Points of Linkage
At least six points exist in this design process where purchasing can or should provide information and advice on the services, components, and materials that the company will need to buy.
In the investigative phase, purchasing should help establish price, performance, timeliness, quality, and reliability objectives and pinpoint the trade-offs among them. Later in this stage, purchasing must inform other departments about various suppliers’ abilities to meet these objectives. After engineering has developed alternative conceptual solutions to the agreed-on objectives, purchasing should determine economic and scheduling implications for necessary materials, components, and subassemblies under each option.
The several design reviews held during the laboratory phase also need the involvement of purchasing—especially in terms of deciding on the use of standard items available from, and stocked by, two or more suppliers. These reviews must carefully weigh the trade-offs between the improved performance made possible by components incorporating state-of-the-art technology and the reliability and cost advantages standard items offer.
After the design process results in a manufacturing plan that, in turn, leads to a procurement plan, purchasing has the responsibility to challenge requirements that are uneconomical or otherwise not in the company’s best interests. Further, it must do so before the company commits itself to a particular design configuration. Purchasing should also encourage vendors to offer cost reduction suggestions at any time while they are supplying an item.
Finally, changes in an item’s configuration during manufacturing may have significant cost or delivery implications. Purchasing, together with manufacturing, marketing, and inventory control, should help evaluate such engineering change requests.
Connection with Engineering
Ideally, engineering will solicit—and purchasing will aggressively seek out and disseminate—the essential information about the supply environment called for by an integrated development system. In practice, old habits and procedures are extremely resistant to change. Accordingly, senior managers must recognize the need for a new approach and put that recognition into action in the recruiting, motivating, and training of key members of both the engineering and purchasing departments. Other methods for better integrating these two functions include:
Colocation, which calls for placing purchasing staff near design engineering people. Purchasing employees with technical backgrounds can advise design engineers on the procurement implications of different components. In some organizations, these purchasing experts may have the authority to issue purchase orders; in others, they act in a liaison capacity only. For all its benefits, however, colocation is often quite expensive in that it usually requires increased personnel. Before attempting it on a large scale, companies should do thorough cost-benefit studies and perhaps undertake a pilot program.
Formal reviews, conducted through a committee consisting of representatives from engineering, marketing, manufacturing, quality control, and purchasing to review all designs prior to manufacture or purchase. One danger here is that the committee may adopt the view that its function is to veto designs rather than to provide information and ideas.
Project teams, like those established by IBM’s Entry System Division (its personal computer operation) and GE’s Evandale Division (developers and producers of large jet engines), among others, to develop and introduce new products. The nature of the industry and the type of product will determine the group’s composition and function, team membership, and the most appropriate control system.
Recommended parts lists, which become possible when purchasing establishes and maintains a data base of recommended parts in the form of a traditional catalog or of computerized files linked to the company’s CAD system. The data base includes all relevant technical information (like physical, reliability, mechanical, electrical, and thermal descriptions) and divides parts into two groups: recommended and acceptable. Engineers are free to select items with a “recommended” code. Choosing “acceptable” items or items not listed requires higher management’s approval. Employing such a list sharply reduces design time and greatly assists any ongoing standardization program.
Procurement engineers, who work with design engineers on a daily basis and supply information on the commercial implications of various design approaches and on alternative materials and components.
Employee rotation, which encourages career development programs to include an assignment in the procurement department for selected technical personnel. This procedure has three big advantages: it provides an ideal transition from a technical to a management position; it brings invaluable expertise into the purchasing function; and it creates a deep appreciation of the advantages of close links between engineering and purchasing.
A Future for Purchasing
Investment in new technologies alone will not be sufficient to revitalize U.S. industry. Managers must achieve a mastery of the whole product development process—especially of such long-neglected activities as purchasing. Indeed, purchasing must develop a new relationship with engineering that reflects the importance that vendor capability plays in new product design and manufacture. Manufacturers can no longer view suppliers simply as a source for components they do not want to make themselves. Vendors can also provide ideas about new technologies, materials, and techniques, and collectively they represent a clear window through which a company can scan a number of crucial environmental variables.
Purchasing must become the conduit through which such information flows. Engineering and purchasing together must forge a partnership that incorporates that flow of information into the process of designing and developing new products.