Assignment

Submitted to

Sir Umair najam

Subject

Supply Chain Management

Submitted By

M.Zain Ali Chishti L1F16MBAM0269

 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.