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15 January 2013 | Adam Leach
How can procurement work more closely with product design teams? Adam Leach talks to purchasers who enjoy successful partnerships.
At the end of last year, Siemens publicised plans to cut costs across the company by €3 billion (£2.4 billion) by 2014. One measure it announced was the intention to implement a ‘design to cost’ approach to product development.
This method mandates that procurement is consulted at the start and right through to the launch of a new product. This enables buyers to play a more strategic and collaborative role in the process, so outcomes that meet both supply requirements and design priorities can be achieved first time, as opposed to procurement entering the process at the last minute and being seen as taking things away to lower costs.
This early involvement can expand the influence of procurement and enable the function to deliver greater strategic value to the design team and the wider organisation. As Lisa Callow, sourcing manager at drinks manufacturer Global Brands explains, bringing procurement in early enables the two teams to build a stronger relationship and align their goals more closely. “Early involvement makes for an easier working relationship between people from different business areas. It prevents feelings of procurement ‘swooping in’ and changing things, or of appearing negative towards concepts that people have spent time developing.”
It also saves time. “Involvement at this early stage enables the procurement team to fully understand the brief, objectives and thought process of the design team. It also creates a working group that is more efficient from the outset, saving time catching up or from going down the wrong avenue later on in the process. It ultimately saves time for the project as a whole.”
At Premier Foods, procurement works closely with colleagues in new product development (NPD), recently collaborating on the launch of a new stock melt – a stock cube alternative – under the Bisto brand. The two teams worked closely to negotiate limitations on materials and suppliers imposed by a rival firm’s patent.
“We had to be very creative and innovative in getting around patents that prevented supply or competitive products in the market and procurement was right in the middle of that, working closely with the key suppliers to deliver the right solutions,” says Jeff Arlott, group procurement supplier relationship manager at Premier Foods.
Involvement from the get-go can also be a big motivator for buyers. “With the stock melts, a couple of our buyers went through that whole project, working closely with suppliers, gaining personal recognition from it and also a sense of achievement that they’ve done a lot to contribute to the success of the project,” Arlott adds.
But where there is no mandate for procurement’s involvement, there can sometimes be hesitation from designers to bring in the buyers.
Mike Inman, former head of global procurement at MGM Resorts and now a negotiation coach, has encountered such resistance: “I believe it is because procurement has a reputation of being the ‘price police’. That’s viewed as a positive to a short-term-thinking finance person, but ends up being a negative to a budget owner who has a longer-term total cost of ownership view.”
Larry Beard, chief procurement officer at Tate & Lyle, has also encountered this and understands why designers feel this way. “Purchasing can be viewed as a hindrance, something that slows down the process and, in some cases where the purchasing people have not had the necessary skills, this has been true,” he says.
Hannah O’Reilly, a category manager at retailer Sainsbury’s, explains that they originally encountered hesitance, but were able to turn it around. “Initially, the perception was that procurement would only focus on cost cutting rather than balancing value with service, quality and performance criteria,” she says. “At Sainsbury’s, we work to demonstrate that we look at a total lifecycle cost approach and driving best value for the business, whether this be through service, cost or sustainability. We don’t necessarily advocate the cheapest but the right approach to meet our balanced corporate business objectives.”
To ensure the process runs smoothly, good communication with the design team and other relevant stakeholders is key. Callow highlights the importance of procurement publicising itself and its successes by getting out and meeting with the various teams.
“Procurement departments should make the business aware of their successes not just individually, but also when as part of a cross-functional team. The team should also be accessible and approachable to the business and key stakeholders and take an active interest in the challenges they face. This can be achieved by spending time in their stakeholders’ departments, even if purely to hot-desk so that they have a visible presence.”
At Sainsbury’s, O’Reilly says the team has worked to make itself dependable to improve how it is viewed by its stakeholders. “This is about good stakeholder management and understanding the stakeholder’s wants and needs. We look to build relationships and trust through showing that we listen and incorporate these needs in what we source. We make ourselves a dependable sounding board through knowledge of our product areas and supply chain, building our credibility with design stakeholders.
“We get our design stakeholders involved in our supplier relationship management programmes in order to build their confidence in our capabilities and see this as a further source of innovation. Finally, we try to be seen as being critical and challenging in the right way, rather than being seen as a blocker.”
Arlott also advocates the value of a strong track record. “Nothing beats having a history of delivering on expectations and hitting relevant targets and dates. It’s on procurement to demonstrate to the wider business, the value of engaging with the team and the value that procurement can bring,” he says.
With economic pressures continuing, applying greater cost control in design and manufacturing is a growing trend. But for procurement to remain involved after the first meeting, once the pressure has lifted buyers will need to prove they can deliver through strong engagement, hitting targets and up-to-date market knowledge. Without that, the negative views of procurement could return, even after success.
Influencing product design
Jeff Arlott, group procurement supplier relationship manager at Premier Foods, gives advice on how buyers can get more involved in the design process:
● Identify your key stakeholders and open the appropriate dialogue.
● Understand and be clear about what it is that they are looking for and what their limitations are.
● Ensure the procurement strategy is aligned with the relevant brand plans. There’s no point creating a Rolls-Royce when they want a Mini.
● Communicate what you’re doing with the wider procurement team and ensure they all play their part.
● Get some quick wins under your belt to start building confidence and trust that procurement can deliver what it says it can.
● Start segmenting category suppliers so that your team can provide in-depth expertise on what is on offer in the market.