Casting a Light on Procurement

Tags: Logistics, Sourcing/Negotiations, Supply Chain

As closer supply chain ties are forged with vendors, logistics managers must increasingly collaborate with procurement. To provide insight, a new study illuminates today's procurement process, and the many challenges
purchasing managers face.

More to the Story:

In today's dynamic business climate, customers are motivated to create tighter supply chain links with their vendors. To do that, it's important for vendors' transportation and logistics professionals to work more closely with their customers' procurement teams. If you are in logistics, it's helpful to identify what procurement teams require so you can best serve their interests.

To those outside the supply chain, and even for some who work within it, the job of a purchasing manager can be a bit of a mystery. Sure, as the name implies, they "purchase" products and services.

But is that really all that they do?

Of course not.

In reality, the job of today's purchasing professional is incredibly complex. They don't just source one product or service at a time; they may have hundreds of projects on their plate at any given moment. They also need to satisfy different requirements—safety, environmental, functional, and, of course, price—all while meeting the needs of different stakeholders up and down the supply chain. Add in the different tools and technologies that they need to master, and the act of actually "purchasing" anything may be the very last thing on their to-do lists.

Clearly, answering the question "What do you do?" may not be as simple as it seems.

However, a new, exhaustive research study from Thomas sheds new light on both the purchasing process and the myriad tasks, responsibilities, and challenges that define life as a purchasing manager today. It reveals purchasing best practices and top-line concerns.

If you are a purchasing professional who oversees one aspect of the process, this insight may give you a better appreciation for your colleagues and counterparts handling other tasks. And, if you are on the supplier side, it should serve as an eye-opening wake-up call to everything that happens before you receive a contract or purchase order.

Methodology

The Thomas Network is the leading platform for supplier selection and product sourcing. Every year, 12 million buyers and engineers visit the site for information on North American suppliers.

All this buying activity generates terabytes of buyer behavior data, which Thomas regularly reviews to better understand the nuances of the buying process. To augment the company's understanding further, it recently worked with product research firm Strategyn to conduct one of the most comprehensive studies of B2B buying behavior ever performed.

The study consisted of a 200+ question survey of 315 purchasing professionals, in-depth one-on-one and group interviews with a diverse set of purchasing decision makers, and more than 200 hours of data analysis.

Though every company—and every individual purchasing manager—approaches their job differently, the data derived from Thomas reveals a near-universal, six-phase buying process (see chart below).

While the chart is an accurate depiction of the buying process at a high level, through the research study, it became clear there are a lot more steps along the way—15 to be exact (see chart, right).

Steps in the Need Phase. Though it may seem straightforward, defining a need for the product or service is actually a two-step process:

  1. Establish the business need for acquiring a specific product or service.
  2. Define the requirements the product or service must meet.

    Steps In The Research Phase. Investigating different solutions in the marketplace can take up a lot of time and present distinct challenges for purchasing managers.

  3. Determine what products or services to consider.
  4. Determine if a new product or service is necessary to address the business need.
  5. Determine if buying a new product or service is financially justifiable and affordable.

    Steps in the Design Phase. This is where engineers and purchasing managers often collaborate, and a lot goes into moving on to the next phase.

  6. Define the criteria to use to evaluate the products or services under consideration.
  7. Prioritize the criteria to use to evaluate the products or services under consideration.
  8. Evaluate alternative products or services against the prioritized criteria.
  9. Select the product or service to acquire.

    Steps in the Evaluation Phase. Before purchasing professionals can actually begin comparing suppliers, they need to know what criteria will drive these comparisons. Using a one-size-fits-all approach is not advised and, in most organizations, not acceptable.

  10. Define the criteria to use to evaluate the suppliers that offer the needed product or service.
  11. Prioritize the criteria used to evaluate suppliers offering the needed product or service.
  12. Determine what suppliers to consider.

    Steps in the Shortlist Phase. Whittling down the list of potential suppliers can be a time-consuming proposition. Buyers must choose carefully, or risk introducing suboptimal partners to their supply chains.

  13. Evaluate alternative suppliers against the prioritized criteria.
  14. Select the supplier from which to acquire the product or service.

    Steps in the Purchase Phase. Finally, the product or service can be acquired.

