Purchasing Managers: Shop Talk
Purchasing managers juggle a To-Do list of stressful, business-critical tasks—from striking the best deals to projecting demand to staying abreast of financial and political changes worldwide. Listen in as four purchasing managers chat about challenges and shoot the breeze on strategy.
Imagine shopping for a living. That's the basic job description for purchasing managers, but a shopping spree at the mall isn't on their To-Do lists.
Unlike people who shop for fun or to relieve boredom, purchasing managers find themselves juggling an array of stressful, business-critical tasks.
As they strive to strike the best deals for their companies, purchasing managers consider product cost, quality, availability, reliability, and support when choosing supplies and suppliers.
In addition to highly refined negotiating skills, purchasing managers need in-depth knowledge of specific products or services and market conditions.
They dedicate endless hours to studying sales records, evaluating inventory levels, projecting demand, researching foreign and domestic suppliers, and staying abreast of financial and political changes that could potentially affect the supply of, and demand for, necessary materials.
Listen in as four purchasing managers talk shop, chat about challenges, and shoot the breeze on strategy.
ON THE ROAD: Scott Vanderlinde
Purchases: Custom and common components for producing semi-trailers and grain haulers
Challenge: Gathering background on parts bought from North American suppliers that originated at overseas manufacturers
Insight: Overseas sourcing is diminishing in favor of North American suppliers
As purchasing manager for Doepker Industries, a manufacturer located in Annaheim, Saskatchewan, Canada, Scott Vanderlinde acquires the basic materials the company needs to produce its semi-trailers and grain haulers.
"I purchase custom and common components, such as suspensions, tires, wheels, lights, and wiring, as well as raw materials, including steel and aluminum, which we use to either make parts in-house or outsource for fabrication," Vanderlinde says.
For Vanderlinde, an ideal workday is one when everything rolls along as steadily and smoothly as the trailers and haulers his acquisitions help create.
His work is usually hectic, however. A typical day might find him negotiating with a mill for sheet metal, a metal fabricator for a specialized part, or a component supplier for a specific nut or bolt.
"Many components we use are standard in the industry and easy to source," Vanderlinde says. "But when we design the part, we provide drawings and specifications to a contract manufacturer."
Because Doepker manufactures vehicles in an array of configurations, Vanderlinde sources thousands of parts and raw material types to meet the company's diverse production needs. Each purchase requires Vanderlinde to consider a variety of factors.
"I review the total cost, and how critical the part is to manufacturing," he says. "Also, when we source overseas, I have to consider factors other than transportation that add expense."
Doepker sources nearly all its products from suppliers located in Canada and the United States.
"We source 95 percent of our products from North America, distributed between Canada and the United States," Vanderlinde says. "And we buy a small volume of materials from Mexico."
Just because a supplier is located in North America doesn't mean that its parts or materials haven't originated in other places. "Many of our suppliers indirectly bring in products from overseas," he says. This means he has to investigate the supplier's operations to discover exactly who is providing the products, and determine the potential for supply chain vulnerabilities that could cut off the source of a critical part or material.
"I need to understand where our products come from and the difficulties our suppliers face," Vanderlinde says.
Like many purchasing managers, Vanderlinde is seeing supply chains shorten as rising energy and transportation costs, combined with a weaker U.S. dollar, make it more expensive to import products.
"The 'Made in China' trend is diminishing," he says. "Many suppliers are considering locating development and manufacturing in North America instead of China."
Regardless of the distances involved, freight remains an inevitable part of any product's cost. To simplify pricing management and gain more control over shipments, Doepker prefers to pay its own freight costs whenever possible.
"Even though about 25 percent of our products arrive via prepaid freight, there's still a cost to us," Vanderlinde says. "No supplier can ship for free."
To manage procurement costs and expedite planning, Vanderlinde relies on Doepker's enterprise resource planning (ERP) software. The technology, supplied by Indianapolis-based Consona, provides a rules-based system that enables Vanderlinde to plan and execute procurement strategies by describing the company's requirements.
The software streamlines routine tasks and helps Vanderlinde stay on top of critical situations. Reordering, for instance, is now fully automated.
"The system alerts us when we're down to the last four weeks of inventory on an item," he says. All orders can be automatically increased, reduced, rushed, pushed back, or even canceled.
"Purchasing has evolved from the days when we handled orders manually," Vanderlinde observes.
