How to Convince Top Executives of the Value of Purchasing

By Tom DePaoli

March 02, 2015 at 4:24 AM

Purchasing has continuously demonstrated their impact to the bottom line of an organization. It has been well documented and universality recognized. Then why do many companies refuse to take advantage of this cost-saving resource? Why do executives still remain skeptical of purchasing’s value? In many organizations purchased materials and services account for over 50% of the cost of goods sold; yet purchasing is often relegated to a bureaucratic mundane dungeon of clerical functions.

Some of the fault lies in purchasing itself. Purchasing personnel are notoriously inept at marketing and selling their ideas and suggestions. They are often a harried bunch running around from firefight to firefight. Most do not even have a good or comprehensive communication plan. They fail to “toot their horn” or market their successes. Purchasing fails to tell their story compellingly and neglects to sell their importance. Other departments either ignore or politely humor purchasing. Purchasing remains the chief cost driver or cost saver for many companies, yet often purchasing is remarkably under-resourced and underappreciated. 

One-way to sell purchasing’s importance is to empower as many other employees as possible to participate in purchasing especially on cross-functional sourcing teams. Involving as many personnel in constructive purchasing activities educates them on the value and importance of purchasing. This is a bottom-up approach to educating employees on the value of purchasing. It encourages them to contribute their ideas about improving services and products. Purchasing needs to strongly persuade other departments to participate in purchasing processes and decisions. Purchasing all too often fails at what I call the empowerment of employees and internal public relations.

But what can purchasing do about the top executives or top-down? Many executives have stereotype views of purchasing. One of our most successful methods to convince top executives of the value of executives is to encourage direct one-on-one collaboration with executives of your suppliers; especially ones who you are partnering with who realize the relationship is long-term. Exchanging ideas at this level not only yields great results, but also expedites decisions and removes bureaucratic barriers to success.

The fact is that purchasing also runs its own Research and Development (R&D) department. Suppliers, in collaboration with purchasing, are perhaps the most cost effective R&D function in a company. Jointly they often come up with leaps in technology and transformations in products. When they cooperate they can transform a company and its products. Breakthroughs that occur via this method should receive as much publicity if not more than those developed internally! 

In summary, getting purchasing valued for its great contribution to revenue requires both a bottom-up and top-down approach. Empower as many employees as possible to participate in purchasing and solicit their ideas and suggestions. Set up one-on-one executive exchanges with your supplier executives. Finally, systematically create a strong marketing plan to communicate your successes.

 




Tags: purchasing Supply chain management Procurement sourcing
Category: Blog Post

Tom DePaoli

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Dr. Tom DePaoli is the Management Program Director at Marian University in Fond du Lac, Wisc., and the Principal (CEO) of which does general business consulting in the supply chain, Lean Six Sigma and human resources areas. Recently he retired from the Navy Reserve after more than 30 years of service. In other civilian careers, he was a supply chain and human resources executive with corporate purchasing turnaround experience and Lean Six Sigma deployments. He is the author of eight books and numerous articles. His Amazon author’s page is https://www.amazon.com/author/tomdepaoli

 


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