The latest edition of IndustryWeek’s Manufacturing Business Challenge has been published.

This month’s challenge discusses a large, multinational manufacturer of industrial equipment that is looking to improve its purchasing practices after discovering that they were literally leaking money by not fully leveraging its purchase volumes and buying power.

I took part in providing one of the solutions, as did Corey Billington, Professor of Operations Management and Procurement at IMD.

Tell us what you think of our responses to the challenge as described below:

I am the CFO of Tevper Performance Products, a large, multinational manufacturer of industrial equipment. Tevper sources hundreds of thousands of components, materials, and services every year, which account for billions of dollars. The VP of procurement and I have convened a team to review and improve our purchasing practices throughout the organization.

The impetus for the review was discovering that we are literally leaking money by not fully leveraging our purchase volumes and buying power. I don’t expect all of our 13 production locations to source in an identical manner: Many have total-cost formulas that are best served by tapping into local suppliers. Others require nearby sourcing to reduce lead times. Some are constrained by how and what their outsource manufacturers choose to purchase. But even after lightly scratching the surface, I see countless missed opportunities for Tevper to lower our costs for direct and indirect materials. For example, at our Arizona location, I can find a variety of suppliers, product numbers, product names, and pricing for the exact same component. This must stop.

In my five years at Tevper, we’ve taken a light hand toward strategic sourcing, believing that well-trained, local procurement departments would make the right decisions: implement sourcing processes and systems that enable them to understand, aggregate, and control procurement activity that is occurring within their location or division as well as make purchasing decisions consistent with other business units. I have respected their autonomy, but cannot afford to do so any longer.

The VP of procurement, the review team, and I must, first, uncover the most egregious purchasing problems and put an end to them as quickly as possible. But, more importantly, we need to begin developing the means and systems that allow comprehensive and real-time tracking and reporting required to achieve high levels of purchasing performance even within our diverse and distributed business model. It will be a challenge, and, as word has leaked out, I am seeing the emails stream in: “Our supplier relations are unique,” “You’ll never get our purchasing data to be compatible,” and “We don’t have time to make every purchase align with corporate mandates.”

I don’t have time for their excuses. And my future with Tevper may rest on my ability to install a major strategic procurement program. Can it be done?

See our advice here. What advice would you give?

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Tags: Collaboration, Inventory, Supply chain management, Supply chain visibility, Supply management
Posted in Inventory management, Supply chain collaboration, Supply chain management
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