Aggressive Initiatives Lead Purchasers to the Strategic Table

Aggressive Initiatives Lead Purchasers to the Strategic Table

By developing core competencies and vision, purchasing and supply managers can become prime players within an organization’s decision-making team

Over the past five years, the purchasing and supply management profession has undergone a major transition, requiring professionals to re-formulate their game plans for success. The procurement process has moved from a reactive, transaction-driven function to a strategic role that is increasingly more customer focused, integrated throughout an organization, and guided by value-added solutions.

Much information about this newly expanded and strategic role has been communicated in procurement workshops, seminars, and various publications.

However, many procurement organizations still find themselves, for whatever reason, bogged down in tactical, non-value-added processes. In these organizations, procurement personnel can hardly find time to become strategic thinkers.

In the procurement arena, it is never an easy task to make the transition from a tactical-based operation to one that has a strategic nature. The toughest part involves rising above the loads of paperwork and hand-to-mouth purchasing practices in order to develop new strategies that will help lead the organization to improved business results. Until an individual is fully prepared to show senior administrators and operating disciplines that the purchasing function is more than just an activity that obligates the agency to procure goods and services, he or she cannot begin to make a difference in the organization.

Getting to the “strategic table,” or the table where organizational decisions are made, still remains one of today’s toughest challenges faced by purchasing and supply managers.

What can be done to ease this transition and assure that purchasing and supply managers gain a seat at the strategic table? Although a number of possibilities exist, a productive start generally begins with a combination of individual discovery and fact-finding within the organization, open communication with senior administrators, collaborative thinking, and a thorough under-standing of organizational strategy.

The following mapping points can help purchasing and supply managers plot a productive course:

• Define your business.
• Understand organizational strategy.
• Determine departmental strengths and capabilities.
• Translate organizational strategy into procurement strategy.

Defining Your Business
Before purchasing and supply managers can begin to consider aggressive initiatives that will help lead them to the strategic table, initial steps involve gaining a good understanding of the business they’re engaged in.

Just as a salesperson should be well-informed about the product and company he or she represents, so should purchasing and supply managers understand their organization’s business and staff roles.

Imagine for a moment, a situation in which purchasing professionals are asked about what job they do for a living. Invariably, responses include “purchasing,” “procurement,” or “materiel management.”

However, working in the purchasing and supply management business means more than a department name or title. Purchasing professionals need to understand core competencies within the organization. They also need to develop insight into the “big picture,” which is essentially their role and how it fits into organizational strategies.

For instance, the District of Columbia Water and Sewer Authority operates the largest advanced wastewater treatment facility in the world. The organization provides retail water and wastewater collection and treatment services to notable customers such as the White House, U.S. Capitol, and a host of federal, commercial, and residential customers in the District of Columbia.

Thus, when asked about the business I work for, I reply, “I’m in the water distribution and wastewater treatment business, and the procurement function is an operating discipline that helps the Authority carry out its strategic objectives.” Although this definition sounds simple, its formulation directly relates to a core understanding of one’s organization and job function. Before gaining a seat at the strategic decision-making table, purchasers must be able to define and articulate details about his or her business.

Understanding Organizational Strategy
Purchasing and supply management professionals must first under-stand the organization’s vision and mission, along with the strategic plan necessary for the organization to realize that mission. However, gaining insight into the internal mechanics and intricacies of the organization does not occur overnight and without perseverance.

Purchasing and supply managers must first establish a foundation from which to deal with the daily challenges in the purchasing business, as well as build their own credibility within the organization.

Part of the foundation consists of defining and understanding the organization’s business. The other involves examining the organization’s overall strategy. While purchasing and supply managers may develop one or both of these skills to varying degrees, merging the two within the purchasing function is critical.

As purchasing professionals become familiar with organizational strategy, this knowledge must serve as a beacon that guides them in every aspect of the business. They must also ensure that through effective leadership, subordinate staff have a broad perspective of the organization’s strategic direction.

For instance, if a buyer is responsible for purchasing plumbing or electrical supplies, quality and reliability are generally important factors to consider during the sourcing process. However, to put these factors in perspective with regards to the total organization, the buyer needs to understand supply predictions for the entire year, as well as financial targets and frameworks.

