The power of purchasing

Many organisations, if not the majority, have no idea just how valuable their purchasing department or logistics chain are to overall business success. With technology continuously revolutionising the way we do business, it is time we understood just what our purchasing specialists do and why they hold the key to our future.It is a little known fact - outside of the purchasing department - that for every Dollar, Deutschmark or Dinar saved by a purchaser, there is usually at least a twofold return to the organisation on that saving be it in customer delivery performance, customer retention, asset utilisation or elsewhere. Indeed, the supply chain is all about how an entire organisation can effectively and efficiently deliver value to their customers, thereby creating for themselves true competitive advantage.

But all too often this is a great opportunity wasted. Although the supply chain is critical to an organisation's future prosperity and even survival, and it represents perhaps one of the greatest marketing opportunities that exists today - it also remains one of the least visible and little understood of all business functions. Arjan van Weele, NEVI chair for purchasing and supply chain management at Eindhoven University of Technology in the Netherlands: "In my experience, in just about every company today there are still significant savings and cost reductions possible, through efficient and effective supply chain management.

But the amount of companies I see that actually know how to leverage these
savings are few and far between." That's why it is high time the purchasing function was promoted to the centre stage of business strategy and the purchasing department given the visibility it deserves.One of the main reasons that the supply chain has grown so rapidly in importance is as a result of the arrival of new technologies, and in particular the Internet. By providing direct access to global markets, the Internet allows suppliers to add real value to their clients through customised products and services and best value for
money. Many of today's smart companies are already doing this - Cathy Neuman, deputy global e-business practice leader for PricewaterhouseCoopers, however, believes this process has much further to go.

Eventually, she says, the "E" in e-business will be gone, "electronic business will evolve to such an extent and its impact on business will be so pervasive there will be no need to distinguish between the two." "Ultimately," she goes on, "E-business will change the definition of the 'industry' and recast relationships between businesses." She sees this happening in three stages :The establishment of an Internet presence or channel "actively integrating and connecting the buying and selling processes of their websites into back office, customer and marketing systems." The active integration throughout the value chain of web capabilities. "Here, customers and suppliers work together to build on-line value chains that improve service and reduce costs." Businesses of all kinds will converge electronically to combine their expertise and provide packaged services. They will push the edge of their current e-business capabilities to transform their strategies, organisations, processes and systems so that they can better meet the needs of their customers. The focus here is on building trust.

There is little doubt that Neuman's predictions are not far off the mark. And that means that companies that work at getting to grips with their purchasing power may well see their competitors get their grip on it.Proclaiming the power of purchasingAll too often in today's lean and mean corporate machine, the purchasing department is still hidden away, lacking any kind of visibility or understanding and enjoying very little senior management support. But this can and will change starting from within if purchasing specialists are encouraged to:let the figures do the talking: advertise to the rest of the organisation how much has been saved through a well-timed report on organisational costs savings - remember to include internal customer benefits meet and greet develop face-to-face interactions with each and every business unit within the organisation to show what purchasing and supply has to offer personalise your messagetake time to go to the internal customers' departments and find out how the items or services you'll be purchasing on their behalf are used.

It has been proven that purchasing departments that use networking, foster a ripple effect throughout the organisation and often have a higher internal customer satisfaction rate communicate, communicate, communicate - and the best way to do that is using the company's Intranet (if they have one) and Internet sites. Through this far-reaching technology potential suppliers can learn how to do business with you and internal customers can quickly find out who is responsible for what product or service - the Internet may well be the purchasers' best friend in this new millennium!