MAKING TECH WORK: Jon Letsinger
Purchases: Electronics components and raw materials for consumer and office products
Challenge: Maintaining inventory to support an array of components required by a constantly evolving production line
Insight: Visibility provided by suppliers' online purchasing portals enables more accurate delivery commitments to customers
For the past 23 years, Meridian, Idaho-based Western Electronics has handled printed circuit board assembly and packaging operations for a variety of electronics manufacturers, creating the "guts" inside a variety of consumer and office products.
As Western Electronics' purchasing manager, Jon Letsinger understands the sourcing challenges a contract tech manufacturer faces, including an almost endless array of electronic components required by a constantly evolving production line. The parts run the gamut of technology, including both cutting- and trailing-edge products.
"I handle everything from electric motors and large transformers to sheet metal and copper wire to typical electronic components, such as capacitors, resistors, and integrated circuits," Letsinger says.
Western Electronics sources most of these materials, which are manufactured around the world, through large distributors, including Avnet and Arrow Electronics.
The firm also deals with smaller distributors for specialty products. Most of these partners are located within a three- to five-day transportation window.
Custom metal products, however, are usually sourced from what Letsinger describes as low-cost geographies, such as Thailand and other parts of Southeast Asia.
Like Vanderlinde, Letsinger relies on planning software to help coordinate and monitor Western Electronics' purchasing activities. He also depends on collaboration with co-workers.
"I work with the scheduling team daily to determine the operation's short-term needs," Letsinger says.
The purchasing group serves as a support team for operations. "As planning horizons close in, operations needs to have the materials on hand, in the right amounts, at the right point," he adds.
The Internet also helps purchasing managers do their jobs faster and more effectively. Letsinger notes that a growing number of suppliers are setting up purchasing portals on their Web sites.
"This technology allows us to log in, view costing information, and see the stock being held for us," he notes. "That visibility allows us to make more accurate delivery commitments to customers."
By giving businesses the ability to view critical partner data in real time, the Internet expands purchasing's geographic scope while shortening lead times.
Instant data access also allows purchasing managers to collaborate with global suppliers 24/7, without picking up a phone or sending an email, by directly accessing their partners' inventory and billing systems.
"It's a worldwide economy, and the world is getting smaller," Letsinger observes. "It will help our business if we can source from different parts of the world to satisfy both our needs and, ultimately, our customers' needs."
PUMPING PURCHASES: Ken Westfield
Purchases: Parts and materials for industrial pumps
Challenge: Coping with rising commodity prices and transportation costs
Insight: Monitoring supplier performance and relationships helps identify savings opportunities
As a strategic sourcing manager, Ken Westfield keeps a steady supply of parts and other materials flowing into The Gorman-Rupp Company, an industrial pump manufacturer located in Mansfield, Ohio.
Gorman-Rupp manufactures pumps for a variety of markets, including consumer, municipality, wastewater, industrial, construction, petroleum, and agriculture.
The company operates seven manufacturing facilities in three countries: one each in Canada, The Netherlands, and Ireland; and four in the United States.
Westfield has worked at Gorman-Rupp for 14 years. He started in the company's engineering department, where he spent six years as a computer-assisted design (CAD) operator and technical support engineer, among other roles.
He then moved into sales and, when the opportunity arose, became a corporate buyer. Westfield has worked in purchasing for the past five years.
In his current position, Westfield oversees purchasing for Gorman-Rupp's main plant in Mansfield. His job tasks him with acquiring a variety of products, ranging from castings to diesel engines, as well as fabricated parts, electrical components, wiring, decals, paint, and even nuts and bolts.
Most of Gorman-Rupp's suppliers are based in the United States. "We take pride in the fact that we buy domestically," he says.
Westfield describes his purchasing department as a "jobbing shop." "We don't buy large quantities of any one product, but we do purchase volumes of different products," he says.
Westfield feels that careful statistical analysis is vital to coordinating Gorman-Rupp's wide-ranging sourcing activities. "We base forecasts on history and sales reports," he says.
The company's sales information is stored in an AS-400 computer system running MAC-PAC ERP software provided by Columbus, Ohio-based TDCI.
"Once the data is loaded, the system creates a master schedule from which we build purchasing plans," Westfield says.
The company scores its 80-plus suppliers on several key criteria, including delivery, quality, and pricing data.
"We issue a quarterly scorecard to benchmark supplier performance," Westfield says. "Last year, we held a 'supplier day' to reward the best performers."
The event serves to strengthen bonds and help both parties better understand and appreciate each other's needs. Gorman-Rupp presented the suppliers with awards and updated them on company news and plans.