  15. Initiate the product or service purchase.

Top Priorities

Looking further into the 15-step buying cycle, the research study identifies more than 225 smaller, incremental tasks that procurement professionals must accomplish in order to keep the chains moving. The study also ranks these tasks in terms of importance (how critical the task is for the purchasing manager to complete) and satisfaction (how satisfied procurement professionals are with their ability to complete the task).

These are the buying-related tasks that procurement managers say are most important, on a scale of 0-10:

  • Determining how frequently the products/service is required to fulfill the business need. (8.1)
  • Determining the priority order of the supply performance-related criteria to be used to evaluate the suppliers, e.g., delivery performance, reliability (7.7)
  • Defining the shipping-related requirements the products or service must meet. (7.7)
  • Confirming that the selected products or service meet the prioritized criteria prior to making the purchase. (7.6)
  • Eliminating suppliers from consideration that have a poor reputation. (7.6)
  • Determining which criteria will not be met by the top-ranking product or service. (7.6)
  • Determining the priority order of the products or service quality-related criteria to be used to evaluate the suppliers. (7.5)
  • Identifying the product or service quality-related criteria to be used to evaluate the suppliers. (7.5)
  • Correctly defining the requirements that the products or service must meet. (7.5)
  • Identifying the products or service quality-related criteria to be used to evaluate the suppliers. (7.5)
  • Defining what certification-related requirements the products or service must meet, such as UL certification, digital certification, etc. (7.4)
  • Determining which supplier best satisfies the prioritized business stability-related criteria. (7.4)

Biggest Pain Points

While those tasks were the most important, these are the ones that prove most frustrating and cause the most headaches for procurement professionals in the supply chain. The lower the number, the more frustrating the task.

  • Determining when the product/service will be needed to fulfill the business by monitoring inventory levels or meeting deadlines. (4.9)
  • Defining the quality-related requirements the product or service must meet. (5.0)
  • Determining which product or service best satisfies all the prioritized criteria. (5.1)
  • Identifying the business stability-related criteria (time in business, revenue growth projections, etc.) to be used to evaluate which supplier to select. (5.1)
  • Determining if a product or service that is already available in-house can meet the business need. (5.1)
  • Inadvertently selecting the wrong product or service for purchase, e.g., accidentally selecting the wrong model, size, level of service, etc. (5.4)
  • Verifying that the evaluation of the top-ranking suppliers is accurate. (5.4)
  • Determining if the required product or service can be obtained before the business need goes away. (5.4)
  • Identifying which quality-related criteria to use to evaluate the product/services under consideration. (5.4)
  • Minimizing the time it takes to determine which suppliers best meet the prioritized supplier evaluation criteria. (5.5)
  • Determining what well-established products or services are available for consideration. (5.5)
  • Defining the shipping-related requirements the products or service must meet. (5.5) This task is the only one that was ranked both most important and most frustrating by participating procurement professionals. This highlights a great opportunity for 3PL service providers to step up and meet a critical customer need while reducing a major pain point.

Back to School

The purchasing and procurement profession is constantly evolving, and the people who work within the field must keep their skills sharp and their knowledge current at all times.

With that in mind, the research study sought to identify the areas of professional development that were most important to procurement pros. These educational priorities topped the list:

  • Ways to improve overall supply chain performance.
  • Strategies to boost order fulfillment rates.
  • Uncovering easy ways to keep abreast of new products and services.
  • Steps to becoming ISO 9000/9001 certified.
  • Reducing risks in the supply chain and bolstering overall risk management.
  • Improving negotiation skills.
  • Simplifying the search for suppliers.
  • Keeping current with new regulations in their markets of interests.
  • Learning the best ways to reduce shipping costs.
  • Learning how to minimize shipping errors.

More To-Dos to Come

Just a few short years ago, many of the tasks identified by the study fell outside the realm of procurement. Today, professionals in the field are taking on additional responsibilities, demanding more seats at more tables, and demonstrating their skills and value in new and unexpected ways.

Thus, while this study offers an unprecedentedly detailed glimpse into the purchasing profession and the buying cycle right now, things will only increase in breadth and complexity in the years to come.

It's therefore incumbent on purchasing and supply chain managers to learn all they can about the changes and trends that will shape their profession and their careers.

To do that, start by asking your peers, "What do you do?"






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