.
One of the first things a purchasing leader must make clear is what is acceptable ethical behavior. Publish and conduct classes on purchasing ethical standards. I have been fortunate to work for companies that have clear standards and strong ethics. I personally condone a zero tolerance of any gifts or gratuities including lunches or dinners from a supplier or anyone. I recommend purchasing actually budget dollars for these events and strive to not even give a semblance of any favoritism.
Because of the frenetic atmosphere; a purchasing leader must be a working leader or “hands on” resource especially when a crisis develops. Leading from the front is a requirement.
Clear goal setting and the flexibility to constantly adjust goals is a skill that must be repeatedly practiced and communicated. This goes hand in hand with the ability to provide come discipline and structure to the team in light of all the pressures and deadlines. Along with this, the talent to delegate and not to micromanage is essential. This encourages team members to take risks and grow. Purchasing leaders need to show that they truly care for their team by personally conducting training in many areas.
Curiosity and the drive to wander around and find out what is really happening, especially in other departments and with suppliers, often yields useful knowledge and actionable projects. Getting visible and being approachable cements relationship building which is the linchpin of the art of purchasing.
Sheer drive and the perseverance to not quit seizes the imagination of team members and other employees as well. I call this “indomitable spirit” and it is contagious. Below is my list of one-off purchasing leadership traits along with additional complimentary traits that develop from them. Finally never lose sight of the fact that leading by example is not working, unless your team is following and exceeding your example.
One-Off Purchasing Leadership Traits Complimentary Leadership Traits
Integrity Admitting mistakes
Clear goal setting Strong and visible metrics
Relationship building Empathy
Flexibility in priorities Adaptability
Providing discipline and structure Strength during crisis
Delegation skills Trusting your employees
Training ability Expertise
Indomitable spirit Celebrating successes
Over 95% of purchasing or supply management organizations do not have a long-term strategic plan. This is not surprising given the dynamic and hectic pace of purchasing organizations. Many of the plans that are completed are done once, and put in a three ring binder or a hard drive to never be referenced again. These plans do require a lot of effort and support from top management to become useful and meaningful. They are essential to keeping purchasing on track and focused on the most important supply chain improvement efforts. Long-term plans serve as a great focal point for purchasing and insure that constant firefighting and other upsets do not overwhelm their efforts. They can serve as guides for the stages of organizational transformation that a purchasing department wants to achieve, and reveal to non-purchasing personnel, purchasing’s long-range direction. First off, create a vision and mission statement that aligns with the organization’s vision and mission statement. Be bold and make sure people realize that you are aiming for supply management not traditional bureaucratic purchasing. Try to gain a broad consensus and gather input from surveys, one-on-one meetings, research and as many employees, suppliers and customers as possible.
There are limitations to this guide. I am certain that I have missed some areas but I have tried to be as comprehensive as possible. Use this document as a guide and checklist not a dogmatic methodology. It is extremely difficult to predict the future as technology and the macro environment are rapidly changing. Global events can radically alter the supply chain and require new innovative strategies. Collaboration is the norm now, but collaboration can also be cyclical and have peaks and valleys of cooperation. People are the strength of an organization and any strategic plan that does not focus on people development is woefully inadequate. Many companies also have to cope with dealing with multi-generational group differences.
New products can require new supply chain tactics and alter your product mix landscape. Competitive pressures can often dictate rapid responses and major changes in product marketing and sourcing. Communication is becoming even more critical in this rapid paced world. The selling or marketing of the strategic plan is even more crucial.
Once in place, a strategic plan is much easier to update, review and fine tune. It is important to keep it dynamic, up to date and a living document. I hope this guide motivates the reader to take the journey of completing a strategic plan. Good luck in the journey!
When I took over as head of a Procurement Division there were three Plants with over $500,000,000 in purchases per year. I was to transform Purchasing into Supply Management with some Lean Six Sigma tools. Plant senior management decided to downsize my department at the plant where I was located at from eight to four, starting from day one. The plant manager was not committed to the transformation attempt and wanted it to fail. I decided to do everything in my power to not fulfill his wish.
At the first meeting I had with the department team two people started to cry. They did not know how they were going to keep up with the work. I pledged that within six months, they would have enough spare time, that they would be coming to me asking me what to do to move the business ahead. They all laughed at the statement. I volunteered to take over buying of one of the major components in the plant. I of course had no idea about the workload involved in the buying process. The next day four file drawers of paperwork for the component were moved into my office. I spent a week creating a database to help me manage the component which had no previous reliable information. Eventually a supplier helped me improve the database and ordering process.
I soon found out that purchasing data was scarce or non-existent. Purchasing employees could not give me any good summary statistics and were so caught up in firefighting that confusion reigned supreme. No one could adequately explain the purchase order process. There were no standard operating procedures. Undaunted, I actually rolled up my sleeves and typed purchase orders myself just to get an idea of what happens. We did a process map of the purchase order process. We locked to doors to the department while we had Kaizen process mapping meetings (As Is).