Like his counterparts at other companies, Westfield is battling rising commodity prices and transportation costs.
"To minimize the impact of soaring prices, we've built more efficiency into the assembly line and shipment consolidation process," he says.
While Westfield realizes that he has only limited control over shipping costs, he still wants to shave rates wherever he can. For instance, after learning that one carrier was moving about 80 percent of inbound freight on the suppliers' terms, he called a meeting to address the situation.
"I'm now working with the traffic coordinator to compile a list of carriers we have contracts with and determine which ones offer the most favorable terms," he says. "And we're working toward including specific carrier requests on the purchase orders."
Westfield says strategic sourcing—a procurement process that continuously improves and re-evaluates a company's purchasing activities—also helps him buy products and materials on the best terms, while saving time and reducing overhead expenses.
Westfield stays abreast of new technologies to find ways to improve processes and cut costs.
"We now release about 88 percent of our purchase orders electronically," he says. "That represents a lot of time—and postage—saved."
He's also looking into the "supplier-managed inventory" concept, which requires key suppliers to assume responsibility for maintaining negotiated inventory levels.
"This is an opportunity to shift some tracking and management work to the supplier," he says.
But Westfield doesn't believe that more supplier oversight will diminish the purchasing manager's role. "Companies will always need someone to decide what to buy and who to buy it from," he says. "That will never change."
GOVERNMENT WORK: Paul North
Purchases: Custom-developed components and non-critical parts for radio communications equipment
Challenge: Servicing government agencies with specific quality, source, and security requirements
Insight: Custom software helps identify potential vendors and negotiating terms
Purchasing materials for a business with a customer base composed almost entirely of government agencies poses a variety of special challenges.
Paul North, vice president of procurement for Harris Corp.'s Rochester, N.Y.-based RF Communications Division, is used to coping with the special purchasing requirements government customers set for the type, quality, and geographic origin of sourced parts.
"Our primary products are tactical radio communications equipment," North says. "Our customers are the U.S. government, including the Department of Defense, and various international governments."
Intended for highly secure voice and data communications, Harris Corp.'s specialized radios offer reliability for high-security customers.
"We develop the majority of products ourselves," North says. "We identify customers' needs and create products that meet their requirements."
Such specialized radio equipment demands expensive and often unique components. Unlike most manufacturers' purchasing requirements, quality, source, and security considerations all trump price for the parts North procures.
"We pay close attention to security," he says. "Working with the State Department and other government agencies, we perform a technology review of components."
The review tells the company's buyers which products they may procure and how to source them.
North sources non-critical parts conventionally from vendors worldwide. "Some components are classified as pure commercial devices," North says.
But many parts, mostly those using cutting-edge or militarily sensitive technologies, are considered "controlled" and must be procured from U.S.-based vendors. Exceptions are sometimes made when availability or some other criteria suggests that it may be best to look to a foreign vendor for a particular part.
"Through licensing, we can obtain approval from the State Department to source those components internationally," North says. "But some devices are not cleared to be manufactured outside the United States."
Automation technology has significantly lifted the burden from North's purchasing team.
"It used to take two days for a buyer to issue requests for quotations because we had to figure out what products were needed and in what quantities, determine the last supplier of choice, and do the engineering drawing," he says.
"Then we had to pull the package together by completing, distributing, and collecting the RFQs, and manually transferring the information into a decision matrix."
Today, a custom software environment automates most of the process.
"The software tools relieve the buyer's responsibility," North says. In fact, the system takes the first step in the procurement process by automatically matching required parts with potential vendors. "When I arrive in the morning, the action messages are waiting for me," he adds.
The system also facilitates online negotiations.
"Our suppliers are given a bid deadline, and they provide an electronic quote," North says. "The data is then presented to the buyers for review."
The system also helps Harris meet export control mandates by making sure confidential data isn't accidentally disclosed to parties who aren't cleared to receive such information.
"Protection is built into the system to make sure the right people get the right data," North says.
Harris recently implemented a software-based dashboard that helps buyers track critical procurements with a real-time status summary.
"The system shows how many outstanding RFQs the buyer has; how many are on time; and how many have been expedited, held, and cancelled," North says. "We can look at the metrics and note where we're in control and where we need help."
North's purchasing team would be hard-pressed to achieve comparable efficiency and productivity without automation. "It has given us more time to work strategically and stay focused on our key partners," he says.
That visibility is a strategic commodity purchasing managers can appreciate, whether their To-Do lists feature procuring raw materials from domestic suppliers or high-tech components from overseas.