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?

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