The document is a summary about transforming purchasing functions from a transactional role to a strategic role. It discusses that traditional purchasing focuses on short-term costs but overlooks long-term value and innovation. It provides an example of how BMW transformed its purchasing department by increasing staff training, hiring industry experts, and involving purchasers earlier in the product development process to help lower costs and facilitate cooperation between suppliers and internal teams.
The document is a summary about transforming purchasing functions from a transactional role to a strategic role. It discusses that traditional purchasing focuses on short-term costs but overlooks long-term value and innovation. It provides an example of how BMW transformed its purchasing department by increasing staff training, hiring industry experts, and involving purchasers earlier in the product development process to help lower costs and facilitate cooperation between suppliers and internal teams.
The document is a summary about transforming purchasing functions from a transactional role to a strategic role. It discusses that traditional purchasing focuses on short-term costs but overlooks long-term value and innovation. It provides an example of how BMW transformed its purchasing department by increasing staff training, hiring industry experts, and involving purchasers earlier in the product development process to help lower costs and facilitate cooperation between suppliers and internal teams.
Summary Making the Transition to Strategic Purchasing The purchasing function can go beyond mere cost cutting by rote. It can add value by driving innovation and superior long term cost performance. Companies are simplistic and merely a means to an end. Traditional approach to purchasing misses the function's significant potential to add value by driving innovation and superior long-term cost performance. The goal is to minimize costs while meeting functional requirements. Senior managers in purchasing seldom stay in their positions for more than a few years, they rarely build good will among suppliers or create sustainable improvements in the overall purchasing function. As a result, the primary purchasing model in most companies rests on finding the best price for each isolated transaction through any means possible. Transforming purchasing into such a strategic function requires a long-term perspective aimed at building “networks of competence” people who can cross boundaries and analyze the true costs of product and process proposals. When purchasing decisions are made, each department is guided by its own proprietary knowledge, and vested interests. Purchasing managers have a great deal of autonomy in how they approach their jobs because they work with many different people in different areas. Former senior vice president of technical purchasing for BMW, the author oversaw the transformation of the department's mission from functional to strategic, and he offers insights about the transformation. Strategic purchasing can only be effective if the purchasing department constantly expands and updates its technical knowledge to preserve credibility with both suppliers and internal departments. BMW's purchasing agents spent up to 20% of their time training and everything from foreign languages to technical know-how to contract law. In addition, BMW began to hire industry experts and train them as buyers who had as much in-depth knowledge as the suppliers with whom they would be dealing. Their goal is to apply their specialized knowledge to realize savings for all parties. Today, BMW’s cost engineers have built up a level of technical and cross-engineering know-how that is so deep they could run body shops, paint shops, or assembly lines. They are thus able to effectively act as an interface between the engineering design people, the development department, and the suppliers. They can influence the cost and investment level of suppliers and give good advice to internal partners about the potential effect of the various decisions they may make. The author describes how BMW associates become involved at the early concept stage of product development, often suggesting how certain design features will affect the technical equipment at the factory or the level of investment that will be required to execute the design.