We all went on a data expedition and since I knew some computer programming and could query from the company databases we started to compile our data. We discovered that we had approximately 40,000 transactions or buys per year. By using a Pareto chart we saw that over 80% of the purchase orders were under $200. The vast majority of our purchases were small dollar items. Additionally only twenty people did about 90% of these buys. They were our super users or power requisitioners. We decided to concentrate on them and educate them about our efforts to transform the entire process. We designed a short order purchase form for purchases under $1000 that they could use. They participated in the design of the form. No interface with purchasing was required for the form. The middleman (purchasing) was eliminated. The only catch was they had to buy from a list of our preferred suppliers. If they wanted to deviate from the list they needed to get our approval.
We did a new process map (To Be) for the short order form with the super users participating. We created a manual and SOP for the super users with the preferred supplier list, contact information and basic purchasing terms, rules etc. We posted a process flow map in the department for everyone to see.
Our workload was drastically reduced and the buyers did not have to worry about these small purchase orders. In addition out suppliers remarked that the error rate on these short orders was greatly reduced. We recognized super users who had error free months and who worked well with suppliers. We eventually switched to purchase cards for these twenty super users which practically eliminated all paperwork.
Finally we had time for supplier rationalization or reduction and strategic initiatives. Again we mined the data and found out that we had over 20,000 suppliers. With hard work and consolidation of buys we got that number down to 209. We set up preferred suppliers and greatly simplified the entire process from requisition to payment. We standardized payment terms which greatly relieved accounts payables workload who soon became our allies.
We essentially used all the tools of the Kaizen event but not quite in the sequence order that is recommended.
In four months not six, my employees had the confidence and trust in me to come to my office and admit that they had nothing to do that day and ask what could they work on to move the business ahead. Most of this progress was due to using some simple Lean Six Sigma process improvement tools.
After completing my new employee orientation at a new company that hired me, I was astounded by the redundancy and the lack of coordination of the process. Essentially employees were given a checklist and told to get signatures or initials on a laundry list of orientation items. No time limit or deadline was provided. Employees were put on their own, to go about and about, to complete the checklist. It took me two weeks to complete the employee checklist and much of the “orientation” that I received from each department on the checklist was haphazard at best.
A Kaizen team was formed which I led to look at the orientation process and recommend changes. The team actually walked the process and was astounded that the entire process walking distance was at least three miles and often the person who was supposed to “orientate” the new employee was not available. There was a high level of frustration with all new employees as they went through the process.
The team did a Voice of the Customer analysis and discovered that about 80% of the items on the checklist were not really essential and did not require the new employee to be physically present in the department indicated on the list.
In designing the As Is process, the Kaizen team made heavy use of Internet and invented a New Employee Orientation Web site. Many of the departments on the check off list already had orientation PowerPoints or webinars for new employees. All the Kaizen team had to do was organize them on the website and make sure the departments kept them up to date. In addition we provided access for new employees to work related information like phone lists, email lists, FAQs etc. that drastically reduced their anxiety and questions.
The cycle time for the orientation was reduced from two weeks down to 2-3 days or less. More importantly a much better first impression was made on the new employee.
Purchasing is the art of building relationships. It is not about negotiations, transactions, industry knowledge, market knowledge, know-how or technology. It is all about building strong relationships and gaining the trust of suppliers, customers, and colleagues. Nothing else comes close to building relationships in importance for successful purchasing. A purchasing professional must be able to build relationships or they are about as useless as a screen door on a submarine. They may need to pursue another career. Do not spend inordinate amounts of money on so called purchasing technical training unless a strong foundation of relationships is well underway. You cannot fake relationships. You cannot legislate it. Purchasing professionals need to live it and commit to it. Integrity in relationships will always carry the day, impress suppliers, scare the competition, and let you sleep well at night. Educational credentials look good, and certifications are impressive but nothing makes a purchasing professional more effective than developing strong relationships and being true to their word. Spending more time on relationships almost always pays off for all participants. Once trust or relationships are broken they are nearly impossible to repair, so don’t neglect them or underestimate their criticality. You will not be able to dig yourself out of any of the deep holes that you dig by dishonest relationships. Smoozing is a lot easier than shoveling. Honesty builds respect.
Strategic sourcing is a disciplined process organizations implement in order to more efficiently purchase goods and services from suppliers. The goal is to reduce total acquisition cost while improving value. A Strategic sourcing strategy should be initiated immediately. A comprehensive sourcing methodology should be followed religiously to include strategic alliance and strategic relationship building with key suppliers. Key supplier alliances must be established. Supplier rationalization (reduction) must be accomplished first and dramatically. Many consulting firms offer a Strategic Sourcing Management solution that walks online users through each step of a consulting-type procurement methodology, including gathering data, analyzing requirements, and setting strategy, as well as executing e-procurement through shopping e-marketplaces, conducting reverse auctions, and using other methods that are built into the application.
