Given the divergent interests of different departments in a company, can changes to the purchasing organisation significantly improve the functioning performance of the Buyers team? How to overcome obstacles to ensure that the purchasing department is effective?
The new approach is the basic
The inherent feature of innovative purchasing organisations that adapt worldwide standards of purchasing operations is building technical and commercial specifications based on dialogue and purchasing process management. The basis for creating each specification is not its features, but the need and product functions. For this purpose, there is a dialogue between the purchasing department and the internal client who shares its professional knowledge. As early as at the stage of designing the purchase of a product or service, the company already understands where to look for major savings. It also realises that the process cannot be effectively completed without the purchasing function. It should be noted, that the internal client will always be “indolent”, therefore the initiative of effective communication will have to come from the purchasing organisation. At the same time, it is assumed that the internal client will also pursue to obtain the best product, regardless of the actual needs of the company and the price to value ratio. If there is no other function with different objectives in the enterprise (see: experienced purchases), then savings will certainly not be achieved. Naturally, such divergent interests may cause tensions between departments, but this is an integral part of the art of negotiating with internal clients – to respectfully make the client realise that its expectations are irrational or schematic.
Considering the significant investment outlays or exploitation in different sectors, the cost of not defining the role of the internal client (a professional organisation) and the purchasing function may be decisive for the profit and loss, or multimillion savings and no savings at all.
The transition from meeting the demands to the dialogue about necessary functions and standardisation early in the first optimisation step may generate savings of up to 10%!
Beyond your comfort zone
Day-to-day functioning of the purchasing department surrounded by internal clients becomes even more complicated when an organisation decides to change the manner it purchases. Over time, the purchasing organisation becomes aware of its limitations, more solid and unwilling to change the way it performs its activities and actions. Further saving achievements are not that spectacular anymore and become far more predictable on an annual basis. However, this is a stabilisation carries a hidden threat: as any other organisation, the purchasing is developing its own “comfort zone”, a well-known area and forms of communication with other departments in the company. With the current ever-changing business environment, it becomes necessary to adjust market requirements in terms of purchasing, its functioning, structural and personal organisation. In the 21st century, the buyer is a specialist in adjusting the strategy, searching for innovative solutions, creating new challenges for the internal client, building long-term partner relationships with suppliers and in strategic negotiations.
This is a demanding task – when the environment and tools fail to support the quality dialogue with each of the mentioned internal clients, then the purchasing department’s activities bring no or insufficient effects. Therefore, today’s purchasing organisation should dynamically adapt to changes, and impose the same approach on its internal clients. There is a long way ahead for purchasing and especially supplies departments to attain this achievement. Surprisingly, it is often entities with State Treasury participation, and not private companies, who make greater progress in this area. Being relatively newly-built, the purchasing organisation within the structures of such entities and institutions, has at its disposal a wide range of innovative skills and tools. On the other hand, entities convinced about the advancement of their purchasing, including those from such dynamic sectors as FMCG, on many occasions neglect the dynamics of the purchasing organisation development by keeping to their “comfort zones”. Therefore, it is worth to remember that continued improvement, searching for new methods and solving implementation issues, similarly to the Japanese “quality circles” – should be one of the key objectives for purchasing teams.