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People, Not Processes, Are Important in Purchasing Operations

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Purchasing is the very first step towards operations for a company. It is the duty of purchasing managers to know exactly what and how much to purchase to maintain the perfect inventory. This article discusses a survey by McKinsey & Company which proves that purchasers are more important than processes.

McKinsey & Company conducted a survey with the Supply Management Institute of the European Business School to assess the performance of companies in conjunction with recognized best practices in purchasing and supply management.

The responses were analyzed along four dimensions:


  • Capabilities and cultures of purchasing professionals and their organizations, respectively
  • Corporate structure and systems that support purchasing
  • Management techniques and business processes supporting them
  • Contribution of purchasers to their companies and the extent of the alignment of purchasing with corporate strategy
Purchasing executives at 202 companies were surveyed, and it was found that those setting the pace in purchasing best practices differed from ordinary companies along three talent dimensions.

First Talent Dimension

In analyzing the capabilities of purchasing operations, it was found that top-performing companies were five times as likely as ordinary performers to hire purchasing managers with analytical expertise and general management backgrounds, apart from in-depth knowledge of a particular purchasing category, such as packaging.

Moreover, purchasing heads at big companies were six times as likely as managers at low-performing organizations to have experience in other functional areas, such as product development or engineering.

Seventy-six percent of the high-performing companies provided proper training for their purchasing staff, compared to 11% of the low performers.

Second Talent Dimension

The second talent dimension took into account the perceptions purchasers had of their roles in their companies. Among purchasers employed by top performers, 69% felt that their bosses expected more from them than the ability to cut costs, while 81% of these purchasers articulated a clear vision for achieving other goals.

However, out of purchasers employed by low performers, 49% believed that their bosses viewed purchasing as a limited support function, while almost two-thirds saw little indication that this mindset would change.

Third Talent Dimension

High performers were more likely to involve purchasing executives in business planning than other companies. For example, it was found that 80% of the top companies involved purchasing executives during the product development phase. Ninety percent of the top companies allowed purchasing managers to work with sales and marketing executives.

Top-performing companies hire better sourcing employees, provide them with clearer performance goals, and have solid purchasing cultures that encourage purchasing employees to align their decisions with corporate plans.

From their overall sourcing efforts, top companies also enjoy annual cost savings almost six times as great as the savings of low performers.

Conclusion

These findings suggest that while technology and processes are important, purchasing managers and purchasing staff make the biggest difference. According to the survey, creating a high-performing procurement organization starts with managing people, not processes.
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 best practices  experts  engineering  managers  endowments  procedures  businesses processes  details  product developments  general management


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