About Purchasing and Supplier Management
Supplier Management is a Critical Function
The Purchasing volume of global Fortune 500 Companies today represents over 70% of their revenue, with an increasing trend. It has become by far the biggest cost leverage factor in an average company’s P&L. Professional methods and techniques must therefore be rigorously applied to manage this function.
Purchasing, or more correctly, "Supplier Management" has become a science in itselft. The term "Purchasing" is sometimes misleading as most equal it with the action of buying and managing the associated transactions, while Supplier Management is covering a broad range of activities, from scouting the markets for innovationve solutions to supporting technical teams in optilizing the specifications and optimizing the administrative process by introducing the right electronic systems supporting purchasing, sourcing, project management across extended enterprises, etc.
Supplier Management has Evolved
Therefore managing suppliers has become a demanding profession, with basic and advanced techniques and methods. Supplier Management brings, by nature, change to organizations and therefore disturbs. It has evolved in just two decades from an execution function at the end of the process (just fill the order, Joe and see whether you can get a few extra points out of it ...) to the role of Super-negotiator (we need to drive cost down by 30%, and now...), which now needs to move on to a global business responsibility of managing two thirds of a company’s resources and innovation capacity (supplier relationship management...) to deliver shareholder value rather than mere cost reduction.
Indeed, the challenge is to "perform better than the competition" rather than "better than last year". This evolution is illustrated by the "Supplier Management Contribution Matrix" at right. Strategic Purchasing or “Resource Management” means making adequate make or buy decisions, sourcing and selecting internal and external resources, and continuously working with these resources to reach the company’s objectives. Through effective cooperation with suppliers you can either increase your capacity of bringing innovative products and services faster to market than your competition, or you can drive down the cost thereby allowing you to sell more aggressively.
Big Fish to Build Strong Purchasing Procurement and Supplier Management Teams
In today's fast changing extended enterprises, Supplier Management plays a key role within and outside Operations to manage all the external resources of the firm
- Finding and selecting the right skills and partner companies
- Making sure that these partners are motivated to work with and fully commit to your business (Relationship management)
- Managing their performance and supporting the suppliers to improve to meet more demanding PLM requirements
- Reduce total cost of ownership while preserving other essential aspects like quality, responsiveness, innovation.
If you look at these responsibilities and combine them with the typical profiles that will work in such areas – very international, business understanding, communicators and leaders – you will understand that People in Purchasing and Supply Chain are set to become the entrepreneurs and General Managers of tomorrow’s modern business organizations. At Big Fish we will help you find those key people, train them and make them perform better as teams to deliver true value to your organization.