IBX Purchasing Transformation Introduction (Test)

Introduction

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Sustainable Purchasing Transformation

Sustainable Purchasing Transformation Introduction by Leif Bohlin When I started my career in purchasing, only a select few industries saw this role as a strategic vehicle for success.

Most companies relied on the purchasing function to reduce costs and ensure supply quality and availability.

Today purchasing functions in every sector are playing an increasingly important role in corporate value creation.

Take a look at Dell or IKEA, two of the most successful manufacturing companies over the last 15 years, or examine the success stories Ryanair and Walmart. All owe their success to efficient purchasing and cost leadership.

In a fiercely competitive global economy, purchasing and the supply chain have become so important that, in effect, they have become a core aspect of any business model.

The evolution of the purchaser For years many purchasing organizations have taken the two-fold road of cost and compliance towards purchasing excellence. It’s the foundation of corporate purchasing, yet I’d like to add another parameter to this simple equation: the purchasing organization.

Leif Bohlin CEO IBX Group AB

In order to excel in purchasing and generate sustainable value, I believe that the purchasing function should rest on three pillars; the strategic sourcing process, compliance to corporate contracts and the focus of the purchasing organization.

Leif Bohlin’s has a solid industry background from the automotive industry. He spent several years at various managerial positions at Saab and General Motors. Prior to joining IBX he spent five years at AT Kearney and Booz-Allen Hamilton as a management consultant.

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Purchasing Transformation

In a recent report issued by Aberdeen Group, 65 percent of the 350 surveyed companies stated that expanding their organization to meet the demands of strategic purchasing was on the top of their agenda. This is because, in order to meet the supply market at eye level, the purchasing function needs to attract and retain talent. Competence asymmetry at the negotiation table should be seen as a cardinal sin of purchasing.

In Efficient Purchasing magazine (Issue 1, 2005), Bo Andersson, Chief Purchasing Officer of General Motors was quoted saying: “…the single area where I spend most time, [is] choosing and recruiting the right people.

I don’t personally make any decisions on which supplier to work with, but I am deeply involved in all important recruiting issues.”

In his eyes an efficient purchasing organization is a vital condition for success. I couldn’t agree more.

With supply chain issues on the corporate agenda, purchasing will start to be seen as a springboard for an executive career. Given that the purchasing function has a reputation for delivering results, purchasing is going to rise in corporate status. A higher status attracts the upwardly mobile.

As a result, I foresee a frantic hunt for purchasing talent during the coming years.

Getting the work done I’m the first to admit it – there is nothing new to strategic purchasing, but in a world where trade barriers are down, low-cost countries are increasing their manufacturing capacity by the hour and customers expect lower prices, the companies that have implemented a best practice purchasing function will emerge as winners.

So how does one identify a best practice purchasing function?

First and foremost, the purchasing function must focus on the big picture.

Gone are the days when a purchaser’s work was done after a hard day of negotiations. The modern purchaser knows that time spent in analysis, base-lining and sourcing strategy pays off in the negotiation phase of the strategic sourcing process. With modern tools and processes, the purchasing function will yield better results with less effort. Then, when VIII

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Sustainable Purchasing Transformation

the contract is signed, the purchasing functions ensure that the contracts are implemented and exposed to all affected users.

Savings on paper are one thing. Savings on the bottom line are something completely different. These savings will only be generated if the contracts are actually used.

Secondly, in order to be sustainable for the long term, the corporate purchasing strategy has to be in line with the business goals of the corporation and appropriate for the purchasing maturity of the organization.

Purchasing maturity is measured by the level of professionalism and competence of the purchasing function. It is expressed by the status and strategic position of the purchasing function within the organization and the usage of modern tools and processes for both strategic and operational purchasing.

Thirdly, the purchasing function must have the support and commitment of top management. Interaction between the major stakeholders (top management, business unit managers and corporate purchasing managers) is crucial. A center-led purchasing organization with a CPO that reports directly to the CEO and is part of the management team greatly improves the chances of successful purchasing transformation.

EFFORT

PREPARATION

NEGOTIATION

IMPLEMENTATION

TRADITIONAL FOCUS

OPTIMAL FOCUS

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Purchasing Transformation

Sustainable purchasing transformation When we initiated this book project, I was not sure where it would lead us. As I read the manuscript I started to hope that the book would inspire purchasing functions to assess their current situation and act on the results.

Why might it do this? Because this is not just another book on purchasing theory; it is a book that provides perspectives on a pragmatic approach to purchasing transformation drawing on hands-on experience. Authors Gustav Hasselskog, BjĂśrn Stenecker, Christer Hallqvist, AbdĂźlkadir Tekin and Ann-Sofie Flodin all possess deep purchasing knowledge and experience gathered from a variety of fields.

I urge you to use their collective writings as input into your purchasing transformation. Let their expertise guide you through the value assessment phase, help you design the best fit purchasing organization, increase your usage of strategic sourcing and provide you with vital insights into procurement and settlement.

Some say that you cannot teach an old dog new tricks. I beg to differ, if the motivation is strong enough, anyone can change. But at the end of the day, the transformation will only be sustained if the hearts and minds of those affected are reached. I hope that this book does just that.

As a final note, I’d like to thank Peter Lageson, co-founder of IBX, for instigating and fuelling this book project. Without him, this book would not have come to be.

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