If buyers and other procurement professionals do not have that “broad perspective,” and if they lack vision or understanding of organizational goals and how these goals drive purchasing activities, then they cannot contribute real value to the organization.

Determining Departmental Strengths and Capabilities
Although the view that purchasers perform a tactical, non-strategic function is slowly waning, this mindset can still present a critical obstacle for purchasing and supply management departments. When organizations discuss long-term strategies, three primary reasons may prevent the purchasing and supply management department from being invited to the strategic table:

1. The organization doesn’t regard the department as a strategic player.
2. The department hasn’t demonstrated strategic initiatives.
3. The department has difficulties executing its core responsibilities.

Before the task of developing purchasing strategy begins, the procurement department should first assess its capabilities in executing core responsibilities. If purchasing and supply managers are struggling to keep the departmental ship afloat, chances are great that no strategic successes are occurring.

To help senior administrators understand that the ideas of the purchasing and supply management department are important to overall success, purchasing managers should demonstrate capabilities in meeting current objectives. Similar to football, practices related to good, solid blocking, tackling, running, and passing are basic fundamentals that must be mastered before strategic objectives can be undertaken. By demonstrating effective sourcing practices and achieving results, the department will gain the confidence and respect of the organization.

Shortly after assuming my new role, two years ago, as Director of Procurement at the District of Columbia Water and Sewer Authority, one of my initial goals was to position the 40-person department as a strategic player within the organization. After defining the business and becoming familiar with the “big picture” in terms of where the organization was headed, I realized that to become a strategic player in helping the organization achieve its long-term goals, the department needed to begin mastering tactical areas of the business.

At that time, the requisition-to-PO (purchase order) processing time for informal quotes was 30 to 45 days. For formal bids, the cycle time was more than 120 days. Given these performance numbers, I knew that it would be nearly impossible to gain management’s acceptance and be viewed as a positive and credible contributor to the business until purchasers learned to get basic goods and services to our customers quick-ly and efficiently. These factors relate to the fundamental aspect of the business.

“The purchasing and supply management department must begin to move outside of its traditional role as facilitators to a new role as value creators.”

Following a three-month process improvement initiative, the purchasing department managed to reduce the requisition-to-PO time for informal quotes to 10 days. For formal bids, the time was reduced to 45 days (including a 30-day advertisement period).

As a result, the purchasing depart-ment’s reputation for fulfilling basic needs of the organization was elevated, and purchasers found themselves in a position to begin instituting new practices that would help the organization improve business results. Once those traditional functions are operating like a well-oiled machine, the next logical step is to advance into strategic territory.

Translating Organizational Strategy Into Purchasing and Supply Management
Moving into strategic territory begins with defining the business, gaining a comprehensive under-standing of the strategic goals and direction of the organization, and translating organizational strategy into procurement strategy.

Translating organizational strategy into procurement strategy consists of the following two steps:

1. Gaining a proper understanding of where the organization is headed strategically.
2. Based on this understanding, determining how the purchasing and supply management function can best serve the organization in carrying out its strategic mission.

The purchasing and supply management function must properly align with organizational strategy. Otherwise, it is difficult to garner executive-level support for purchasing initiatives.

By aligning with organizational strategy, the purchasing department will know why its activities are important to the organization. In addition, the alignment ensures that purchasing projects and tasks gain agency-wide recognition and contribute to the organization’s strategic direction.

To become a leading-edge purchasing and supply management organization, managers cannot continue doing things as they’ve always done them, without moving into total business concepts. To be truly strategic means to take the initiative and find uncharted waters where new opportunities to add value can be achieved.

What areas should be explored that can accomplish strategic objectives and provide possible revenue enhancements for the organization? This question is particularly important, given the current economic environment where diminishing revenue streams prevail.

In addition, the question is one of many concerns that should challenge purchasing and supply managers, as they scout entire “packages” of value attributes that span functional areas and groups within the organization. The purchasing and supply management department must begin to move outside of its traditional role as facilitators to a new role as value creators.