Here is a Strategic Sourcing Step Process that outlines an iterative six-step process:
Assess Internal Supply Chain
Assess Supply Markets
Develop Sourcing Strategy
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An information-based negotiation is a radically different approach to negotiations. It emphasizes deep knowledge of the supplier and their industry. It transgresses from some traditional approaches to negotiations. It is not the adversarial win-lose negotiation style with the emphasis on game playing, theatrics and taking full advantage of a supplier’s weaknesses. An information-based negotiation is not the win-win model either. Information or knowledge is power, but in information-based negotiations the purchasing professional gains a deep understanding of the supplier’s industry, their margins and their culture. In essence this is an immersion or empathy with the supplier and their competitive landscape. The best way to describe it is that the purchasing professional knows as much or more about the supplier and their industry as they do!
In my recent book Common Sense Supply Management I state, “The very best piece of negotiations advice I ever received was to know the capabilities of your supplier, their industry, their competitors, their cost drivers, their margins and their capabilities better than they do. It requires a lot of homework, digging and flat out work. You obviously cannot do this with every supplier only the most important and most strategic ones. It is a powerful negotiation tactic based on knowledge not histrionics. There is no glamour in the information-based approach it requires immense research about the industry, the suppliers financial condition and competitive forces. Understanding their culture and their organization is critical. You are in essence trying your best to put yourself in their shoes, and mimic as best as possible their anxieties and fears about the whole process. The information-based approach is not for the faint hearted or those who do not want to persevere. It should only be exercised for critical materials or services. It requires ongoing market research and it will work better when executives are actually exchanged with the supplier on their site. The resources and commitment to pull off such an information based approach are significant.”
With the Internet the gathering of information for the information based negotiations approach has been greatly facilitated. There are numerous industry reports, websites and search engines that can help the purchasing professional. Nothing beats personal face-to-face contact and dialogue with numerous suppliers in a particular industry. They all have a fairly keen knowledge of their competitors which can rapidly improve your overall knowledge. Since many industries are oligarchic in nature, once you understand the top three or four players in the industry you have a real good foundation from which to start partnerships with your chosen supplier.
I suggest the purchasing professional consider using the Porter Five Forces analysis. Although this used extensively in marketing and marketing analysis, it can be invaluable to the purchasing professional. This will provide a good start for industry understanding. Another good source for information about suppliers and particular industries are distributors. Often they are glad to provide information about suppliers and especially their customer service. Here is a general diagram of the approach to information based negotiations that I have used:
Many supply chain and purchasing professionals are intimidated by Lean Six Sigma (LSS) and its proponents. Relax; it is just a disciplined approach to problem solving. It uses many tools that have been around for years and the tools have just been cleverly repackaged by consultants. Decisions are data based, disciplined and plodding. Without top-down commitment, it is doomed to fail. Make sure you secure this executive commitment, and better yet make participation a strong criterion for individual performance reviews (raises). Projects should be selected by ROI and since much time and teams are required for a project, they must return or save at least $300,000 to qualify as a full blown LSS project.
Supply Chain and purchasing professionals must be involved in sourcing the LSS consultant. Experience is critical and a proven track record of project success essential. Get references and insist on examples of work. Use a fixed hourly rate and make sure all developed training and projects remain your property. You can try to make the contract performance based but many LSS firms will not agree to this. Make the goal to be self-sufficient internally within two years with all LSS training and projects.
Some projects that have been done in purchasing and the supply chain are: inventory cost, part obsolescence prevention, lead-time reduction, backlogs, unexpected orders, customer service internal and external, cost of schedule changes, transaction flows, cost of return product, and supply chain optimization. Many of these involve process mapping which is a type of flow chart that illustrates how things are done and identifies areas of strength or weakness. LSS is not the only tool that can be used by supply management professionals for improvement. In my experience LSS should be used when the potential savings is great and you have some good data to analyze. If you do not have good data the LSS project will take even longer. If data is sparse, the Lean approach is much preferred which is highly visual, intuitive and does not require as much data.
Always Lean a process before your use LSS. By this I mean eliminate any redundant steps in the process that can be easily eliminated first. Reduce the number of variables in the process. Try to understand the voice of the customer (VOC) clearly before your start process improvement. Remember if the customer does not really care or value a process step; ask yourself, “Why are we doing it?”
Finally use kaizens for straight forward less complicated projects. The kaizen approach is usually done by the work team using the process and strives to eliminate waste in the process. The new kaizen improved process should then be quickly implemented. Supply chain and purchasing professionals must take the leadership role in LSS, Lean and kaizens. In my professional experience, the rewards of these approaches can be astounding. They do however require a measured and disciplined approach, and a commitment to not giving up!