Thursday, June 22, 2017

Reengineering of purchasing is a major rethinking and total redesign of companywide buying practices.  The objective is to obtain a tremendous leap in the supply chain elements such as quality, cost, technology, cycle time, inventory levels, lead-time, transactions and total cost of ownership. The barriers to achieving this major improvement are numerous and intense.  There is limited or no top management perception of the role of purchasing and often insufficient license to operate.  Out of date attitudes towards purchasing among other departments often thwart the process.  Management often permits other departments to define what they want purchasing to do which typically is a blind subservient service department that meets their non-value adding perceived needs. Purchasing departments are typically bureaucracies’ rift with disabling policies, procedures, and redundant controls.  Purchasing reports to different functions in different companies. This just adds to the confusion about their role. Often antiquated information systems with little or no value for purchasing are mired in place.  Many corporate hierarchies and organizational structures militate against letting purchasing "play in their sandbox."  A very high percentage (over eighty percent) of purchasing departments remains solidly traditional.  This inability to change or even progress remains a mystery for the many purchasing professionals.  According to Jack Welch CEO of General Electric, "The only two departments in a company that generate revenue are sales and purchasing. Everyone else is overhead." He is dead right. The problem is that the overhead departments rule most organizations.