Monday, February 11, 2008

I asked for Purchasing and no one answered

My Father spent 30+ years working as a CPM (Certified Purchasing Manager) for Burroughs Corporation here in Michigan. When Sperry and Burroughs united to form Unisys he stayed on as a CPM. I spent nearly 12 years on that side of the table as well carrying such titles as "Purchasing Manager" and "Buyer". Then I left that career to hop onto the other side and I went into sales. Why?

For those 12 years I was in purchasing, I saved my respective employers more than I was paid each and every year. I took pride in reducing costs every year without reducing quality or lead time. For some reason though those major accomplishments were never acknowledged by the owners of the company or my immediate supervisors. All I would ever hear when I bought something was, "Did we really need that?" or "How much did that cost?". It became comical and I enjoyed shaking my head at them after they would leave my office knowing at least in my head what a fantastic job I was doing. They would always sweat the pennies and ignore the dollars. Too funny.

Then it happened. The first time I heard it was in the hallway outside of my office. The same accountant (son of the owner) who just chewed me out for spending a few bucks on a new bar code reader (we now barcoded everything and had no method for making sure the barcodes were readable on the cardboard boxes so I bought a scanner that cost in the area of $200) was in the hallway praising the sales manager for hitting such a great number the previous month. I withhold making any obscene comments here about brown noses and such for reasons that I am trying to be politically correct. Hmmm, politically correct? That sounds like another blog for another time.

Then I found out that this sales manager was receiving HUGE bonuses based on increasing sales every month. I ran a few numbers and it was 100% true that I actually saved the company in my frugal purchasing MORE than the sales team made us in profits for most months during the year. The bottom line was blacker than ever but not just because of sales but because of purchasing. Yet all of the credit was given to sales and the bonuses too. Ultimately that is why I left purchasing for sales.

Back in the 1980's I had an idea to manage companies inventories and purchases. That is, I thought myself to be such a great buyer that I thought I could manage several companies inventories, reduce their costs and I would work on a percentage of what I saved them and I would take NO salary. A win/win situation and a brilliant idea if I may say so. I'm gonna stop right here with taking credit for the commodity management idea as I won't argue who came up with it first.

The concept of commodity management or whatever we want to call it has really become turned around in many instances. I see it first hand that the only one benefiting from this relationship is the commodity manager. This only holds true for those companies who have eliminated their purchasing department in lieu of hiring a distributor to handle their buying. It is like putting the fox in charge of the chicken coop. Yes, I live in the country but I do not have any chickens....yet.

So why have so many manufacturers abandoned their purchasing departments? Do they believe they are saving money by reducing salaried employees, reducing benefits paid to them and getting a signed agreement that they will save X% on their purchases? This argument through accurate in a surface only skim of the formula holds true but look a bit deeper and its all wet. A good buyer cares about his company. Who do you think the commodity manager's company is? Clue: It's not yours!

A good buyer seeks out the best supplier. I didn't say the cheapest I said the best. After all, the old adage that my Father taught me still holds true today: "You get what you pay for." Period. Many, not all, commodity managers want to sell you the products that they make the most on. For example: Let's say that you hire Distributor A to do your commodity management. Distributor A has a long relationship with Carbide Insert Manufacturer B. The first thing A wants to do is convert all of your Carbide Inserts over to brand B. You may even be blinded by the small savings they present to you. I wonder what a professional buyer could have done? What if Manufacturer C has a wonderful new Carbide Insert that will cost half as much and run twice as long as Manufacturer B has? You may never know it because A doesn't sell (represent or distribute) it. A buyer, on the other hand, could allow this new company past the front door, speak to them about these new inserts and get samples for testing.

I think the best scenario is to have your companies purchasing managed by your companies purchasing department. I didn't say that all of the commodity managers work this way but many of them do. You decide: Purchasing Department or Commodity Manager?

At www.toolinghouse.com we offer you the right tool and the right price. Great Tools - Great Prices. It's on our site, it's trademarked as our slogan. It holds true because it is the words that I founded the company on. It doesn't say cheap tools - great prices. It says great for a reason. Our cutting tools are superior quality - guaranteed. After all, "You get what you pay for" and we offer the best of both worlds - the best tools at the best prices. Try us today and I know you'll be pleased.

Sunday, February 10, 2008

Coffee makers and throw away mentalities.

This is a long one - get your coffee, tea or favorite beverage in hand and sit back.

My coffee brewer stopped working this morning. It wasn’t the biggest problem as, any coffee lover has, I had another new machine in the closet just waiting for its chance to turn out a fresh brew for me. How clever I thought myself to be as I dug past the other backups that I already purchased for other items to find my backup coffee brewer. Then it dawned on me how sad it really was that I actually had thought enough ahead to realize that my “New” coffee maker would need a backup. After all, the one that just stopped working is seven months old and of course one month past its warranty date. This is about the time when I realized how accustomed we have become (or maybe it’s just me) that things wear out, sometimes possibly prematurely and we simply replace them.