When purchasing and supply managers look for areas to add value in an organization, senior administrators, legislative bodies, and business units begin to appreciate their judgment and decision-making abilities, as opposed to a tactical mind-set. When purchasing and supply managers look at other operating disciplines within the organization, they not only strive to provide basic procurement requirements, but are also looking for ways to bring new and creative ideas to the table, based on viewing these disciplines from a strategic perspective.

Bringing Value to Overall Operations
At the District of Columbia Water and Sewer Authority, I believe that everything that my department engages in ultimately impacts our customers who drink our water and depend on reliable wastewater collection and treatment services.

Relating to this philosophy, I believe that my department must efficiently handle the purchasing and supply management business. As such, other operating disciplines within the organization need not spend enormous time thinking and looking at an array of new and different products and services that would distract them from their focus of providing safe drinking water to the public. With these goals in mind, purchasers can bring value to the table of operating disciplines.

In another example, during February 2004, the District of Columbia Water and Sewer Authority experienced a significant increase in the presence of lead in drinking water. After numerous tests, results determined that the increases were due, in part, to a combination of aging pipes and possibly a new chemical added to the water treatment process, causing corrosion.

Drawing on the Procurement Department’s knowledge and expertise of the industry, suppliers, and products, negotiations were conducted with three national suppliers. As a result, 35,600 water filters, pitchers, and replacement cartridges were donated, at a savings of $500,000.

Besides negotiating sizeable donations with suppliers, the Procurement Department was directly responsible in setting up a cradle-to-grave distribution process for supplying the filters and pitchers to customers. The process involved an outside order fulfillment center, which was contracted to package and ship the filters, track them through internal bar-code technology, and update a customer information database.

In addition to playing a key role in developing the distribution process, the Procurement Department served as project manager, overseeing the distribution program and contract. This management role led to our subsequent involvement in developing a similar distribution process for a major lab analysis testing service, where we also served as project manager once the contract was executed—a role normally carried out by operating disciplines.

By confronting the challenges presented by lead found in water, the purchasing department also elevated the strategic importance of the purchasing function by contributing creative and value-added solutions. The results of these efforts led to the department being invited to subsequent all-hands meetings, where organizational decisions addressed the problem of lead in water.

Today’s leading-edge purchasing and supply management organizations are well-rounded “total package” businesses. They under-stand that meeting the organization’s objectives means assuming a role beyond sourcing and supply-side activities. In this new role, the purchasing function must have the capacity for creating and sustaining a competitive advantage for the organization. This role is particularly important in today’s economic environment, in which private firms are becoming more eager to promise elected officials and senior administrators that outsourcing can perform certain government services cheaper, better, and faster.

Therefore, it behooves public purchasers to begin stepping up to the strategic table by acquiring the skills and abilities needed to affect the total business. Knowledge and expertise gathered from a clear under-standing of the industry, suppliers, and products can enhance a purchaser’s position in the organization. These core competencies can lead to involvement in strategic initiatives whereby purchasing and supply managers can share in the results with other stakeholders.

To advance in their profession and organization, purchasing and supply managers should have the paramount thought of “strategy.” If you, as an employee, are not involved in strategic planning within your organization, start figuring out how you can become involved. Your department, internal and external customers, the organization, and the purchasing and supply management profession have much to gain from your involvement.

Editor’s Note: Roger L. Ball, CPPO, CPPB, C.P.M., A.P.P., is Director of Procurement Services at the District of Columbia Water and Sewer Authority, based in Washington, DC. He has 18 years of experience in managing purchasing and supply management organizations at federal, state, city, and county levels of government. Ball focuses on strategic procurement, process improvement, and increasing efficiency and credibility within the procurement function. Currently, he is an instructor for the National Institute of Governmental Purchasing (NIGP), and he has presented many workshops and seminars. During 2001 and 2002, Ball served as President of NIGP’s Metropolitan Washington Chapter. In 2001, he received NIGP’s Robin J. Zee “Best Practices” citation for successfully implementing trend-setting practices. Readers who have any questions or comments about this article can contact Ball via e-mail: [email protected].