Some of you may know that in addition to my unhealthy love for cutting tools, I am, or at least once was an avid bowler. I love the sport. I remember when particle bowling balls came out and everyone bought them because “they hooked early and they hooked more” than the old balls. A sales technique that is still applied to the hundreds of bowling balls released as “New-hooks more” every year. When my particle ball wore out after about 50 games and stopped hooking. I logged onto my favorite bowling chat room (See I do have other addictions) and asked why we should expect to pay $200 for a bowling ball that wore out so fast? Thinking myself to be the champion up-riser against the evil bowling ball producer machines I sat back and waiting for the chat rooms replies. Remarkably I began receiving reply after reply telling me to go get another ball and to just deal with it. Here are some paraphrased excerpts:

“So, the ball wore out? If you average 219 like you say you do then it was worth it.”

“Nothing lasts forever, get over it and go buy a new ball.”

“That ball probably paid for itself with jackpots that you won. So what is the problem?”

This was in the late 1980’s or early 1990’s and it dawned on me that we now lived in a throw away society. When did this begin? How did I miss the memo that things are now disposable? Does this apply to everything or just certain things? I was behind. I felt like it was 11th grade accounting all over again and I would never get to the surface again. (Please note uncanny, remarkable and never done before comparison to drowning) _

So here I am 20 years later and I now own backups for many things that I own. Would you believe that for many years I even had a backup car!? It is true. Being in sales and having to service the customer it was very important that if my car didn’t start or couldn’t go for whatever reason, I had a backup car. Pretty sick in itself but for me not to actually realize that 20 years later I had all of these backups, that I had fallen victim to the same delusions that these bowling ball people had so long ago, surprised me to say the least.

So, what else did I have backups for? Why not the dishwasher, stove or refrigerator? I thought that perhaps I was unprepared. After all, just a few years ago, I bought a generator and wired it so I could still have all of my creature comforts if the power went out. Actually, living in the country I can justify this last purchase but I mention it anyway. So why do we accept this “throw away” mentality? Has it always been like this?

Growing up in the suburbs of Detroit I was around autos my whole life. I remember when you’d see “rust buckets” drive by with so much rust on the car that you could see what the driver was wearing. I once owned a car that had mats in the backseat to cover the holes in the floorboards. Holes that let you see the concrete if you were sitting in the backseat! The carpet mats were the solution to the issue as seen through the eyes of any 17 year old. But now, I don’t see any rusty cars on the road. None. Why? Because we live in a throw away society? Perhaps.

The thing is that many of us have come to believe that we should only borrow cars for a couple of years pay Mr. Manufacturer $300-$600 or more dollars a month for this privilege and then simply give it back after two or so years all the time carefully watching our mileage. Even worse is the up-front cost of thousands of dollars all paid in the interest of getting lower monthly payments. Think about that for a minute and get ready for a major realization. Maybe I am different than most but I like to drive. 10,000-12,000 miles is about three months worth of driving for me. Can I stretch that out over 12 months? Nope, I cannot do it. Now, don’t jump all over me because I know that leasing or borrowing as I like to call it does have its positive points in certain conditions. I had to use it because it is a great example of our throw away society. Do you know that I have a younger cousin who just got married recently whose new bride (a wonderful and fun loving person) told me that she desperately needed a new car because the one she was driving had almost 12,000 miles on it and was old? Even now, in writing this I had to sit back, scratch my head and make that “say-what?” face as I think about her statement. I’ve owned a few cars in my lifetime and I can think of only two that I bought that had LESS miles than that on them when I bought them. Old school or just old? Not sure what that makes me.

So, I guess we must accept this throw away society that we have created and worse yet accepted for ourselves. It got me to thinking about cutting tools. (You knew where I was going with this so don’t roll your eyes) I tend to think as any good manufacturer/supplier of goods or services would, that my product is superior to my competitor’s. I think this because it is true. My toolinghouse products are superior to the competitions and they cost less too. Shameless plug, evil marketing tool, or simply the spoken true word. You decide. But I will say this, if my tools wear out to what I believe to be prematurely or what my customer believes to be so, I will look at it closely. I will try to change a coating or a helix angle on an end mill to get more tool life. I have never, and I will never tell a customer things like: “Tools wear out – get over it – buy more”. Its just not me and never will be.

After carefully considering the facts, I can honestly say that although cutting tools by nature do wear out, I believe that I provide my customers with the hardest working tools that last for the maximum amount of time and that I provide the best tools for the job. Check us out at www.toolinghouse.com and let us prove it to you. I wonder if my coffee making machine manufacturer would say that. I don’t know because I didn’t call them. I just pulled another pot out of the closet and created my dark brew of life.

By the way, I just remembered that I DO have an extra refrigerator in the garage. So the saga continues…